PURCHASE AND SALE AGREEMENT
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AND ESCROW INSTRUCTIONS
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THIS AGREEMENT, dated as of November 5, 1999, is entered into by and
between ENZO DRIVE, LLC, a California limited liability company ("Seller"), and
SUNRISE TELECOM, a California Corporation ("Buyer").
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IN CONSIDERATION of the respective agreements hereinafter set forth, Seller
and Buyer agree as follows:
1. Description of Property. Seller shall sell and convey to Buyer, and
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Buyer shall purchase from Seller, subject to the terms-and conditions set forth
herein, that certain real property in the City of San ▇▇▇▇, Santa ▇▇▇▇▇ County,
California, consisting of approximately 6.07 acres of land, as shown on the site
plan attached hereto as EXHIBIT A and more particularly described in EXHIBIT A-1
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attached hereto (the "Land"), together with those certain Building Improvements
to be constructed by Seller thereon as defined in subparagraph 7(a) below. As
used herein, the term "Property" shall mean the Land and the Building
Improvements together with (a) all easements and other rights appurtenant
thereto, and (b) Seller's entire right, title and interest in and to all plans
and specifications for the Building Improvements, all warranties and guaranties
applicable to the Building Improvements, and all governmental permits and
approvals applicable to construction and operation of the Building Improvements.
The parties hereto acknowledge and agree that, as of the date of execution of
this Agreement, the Land is not a separate, legal parcel and is part of a larger
parcel, consisting of approximately 11.01 acres, more or less. Seller intends to
process for approval by the City of San ▇▇▇▇ a parcel map which, if approved,
will create the Land as a separate, legal parcel and the balance of the existing
11.01 acre parcel (the "Remainder Parcel") as a separate legal parcel. The
boundaries of the Land as shown on EXHIBIT A are approximate and the true
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boundaries of the Land shall be as shown on the approved parcel map to be
processed for approval by Seller. Seller makes no representation or warranty to
Buyer that the City of San ▇▇▇▇ will approve the parcel map submitted by Seller
for approval.
2. Purchase Price.
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(a) Amount and Payment. The purchase price of the Property is equal to
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the sum of (i) Thirteen Million Three Hundred Eighty-seven Thousand Three
Hundred Twenty-four and no/100ths Dollars ($13,387,324), as the same may be
adjusted pursuant to the provisions below, plus (ii) an amount equal to the
amount of the Interior Improvements Allowance expended or disbursed by Seller
prior to the Close of Escrow. The parties hereto acknowledge that Seller desires
to construct a building shell, consisting of approximately 91,694 square feet,
on the Land pursuant to the terms and conditions set forth below. In the event
that Seller obtains approval from the City of San ▇▇▇▇ for construction of a
building shell on the Land which is more or less than 91,694 square feet, then
the component of the Purchase Price of the Property referred to in clause (i) of
this subparagraph 2(a) shall be adjusted upward or downward, as the case may be,
based upon One Hundred Forty-six and 00/100 Dollars ($146.00) per square foot.
The
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Purchase Price shall be paid to Seller in immediately available funds at the
Closing (as defined in subparagraph 8(a)) of the purchase and sale contemplated
hereunder. The Deposit (as defined in subparagraph 2 (b) below), together with
an amount equal to the product obtained by multiplying the Deposit by five
percent per annum, commencing as of the date the Deposit is released to Seller
pursuant to the terms of subparagraph 2(b) below, shall be applied against the
Purchase Price at Closing. In addition to the Purchase Price, Buyer shall pay
the Buyer's Shell Contribution and Buyer's Interior Improvement Contribution (as
defined in subparagraph 7(b) below), if any, in the amount and at the time set
forth in subparagraph 7(b). No portion of Buyer's Shell Contribution or Buyer's
Interior Improvement Contribution (nor any of the interest earned thereon) shall
be applied against the Purchase Price.
(b) Deposit. Within three (3) business days after execution of this
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Agreement, Buyer shall deliver to Escrow Agent (as defined in subparagraph 8(a)
below) a deposit ("Deposit") of One Hundred Thousand Dollars ($100,000). The
Deposit shall be placed in an interest-bearing account to be approved by Buyer
(the "Deposit Account") with all interest earned thereon while in the Deposit
Account to accrue for the benefit of Buyer, except as expressly provided in
subparagraph 2(c). Upon the satisfaction or waiver of those conditions to
Buyer's obligation to purchase the Property set forth in subparagraphs 5(a),
5(b) and 5(c) below, Buyer shall increase the Deposit in the Deposit Account to
Two Million Six Hundred Seventy-five Thousand Dollars ($2,675,000). Buyer shall
cause and instruct the Escrow Agent (defined below) to release the Deposit to
Seller not later than one (1) business day following the date the conditions set
forth in subparagraphs 5(d) and 5(e) are satisfied. Upon release of the Deposit
to Seller, such Deposit shall be non-refundable to Buyer (in the absence of a
material breach or default by Seller hereunder) but applicable to the Purchase
Price. All of the funds in the Deposit Account and all interest earned thereon
while in the Escrow Account shall be returned to Buyer if Buyer elects to
terminate this Agreement pursuant to any termination right given Buyer under
this Agreement (and Buyer is not in breach or default of any obligation
hereunder at the time of such termination).
(c) LIQUIDATED DAMAGES. IN THE EVENT THE SALE OF THE PROPERTY IS NOT
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CONSUMMATED BECAUSE OF A DEFAULT UNDER THIS AGREEMENT ON THE PART OF BUYER,
SELLER SHALL BE ENTITLED TO THE DEPOSIT TOGETHER WITH ANY INTEREST EARNED
THEREON AS LIQUIDATED DAMAGES. THE PARTIES HAVE AGREED THAT SELLER'S ACTUAL
DAMAGES IN THE EVENT OF A DEFAULT BY BUYER WOULD BE EXTREMELY DIFFICULT OR
IMPRACTICABLE TO DETERMINE. THEREFORE, BY PLACING THEIR INITIALS BELOW, THE
PARTIES ACKNOWLEDGE THAT THE AMOUNT OF THE DEPOSIT (i.e. $2,675,000) HAS BEEN
AGREED UPON, AFTER NEGOTIATION, AS THE PARTIES' REASONABLE ESTIMATE OF SELLER'S
DAMAGES AND AS SELLER'S EXCLUSIVE REMEDY AGAINST BUYER, AT LAW OR IN EQUITY, IN
THE EVENT THAT THIS TRANSACTION DOES NOT CLOSE DUE TO A DEFAULT UNDER THIS
AGREEMENT ON THE PART OF BUYER. THIS LIQUIDATED DAMAGES PARAGRAPH SHALL NOT BE
APPLICABLE TO ANY INDEMNIFICATION OBLIGATIONS OF BUYER UNDER THIS AGREEMENT. IN
THE EVENT THAT THIS TRANSACTION DOES NOT CLOSE DUE TO A DEFAULT UNDER THIS
AGREEMENT ON THE PART OF BUYER, SELLER
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SHALL HAVE NO OBLIGATION TO RETURN TO BUYER ANY EXPENDED PORTION OF BUYER'S
SHELL CONTRIBUTION OR BUYER'S INTERIOR IMPROVEMENT CONTRIBUTION OR WHICH IS
STILL IN THE BUILDING SHELL FUND OR INTERIOR IMPROVEMENT FUND AS OF THE DATE
THIS AGREEMENT IS TERMINATED AS A RESULT OF BUYER'S BREACH OR DEFAULT UNDER THIS
AGREEMENT (OR ANY OF THE EXHIBITS ATTACHED HERETO).
Buyer's Initials /s/ XXX Seller's Initial /s/ XXX
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3. Title to the Property.
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(a) At the Closing, Seller shall convey to Buyer fee title to the
Property by a duly executed and acknowledged Grant Deed substantially in the
form attached hereto as EXHIBIT B (the "Grant Deed"). At Closing, Seller shall
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cause Alliance Title Company in San ▇▇▇▇ or its underwriter ("Title Insurer") to
issue to Buyer a CLTA standard coverage owner's policy of title insurance in the
amount of the Purchase Price plus Buyer's Shell Contribution and Interior
Improvement Contribution, if any, insuring fee simple title to the Property,
subject only to (i) such exceptions to title as Buyer shall approve pursuant to
subparagraph 5(a) below, (ii) such exceptions as are shown on the approved
parcel map creating the Land as a separate, legal parcel, (iii) that certain
Declaration of Covenants, Conditions and Restrictions and/or Reciprocal Easement
Agreement, as the case may be, which may be executed by Seller prior to the
Closing and which is more particularly described below, (iv) any title matters
caused or created by Buyer or its agents, employees or contractors, and (v) any
title matters that would be shown on an accurate survey of the Land
(collectively, the "Permitted Exceptions"). Any extended coverage or title
endorsements desired by Buyer shall be obtained at Buyer's expense. Issuance of
an ALTA extended coverage owner's policy of title insurance is not a condition
to closing and, if Buyer desires such extended coverage, Buyer shall bear the
cost of any ALTA survey required in order to issue to Buyer an ALTA extended
coverage owner's policy of title insurance.
Prior to the Closing hereunder, Seller intends to execute a Declaration of
Covenants, Conditions or Restrictions and/or Reciprocal Easement Agreement
(collectively, the "CC&Rs") to be recorded against the Land (and the Remainder
Parcel) and which will provide for the operation, maintenance, repair and/or
management of improvements to be used in common and/or on a non-exclusive basis
by the owners, tenants and occupants of the Land and the Remainder Parcel (e.g.
common driveways, parking spaces, storm drains and utilities). Among other
things the CC&Rs shall likely provide that (i) each owner of the Land and the
Remainder Parcel will be responsible for the repair and maintenance of its
parcel, including any shared or jointly used facilities, (ii) if the number of
parking spaces located on the Remainder Parcel or the number of parking spaces
located on the Land does not satisfy the code requirements of the City of San
▇▇▇▇, then the owner and tenant(s) of the Remainder Parcel and Land, as the case
may be, shall have the right to use, on a non-exclusive basis, a sufficient
number of parking spaces located on the other parcel to satisfy the code
requirements of the City of San ▇▇▇▇, and (iii) the owner and tenant(s) of the
Remainder Parcel shall be entitled to use not less than 200 parking spaces on
the Remainder Parcel (and if such 200 parking spaces are not located on the
Remainder Parcel, then the owner and tenant(s) of the Remainder Parcel shall be
entitled to use
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on a non-exclusive basis such number of parking spaces on the Land as are equal
to the difference between 200 parking spaces and the number of parking spaces
located on the Remainder Parcel).
(b) Subject to and effective upon the Closing, Seller shall assign to
Buyer and Buyer shall accept, all of Seller's right, title and interest, as of
the Closing Date, in and to the following: (i)all plans and specifications for
the Building Improvements and warranties and guaranties applicable to the
Building Improvements, provided, however, that Seller reserves from the
foregoing assignment such right, title and interest to the extent necessary to
enable Seller to perform its post-Closing obligations as described in
subparagraph 7(e) below and the full right, power and authority to pursue claims
against parties who prepared such plans and specifications and issued such
warranties and guaranties; and (ii) all governmental permits and approvals
applicable to the Building Improvements. Such assignment and acceptance shall be
on the terms and conditions set forth in an Assignment Agreement substantially
in the form attached as EXHIBIT C ("Assignment Agreement"). Prior to the
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Closing, Seller and Buyer shall execute and deliver to Escrow Agent two (2)
originals of the Assignment Agreement.
4. Due Diligence and Time for Satisfaction of Conditions.
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(a) Due Diligence Period. Buyer shall have until December 20, 1999
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(the "Due Diligence Period") to complete its due diligence investigations with
respect to the Property. Seller has delivered to Buyer and Buyer acknowledges
receipt of all of the items listed on EXHIBIT D attached hereto. Seller makes no
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representations regarding the accuracy or completeness of any of the studies,
reports or other documents identified in EXHIBIT D. Notwithstanding anything in
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this Agreement to the contrary, Buyer shall have the right to terminate this
Agreement at any time during the Due Diligence Period.
(b) Access to Property. During the Due Diligence Period, Seller shall
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afford authorized representatives of Buyer reasonable access to the Property for
purposes of satisfying Buyer with respect to the representations, warranties and
covenants of Seller contained herein and with respect to satisfaction of any
Conditions Precedent to the Closing contained herein. Buyer hereby agrees to
indemnify, defend and hold Seller and its members and lender holding a security
interest in the Property harmless from and against any and all damages, losses,
claims, actions, causes of action, liabilities, injuries to persons or property,
costs or expenses (including, without limitation, reasonable attorney's fees and
legal costs) arising out of or related to the activities of Buyer or any of its
agents, employees, consultants, contractors or other representatives during
their entry and investigations prior to the Closing. In the event this Agreement
is terminated, Buyer shall restore the Property to the condition in which it was
found. The obligations of Buyer under this subparagraph 4(b) shall survive the
termination of this Agreement or the Closing, as applicable.
Prior to any entry onto the Property by Buyer, or its agents, employees,
consultants, contractors, or other representatives, Buyer shall obtain and
maintain during the term of this Agreement, a general liability policy on an
occurrence basis, identifying Seller as an additional insured, with a combined
single limit of not less than One Million Dollars ($1,000,000). Buyer
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shall provide Seller with an insurance certificate evidencing such coverage
prior to any entry by Buyer or its agents, employees, consultants or contractors
on the Property. Such liability insurance policy of Buyer shall provide that the
same shall not be cancelled or modified or scope of coverage reduced without at
least thirty (30) days advance written notice to Buyer.
5. Buyer's Conditions to Closing. The following conditions are precedent to
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Buyer's obligation to purchase the Property (the "Conditions Precedent"):
(a) Title. Buyer's review and approval of title to the Property during
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the Due Diligence Period. Buyer acknowledges receipt of or shall obtain, if not
previously provided by Seller to Buyer, a current preliminary title report
coveting the Property issued by Escrow Holder, accompanied by copies of all
documents referred to therein (collectively, the "Preliminary Report"). Buyer
shall advise Seller in writing prior to the expiration of the Due Diligence
Period if Buyer objects to any exceptions to title disclosed by the Preliminary
Report. If Buyer fails to object to any title exceptions during the Due
Diligence Period, then Buyer shall be deemed to have approved the condition of
title to the Property and this condition shall be deemed satisfied. It is the
intent of the parties that Title Insurer, Buyer and Seller shall agree on the
form of the title policy to be issued to Buyer upon the Close of Escrow (the
"Proforma Title Policy") during the Due Diligence Period. If Buyer does not
elect to terminate this Agreement prior to the expiration of the Due Diligence
Period, then Buyer shall be deemed to have approved the Proforma Title Policy
(or waived the right to receive the same).
(b) Physical Condition of Property. Buyer's review and approval, on or
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prior to the expiration of the Due Diligence Period, of the physical condition
of the Property, including the soil and groundwater conditions, the stability
and load-bearing capacity of the soil, and the presence of Hazardous Materials
(defined below), if any, on or under the Property or the potential for migration
of Hazardous Materials onto the Property from other property in the area. To the
extent the same have not already been delivered to Buyer as provided in Section
4(a) above, Seller shall, within three (3) days following execution of this
Agreement, deliver or make available to Buyer, without representation or
warranty as to accuracy or completeness, copies of any environmental reports,
soils reports, and other studies in Seller's possession or control regarding the
physical condition of the Property and copies of all permits and approvals
obtained by Buyer related to the Property. Buyer's review of the Property may
include such additional environmental tests as Buyer deems necessary, which
shall be performed or arranged by Buyer at Buyer's sole expense, except that any
invasive testing of the soils or groundwater (or building materials testing)
shall require the prior consent of Seller.
(c) Permits and Approvals. Buyer's review and approval, within the Due
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Diligence Period, of all governmental permits, approvals and other information
relating to the development, construction, operation, use or occupancy of the
Property (collectively, the "Permits"), and all zoning, land use, subdivision,
environmental, building and construction laws and regulations restricting or
regulating or otherwise affecting the use, occupancy or enjoyment of the
Property. Promptly following the execution of this Agreement, Seller shall
deliver to Buyer all Permits (including any applications therefor) which are in
Seller's possession or control and thereafter promptly upon receipt thereof.
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(d) Tentative Parcel Map Approval. On or before the Close of Escrow,
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Seller shall have obtained approval from the City of San ▇▇▇▇ of a tentative
parcel map creating the Land and the Remainder Parcel as two separate, legal
parcels, subject to conditions acceptable to Seller.
(e) Site Development Permit. On or before the Close of Escrow, Seller
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shall have obtained approval from the City of San ▇▇▇▇ of a site development
permit applicable to the Land and building to be constructed thereon by Seller,
subject to conditions acceptable to Seller.
(f) Seller's Representations and Warranties. All of Seller's
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representations and warranties contained in or made pursuant to this Agreement
shall have been true and correct upon the execution of this Agreement and shall
be true and correct as of the Closing Date.
(g) Title Policy. As of the Closing Date, Title Insurer shall issue or
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be committed to issue a CLTA extended coverage owner's policy of title insurance
insuring Buyer's title to the Property in the amount of the Purchase Price (and
the expended portion, if any, of Buyer's Shell Contribution and Buyer's Interior
Improvement Contribution) and subject only to the Permitted Exceptions (and
other exceptions shown in the Proforma Title Policy approved by Buyer and any
other exceptions to title approved by Buyer) ("Title Policy").
(h) Substantial Completion. As of the Closing Date, the Building
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Improvements shall have been Substantially Completed substantially in accordance
with the Building Plans and Interior Improvement Plans approved by Buyer and
Seller.
If any of the foregoing conditions are not satisfied or waived by Buyer
within the time period set forth above (the "Condition Period"), Buyer shall
have the right by notice to Seller prior to the expiration of the particular
Condition Period for the unsatisfied condition, to terminate this Agreement and
thereupon the Deposit and all interest thereon while in the Deposit Account (and
the Buyer's Shell Contribution and Interior Improvement Contribution, if
applicable) shall be returned to Buyer. Buyer's failure to so notify Seller
prior to the expiration of the applicable Condition Period shall be deemed to be
Buyer's approval of the condition.
6. Seller's Conditions Precedent. Seller's obligation to sell the
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Property to Buyer is subject to the satisfaction of the following conditions
precedent'
(a) Parcel Map Approval. On or before the Close of Escrow, Seller
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shall have obtained approval from the City of San ▇▇▇▇ of a parcel map creating
the Land and the Remainder Parcel as two separate, legal parcels, subject to
conditions acceptable to Seller.
(b) Site Development Permit. On or before the Close of Escrow, Seller
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shall have obtained approval from the City of San ▇▇▇▇ of a site development
permit applicable to the Land and building to be constructed thereon by Seller,
subject to conditions acceptable to Seller.
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(c) Buyer's Performance of Obligations. Buyer shall have performed and
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complied with in all material respects all of the covenants and agreements
required by this Agreement to be performed and complied with by it within the
applicable time period set forth in this Agreement (or any of the Exhibits
attached hereto) for performance of or compliance with such covenants and
agreements. All of Buyer's representations and warranties contained in or made
pursuant to this Agreement shall have been true and correct upon the execution
of this Agreement and shall be true and correct as of the Closing Date.
If any of the conditions in subparagraphs 6(a) or 6(b) are not satisfied
prior to the Close of Escrow hereunder, Seller shall have the right by notice to
Buyer prior to the Close of Escrow, to terminate this Agreement and thereupon
the Deposit and all interest thereon while in the Deposit Account (and the
Buyer's Shell Contribution and Interior Improvement Contribution, if applicable)
shall be returned to Buyer. If the condition in subparagraph 6(c) is not
satisfied (or waived in writing by Seller), then Seller shall have the right by
notice to Buyer to terminate this Agreement and thereupon the Deposit and all
interest thereon while in the Deposit Account shall be released to or retained
by Seller as liquidated damages (and Seller shall have no obligation to return
to Buyer any expended portion of Buyer's Shell Contribution or Buyer's Interior
Improvement Contribution or which is still in the Building Shell Fund or
Interior Improvement Fund as of the date this Agreement is terminated as a
result of Buyer's breach or default under this Agreement or any of the exhibits
attached hereto).
7. Construction of Building Improvements.
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(a) Building Improvements. Prior to the Closing, Seller shall complete
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the following improvements to the Land, free from all liens and claims
(collectively, "Building Improvements"), in accordance with the terms of the
Construction Agreement attached hereto as EXHIBIT E, which shall be executed by
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Buyer and Seller contemporaneously herewith:
(i) Grading, installation of underground utilities and preparation of
the Land for building foundations, in accordance with plans and specifications
prepared by Seller's project architect ("Project Architect");
(ii) A "Building Shell," as defined in the Construction Agreement,
sufficient to accommodate approximately 91,694 square feet of rentable area,
more or less, in accordance with plans and specifications prepared by the
Project Architect (as described in the Construction Agreement) and the
definition of Building Shell attached to the Construction Agreement as Exhibit
E-3;
(iii) Certain "Land Improvements," as defined in the Construction
Agreement, including surface parking areas, landscaping, drainage, irrigation,
utility service laterals, lighting, curbs, gutters, walkways, driveways,
retaining walls, fencing and gates, planters, sign monuments, and other
improvements, in accordance with plans and specifications prepared by the
Project Architect and in accordance with the "Sitework" element of the Building
Shell definition attached to the Construction Agreement as Exhibit E-3; and
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(iv) Certain "Interior Improvements," as defined in the Construction
Agreement, in accordance with plans and specifications to be prepared by the
Seller's architect who shall be approved by Buyer and Seller.
(b) Building Improvements Costs. The total cost of construction for
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the Land Improvements and the Building Shell including, without limitation,
direct costs of construction, the general contractor's fee, on-site supervision
and overhead, architectural and engineering fees, permits, and insurance shall
be paid by Seller and Buyer as follows: Seller shall provide an allowance of
Fifty and 00/100 Dollars ($50.00) per square foot of Building Shell ("Building
Shell Allowance") to be applied to the hard costs of constructing the Building
Shell (and the Land Improvements) only. For purposes of this Agreement and the
Construction Agreement attached hereto as EXHIBIT E, the parties agree that the
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hard costs of constructing the Building Shell (and the Land Improvements) shall
be equal to the contract price for the Building Shell and Land Improvements to
be set forth in a construction contract to be entered into between Seller and
Seller's general contractor, South Bay Construction Company, an affiliate of
Seller, and shall include, without limitation, a profit and overhead fee to be
paid to South Bay Construction Company equal to 4.5% of such costs of
construction. Seller will be responsible for the payment of all costs of
obtaining approvals for the construction of the Building Shell (and Land
Improvements), all costs of designing the Building Shell and Land Improvements
(including, without limitation, architectural and engineering fees for the
Building Shell and Land Improvements) and costs of testing and inspection; it
being understood and agreed that the Building Shell Allowance shall not be
applicable to such costs of obtaining approvals for the construction of the
Building Shell or Land Improvements, costs of designing the Building Shell or
Land Improvements or costs of testing and inspection. If the hard costs of
constructing the Building Shell and Land Improvements are less than the Building
Shell Allowance, then such savings shall be credited to Buyer in the form of a
reduction in the Purchase Price of the Property. Buyer shall pay for that
portion of the total hard costs of constructing the Building Shell and Land
Improvements which is in excess of the Building Shell Allowance ("Buyer's Shell
Contribution"). Prior to the commencement of construction of the Building Shell
and Land Improvements, Buyer shall deposit Buyer's Shell Contribution in an
interest-bearing operating account to be established for the collection and
disbursement of funds in connection with the Building Shell (and Land
Improvements). The term "Building Shell Fund" shall mean the aggregate of (i)
the Building Shell Allowance (or the construction loan proceeds of Seller
allocated thereto) and (ii) Buyer's Shell Contribution. The hard costs of
construction of the Building Shell and Land Improvements shall be paid from the
Building Shell Fund in accordance with the terms of the Construction Agreement
which shall provide that the hard costs of constructing the Building Shell (and
Land Improvements) shall be paid out of the Building Shell Fund in the same
ratio as the contributions required to be made to the fund (the "Building Shell
Contribution Ratios"). If the hard costs of constructing the Building Shell (and
Land Improvements") exceeds the amount of funds in the Building Shell Fund, then
Buyer shall pay such shortfall to Seller within five (5) days following receipt
of written invoice(s) or statements from Seller setting forth the amount of such
shortfall.
The total cost of designing and construction for the Interior Improvements
including, without limitation, direct costs of construction, the general
contractor's fee, on-site supervision
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and overhead, architectural and engineering fees, permits, and insurance shall
be paid by Seller and Buyer as follows: Seller shall provide an allowance of
Thirty and 00/100 Dollars ($30.00) per square foot of Building Shell to be
applied toward the total cost of the Interior Improvements ("Interior
Improvements Allowance"). The costs of constructing the Interior Improvements
will include, without limitation, a profit and overhead fee to be paid to
Seller's general contractor, South Bay Construction Company, equal to 4.5% of
such costs of construction of the Interior Improvements. Seller anticipates that
the Interior Improvements Allowance will be funded with proceeds of the loan to
be provided by Seller's construction lender. Buyer shall pay for that portion of
the total cost of the Interior Improvements which is in excess of the Interior
Improvements Allowance ("Buyer's Interior Improvement Contribution"). At the
time when invoices for the Interior Improvement work first become due and
payable (or, if earlier, when required by the construction lender), Buyer shall
deposit Buyer's Interior Improvement Contribution in an interest-bearing
operating account to be established for the collection and disbursement of funds
in connection with the Interior Improvements. The term "Interior Improvement
Fund" shall mean the aggregate of (i) the Interior Improvements Allowance (or
the construction loan proceeds allocated thereto) and (ii) Buyer's Interior
Improvement Contribution. The cost of the Interior Improvements shall be paid
from the Interior Improvement Fund in accordance with the terms of the
Construction Agreement which shall provide that the Interior Improvements cost
shall be paid out of the Interior Improvement Fund in the same ratio as the
contributions required to be made to the fund (the "Interior Improvement
Contribution Ratios"). For example, if Buyer's Interior Improvement Contribution
is $916,940 and the Interior Improvement Allowance is $2,750,820, then 25%
(i.e., 916,940/3,667,760) of each dollar disbursed from the Interior Improvement
Fund would come from Buyer's Interior Improvement Contribution and 75% (i.e.,
2,750,820/3,667,760) of each dollar disbursed from the Interior Improvement Fund
would come from the Interior Improvement Allowance. If the total costs to design
and construct the Interior Improvements is less than the Improvement Allowance,
then any unused or undisbursed portion of the Interior Improvement Allowance
will not be advanced or made available by Seller. If the costs of constructing
the Interior Improvements exceeds the amount of funds in the Interior
Improvement Fund, then Buyer shall pay such shortfall to Seller within five (5)
days following receipt by Buyer's Representative of written invoice(s) or
statements from Seller setting forth the amount of such shortfall.
If, at any time prior to the Closing, Buyer defaults under this Agreement
and this Agreement is terminated as a result thereof, Seller shall retain all
right, title and interest in and to the Land Improvements, the Building Shell,
the Interior Improvements and the remaining balance in the Building Shell Fund
and the Interior Improvement Fund; provided that such rights shall be subject to
the rights of Seller's construction lender, if any, as to the same. In such
case, Seller shall have no obligation to reimburse or refund to Buyer for any
portion of Buyer's Shell Contribution or Buyer's Improvements Contribution which
may have been expended prior to the date this Agreement is terminated or which
was still in the Building Shell Fund or Interior Improvement Fund as of the date
this Agreement is terminated as a result of Buyer's default.
(c) Building Shell Plans. The Building Shell and Land Improvements
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shall be constructed in accordance with the terms of the definition of Building
Shell attached to the Construction Agreement as Exhibit E-3 and the Project
Scope drawings described in Exhibit E-2
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to the Construction Agreement. Buyer hereby acknowledges that, prior to the
execution of this Agreement, Buyer approved the definition of Building Shell
attached to the Construction Agreement as Exhibit E-3 and the Project Scope
drawings described in Exhibit E-2 to the Construction Agreement. Contracts. No
changes shall be made by Buyer to such Project Scope drawings referred to in
Exhibit E-2 to the Construction Agreement.
(d) Substantial Completion. The Building Improvements shall be deemed
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substantially completed upon the date which is the earlier to occur of the
following: (i) the date the City has completed its final inspection of the
Building improvements and approved the Building Improvements for occupancy
(i.e., as evidenced by the inspector's signature in the appropriate box on the
Building Permit Inspection Record which indicates that Buyer may legally occupy
the Building; (ii) the date the Project Architect and Project Contractor have
certified that the Building Improvements have been substantially completed in
accordance with the final plans and specifications, as described in the
Construction Agreement, except for any punch list items, (iii) the date the
Building Improvements would have been completed but for any Buyer Caused Delay
(as defined in the Construction Agreement), or (iv) the date Buyer occupies the
Building Shell for the purpose of conducting its business therein.
(e) Post-Closing Obligations. As soon as reasonably possible after
------------------------
Closing, Seller shall at Seller's cost, complete the following: (i) cause any
uncompleted "Punch List" items (as described in Section 6.4 of the Construction
Agreement) to be completed in accordance with the final plans and
specifications, free from all liens and claims; and (ii) cause the City to issue
a certificate of occupancy, or its equivalent for the Building Improvements. If
Seller disburses any portion of the Interior Improvement Allowance after the
Closing (which it shall not be obligated to do hereunder) to cover costs of
constructing any Interior Improvements constructed prior to or following the
Closing, then Buyer shall pay to Seller, as additional consideration for the
Property, within fifteen (15) days following the receipt of written invoice(s)
or statement(s) evidencing the costs so incurred, the amount of such Interior
Improvement Allowance so disbursed or paid by Seller following the Closing.
(f) Mechanic's Lien. If Buyer receives notice, after Closing, of any
---------------
mechanics' or materialmen's lien recorded against the Property, or any claim of
such a lien, arising out of Seller's construction of the Building Improvements,
Buyer shall give prompt written notice thereof to Seller. Seller shall remove
any such lien (or provide to Buyer a bond insuring against any damage to Buyer
as a result of foreclosure of such lien) within thirty (30) days after Seller's
receipt of such notice; provided, however, Seller shall have no obligation to
remove or bond over such lien if such lien arises as a result of Buyer failing
or refusing to pay its share of the costs of the Building Improvements, or
applicable portion thereof. Buyer shall not file or pursue any claim under the
Title Policy relating to any such lien prior to giving the notice and providing
the cure period described above to Seller, but the provisions of this
subparagraph 7(f) are not intended to waive or adversely affect Buyer's rights
or remedies under such Title Policy.
(g) Damage or Destruction. If, prior to the Closing Date, any part of
---------------------
the improvements on the Property is damaged or destroyed by fire or other
casualty, Seller shall
-10-
promptly give notice thereof to Buyer. If due to such damage or destruction
Seller or its Project Contractor reasonably determines that Project Contractor
will be delayed in substantially completing the Building Improvements beyond
March 30, 2001, or if the damage or destruction is caused by an uninsured
casualty, then Seller may elect, by delivering written notice to Buyer, to
terminate this Agreement, in which event neither party shall have any further
rights or obligations hereunder and Buyer shall be entitled to recover its
Deposit and all interest earned thereon. If Seller does not deliver such written
notice of termination, then: (1) this Agreement shall remain in full force and
effect; (2) Seller shall restore the Property; and (3) the parties shall
continue performance under this Agreement, without modification of any of its
terms and without any reduction in the Purchase Price. Seller shall have no
liabilities or obligations to Buyer, and Buyer shall have no claims for damages
or other remedies against Seller, as a result of such damage or destruction of
the Property. Seller agrees to maintain (either directly or by requiting the
Project Contractor to maintain) an all-risk insurance policy on the Building
Improvements in an amount equal to the replacement cost of the same. Seller
agrees to have Buyer named as an additional insured on such insurance policy;
provided that Buyer's right to any insurance proceeds shall be specifically
subject to the rights of Seller's construction lender under Seller's
construction loan, and limited to Buyer's Building Shell Contribution Ratio and
Buyer's Interior Improvement Contribution Ratio (as defined in subparagraph 7(b)
above), as the case may be, times the insurance proceeds available to Seller and
Buyer; provided in no event shall Buyer receive insurance proceeds in excess of
Buyer's Shell Contribution (for damage to the Building Shell) actually expended
or in excess of Buyer's Interior Improvement Contribution (for damage to the
Interior Improvements) actually expended.
(h) Possession. Possession of the Property shall be delivered by
----------
Seller to Buyer on the Closing Date immediately upon the recordation of the
Grant Deed. All risk of loss and damage to the Property from whatever source
shall be the sole responsibility of Buyer after the Closing. On the Closing
Date, Seller shall deliver to Buyer (or to Escrow Agent for the benefit of
Buyer): (i) copies of the as-built plans and specifications for the Building
Improvements and other documentation required to be delivered to be delivered to
Seller under contract(s) with the Project Contractor; and (ii) keys, codes and
combinations for locks or security devices for the Building Improvements, to the
extent under Seller's control, (iii) the documents listed in subparagraph 8(c)
below, and (iv) copies of all other information and documents relating to the
Property which are in Seller's possession.
8. Closing and Escrow. Alliance Title Company located at 1732 North
------------------
▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇. ▇▇▇▇▇, is designated and authorized to
act as "Escrow Agent" pursuant to the terms of this Agreement. Within three (3)
days after execution of this Agreement by Buyer and Seller, the parties hereto
shall deposit an executed counterpart of this Agreement with Escrow Agent and
this Agreement shall serve as instructions to Escrow Agent for consummation of
the purchase and sale contemplated hereby. Seller and Buyer agree to execute
such additional escrow instructions as may be appropriate to enable the Escrow
Agent to comply with the terms of this Agreement; provided, however, that in the
event of any conflict between the provisions of this Agreement and any
supplementary escrow instructions, the terms of this Agreement shall control.
-11-
(a) Closing Date. The Closing shall occur on a date five (5) days
------------
following the Substantial Completion of the Building Improvements (as defined
above) (the "Closing Date"). Seller shall exercise diligent efforts to break
ground on the Building Shell not later than April 1, 2000 and exercise diligent
efforts to substantially complete the Building Shell, Land Improvements and
Tenant Improvements by October 1, 2000. Seller makes no representation or
warranty as to the exact date ground will be broken on the Building Shell or the
exact date the Building Improvements will be Substantially Completed, and Seller
shall have no liability to Buyer if the actual Closing .Date does not occur on
or before October 1, 2000. The Close of Escrow on the Property (or the closing
of escrow or the Closing on the Property) shall mean the recordation of the
Grant Deed covering the Land and the Building Improvements constructed thereon.
The date escrow closes or the date of closing of escrow hereunder shall be the
date on which the Grant Deed describing the Land and Building Improvements is
recorded.
(b) Buyer-Caused Delays. In the event the Building Improvements are
-------------------
not completed by October 1, 2000 due to a Buyer-Caused Delay (as defined in the
Construction Agreement), then Buyer shall be responsible for paying the interest
incurred on the construction loan of Seller for the number of days of delay
attributable to a Buyer-Caused Delay. When the total number of days of delay
attributable to Buyer-Caused Delay equal or exceed, or when a proposed change by
Buyer to the Building Improvements will cause the total number of days of delay
attributable to Buyer-Caused Delay to equal or exceed, sixty (60) days, Seller
shall have no obligation to implement the proposed and future changes requested
by Buyer to the extent they would further delay the Close of Escrow and may
proceed to complete the Project without incorporating such requested changes.
The parties hereto agree that Seller shall be responsible for paying
the interest incurred on Seller's construction loan for the number of days of
delay attributable to a Seller Caused Delay (as defined in the Construction
Agreement) and/or a Force Majeure Delay (as defined in the Construction
Agreement). Seller shall not be responsible for any costs, expenses, damages or
liabilities incurred by Buyer as a result of a Force Majeure Delay and Buyer
agrees that it shall be responsible for any direct or indirect costs, expenses
or damages attributable to such Force Majeure Delay, such as leasing additional
space and/or the payment of holdover rent at its existing space.
(c) Delivery of Seller's Document. At or before the Closing (except to
-----------------------------
the extent otherwise specifically provided below), Seller shall deliver to Buyer
(or to Escrow Agent for the benefit of Buyer) the following:
(i) a duly executed and acknowledged Grant Deed, conveying
title to the Property to Buyer;
(ii) two (2) duly executed originals of the Assignment
Agreement;
(iii) An affidavit pursuant to Section 1445(b)(2) of the Internal
Revenue Code that Seller is not a "foreign person" within the meaning of Section
1445(f)(3) of the Internal Revenue Code;
-12-
(iv) A properly executed California Form 590 certifying that
Seller has a permanent place of business in California or is qualified to do
business in California. If Seller fails to deliver any such Form 590, Buyer
shall not be excused from its obligation to consummate the transactions
contemplated herein, but rather may deduct and withhold from the Purchase Price
an amount equal to three and one-third percent (3 1/3%) of the "sales price of
the California real property conveyed" in connection with the transactions
contemplated herein, as defined and required by the State Withholding
Provisions; and
(v) Title Policy to be issued by Title Insurer.
(d) Deliver of Purchase Price. At or before the Closing, Buyer shall
-------------------------
deliver to Seller:
(i) the Purchase Price; and
(ii) two (2) duly executed originals of the Assignment Agreement.
(e) Designation Agreement. Seller and Buyer shall each deposit such
---------------------
other instruments as are reasonably required by the escrow holder or otherwise
required to close the escrow and consummate the purchase of the Property in
accordance with the terms hereof, including, without limitation, an agreement
(the "Designation Agreement") designating Escrow Agent as the "Reporting Person"
for the transaction pursuant to Section 6045(e) of the Internal Revenue Code,
and executed by Seller, Buyer and Escrow Agent. The Designation Agreement shall
be substantially in the form attached hereto as Exhibit F.
---------
(f) Prorations. General real estate taxes and assessments payable for
----------
fiscal year 2000-2001 shall be prorated between Seller and Buyer as of the
Closing Date based on the most recent official information available in the
office of the taxing entity. Buyer shall be solely responsible for any
supplemental assessments that may be imposed against the Property as a result of
the sale of the Property to Buyer.
(g) Closing Costs. Seller shall pay the Santa ▇▇▇▇▇ County documentary
-------------
transfer tax and the premium for a CLTA standard owner's policy of title
insurance (and Buyer shall pay the excess premium associated with the issuance
of an ALTA owner's extended coverage Title Policy, if obtained by Buyer). City
of San ▇▇▇▇ transfer taxes shall be paid fifty percent (50%) by Buyer and fifty
percent (50%) by Seller. All other costs and charges of the escrow for the sale
not otherwise provided for in this subparagraph 8(g) or elsewhere in this
Agreement (including, without limitation, escrow fees and recording fees) shall
be allocated in accordance with the closing customs for Santa ▇▇▇▇▇ County. Each
party shall bear its own attorney's fees incurred in connection with the
drafting and negotiation of this Agreement.
9. Representations and Warranties of Seller. Seller hereby represents and
----------------------------------------
warrants to and covenants with Buyer as follows:
-13-
(a) Authority. Seller is a limited liability company duly organized
---------
and validly existing and in good standing under the laws of the State of
California; this Agreement and all documents executed by Seller which are to be
delivered to Buyer at the Closing are and at the time of Closing will be duly
authorized, executed and delivered by Seller, are and at the time of Closing
will be legal, valid and binding obligations of Seller enforceable against
Seller in accordance with their respective terms, and do not, and at the time of
Closing will not, violate any provision of any agreement or judicial order to
which Seller or the Property is subject.
(b) Governmental Proceedings. As of the date of execution of this
------------------------
Agreement, Seller has received no written notice of any condemnation, zoning or
other land-use regulation proceedings, either instituted or planned to be
instituted, which would detrimentally affect the use or operation of the
Property, nor has Seller received written notice of any special assessment
proceedings affecting the Property (other than as set forth in the Preliminary
Report). From the date hereof through the Closing Date, Seller shall notify
Buyer promptly of any such proceedings of which Seller becomes aware.
(c) Litigation. There is no litigation pending or, to the best of
----------
Seller's knowledge, threatened against Seller or the Property that might
detrimentally affect the use or operation of the Property for its intended
purpose or the ability of Seller to perform its obligations under this
Agreement. From the date hereof through the Closing Date, Seller shall notify
Buyer promptly of any such litigation of which Seller becomes aware.
(d) No Other Sales Contracts. Seller has not entered into any other
------------------------
contracts for the sale of the Property, other than this Agreement, and to the
actual knowledge of Seller, no other person or entity has any right of first
refusal, option or other preferential right to purchase the Property or any
interest therein.
(e) Non-Foreign Person. Seller is not a "foreign person" within the
------------------
meaning of Section 1445(f)(3) of the Internal Revenue Code.
(f) Hazardous Materials. Seller has received no written notice that
-------------------
the Property is in violation of any federal, state local or administrative
agency ordinance, law, role, regulation, order or requirement relating to
environmental conditions or Hazardous Materials. For the purposes hereof,
"Hazardous Material" shall mean any substance, chemical, waste or other material
which is listed, defined or otherwise identified as "hazardous" or "toxic" under
any federal, state, local or administrative agency ordinance or law, including,
without limitation, the Comprehensive Environmental Response, Compensation and
Liability Act, 42 U.S.C. (S)9601 et seq.; the Resource Conservation and Recovery
Act, 42 U.S.C. (S)6901 et seq.; the Federal Water Pollution Control Act, 33
U.S.C. (S)1251 et seq.; California Hazardous Substance Account Act, California
Health & Safety Code (S)25300 et seq.; California Hazardous Waste Control Law,
California Health & Safety Code (S)22100 et seq.; California ▇▇▇▇▇▇-Cologne
Water Quality Act, California Water Code (S)13000 et seq.; California
Underground Storage Tank Act, California Health & Safety Code (S)25280 et seq.;
or any regulation, order, rule or requirement adopted thereunder, as well as any
formaldehyde, urea, polychlorinated biphenyl, petroleum, petroleum
-14-
product or by-product, crude oil, natural gas, natural gas liquids, liquefied
natural gas, or synthetic gas usable for fuel or mixture thereof, radon, and
asbestos.
(g) Bankruptcy. There are no attachments, execution proceedings,
----------
assignments for the benefit of creditors, insolvency, bankruptcy, or similar
proceedings pending or, to the actual knowledge of Seller, threatened against
Seller. From the date hereof through the Closing Date, Seller shall notify Buyer
promptly of any such proceedings of which Seller becomes aware.
For the purposes of the representations and warranties made pursuant to
this paragraph 9, a statement that a fact is true to "the actual knowledge of
Seller" means that neither ▇▇▇▇▇ ▇▇▇▇▇▇ nor ▇▇▇▇▇ ▇▇▇▇ actually knows such
statement to be untrue. Except for the representations and warranties set forth
in this paragraph 9 or elsewhere in this Agreement or any document delivered
pursuant to the terms of this Agreement, Seller makes no warranties or
representations regarding the Property, including the physical, economic or
other characteristics of the Property.
If, prior to the Close of Escrow hereunder, Buyer discovers or is informed
of any fact or condition which would make any of Seller's representations or
warranties in this paragraph 9 untrue or inaccurate in a material respect, and
such fact or condition is material to Buyer's decision whether to purchase the
Property, then Buyer shall have the right to terminate this Agreement by
delivery of written notice to Seller within ten (10) days following the date
such fact or condition is discovered or becomes known to Buyer. Time is of the
essence as to the delivery of such notice of termination. If Buyer timely
delivers such notice of termination, then all rights and obligations hereunder
shall cease (except for those that expressly survive termination of this
Agreement) and, as Buyer's sole and exclusive remedy, the Deposit shall be
returned to Buyer and Seller shall refund to Buyer its Building Shell
Contribution and Interior Improvement Contribution. If, prior to the Close of
Escrow hereunder, Buyer discovers or is informed of any fact or condition which
would make any of Seller's representations or warranties in this paragraph 9
untrue or inaccurate in a material respect and Buyer does not terminate this
Agreement as provided above based on a breach by Seller of any such
representation or warranty, then Buyer shall be deemed to have waived all rights
and remedies available against Seller with respect to any breach of any
representation or warranty set forth in paragraph 9 above.
Buyer hereby acknowledges that, as of the close of escrow hereunder, it
shall have inspected the Property and observed its physical characteristics and
conditions. As of the close of escrow, Buyer waives any and all objections to
said physical characteristics and conditions of the Property which would
reasonably be disclosed by such inspection. Buyer hereby agrees that if Buyer or
any of its agents, employees or consultants discover any Hazardous Materials on,
in or under the Land or Improvements in connection with its investigation or
environmental assessment of the Property under Section 4(b) above or otherwise
(excepting therefrom any Hazardous Materials caused to be present in, on or
under the Land or Improvements by Seller or its agents or employees), and if
Buyer elects nevertheless to close escrow under this Agreement (and escrow so
closes), then Seller shall have no obligation to Buyer hereunder to clean up or
remediate such environmental conditions so discovered by Buyer or its agents,
employees or consultants (and not caused to be present by Seller or its agents
or employees) and Buyer waives all claims against
-15-
Seller with respect to such Hazardous Materials so discovered by Buyer or its
agents, employees or consultants. Buyer further acknowledges and agrees that, if
escrow closes hereunder, the Property shall be accepted by Buyer in its then "as
is" condition and that no physical, environmental, title or economic condition
of the Property shall affect the rights of either party hereto. As of the close
of escrow hereunder, Buyer shall have investigated and possessed knowledge of
operative or proposed governmental laws and regulations including, without
limitation, zoning, environmental and land use laws and regulations to which the
Property may be subject. Except for those representations and warranties set
forth in Section 9 above, Buyer has neither received nor relied upon any
representations concerning such laws and regulations made by Seller or any other
person acting on or in behalf of Seller.
BUYER SPECIFICALLY ACKNOWLEDGES AND AGREES BUYER IS NOT RELYING ON ANY
---
REPRESENTATIONS OR WARRANTIES OF ANY KIND WHATSOEVER, EXPRESS (EXCEPT AS
EXPRESSLY SET FORTH IN THIS AGREEMENT) OR IMPLIED, FROM SELLER, ITS AGENTS, OR
BROKERS AS TO ANY MATTERS CONCERNING THE PROPERTY, INCLUDING WITHOUT LIMITATION:
(I) THE QUALITY, NATURE, ADEQUACY AND PHYSICAL CONDITION OF THE PROPERTY,
INCLUDING, BUT NOT LIMITED TO, THE STRUCTURAL ELEMENTS, FOUNDATION, ROOF,
APPURTENANCES, ACCESS, LANDSCAPING, PARKING FACILITIES AND THE ELECTRICAL,
MECHANICAL, HVAC, PLUMBING, SEWAGE, AND UTILITY SYSTEMS, FACILITIES AND
APPLIANCES, (II) THE QUALITY, NATURE, ADEQUACY, AND PHYSICAL CONDITION OF SOILS,
GEOLOGY AND ANY GROUNDWATER, (III) THE EXISTENCE, QUALITY, NATURE, ADEQUACY AND
PHYSICAL CONDITION OF UTILITIES SERVING THE PROPERTY, (IV) THE DEVELOPMENT
POTENTIAL OF THE PROPERTY, AND THE PROPERTY'S USE, HABITABILITY,
MERCHANTABILITY, OR FITNESS, SUITABILITY, VALUE OR ADEQUACY OF THE PROPERTY FOR
ANY PARTICULAR PURPOSE, (V) THE ZONING OR OTHER LEGAL STATUS OF THE PROPERTY OR
ANY OTHER PUBLIC OR PRIVATE RESTRICTIONS ON USE OF THE PROPERTY, (VI) THE
COMPLIANCE OF THE PROPERTY OR ITS OPERATION WITH ANY APPLICABLE CODES, LAWS,
REGULATIONS, STATUTES, ORDINANCES, COVENANTS, CONDITIONS AND RESTRICTIONS OF ANY
GOVERNMENTAL OR QUASI-GOVERNMENTAL ENTITY OR OF ANY OTHER PERSON OR ENTITY,
(VII) THE PRESENCE OF HAZARDOUS MATERIALS ON, UNDER OR ABOUT THE PROPERTY OR THE
ADJOINING OR NEIGHBORING PROPERTY, (VIII) THE QUALITY OF ANY LABOR AND MATERIALS
USED IN ANY IMPROVEMENTS ON THE PROPERTY, (IX) THE CONDITION OF TITLE TO THE
PROPERTY, AND (X) THE ECONOMICS OF THE OPERATION OF THE PROPERTY. BUYER
ACKNOWLEDGES THAT IT SHALL USE ITS INDEPENDENT JUDGMENT AND MAKE ITS OWN
DETERMINATION AS TO THE SCOPE AND BREATH OF THE DUE DILIGENCE INVESTIGATION
WHICH IT SHALL MAKE RELATIVE TO THE PROPERTY. EXCEPT AS EXPRESSLY SET FORTH IN
THIS AGREEMENT, BUYER SHALL RELY UPON ITS OWN INVESTIGATION OF THE PHYSICAL,
ENVIRONMENTAL, ECONOMIC AND LEGAL CONDITION OF THE PROPERTY (INCLUDING, WITHOUT
LIMITATION, WHETHER THE PROPERTY IS LOCATED IN ANY AREA WHICH IS DESIGNATED AS A
SPECIAL FLOOD HAZARD
-16-
AREA, DAM FAILURE INUNDATION AREA, EARTHQUAKE FAULT ZONE, SEISMIC HAZARD ZONE,
HIGH FIRE SEVERITY AREA OR WILDLAND FIRE AREA, BY ANY FEDERAL, STATE OR LOCAL
AGENCY). BUYER UNDERTAKES AND ASSUMES THE RISKS ASSOCIATED WITH ALL MATTERS
PERTAINING TO THE PROPERTY'S LOCATION IN ANY AREA DESIGNATED AS A SPECIAL FLOOD
HAZARD AREA, DAM FAILURE INUNDATION AREA, EARTHQUAKE FAULT ZONE, SEISMIC HAZARD
ZONE, HIGH FIRE SEVERITY AREA OR WILDLAND FIRE AREA, BY ANY FEDERAL, STATE OR
LOCAL AGENCY. THE PROVISIONS OF THIS PARAGRAPH SHALL INDEFINITELY SURVIVE THE
CLOSE OF ESCROW HEREUNDER OR TERMINATION OF THIS AGREEMENT AND SHALL NOT BE
MERGED INTO THE GRANT DEED.
Without limiting the above, as of the Close of Escrow, Buyer waives on
behalf of itself and its agents, employees, affiliates, partners, shareholders,
members, successors and assigns, any and all right to recover from Seller and
from Seller's members, the affiliates of Seller and the members, partners,
trustees, shareholders, directors, officers, employees and agents of each of
them (collectively, the "Seller Related Parties"), and forever releases and
discharges Seller and the Seller Related Parties from any and all damages,
claims, losses, liabilities, penalties, fines, liens, judgments, costs or
expenses whatsoever (including, without limitation, attorneys' fees and costs),
whether direct or indirect, known or unknown, foreseen or unforeseen, that may
arise on account of or in any way be connected with the Property, including
without limitation title to the Property, the physical condition of the Property
or any law or regulation applicable thereto (including, without limitation, the
Comprehensive Environmental Response, Compensation and Liability Act of 1980, as
amended (42 U.S.C. Sections 9601 et seq.), the Resource Conservation and
-- ---
Recovery Act of 1976 (42 U.S.C. Sections 6901 et seq.), the Federal Water
-- ---
Pollution Control Act (33 U.S.C. Sections 1251 et seq.), the Toxic Substance
-- ---
Control Act (15 U.S.C. Sections 2601 et seq.), the California Hazardous Waste
-- ---
Control Law (California Health and Safety Code Sections 25100 et seq.), the
-- ---
▇▇▇▇▇▇-Cologne Water Quality Control Act (California Water Code Sections 13000
et seq.), and the Safe Drinking Water and Toxic Enforcement Act (California
-- ---
Health and Safety Code Section 25249.5 et seq.)). The above waiver and release
-- ---
shall not constitute a waiver or release of any warranty claims that Buyer may
have against South Bay Construction Company or any of its subcontractors or the
Project Architect based on the design or construction of the Building
Improvements.
In connection with the immediately preceding paragraph, Buyer
expressly waives the benefits of Section 1542 of the California Civil Code,
which provides as follows: "A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH
THE CREDITOR DOES NOT KNOW OR SUSPECT TO EXIST IN HIS FAVOR AT THE TIME OF
EXECUTING THE RELEASE, WHICH IF KNOWN BY HIM MUST HAVE MATERIALLY AFFECTED HIS
SETTLEMENT WITH THE DEBTOR."
Buyer's Initial /s/ XXX Seller s Initials /s/ XXX
------- -------
10. Representation and Warranties of Buyer. Buyer hereby represents and
--------------------------------------
warrants to Seller as follows: this Agreement and all documents executed by
Buyer which are to be delivered to Seller at the Closing are or at the time of
Closing will be duly authorized, executed
-17-
and delivered by Buyer, and are or at the Closing will be legal, valid and
binding obligations of Buyer, and do not and at the time of Closing will not,
violate any provisions of any agreement or judicial order to which Buyer is
subject.
11. Cooperation. Seller hereby irrevocably authorizes Buyer and its
-----------
agents during the Due Diligence Period to make all inquiries with and
applications to any third party, including any governmental authority, as Buyer
may reasonably require to complete its due-diligence. Buyer shall cooperate and
do all acts as may be reasonably required or requested by Seller with regard to
Seller's obtaining its contemplated construction loan from its construction
lender. Buyer agrees to execute any documents which may be reasonably required
by Seller's construction lender as a condition to making the construction loan.
12. General.
-------
(a) Notices. Any notice, consent or approval required or permitted to
-------
be given undo this Agreement shall be in writing and shall be deemed to have
been given upon (i) hand delivery, or (ii) one (1) day after being deposited
with Federal Express or another reliable overnight courier service or
transmitted by facsimile telecopy, and addressed as follows:
If to Seller: Enzo Drive, LLC
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇ ▇▇▇▇▇▇▇▇▇ and ▇▇▇▇▇ ▇▇▇▇▇▇
Phone: ▇▇▇-▇▇▇-▇▇▇▇
Fax: ▇▇▇-▇▇▇-▇▇▇▇
With a copy to: Berliner ▇▇▇▇▇
▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇., ▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇ ▇▇▇▇, Esq.
Phone: ▇▇▇-▇▇▇-▇▇▇▇
Fax: ▇▇▇-▇▇▇-▇▇▇▇
If to Buyer: Sunrise Telecom
▇▇ ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇ ▇▇▇▇▇▇▇▇
Phone: ▇▇▇-▇▇▇-▇▇▇▇
Fax: ▇▇▇-▇▇▇-▇▇▇▇
or such other address as either party may from time to time specify in writing
to the other.
(b) Brokers and Finders. Neither party has had any contact or dealings
-------------------
regarding the Property, or any communication in connection with the subject
matter of this
-18-
transaction, through any real estate broker, agent or person other than CPS who
can claim a right to a commission or finder's fee in connection with the sale
contemplated herein. If, and only if, escrow closes hereunder, then Seller shall
pay CPS a brokerage commission pursuant to the terms of a separate written
agreement between Seller and CPS. If any broker or finder perfects a claim for a
commission or finder's fee based upon any such contact, dealings or
communication, the party through whom the broker or finder makes its claim shall
be responsible for said commission or fee and all costs and expenses (including
reasonable attorneys' fees) incurred by the other party in defending against the
same. The provisions of this paragraph shall survive the Closing.
(c) Successors and Assigns. This Agreement may not be assigned by
----------------------
Buyer without Seller's prior written consent. Notwithstanding the foregoing,
Seller agrees that Buyer may assign its rights under this Agreement to an
"Affiliate" of Buyer; provided that such an assignment shall not relieve Buyer
from any of its obligations hereunder and Seller shall continue to have the
right to proceed directly against Buyer in the event Buyer's Affiliate fails to
timely perform any of the Buyer's obligations hereunder. For purposes of the
subparagraph 11 (c) the term "Affiliate" shall mean a legal entity which is
controlled by, is under common control with, or which controls Buyer. This
Agreement may be assigned by Seller to an entity approved by Buyer (which
approval shall not be unreasonably withheld or delayed). Seller hereby agrees
that Buyer shall not be deemed unreasonable if Buyer fails to approve an
assignment of this Agreement by Seller to a third party, where such third party
does not have a net worth at least equal to that of Seller as of the date of
execution of this Agreement. Subject to the foregoing, this Agreement shall be
binding upon and inure to the benefit of the parties hereto and their respective
successors, heirs, administrators and assigns.
(d) Amendments. Except as otherwise provided herein, this Agreement
----------
may be amended or modified only by a written instrument executed by Seller and
Buyer.
(e) Governing Law. This Agreement shall be governed by and construed
-------------
in accordance with the laws of the State of California.
(f) Merger of Prior Agreements. This Agreement and the exhibits hereto
--------------------------
(including, without limitation, the Construction Agreement attached hereto as
EXHIBIT E, which shall be executed by Buyer and Seller contemporaneously
---------
herewith) constitute the entire agreement between the parties and supersede all
prior agreements and understandings between the parties relating to the subject
matter hereof.
(g) Enforcement. If either party hereto fails to perform any of its
-----------
obligations under this Agreement or if a dispute arises between the parties
hereto concerning the meaning or interpretation of any provision of this
Agreement, then the defaulting party or the party not prevailing in such dispute
shall pay any and all costs and expenses incurred by the other party on account
of such default and/or in enforcing or establishing its rights hereunder,
including, without limitation, court costs or costs of arbitration and
attorneys' fees and disbursements. Any such attorneys' fees and other expenses
incurred by either party in enforcing a judgment in its favor under this
Agreement shall be recoverable separately from and in addition to any other
-19-
amount included in such judgment, and such attorneys' fees obligation is
intended to be severable from the other provisions of this Agreement and to
survive and not be merged into any such judgment.
(h) Time of the Essence. Time is of the essence of this Agreement.
-------------------
(i) Severability. If any provision of this Agreement or the
------------
application thereof to any person, place or circumstance shall be held by a
court of competent jurisdiction to be invalid, unenforceable or void, the
remainder of this Agreement and such provisions as applied to other persons,
places and circumstances shall remain in full force and effect.
13. Like-Kind Exchange. Each party agrees to reasonably cooperate
------------------
with the other in the event a party attempts to effectuate a Section 1031
exchange with respect to the Property. Such cooperating party shall not be
required to obtain title to any exchange or target property, execute any
promissory note or other document or instrument which would or could impose
personal liability upon such cooperating party, or incur any additional expense,
cost or liability whatsoever (including, but not limited to, liabilities or
warranties of title, or assumption of indebtedness) with regard to the Section
1031 exchange or exchanges. The party engaging in such Section 1031 exchange
hereby agrees to indemnify and hold harmless the other party from any claim,
damage, liability, demand, cause of action, loss, cost, or expense (including,
without limitation, reasonable attorney's fees) such other party may suffer or
incur as a result of such other party's participation in the aforesaid exchange
or exchanges. Notwithstanding the foregoing, each party's agreement hereunder to
participate in a tax-deferred exchange or exchanges shall not extend the Closing
date hereunder. Neither party shall, by this Agreement or acquiescence to the
exchange contemplated by this Paragraph 13, (a) have its rights under this
Agreement affected or diminished in any manner or (b) be responsible for
compliance with or be deemed to have warranted to the other party that any
exchange in fact complies with Section 1031 of the Internal Revenue Code of
1986, as amended. The obligations of Seller and Buyer under this Paragraph 13
shall survive the Close of Escrow.
14. Default. In the event of a default of Buyer under the terms of
-------
this Agreement, Seller's rights and remedies shall be limited to those set forth
in subparagraph 2(c) herein; provided however Seller shall retain any rights
against Buyer that Seller may have hereunder in connection with Buyer's (or its
consultant's) activities on the Land. In the event of a default of Seller under
the terms of this Agreement, Buyer shall be entitled to avail itself of all of
its rights which it may have at law or in equity by reason of such default,
including the right to seek specific performance of this Agreement or terminate
this Agreement and have the Deposit and the interest earned thereon and Buyer's
Building Shell Contribution and Buyer's Initial Improvement Contribution (and
any interest thereon) returned to Buyer.
-20-
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first above written.
SELLER BUYER
------ -----
ENZO DRIVE, LLC SUNRISE TELECOM
a California limited liability company a
By: /s/ XXX By: /s/ XXX
-------------------- --------------------
Its: Member Its: CFO
-------------------- --------------------
By: By:
-------------------- --------------------
Its: Its:
-------------------- --------------------
ESCROW AGENT
------------
ALLIANCE TITLE COMPANY
By:
--------------------
Its:
--------------------
-21-
[GRAPHIC OF EXHIBIT A]
STREET MAP SHOWING LOCATION OF PROPERTY
OF A NEW TWO STORY BUILDING FOR
ENZO DRIVE
ENZO DRIVE AT THE FERRARI DRIVE
SAN JOSE, CALIFORNIA
EXHIBIT A
SITE ANALYSIS
PARKING
NEW BUILDING 91,694 SQ. FT.
91,694 X .85 = 77,940 NET SQ. FT.
PARKING PROVIDED = 325 CARS
PARKING RATIO - 325/77.94 4.2/1000
EXISTING BUILDING 58,785 SQ. FT.
58,785 X .85 = 49,967 NET SQ. FT.
PARKING PROVIDED = 234 CARS
PARKING RATIO - 234/49.98 4.7/1000
TOTAL BOTH BUILDINGS 150,479 SQ. FT.
150,479 X .85 = 127,907 NET SQ. FT.
PARKING PROVIDED = 559 CARS
PARKING RATIO - 559/127.9 4.4/1000
COVERAGE:
NEW BUILDING
SITE AREA 8.07 ACRES (264,407 SQ. FT.)
BUILDING (F.A.R.) 91,694 SQ. FT. = 34%
BUILDING FOOTPRINT 45,847 SQ. FT. = 17%
LANDSCAPE 125,605 SQ. FT. = 48%
PARKING 92,955 SQ. FT. = 35%
EXISTING BUILDING
SITE AREA 4.94 ACRES (264,407 SQ. FT.)
BUILDING (F.A.R.) 58,785 SQ. FT. = 34%
BUILDING FOOTPRINT 58,785 SQ. FT. = 17%
LANDSCAPE 62,251 SQ. FT. = 48%
PARKING 94,150 SQ. FT. = 35%
TOTAL SITE
SITE AREA 11.01 ACRES (264,407 SQ. FT.)
BUILDING (F.A.R.) 150,479 SQ. FT. = 34%
BUILDING FOOTPRINT 104,632 SQ. FT. = 17%
LANDSCAPE 187,858 SQ. FT. = 48%
PARKING 187,105 SQ. FT. = 35%
EXHIBIT B
FORM OF GRANT DEED
------------------
Order No. SPACE ABOVE THIS LINE FOR RECORDER'S USE
Escrow or Loan No.
RECORDING REQUESTED BY AND
WHEN RECORDED MAIL TO:
-------------------------------------------------------------------------------
Mail Tax Statements to:
---------------------------
---------------------------
---------------------------
Signature of Declarant or Agent determining tax --
Firm Name
-----------------------------------------------------------------------------
A.P.N.
GRANT DEED
FOR VALUABLE CONSIDERATION, receipt of which is hereby acknowledged,
ENZO DRIVE, LLC a California limited liability company hereby GRANT(S) to
that certain real property in the City of San ▇▇▇▇, County of Santa ▇▇▇▇▇, State
of California, more particularly described in EXHIBIT A attached hereto and
---------
incorporated herein by this reference.
This conveyance is made subject to all liens and encumbrances of record.
Dated: ENZO DRIVE, LLC
--------------- a California limited liability company
By:
-----------------------------------
Its:
-----------------------------------
-1-
STATE OF CALIFORNIA
ss.
COUNTY OF
On , before me, , personally appeared ,
[ ] personally known to me -OR- [ ] proved to me on the basis of satisfactory
evidence to be the person(s) whose name(s) is/are subscribed to the within
instrument and acknowledged to me that he/she/they executed the same in
his/her/their authorized capacity(ies), and that by his/her/their signature(s)
on the instrument the person(s), or the entity upon behalf of which the
person(s) acted, executed the instrument
WITNESS my hand and official seal.
---------------------------------------------------------
SIGNATURE OF NOTARY
CAPACITY CLAIMED BY SIGNER
-----------------------------
Though statute does not require the Notary to fill in the data below, doing so
may prove invaluable to persons relying on the document.
[ ] INDIVIDUAL
[ ] CORPORATE OFFICERS(S)
-----------------------------
Title(s)
[ ] PARTNER(S) [ ] LIMITED
[ ] GENERAL
[ ] ATTORNEY-IN-FACT
[ ] TRUSTEE(S)
[ ] GUARDIAN/CONSERVATOR
[ ] OTHER:
----------------------
----------------------
SIGNER IS REPRESENTING:
----------------------
Name of Person(s) or Entity(ies)
-----------------------------
-----------------------------
-2-
EXHIBIT C
ASSIGNMENT AGREEMENT
--------------------
THIS ASSIGNMENT AGREEMENT ("Assignment") is made as of
, , by ENZO DRIVE, LLC, a California limited
liability company ("Assignor") in favor of SUNRISE TELECOM, a
("Assignee").
A. Simultaneously herewith, Assignor shall sell to Assignee that certain
land ("Land") and all of the improvements thereon ("Improvements") described in
that certain Purchase and Sale Agreement dated , 1999 ("Purchase
Agreement") between Assignor and Assignee.
B. In connection with the foregoing conveyance, Assignor desires to
simultaneously assign to Assignee, and Assignee desires to accept and assume
from Assignor, Assignor's entire right, title and interest in those contracts
and other agreements which relate to the construction, development and/or
operation of the Land and Improvements on the terms and conditions set forth
herein. All capitalized terms not otherwise defined herein shall have the same
meanings given to such terms in the Purchase Agreement.
NOW, THEREFORE, for good and valuable consideration, Assignor and Assignee
agree as follows:
1. Assignment. Assignor hereby assigns, transfers, sets over and delivers
----------
to Assignee, to the extent assignable or transferable, all of Assignor's right,
title and interest in and to all preliminary and final development plans and
specifications, architectural drawings (excluding, any copyright owned by the
architect who prepared such drawings), environmental reports, map approvals, and
any and all of the warranties and guaranties in or relating to the construction
agreement for construction of the Land Improvements, Building Shell Improvements
and Interior Improvements, as the case may be (collectively, the "Agreements"),
as the same may be amended or otherwise modified from time to time. The
foregoing assignment encompasses the right of Assignee to receive proceeds of
any insurance, indemnity, warranty or guaranty with respect to any of the
Agreements.
Assignor reserves from the foregoing assignment of plans and specifications
for the Improvements and warranties and guaranties applicable to the
Improvements such right, title and interest to the extent necessary to enable
Assignor to perform its post-closing obligations as described in subparagraph
7(e) of the Purchase Agreement referred to above and the full right, power and
authority to pursue claims against parties who prepared such plans and
specifications and issued such guaranties and warranties.
2. Further Assurances. Assignor shall execute, at its cost, upon
------------------
Assignee's reasonable request, any documents necessary to cause the specific
assignment of any particular Agreements which are necessary, proper or desirable
in Assignee's judgment to carry out the purposes of this Assignment.
-1-
3. Obligations. Assignee shall observe, perform, and discharge duly
-----------
and punctually all material obligations, terms, covenants, conditions and
warranties to be performed by it pursuant to the Agreements.
4. Counterparts. This Assignment may be executed in any number of
------------
counterparts, each of which counterparts shall be deemed to be an original and
all of which together shall constitute but one and the same Assignment.
5. Enforcement. If either party hereto fails to perform any of its
-----------
obligations under this Agreement or if a dispute arises between the parties
hereto concerning the meaning or interpretation of any provision of this
Agreement, then the defaulting party or the party not prevailing in such dispute
shall pay any and all costs and expenses incurred by the party on account of
such default and/or in enforcing or establishing its rights hereunder,
including, without limitation, court costs or costs of arbitration and
attorneys' fees and disbursements. Any such attorney's fees and other expenses
incurred by either party enforcing a judgement in its favor under this Agreement
shall be recoverable separately from and in addition to any other amount
included in such judgement, and such attorneys' fees obligation is intended to
be severable from the other provisions of this Agreement and to survive and not
be merged into any such judgement.
6. Governing Law. This Assignment shall be governed by and
-------------
construed in accordance with the laws of the State of California.
IN WITNESS WHEREOF, Assignor and Assignee have executed this
Assignment on the day and year first above written.
ASSIGNOR: ASSIGNEE:
ENZO DRIVE, LLC SUNRISE TELECOM,
a California limited liability company a
--------------------------------
By By
--------------------------------- --------------------------------
Its Its
--------------------------------- --------------------------------
-2-
EXHIBIT D
LIST OF DOCUMENTS DELIVERED TO AND RECEIVED BY BUYER
Sunrise Telecom, a , hereby acknowledges that it has received
------------
the following documents from ENZO DRIVE, LLC.:
1. Phase I Environmental Site Assessment prepared by ATC Associates dated
August 8, 1997
2. Geotechnical Investigation and Pavement Design prepared by United Soil
Engineering dated August 12, 1997
-2-
EXHIBIT E
---------
CONSTRUCTION AGREEMENT
----------------------
This Construction Agreement ("Agreement") dated as , 1999, is made by
and between ENZO DRIVE, LLC, a California limited liability company ("Seller"),
and SUNRISE TELECOM, a ("Buyer").
ARTICLE 1
DEFINITIONS
-----------
1.1 Building. That certain two-story building with parking on grade to be
--------
constructed on the real property located off of Enzo Drive and Rue Ferrari in
San Jose, California and more particularly depicted in Exhibit E-1 attached
-----------
hereto.
1.2 Building Plans. Final calculations, designs, drawings and
--------------
specifications prepared by the Project Architect and its engineers and other
consultants for the Land Improvements and Building Shell. The final Building
Plans for the Land Improvements and Building Shell shall be a logical evolution
of, and consistent with, the Project Scope Drawings previously approved by Buyer
and referred to in Exhibit E-2 attached hereto.
-----------
1.3 Building Shell. The basic shell of the Building, as more particularly
--------------
described in the final Building Plans prepared by the Project Architect
(constituting a logical evolution of the Project Scope Drawings referred to in
Exhibit E-2), and further described in the definition of Building Shell attached
------------
hereto as Exhibit E-3.
-----------
1.4 Building Shell Allowance. The amount contributed by Seller toward the
------------------------
total hard cost of constructing the Building Shell and Land Improvements, which
amount shall not exceed Fifty Dollars ($50.00) per square foot of the Building
Shell, and which amount may be funded in whole or in part by the Construction
Lender. For purposes of this Agreement, the parties hereto agree that the hard
costs of constructing the Building Shell and the Land Improvements shall be
equal to the contract price for the Building Shell and Land Improvements to be
set forth in a construction contract to be entered into between Seller and the
Project Contractor, South Bay Construction Company, an affiliate of Seller, and
shall include, without limitation, a profit and overhead fee to be paid to the
Project Contractor equal to 4.5% of such costs of construction.
1.5 Building Shell Fund. The aggregate of (i) Construction Loan proceeds
-------------------
which have been specifically allocated to the payment of the Building Shell
Allowance (and any additional amount which may be contributed by Seller) and
(ii) funds contributed by Buyer as needed to pay all hard costs of constructing
the Building Shell and Land Improvements, as more fully described in Section 2.2
-----------
of this Agreement.
1.6 Buyer's Change. Any changes to the interior Improvement Plans and the
--------------
Interior Improvements requested by Buyer.
-1-
1.7 Buyer's Equipment. Equipment and other personal property required by
-----------------
Buyer in the operation of its business, other than such personal property
installed as a part of the interior Improvement Plans, including equipment and
other installations necessary for obtaining a "right to occupy" from the City,
and including installation of necessary utility meters.
1.8 Buyer's Interior Improvement Contribution. The amount to be
-----------------------------------------
contributed by Buyer toward the total cost of the Interior Improvements, which
amount shall be all costs in excess of the Interior Improvement Allowance.
1.9 Buyer's Shell Contribution. The amount to be contributed by Buyer
--------------------------
toward the total hard costs of constructing the Building Shell and Land
Improvements, which amount shall be all hard costs of constructing the Building
Shell and Land Improvements in excess of the Building Shell Allowance.
1.10 Buyer-Caused Delay. Any delay, unless attributable to a condition or
------------------
event described as a Force-Majeure Delay, (i) caused by the failure of Buyer or
its respective contractors, agents or employees, to act within the time limits
set forth in this Agreement, (ii) in receiving or installing equipment ordered
to Buyer's specifications or in receiving permits, permissions or approvals for
the storage or use of Hazardous Material which are the responsibility of Buyer
to obtain; (iii) resulting from Buyer's request for materials, finishes or
installations which are unavailable or nonstandard; (iv) resulting from the
untimely delivery or installation of any of Buyer's Equipment; (v) by Buyer in
funding Buyer's Contribution to the Building Shell Fund or Interior Improvement
Fund within the time periods specified in Section 2.2 or Section 2.3, as the
case may be, of this Agreement or as provided in paragraph 7 of that certain
Purchase and Sale Agreement and Escrow Instructions dated , 1999, between
Seller and Buyer (the "Purchase Agreement"); (vii) caused by any personal injury
or property damage caused by the negligence or wilful misconduct of Buyer or any
of its agents, employees, consultants or contractors; (viii) resulting from or
arising out of any changes orders requested by Buyer, or Buyer modifying the
plans and specifications for the Interior Improvements, or any portion thereof
after the same have been approved by Buyer and Seller, (ix) interference with
the substantial completion of any off-site improvements resulting from the acts
of Buyer or any of its agents, employees, consultants or contractors, (x) caused
by physical interference with or damage to the construction of the Building
Shell or the Interior improvements by Buyer or any of its agents, employees,
contractors or consultants; or (xi) caused by the failure of the Interior
Improvement Plans to be approved by Buyer and Seller by April 15, 2000.
1.11 City. The City of San ▇▇▇▇, and any other governmental agencies and
----
entities involved in the permit and approval process for Building Plans or
Interior Improvement Plans.
1.12 Construction Lender. That lender or lenders which make the
-------------------
Construction Loan.
1.13 Construction Panel. A panel consisting of one of Seller's
------------------
Representatives, one of Buyer's Representatives, the Project Architect, and the
Project Contractor. For purposes of this
-2-
Agreement and construction of the Building Shell, Interior Improvements and Land
Improvements, the parties hereto acknowledge that ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ shall initially
be Buyer's sole Representative and person to whom instructions may be given, on
behalf of Buyer; however, Buyer reserves the right to substitute a new Buyer'
Representative upon delivery of written notice from Buyer to Seller.
1.14 Cost Estimate. An estimate of the cost of materials and construction
-------------
for completing the Interior Improvements, including without limitation the
following: (a) the cost of labor and materials provided by subcontractors to the
Project Contractor, including design-build and design-assist engineering
subcontractors; (b) direct costs for the project manager, field superintendent,
on-site administrative support, general labor (including trash removal) provided
by the Project Contractor, miscellaneous materials/tools provided by the Project
Contractor, on site office supplies, blue prints, safety equipment, and
security; (e) building permits and related fees for the Interior Improvements,
including but not limited to plan check and building permit fees, water, sewer
and other utility connection or service fees (including fees for excess
capacity), health department fees, hazardous material permit fees (if
applicable), and any other similar fees; (d) on-site supervision costs, which
include an allocable portion of the salary of any on-site supervisor of the
Project Contractor and the cost of any on-site construction facilities,
including, but not limited to, office supplies, postage, maintenance, telephone,
and utilities, (e) overhead, which includes general administrative overhead of
the Project Contractor associated with the Interior Improvements including
salaries and benefits for receptionist, secretarial, accounting, estimating,
department head supervision, licenses, legal, insurance, office supplies,
postage, computer supplies and maintenance, telephone, rent, utilities, off-site
office furniture rental, office equipment maintenance and equipment property
tax, and all other main office administrative, accounting and other overhead
costs; (f) the cost of any bonds which may be required of the Project Contractor
by the City, Buyer, or Construction Lender; (g) the premiums for any insurance
described in Sections 5.4 and 5.5 hereof; (h) the Project Contractor's fee; and
(i) a contingency to be reserved for costs for adjustments to the actual costs
of subcontractor's work.
1.15 Force Majeure Delay. Any delay which is attributable to any: (a)
-------------------
actual delay or failure to perform attributable to any strike, lockout or other
labor or industrial disturbance (whether or not on the part of the employees of
Seller or its contractors or other representatives), civil disturbance; future
order of any governmental entity claiming jurisdiction; act of a public enemy;
war; riot, sabotage, blockade, or embargo; or inability to secure customary
materials, supplies or labor through ordinary sources by reason of regulation or
order of any government or regulatory body; (b) delay attributable to the
failure to secure permits and approvals within a reasonable time period
following submittal of the application(s) for such permits or approvals due to
action or inaction of the City; (c) delay in completing plans and specifications
because of changes in any laws (including, without limitation, the Americans
with Disabilities Act of 1990 (the "ADA"))or building requirements, or the
interpretation thereof; or (d) delay attributable to lightning, earthquake,
fire, rain, storm, flood, washout, explosion, or any other cause beyond the
reasonable control of the party from whom performance is required, or any of its
contractors or other representatives. A Force-Majeure Delay shall not include a
delay due to financial inability of a party.
-3-
1.16 Interior Improvements. The improvements within the Building Shell
---------------------
required by Buyer in the operation of its business described in the Interior
Improvement Plans.
1.17 Interior Improvements Allowance. The amount contributed by Seller
-------------------------------
toward the total cost of the Interior Improvements, which amount shall not
exceed Thirty Dollars ($30.00) per square foot of the Building Shell, which
amount Seller anticipates will be funded by the Construction Lender.
1.18 Interior Improvement Fund. The aggregate of (i) Construction Loan
-------------------------
proceeds which have been specifically allocated to the payment of the Interior
Improvements Allowance (and any additional amount which may be contributed by
Seller) and (ii) funds contributed by Buyer as needed to pay all costs and
expenses associated with the Interior Improvements, as more fully described in
Section 2.3 of this Agreement.
-----------
1.19 Interior Improvement Plans. Final calculations, designs, drawings and
--------------------------
specifications prepared by the Project Architect and its engineers and other
consultants for the Interior Improvements, including all architectural,
plumbing, mechanical, and electrical drawings, and all structural calculations,
energy calculations and other engineering calculations necessary to acquire a
building permit.
1.20 Land Improvements. Surface parking areas, landscaping, drainage,
-----------------
irrigation, gutters, sidewalks, lighting, walkways, driveways and other
improvements and appurtenances relating to ingress and egress, preparation of
site (rough graded pad, excluding concrete work and other improvements), for
exterior trash enclosures, if applicable, and any other exterior enclosures and
structures (although Land Improvements shall not include such enclosures and
structures themselves).
1.21 Project. The real property upon which the Building will be
-------
constructed, the Land Improvements, the Building Shell, and the Interior
Improvements.
1.22 Project Architect. The Project Architect for the design of the
-----------------
Building Shell and Land Improvements shall be Arc Tec, Inc. who has been
retained by Seller. Arc Tec may retain civil engineers, structural engineers,
landscaping architects and other consultants. The Project Architect for
preparation of preliminary and final Interior Improvement Plans shall be
selected jointly by Seller and Buyer on or before December 10, 1999.
1.23 Project Contractor. South Bay Construction Company, the contractor
------------------
selected by Seller and approved by Buyer for the construction of the Building
Shell, Land Improvements and the Interior Improvement Work.
1.24 Intentionally Omitted.
---------------------
1.25 Seller's Representative. ▇▇▇▇▇ ▇▇▇▇▇▇ and ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
-----------------------
-4-
1.26 Seller-Caused Delay. Any delay, unless attributable to a condition or
-------------------
event described as a Force-Majeure Delay, caused by the failure of Seller, the
Project Contractor, or their respective contractors, agents or employees, to act
within the time limits set forth in this Agreement.
1.27 Substantial Completion. The date the Land Improvements, the Building
----------------------
Shell and the Interior Improvements have been completed which shall be deemed to
be the earlier of (i) the date Buyer takes occupancy of the Building for the
purpose of conducting its business therein; (ii) the date the City has completed
its final inspection of the Building and determined that the Land Improvements,
the Building Shell and the Interior Improvements are approved for occupancy, as
evidenced by the City's sign-on the final inspection card for such improvements;
(iii) the date the Project Architect(s) has certified that the Building Shell
and the Interior Improvements have been substantially completed in accordance
with the Building Plans and the Interior Improvement Plans, respectively, except
for any punch-list items, or (iv) the date the Building Shell and Interior
Improvements would have been completed but for any Buyer Caused Delay.
ARTICLE 2
GENERAL REQUIREMENTS
--------------------
2.1 Project Schedule. Seller and Buyer agree to develop, design and
----------------
exercise diligent efforts to construct the Land Improvements, Building Shell,
and the Interior Improvements in accordance with this Agreement and the time and
responsibility criteria set forth in this Agreement.
2.2 Building Shell Fund.
--------------------
2.2.1 The Building Shell Fund may, at Seller's election, be
maintained with the Construction Lender (or an escrow holder selected by Seller
in its sole discretion), which shall hold and disburse the funds in accordance
with instructions approved by Seller and Buyer, including provisions for payment
of contractors and appropriate lien waivers.
2.2.2 Seller shall provide evidence reasonably satisfactory to Buyer
that the loan to be provided by the Construction Lender (together with any funds
provided by Seller, if any) includes funds sufficient to pay the Building Shell
Allowance. At or prior to the funding of the loan to be provided by the
Construction Lender, Buyer shall deposit Buyer's Shell Contribution in the
Building Shell Fund. The Building Shell Fund shall be drawn upon by Seller (or
disbursed by Construction Lender) as construction progresses and funds are
needed to pay the hard costs of constructing the Building Shell and Land
Improvements, with the hard costs of constructing the Building Shell and Land
Improvements being paid in the same ratio as the contributions required to be
made to the Building Shell Fund. Any interest earned on funds deposited in the
fund control account shall be added to the Building Shell Fund.
2.2.3 The Building Shell Fund shall be drawn upon by Seller (or
disbursed by Construction Lender) as construction progresses and funds are
needed to pay the hard cost of
-5-
constructing the Building Shell and Land Improvements, with the hard cost of
constructing the Building Shell and Land Improvements being paid in the same
ratio as the contributions required to be made to the Building Shell Fund. Any
interest earned on funds deposited in the fund control account shall be added to
the Building Shell Fund.
2.2.4 If at any time during construction of the Building Shell or
Land Improvements, the remaining hard cost to complete the Building Shell or
Land Improvements exceeds the then-remaining balance of the Building Shell Fund,
Buyer shall contribute the necessary funds within five (5) days after Seller's
written request therefor, accompanied by appropriate invoices evidencing the
work to be performed. Seller may, but shall not be required to, make any
contributions which Buyer fails to make, subject to immediate reimbursement by
Buyer for the amount paid or Seller may halt construction if, at any time during
the course of construction, the remaining balance of the Building Shell Fund is
insufficient to pay the actual hard costs of construction expected to become due
within the following thirty (30) days because of Buyer's failure to contribute
the necessary funds. Buyer's failure to contribute any portion of Buyer's Shell
Contribution to the Building Shell Fund within five (5) days after Seller's
written request therefor shall be a material breach of this Agreement and the
Purchase Agreement, and shall be a Buyer-Caused Delay.
2.3 Interior Improvement Fund.
-------------------------
2.3.1 The Interior Improvement Fund may, at Seller's election, be
maintained with the Construction Lender (or an escrow holder selected by Seller
in its sole discretion), which shall hold and disburse the funds in accordance
with instructions approved by Seller, including provisions for payment of
contractors and appropriate lien waivers.
2.3.2 Seller shall provide evidence reasonably satisfactory to Buyer
that the loan to be provided by the Construction Lender (together with any funds
provided by Seller, if any) includes funds sufficient to pay the Interior
Improvements Allowance. At or prior to the funding of the loan to be provided by
the Construction Lender, Buyer shall deposit Buyer's Interior Improvement
Contribution in the Interior Improvement Fund.
2.3.3 The Interior Improvement Fund shall be drawn upon by Seller (or
disbursed by Construction Lender) as construction progresses and funds are
needed to pay the cost of the Interior Improvements, with the cost of the
Interior Improvements being paid in the same ratio as the contributions required
to be made to the Interior Improvement Fund. Any interest earned on funds
deposited in the fund control account shall be added to the Interior
Improvement Fund.
2.3.4 If at any time during construction of the Interior
Improvements, the remaining cost to complete the Interior Improvements exceeds
the then-remaining balance of the Interior Improvement Fund, Buyer shall
contribute the necessary funds within five (5) days after Seller's written
request therefor, accompanied by appropriate invoices evidencing the work to be
performed. Seller may, but shall not be required to, make any contributions
which Buyer fails to make, subject to immediate reimbursement by Buyer for the
amount paid or Seller may halt
-6-
construction if, at any time during the course of construction, the remaining
balance of the Interior Improvement Fund is insufficient to pay the actual costs
of construction expected to become due within the following thirty (30) days
because of Buyer's failure to contribute the necessary funds. Buyer's failure to
contribute any portion of Buyer's Interior Improvement Contribution to the
Interior Improvement Fund within five (5) days after Seller's written request
therefor shall be a material breach of this Agreement and the Purchase
Agreement, and shall be a Buyer-Caused Delay.
ARTICLE 3
BUILDING AND IMPROVEMENT PLANS
------------------------------
3.1 Familiarization With Documents by Architect. The applicable Project
-------------------------------------------
Architect, prior to preparation of the Building Plans and the Interior
Improvement Plans, and each engineer, consultant and other professional retained
by such Project Architect shall thoroughly familiarize themselves with this
Agreement and all applicable building codes, and all other applicable city,
county, state and federal ordinances, roles and regulations, including, without
limitation, the energy conservation and handicap access requirements of Title 24
of the California Code of Regulations and the Americans With Disabilities Act,
and shall prepare the Building Plans and the Interior Improvement Plans with
full knowledge and compliance therewith. The Project Architect and each engineer
retained by the Project Architect shall be fully qualified and licensed by the
State of California to prepare the plans for which they are responsible.
3.2 Preparation of Building Plans.
-----------------------------
3.2.1 The parties hereto acknowledge and agree that the Project
Architect with respect to the Building Shell and Land Improvements has prepared
the Project Scope Drawings referred to in Exhibit E-2 attached hereto and that
-----------
Seller and Buyer approve the same. Buyer shall have no right to request or make
any changes to the approved Project Scope Drawings. Final Building Shell and
Land Improvement Plans shall conform to and represent a logical development of
the Building Plans referred to in Exhibit E-2. Buyer shall have no right to
-----------
request or make any changes to the approved Building Plans. Once the Building
Plans have been approved by Buyer and Seller (and the applicable governmental
agencies), and final bids have been received and accepted by Seller or its
Project Architect (or Seller's General Contractor), then Seller shall not make
any material changes to the Building Plans without Buyer's approval; provided,
however, without Buyer's prior approval, Seller shall be permitted to make
nonmaterial changes and other changes as shall be requested or required by the
City of San ▇▇▇▇.
3.2.2 Each day of delay incurred as a result of making changes
requested by Buyer to the Building Plans (if approved by Seller, which approval
Seller may withhold in its sole and absolute discretion) and any proceedings
associated therewith under Article 7 shall be a Buyer-Caused Delay.
3.3 Preparation and Approval of the Interior Improvement Plans. As soon as
----------------------------------------------------------
practicable following execution of the Purchase and Sale Agreement and Escrow
Instructions to which this Construction Agreement is attached, Seller shall
cause the Project Architect (to be
-7-
approved by Seller and Buyer with respect to the Interior Improvements) to
complete and deliver to Buyer preliminary Interior Improvement Plans which shall
be subject to Buyer's reasonable approval. Within five (5) days following
receipt of such preliminary Interior Improvement Plans, Buyer shall deliver to
Seller either (i) written approval of such preliminary Interior Improvement
Plans (which shall not be unreasonably withheld), or (ii) specify in writing its
objections to such preliminary Interior Improvement Plans and all changes that
must be made to the same to satisfy such objections. If Buyer does not deliver
written objections to the preliminary Interior Improvement Plans within the
specified time period, Buyer shall be deemed to have approved the same. If Buyer
delivers timely objections within such time period, then the parties shall
confer and use their best efforts to develop preliminary Interior Improvement
Plans that are acceptable to Buyer and Seller as soon as practicable, but in no
event later than March 1, 2000. Once the preliminary Interior Improvement Plans
are approved by Buyer and Seller, Seller shall request the Project Architect to
prepare final Interior Improvement Plans. Within five (5) days following receipt
of such final Interior Improvement Plans, Buyer shall deliver to Seller either
(i) written approval of such final Interior Improvement Plans (which shall not
be unreasonably withheld), or (ii) specify in writing its objections to such
final Interior Improvement Plans and all changes that must be made to the same
to satisfy such objections; provided, however, Buyer may only object to such
final Interior Improvement Plans on the basis that they do not substantially
conform to or do not represent a logical development of the approved preliminary
Interior Improvement Plans. If Buyer does not deliver written objections to the
final Interior Improvement Plans within the specified time period, Buyer shall
be deemed to have approved the same. If Buyer delivers timely objections within
such time period, then the parties shall confer and use their best efforts to
develop preliminary Interior Improvement Plans that are acceptable to Buyer and
Seller as soon as practicable, but in no event later than April 15, 2000. If the
final Tenant Improvement Plans are not approved by Seller and Buyer by April 15,
2000, then each day that passes from April 15, 2000 until the final Interior
Improvement Plans are approved by Seller and Buyer shall be deemed a Buyer
Caused Delay. Time is of the essence with respect to the approval of the
Interior Improvement Plans. Fees of the Project Architect in preparing the
Interior Improvement Plans shall be paid from the Interior Improvement Fund.
3.4 Building Permit -- For Interior Improvement Work. Seller shall cause
------------------------------------------------
the Project Contractor to cause the Project Architect to obtain a building
permit (and any approvals and permits required from any governmental agencies)
required for the construction of the Interior Improvements from the City. If the
City rejects the Interior Improvement Plans and thereby prevents the issuance of
a building permit, Seller shall cause the Project Contractor to cause the
Project Architect to immediately make all necessary changes required by the
City. Upon the City's approval of the Interior Improvement Plans and permit
application, the Project Architect for the Interior Improvement work shall cause
the building permit to be picked up and delivered to Seller with an approved set
of the Interior Improvement Plans marked "for construction." Plan check and
building permit fees, water and sewer connection fees (including such fees for
excess capacity), health department fees, hazardous material permit fees, and
any other fees shall be paid from the Interior Improvement Fund. Any additional
costs and expenses incurred in connection with a change required by the City
shall be paid from the Interior Improvement Fund. Any delay incurred as a result
of a change required by the City shall be a Force Majeure Delay.
-8-
3.5 Buyer Changes to Interior Improvement Plans.
-------------------------------------------
3.5.1 Any requests for Buyer Changes shall be instituted in
accordance with the provisions of this Section 3.5 and shall be subject to the
written approval of Seller after consultation with the Project Architect.
3.5.2 Buyer may request changes to the Interior Improvement Plans
after the same have been approved by Seller by notifying Seller in writing of
the nature and extent of any such Buyer Change and, if the nature of such Buyer
Change requires revisions to the Interior Improvement Plans, then, except as
otherwise provided in this Construction Agreement or the Purchase and Sale
Agreement and Escrow Instructions to which this Construction Agreement is
attached), the Project Architect shall revise the Interior Improvement Plans.
Such notice of Buyer must be signed by Buyer, or Seller shall not be required to
process such Buyer Change request. Seller shall submit to Buyer in writing,
within five (5) business days after Buyer's request for a Buyer Change (or such
longer period of time as may be reasonably required depending on the extent of
the requested Buyer's Change), an analysis of construction costs or savings
resulting from the Buyer Change, including without limitation architectural and
engineering costs, and the period of time, if any, that the Buyer Change will
extend the time for completion of the Interior Improvement Work. Buyer shall
approve or disapprove in writing Seller's submission within five (5) business
days of receipt thereof. Seller shall not be obligated to implement any Buyer
Change for which Buyer does not approve Seller's analysis of construction costs
or savings resulting therefrom or the period of time, if any, that the Buyer
Change will extend the time for completion of the Interior Improvement Work. The
estimated time for completion of the Interior Improvements shall be extended one
day for each day of delay caused by analyzing and processing Buyer's request for
a Buyer Change whether or not the cost or savings and the extension of time for
completion of the Interior Improvements, if any, is approved by Buyer, and such
delay shall be a Buyer-Caused Delay.
3.5.3 If Buyer approves in writing the costs or savings and the
extension in the time for completion of the Interior Improvements, if any,
resulting from the Buyer Change, Seller shall cause the approved Buyer Change to
be instituted. The estimated time for completion of the Interior Improvement
Work shall be extended one day for each day of delay caused by instituting the
Buyer Change requested by Buyer, and such delay shall be a Buyer-Caused Delay.
3.6 Subsequent City - Required Changes. Any delay incurred as a result of
----------------------------------
a change required by the City after the issuance of the building permit shall be
a Force Majeure Delay.
ARTICLE 4
COST ESTIMATE FOR INTERIOR IMPROVEMENT WORK
-------------------------------------------
4.1 Estimate of Interior Improvement Work Costs.
-------------------------------------------
-9-
4.1.1 The Project Contractor shall put the Interior Improvement Plans
out to bid to at least three subcontractors from each major trade involved in
the construction of the Interior Improvements.
4.1.2 Seller (with the Project Contractor's input) shall select one
subcontractor bid from each trade and shall deliver a list of selected
subcontractors and their respective bids to the Project Contractor.
4.2 Approval of Cost Estimate.
-------------------------
4.2.1 The Project Contractor shall prepare the Cost Estimate, and
shall submit the Cost Estimate prepared by the Project Contractor to Buyer for
Buyer's approval. Buyer shall, within five (5) business days after receipt of
the Cost Estimate, notify Seller in writing of either (i) Buyers approval of the
Cost Estimate or (ii) Buyer's disapproval of the Cost Estimate and specific
instructions to Seller to reduce the scope of the Interior Improvements. If
Buyer disapproves the Cost Estimate and instructs Seller to reduce the scope of
the Interior Improvements, and Buyer delivers to Seller revisions to the
Interior Improvement Plans prepared by the Project Architect, if required, then
Seller shall cause the Interior improvement Plans, as revised, to be re-bid in
accordance with Section 4.1, and shall cause a revised Cost Estimate to be
prepared by the Project Contractor and delivered to Buyer for approval or
disapproval in accordance with this Section 4.2. Any subsequent reduction in the
scope of the Interior Improvements and re-bid shall be subject to the same
procedures as set forth in this Article 4.
4.2.2 Each day of delay in Buyer's approval of the original Cost
Estimate or any revised Cost Estimate or any subsequent cost estimate beyond the
time periods set forth in this Article shall be a Buyer-Caused Delay.
ARTICLE 5
CONSTRUCTION
------------
5.1 Construction of Land Improvements and Building Shell. Seller agrees,
----------------------------------------------------
as soon as practical after the Building Plans have been approved by the City,
and the necessary permits have been issued, to cause Project Contractor to
construct the Land Improvements and the Building Shell. Seller shall cause the
Project Contractor to exercise diligent efforts to substantially complete the
Land Improvements and Building Shell in accordance with the Building Plans by
October 1, 2000, subject to extension for Buyer Caused Delays and Force Majeure
Delays. The hard costs incurred by Seller in connection with such construction
of the Land Improvements and the Building Shell shall be paid by Seller up to
the Building Shell Allowance (except that any increased costs resulting from any
Buyer Change to the Building Shell shall be paid by Buyer), and any hard costs
incurred by Seller in excess of the Building Shell Allowance shall be paid by
Buyer. Seller acknowledges and agrees that Buyer shall not be responsible for
payment of costs incurred in connection with the construction of the Land
Improvements and the Building Shell in excess of the greater of (i) the Building
Shell Allowance, or (ii) the Guaranteed Maximum Price ("GMP") established in the
construction contract entered into between Seller and the Project Contractor
(coveting such Land Improvements and Building Shell), subject to adjustment in
such GMP by change orders requested by Buyer, unless such cost overruns are
caused by or
-10-
attributable to Buyer or any of its agents, employees, contractors, affiliates,
or other representatives.
5.2 Construction of Interior Improvements. Seller agrees, as soon as
-------------------------------------
practical after completion or substantial completion of the Land Improvements
and the Building Shell to the point where construction can commence, or earlier
at the sole discretion of Seller, and after receipt of the building permit for
the Interior Improvements, to cause the Project Contractor to construct the
Interior Improvements in accordance with the approved Interior Improvement
Plans. Seller shall cause the Project Contractor to exercise diligent efforts to
substantially complete the Interior Improvements by October 1, 2000, subject to
extension for Tenant Caused Delays and Force Majeure Delays. The costs and
expenses incurred in connection with such construction of the Interior
Improvements shall be paid from the Interior Improvement Fund.
5.3 Installation of Buyer's Equipment. Buyer agrees, at its own expense,
---------------------------------
to install Buyer's Equipment within a time period that does not delay or
interfere with the completion of the Building Shell, Land Improvements or
Interior Improvements by Seller or the Project Contractor. Buyer shall suspend
installing Buyer's Equipment if the same will delay or interfere with the
completion of the Building Shell, Land Improvements or Interior Improvements.
Buyer's Equipment shall be installed in compliance with all governmental
ordinances, rules and regulations relating thereto and shall not be constructed
in a manner inconsistent with the approved Interior Improvement Plans. Any
costs, expenses or damages incurred by Seller arising out of or related to the
installation of Buyer's Equipment by Buyer, its contractors, subcontractors or
other agents, shall be paid by Buyer to Seller.
5.4 Seller's Insurance. From the commencement of the Land Improvements and
------------------
the Building Shell until the completion of the Interior Improvements, Seller
shall maintain a policy of commercial general liability insurance in amounts
sufficient to protect Seller and Buyer from and against liability for death or
injury to persons and for damage to property arising from the construction of
the Land Improvements, the Building Shell and the Interior Improvements. All
such insurance shall name Buyer as an additional insured. In addition, from the
commencement of the Land Improvements and the Building Shell until the
completion of the Interior Improvements, Seller (or the Project Contractor)
shall maintain a policy of all risk builder's risk insurance covering the Land
Improvements, the Building Shell and the Interior Improvements in an amount
equal to one hundred percent (100%) of the full replacement value thereof. The
cost of such insurance allocable to the Land Improvements and the Building Shell
shall be paid by Seller, and the cost of such insurance allocable to the
Interior Improvements shall be paid from the Interior Improvement Fund. Seller's
responsibility to provide insurance under this Section 5.4 shall be satisfied to
the extent such insurance is provided by contractors under the following Section
5.5 hereof.
5.5 Contractor Insurance. The Project Contractor shall carry (a) worker's
--------------------
compensation insurance, including employer's liability insurance, covering all
of their respective employees in statutory amounts; (b) commercial general
liability insurance (including contractor's protective liability) in an amount
not less than Three Million Dollars ($3,000,000.00) combined single limit for
bodily injury and property damage; and (c) comprehensive automobile
-11-
liability insurance in an amount not less than Five Hundred Thousand Dollars
($500,000.00) combined single limit for bodily injury and property damage. Such
policies shall name Seller, Buyer, and Construction Lender, as additional
insureds and shall be for the mutual and joint benefit and protection of Seller,
Buyer, and Construction Lender, as their interests may appear. The policy of
commercial general liability insurance referred to in clause (b) above may be
maintained under an umbrella policy or policies of insurance.
5.6 Rebuilt Drawings. Within thirty (30) days after Substantial
----------------
Completion, Seller shall provide Buyer, at Buyer's expense, with a set of "as-
built" drawings for the Interior Improvements and Seller shall provide Buyer, at
Seller's expense, with a set of "as-built" drawings for the Building Shell and
the Land Improvements.
5.7 Reliance on Construction Warranties. Seller and Buyer acknowledge that
-----------------------------------
each may have the non-exclusive benefit of any applicable warranties from design
professionals, contractors, materialmen manufacturers or other responsible
parties. Seller and Buyer each assumes responsibility to inquire into and be
fully informed regarding provisions of any applicable warranties, and the other
party shall bear no responsibility therefor. Seller shall make commercially
reasonable efforts to obtain, or to insure the Project Contractor obtains, the
warranties described in Section 6.6 hereof, to the extant they are available at
a reasonable expense.
ARTICLE 6
COMPLETION
----------
6.1 Completion of the Work. Seller shall use diligent efforts to
----------------------
substantially complete the Land Improvements, the Building Shell and the
Interior Improvements, on or before October 1, 2000, as such time is extended
one day for each day of delay resulting from a Force-Majeure Delay or Buyer-
Caused Delay.
6.2 Calculations of Delays. Any delay in Seller's or Buyer's performance
----------------------
beyond the date and time for such performance set forth in this Agreement shall
be a Force Majeure Delay, a Buyer-Caused Delay or a Seller-Caused Delay. At each
periodic on-site work review meeting, Seller and Buyer through their designated
construction representatives shall update the schedule for design, development
and construction of the Project and account for and allocate all Force Majeure
Delays, Seller-Caused Delays and Buyer-Caused Delays which have occurred since
the last work review meeting. If Seller and Buyer through their designated
construction representatives are unable to agree on the allocation of Force
Majeure Delays, Seller-Caused Delays and Buyer-Caused Delays, then such dispute
shall be resolved in accordance with Article 7. If a Force Majeure Delay, a
Seller-Caused Delay, or a Buyer-Caused Delay is deemed to have occurred but such
delay has no effect on the date the Building Shell, Land Improvements or
Interior Improvements are to be designed or developed, then such delay shall be
waived; if more than one type of delay contributed to a delay, the delay shall
be fairly apportioned between or among the contributing types of delay. Delays
attributable to the City other than as set forth in this Construction Agreement
shall be a Force Majeure Delay. No delay shall be allowed for any period of time
more than thirty (30) days prior to the time a party asserts at a periodic on-
site
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review meeting (or otherwise in writing to the other party) that the delay has
occurred. As stated above, Buyer's designated construction representative
initially shall be ▇▇▇▇▇ ▇▇▇▇▇▇▇▇, however, Buyer reserves the right, in Buyer's
sole discretion, to substitute a new construction representative for ▇▇▇▇▇
▇▇▇▇▇▇▇▇ upon written notice to Seller.
6.3 Condition of Improvements. Seller shall deliver the Building to Buyer
-------------------------
upon Substantial Completion of the Interior Improvements in clean and operating
condition, subject to punchlist items. The term "clean and operating condition"
shall include the following: (a) walls and partitions are cleaned; (b) glass is
cleaned on both sides; (c) trash, dirt and left-over materials are removed from
the Building and the Building entrance area; (d) air conditioning, heating and
ventilating system is in operating condition and approximately regulated; and
(e) plumbing, electrical and elevator systems are in operating condition.
Punchlist items may include such minor pick up work as would not materially
interfere with Buyer's occupancy and use of the Building for the purpose for
which it is to be used.
6.4 Walk-Through. On or before the date Buyer occupies the Building for
------------
the purpose of conducting its business therein, Seller and Buyer shall conduct a
walk-through inspection of the Building and shall jointly prepare a list of
initial construction items that need to be corrected. Seller shall exercise
commercially reasonable efforts to cause the Project Contractor to correct such
items within thirty (30) days thereafter, provided, however, if by the nature of
such correction more than thirty (30) days is required to effect such
correction, the Project Contractor shall be required to commence correction of
such punch list item(s) within such thirty (30) day period and diligently pursue
the same to completion. The expense of any such correction shall be paid by
Buyer, subject to reimbursement, if appropriate, from any design professional,
contractor, materialman, manufacturer or other responsible party.
6.5 Notice of Completion. Within ten (10) days after Substantial
--------------------
Completion, Seller (or the Project Contractor) shall execute and file a notice
of completion with respect thereto and furnish a copy thereof to Buyer upon
recordation.
6.6 Warranties and Guaranties. Each contractor and subcontractor
-------------------------
participating in the Land Improvements, the Building Shell and the Interior
Improvements shall guarantee that the portion thereof for which he is
responsible shall be free from any defects in workmanship and materials for a
period of not less than one (1) year from the date of Substantial Completion of
the applicable, Land Improvements, Building Shell or Interior Improvements, as
the case may be. Every such contractor or subcontractor shall be responsible for
the replacement or repair, without additional charge, of all work done or
furnished in accordance with its contract which shall become defective within
such one (1) year (or longer, if applicable) warranty period. Seller covenants
to give to Buyer any assignment or other assurances necessary to effect the
right to enforce such warranties.
-13-
ARTICLE 7
CONSTRUCTION DISPUTE RESOLUTION
-------------------------------
7.1 Dispute Resolution. If any dispute arises in connection with this
------------------
Agreement, such dispute shall be resolved in accordance with this Article. All
proceedings contemplated by this Article shall take place at the location for
all job-site meetings, unless the Construction Panel unanimously agrees to
another location, or unless any Arbitrator appointed hereunder selects another
location.
7.2 Notice. All disputes to be determined in accordance with this Article
------
shall be raised by Seller or Buyer by written notice to the other party. Notice
of any dispute with an issue resolved in any minutes of a periodic on-site
review meeting must be given within thirty (30) days of receipt of the minutes,
or the resolution of the issue as reflected in the minutes shall be deemed
conclusive.
7.3 Resolution by Construction Panel. The Construction Panel shall meet
--------------------------------
within two (2) business days of receipt of the notice and attempt in good faith
to resolve the dispute by unanimous agreement.
7.4 Resolution by Arbitrator. If the Construction Panel has not resolved
------------------------
the dispute for any reason within five (5) business days of receipt of the
notice, the panel shall promptly select by unanimous agreement a disinterested
arbitrator ("Arbitrator") with extensive development and construction experience
to resolve the dispute. In the event a selection is not made within six (6)
business days after the written notice, the Arbitrator shall, upon the request
of Seller or Buyer, be appointed by the American Arbitration Association. Once
an Arbitrator is appointed hereunder, such Arbitrator shall serve as Arbitrator
for all subsequent disputes arising in connection with this Construction
Agreement unless the Construction Panel unanimously agrees otherwise. The
Arbitrator shall resolve the dispute as soon as is reasonably practical in
accordance with the provisions of Section 1280 et seq. of the California Code of
Civil Procedure. The cost for the Arbitrator's services shall be paid by the
non-prevailing party in the dispute being determined by the Arbitrator, unless
the Arbitrator determines otherwise.
7.5 Interpretation and Resolution. In determining any dispute, the
-----------------------------
Construction Panel and the Arbitrator shall apply the pertinent provisions of
this Agreement. As part of resolving a dispute, the Construction Panel or the
Arbitrator, as the case may be, shall determine the days of delay, if any, in
completing the Land Improvements, the Building Shell and the Interior
Improvements which directly result from the dispute being considered by the
Construction Panel or the Arbitrator, and from the proceedings pursuant to this
Article 7. The days of delay shall be designated as either Buyer-Caused Delays,
Seller-Caused Delays or Force Majeure Delays or any combination thereof as
determined by the Construction Panel or the Arbitrator, as the case may be.
7.6 Continued Performance. During any proceedings pursuant to this
---------------------
Article, Seller and Buyer shall, to the extent possible, continue to perform and
discharge all of their respective obligations under this Agreement.
-14-
7.7 Binding Resolution. Any and all decisions of the Construction Panel
------------------
made by unanimous agreement as to the matter in dispute shall be binding upon
both Seller and Buyer. In the absence of such unanimous agreement, any and all
decisions by the Arbitrator shall be binding upon both Seller and Buyer. The
provisions of this Article 7 are an arbitration agreement enforceable under
Section 1280 et seq. of the California Code of Civil Procedure.
7.8 Arbitration of Disputes. "NOTICE: BY INITIALING IN THE SPACE BELOW YOU
-----------------------
ARE AGREEING TO HAVE ANY DISPUTE (WHICH CANNOT BE RESOLED BY THE CONSTRUCTION
PANEL) ARISING IN CONNECTION WITH THIS CONSTRUCTION AGREEMENT DECIDED BY NEURAL
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 THOSE RIGHTS ARE SPECIFICALLY INCLUDED ABOVE. IF
YOU REFUSE TO SUBMIT TO ARBITRATION 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.
"WE HAVE READ AND UNDERSTAND THE FOREGOING AND AGREE TO SUBMIT DISPUTES
(WHICH CANNOT BE RESOLVED BY THE CONSTRUCTION PANEL) ARISING IN CONNECTION WITH
THIS CONSTRUCTION AGREEMENT TO NEUTRAL ARBITRATION."
BUYERS INITIALS SELLER'S INITIALS
ARTICLE 8
MISCELLANEOUS PROVISIONS
------------------------
8.1 Notices. Any notice, consent or approval required or permitted to be
-------
given under this Agreement shall be in writing and shall be deemed to have been
given upon (i) hand delivery, or (ii) one (1) day after being deposited with
Federal Express or another reliable overnight courier service or transmitted by
facsimile telecopy, and addressed as follows:
If to Seller: Enzo Drive, LLC
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇ ▇▇▇▇▇▇▇▇▇
If to Buyer: Sunrise Telecom
▇▇ ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇.
▇▇▇ ▇▇▇▇, ▇▇. ▇▇▇▇▇
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or such other address as either party may from time to time specify in writing
to the other.
8.2 Consents and Approvals. Unless otherwise expressly provided herein,
----------------------
any consents or approvals required or allowed by this Agreement shall not be
unreasonably withheld or delayed.
8.3 Successors and Assigns. This Agreement shall be binding upon and inure
----------------------
to the benefit of the parties hereto and their respective successors, heirs,
administrators and assigns.
8.4 Amendments. Except as otherwise provided herein, this Agreement may be
----------
amended or modified only by a written instrument executed by Seller and Buyer.
8.5 Governing Law. This Agreement shall be governed by and construed in
-------------
accordance with the laws of the State of California.
8.6 Merger of Prior Agreements. This Agreement and the exhibits hereto,
--------------------------
together with that certain Purchase Agreement referred to in paragraph 1.10
above, constitute the entire agreement between the parties and supersede all
prior agreements and understandings between the parties relating to the subject
matter hereof.
8.7 Enforcement. If either party hereto fails to perform any of its
-----------
obligations under this Agreement or if a dispute arises between the parties
hereto concerning the meaning or interpretation of any provision of this
Agreement, then the defaulting party or the party not prevailing in such dispute
shall pay any and all costs and expenses incurred by the other party on account
of such default and/or in enforcing or establishing its rights hereunder,
including, without limitation, court costs or costs of arbitration and
attorneys' fees and disbursements. Any such attorneys' fees and other expenses
incurred by either party in enforcing a judgment in its favor under this
Agreement shall be recoverable separately from and in addition to any other
amount included in such judgment, and such attorneys' fees obligation is
intended to be severable from the other provisions of this Agreement and to
survive and not be merged into any such judgment.
8.8 Severability. If any provision of this Agreement or the application
------------
thereof to any person, place or circumstance shall be held by a court of
competent jurisdiction to be invalid, unenforceable or void, the remainder of
this Agreement and such provisions as applied to other persons, places and
circumstances shall remain in full force and effect.
-16-
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first above written.
SELLER BUYER
------ -----
ENZO DRIVE, LLC SUNRISE TELECOM
a California limited liability company A
------------------------------------
By: By:
-------------------------------- -------------------------------
Its: Its:
-------------------------------- -------------------------------
By: By:
-------------------------------- -------------------------------
Its: Its:
-------------------------------- -------------------------------
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[GRAPHIC OF EXHIBIT E-1]
------------------------
STREET MAP SHOWING THE LOCATION OF
A NEW TWO STORY BUILDING FOR
ENZO DRIVE
ENZO DRIVE AT RUE FERRARI DRIVE
SAN JOSE, CALIFORNIA
EXHIBIT E-2
LIST OF PROJECT SCOPE DRAWINGS
A1.0 Site Plan
A2.0 First Floor Plan
A2.1 Second Floor Plan
A3.0 Elevation Plan
C1 Preliminary Grading Plan
L1 Planting Plan
L2 Irrigation Plan
L3 Other Irrigation Plans
EXHIBIT E-3
-----------
DEFINITION OF BUILDING SHELL - ENZO DRIVE
The components and systems below shall be included in the design of the new
building, which shall consist ors two-story, concrete tilt-up building of
approximately 91,694 square feet. All code requirements should be considered
minimum beginning requirements and not the highest level of design.
Owner/Landlord's costs shall include all "hard and soft" costs related to the
construction of the site and shell, including architectural and engineering
services, ▇▇▇▇▇▇, utility fees for connections and meters (shell only).
1. Building Structure
a) All foundations to include footings, piers, caissons, pilings, grade
beams, foundation walls or other building foundation components
required to support the entire building structure.
b) All columns, beams, joists, purlins, headers, or other framing members
to support the roof and roofing membrane. Second floor framing is
concrete over steel deck on steel frame, bar-joists, or trusses.
c) Five inch (5") thick concrete slab on grade with welded wire mesh and
any other reinforcing or structural connections that may be necessary
or required.
d) One (1) set of temporary wood-framed access stairs.
e) The foundation and structural framing will be designed to support a
minimum live load of 100 pounds psf in all leasable areas (which meets
or exceeds current code).
f) First floor to second floor height of 17'-0". Clear height of the
second floor to be 12"-0".
2. Building Exterior
a) Concrete exterior walls that enclose the perimeter of the building with
steel reinforcing and structural connections that may be necessary or
required.
b) Three (3) ply built up roofing: Base sheet one (1) ply of asphalt
impregnated tar paper and a cap sheet.
c) Glass to be 10'-0" tall at glass line. Glass to be "medium" performance
d) All exterior doors, door closer and locking devices necessary for proper
functioning.
e) One "grade" level roll-up door and one "dock" level roll-up door
3. Plumbing
a) Underground sanitary sewer laterals connected to the city sewer main in
the street and piped into the building and under the concrete slab on
grade for the length of the building.
b) Domestic water mains connected to Great Oaks Water Company water main
in the street and stubbed to the building.
c) Gas lines connected to the city public utility mains and gas meters
adjacent to, and in close proximity to the building. Meters supplied by
utility company.
4. Electrical
a) All primary electrical service to the building that is complete
including underground conduit and wire feeders from transformers pads
into the building's main switchgear electrical room. The electrical
characteristics of the secondary side of transformers shall be 277/480
Volt, 3 Phase and the rated capacity of the transformers shall be 2,000
amps for the building.
b) Underground pull section, meter, and panel(s), for site lighting and
landscaping only.
c) Underground conduit from the street to the building electrical room for
telephone trunk line service by Pacific ▇▇▇▇ Telephone.
d) An electrically operated landscape irrigation controller that is a
complete and functioning system.
e) Underground conduit from the building to the main fire protection
system, shut off valve (PIV) for installation of security alarm wiring.
f) All parking lot and landscaping lighting to include fixtures,
underground conduit, wire, distribution panel end controller. All
exterior lighting shall be a complete and functioning system.
5. Fire Protection (Sprinklers)
a) A complete and fully functional overhead system distributed throughout
the building. The systems shall be classified ordinary hazard group II
and be distributed throughout the building.
b) system shall include all sprinkler heads that may be required by
building codes above the ceiling, when ceilings are installed.
c) Site sprinkler main to be sized adequately to support Tenant's uses
within the building.
6. Sitework
a) All work outside the building perimeter walls shall be considered site
work for the building shell and shall include grading, asphalt
concrete, paving, landscaping (hard and soft), landscape irrigation,
storm drainage, utility service laterals, curbs, gutters, sidewalks,
specialty paving (if required), retaining walls, fencing and gates,
trash enclosures, planters, sign monuments, parking lot and landscape
lighting and other exterior lighting per code.
b) Paving sections for automobile and truck access shall be according to
the Geological Soils Report.
c) All paring lot striping to include handicap signage and spaces. Amount
of spaces provided shall comply with City Code.
d) Underground site storm drainage system shall be connected to the city
storm system main.
EXCLUSIONS (partial list)
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The following items are not included in the building shell:
a) Roof screen
b) Elevator
c) Proof loading roof for mechanical equipment
d) Deck penetrations for mechanical equipment
e) Framing, finishes or penetrations for interior stairs (other than
temporary stair).
f) Electrical panels and distribution.
g) Security system
h) All Interior Finishes
EXHIBIT F
DESIGNATION AGREEMENT
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This DESIGNATION AGREEMENT (the "Agreement") is entered into on , 2000,
by and between ENZO DRIVE, LLC a California limited liability company
("Seller"), SUNRISE TELECOM ("Buyer") and ALLIANCE TITLE COMPANY ("Title
Company").
RECITALS
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A. Pursuant to that certain Purchase and Sale Agreement and Escrow
Instructions entered into by and between Seller and Buyer, dated , 1999
(the "Purchase Agreement"), Seller has agreed to sell to Buyer, and Buyer has
agreed to buy from Seller, that certain real property located at Enzo Drive and
Rue Ferrari, San Jose, California, and described more fully on attached EXHIBIT
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A (the "Property"). The purchase and sale of the Property pursuant to the
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Purchase Agreement is sometimes referred to below as the "Transaction."
B. Section 6045(e) of the United States Internal Revenue Code and the
regulations promulgated thereunder (collectively, the "Reporting Requirements")
require an information return to be made to the United States Infernal Revenue
Service, and a statement to be furnished to Seller, in connection with the
Transaction.
C. Pursuant to subparagraph 8.a of the Purchase Agreement, an escrow has
been opened with Title Company (Escrow No. ) through which the Transaction
will be or is being accomplishes. Title Company is either (i) the person
responsible for closing the Transaction (as described in the Reporting
Requirements) or (ii) the disbursing title or escrow company that is most
significant in terms of gross proceeds disbursed in connection with the
Transaction (as described in the Reporting Requirements).
D. Seller, Buyer and Title Company desire to designate Title Company as
the "Reporting Person" (as defined in the Reporting Requirements) with respect
to the Transaction.
AGREEMENT
---------
NOW THEREFORE, for good and valuable consideration, the receipt and
adequacy of which are hereby acknowledged, Seller, Buyer and Title Company agree
as follows:
1. Title Company is hereby designated as the Reporting Person for the
Transaction. Title Company shall perform all duties that are required by the
Reporting Requirements to be performed by the Reporting Person for the
Transaction.
2. Seller and Buyer shall furnish to Title Company, in a timely manner,
any information requested by Title Company and necessary for Title Company to
perform its duties as Reporting Person for the transaction.
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3. Title Company hereby requests Seller to furnish to Title Company
Seller's correct taxpayer identification number. Seller acknowledges that any
failure by Seller to provide Title Company with Seller's correct taxpayer
identification number may subject Seller to civil or criminal penalties imposed
by law. Accordingly, Seller hereby certifies to Title Company, under penalty of
perjury, that Seller's correct taxpayer identification number is
4. The names and addresses of the parties hereto are as follows:
SELLER:
Enzo Drive, LLC
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
BUYER:
Sunrise Telecom
▇▇ ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇.
▇▇▇ ▇▇▇▇, ▇▇. ▇▇▇▇▇
TITLE COMPANY:
Alliance Title Company
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
5. Each of the parties hereto shall retain this Agreement for a period of
four years following the calendar year during which the date of closing of the
Transaction occurs.
IN WITNESS WHEREOF, the parties have entered into this Agreement as of the
date ant year first above written.
SELLER BUYER
ENZO DRIVE, LLC SUNRISE TELECOM
a California limited liability company A
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By: By:
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Its: Its:
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TITLE COMPANY:
ALLIANCE TITLE COMPANY
By
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Its
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