California-San Jose-521 Charcot Avenue Purchase and Sale Agreement - Media Arts Group inc. and Limar Realty Corp. #36
PURCHASE AND SALE AGREEMENT
By and Between
MEDIA ARTS GROUP, INC.
("SELLER")
and
LIMAR REALTY CORP. #36
("BUYER")
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TABLE OF CONTENTS
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PAGE
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1. PURCHASE AND SALE..................................................... 1
1.1 PROPERTY........................................................ 1
1.2 REAL PROPERTY................................................... 2
1.3 ASSIGNMENT...................................................... 2
2. PURCHASE PRICE........................................................ 2
2.1 INITIAL DEPOSIT................................................. 2
2.2 ADDITIONAL DEPOSIT.............................................. 2
2.3 INTEREST ON DEPOSIT............................................. 3
2.4 DISPOSITION OF DEPOSIT.......................................... 3
2.5 LOAN AMOUNT..................................................... 3
2.6 CASH BALANCE.................................................... 3
3. TITLE: NEW LEASES..................................................... 3
3.1 VESTING OF TITLE................................................ 3
3.2 BUYER'S TITLE INSURANCE......................................... 3
3.3 NEW LEASE....................................................... 3
4. ESCROW................................................................ 4
4.1 OPENING OF ESCROW............................................... 4
4.2 INSTRUCTIONS TO TITLE COMPANY................................... 4
5. CLOSING: LOAN......................................................... 4
5.1 CLOSING......................................................... 4
5.2 FAILURE TO CLOSE................................................ 4
5.3 LOAN............................................................ 4
6. DUE DILIGENCE......................................................... 5
6.1 DUE DILIGENCE PERIOD............................................ 5
6.2 AVAILABLE INFORMATION........................................... 5
6.2.1 REQUESTED MATERIALS...................................... 5
6.2.2 PROPERTY FILES........................................... 5
6.3 TITLE REPORT: PERMITTED EXCEPTIONS.............................. 5
6.4 INSPECTION: RIGHT OF ENTRY...................................... 6
6.4.1 PHASE I ENVIRONMENTAL AUDIT.............................. 7
6.4.2 ENVIRONMENTAL CONDITIONS................................. 7
6.5 INDEMNITY: RETURN............................................... 7
6.6 GENERAL CONDITIONS.............................................. 7
7. CONDITIONS TO CLOSING................................................. 7
7.1 SELLER'S CONDITIONS............................................. 7
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7.1.1 BUYER'S DELIVERIES....................................... 8
7.1.2 BUYER'S REPRESENTATIONS.................................. 8
7.1.3 BUYER'S PERFORMANCE...................................... 8
7.1.4 SELLER'S PURCHASE........................................ 8
7.1.5 NEW LEASE................................................ 8
7.2 BUYER'S CONDITIONS.............................................. 8
7.2.1 SELLER'S DELIVERIES...................................... 8
7.2.2 SELLER'S REPRESENTATIONS................................. 8
7.2.3 SELLER'S PERFORMANCE..................................... 8
7.2.4 BUYER'S TITLE POLICY..................................... 8
7.2.5 DUE DILIGENCE MATERIALS.................................. 8
7.2.6 MATERIAL ADVERSE CHANGE.................................. 8
7.2.7 SELLER'S PURCHASE........................................ 8
7.2.8 LEASEBACK................................................ 8
7.3 FAILURE OF CONDITIONS........................................... 9
7.4 SATISFACTION OF CONDITIONS...................................... 9
8. DELIVERIES INTO ESCROW................................................ 9
8.1 DELIVERIES BY SELLER............................................ 9
8.1.1 DEED..................................................... 9
8.1.2 BILL OF SALE............................................. 9
8.1.3 ASSIGNMENT............................................... 9
8.1.4 FIRPTA................................................... 9
8.1.5 FORM 590................................................. 9
8.1.6 NEW LEASE................................................ 9
8.1.8 SELLER'S AUTHORITY....................................... 9
8.2 DELIVERIES BY BUYER............................................. 9
8.2.1 CASH..................................................... 10
8.2.2 ASSIGNMENT............................................... 10
8.2.3 BUYER'S AUTHORITY........................................ 10
8.2.4 NEW LEASE................................................ 10
8.2.5 REQUEST FOR RECONVEYANCE................................. 10
8.2.6 PROMISSORY NOTE.......................................... 10
8.2.7 OTHER DOCUMENTS.......................................... 10
8.3 DELIVERY TO BUYER UPON CLOSING.................................. 10
8.4 DELIVERY FOLLOWING CLOSING...................................... 10
9. PRORATIONS; CLOSING COSTS; SECURITY DEPOSIT........................... 10
9.1 PRORATIONS...................................................... 10
9.1.1 TAXES AND ASSESSMENTS.................................... 10
9.1.2 OPERATING EXPENSES....................................... 11
9.1.3 CALCULATION OF PRORATIONS................................ 11
9.2 CLOSING COSTS................................................... 11
9.2.1 SELLER'S COSTS........................................... 11
9.2.2 BUYER'S COSTS............................................ 11
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9.3 SECURITY DEPOSITS............................................... 11
9.4 OTHER EXPENSES.................................................. 11
10. OPERATION OF PROPERTY PENDING THE CLOSING............................. 11
10.1 NORMAL COURSE OF BUSINESS....................................... 12
10.2 FURTHER ENCUMBRANCES............................................ 12
10.3 ADDITIONAL NEW LEASES........................................... 12
10.4 ENVIRONMENTAL MATTERS........................................... 12
11. REPRESENTATIONS AND WARRANTIES........................................ 12
11.1 NO REPRESENTATIONS OR WARRANTIES BY SELLER...................... 12
11.2 SELLER'S REPRESENTATIONS AND WARRANTIES......................... 12
11.2.1 AUTHORITY............................................... 12
11.2.2 PENDING ACTIONS......................................... 13
11.2.3 GOVERNMENT REGULATIONS.................................. 13
11.2.4 LICENSES................................................ 13
11.2.5 TAXES................................................... 13
11.2.6 UTILITIES............................................... 13
11.2.7 PHYSICAL DEFECTS........................................ 13
11.2.8 SOIL DEFECTS............................................ 13
11.2.9 INSURANCE NOTICE........................................ 13
11.2.10 HAZARDOUS MATERIALS..................................... 14
11.2.11 MATERIAL FACTS.......................................... 14
11.2.12 LEASES.................................................. 14
11.2.13 SERVICE CONTRACTS....................................... 15
11.2.14 FINANCIAL RECORDS....................................... 15
11.2.15 ACCESS.................................................. 15
11.2.16 FOREIGN PERSON.......................................... 15
11.2.17 SQUARE FOOTAGE.......................................... 15
11.2.18 GOOD TITLE.............................................. 15
11.2.19 CORRECT COPIES.......................................... 15
11.2.20 OPTION TO PURCHASE...................................... 15
11.2.21 TRUE AS OF CLOSING...................................... 15
11.2.22 MATERIAL CHANGES........................................ 15
11.2.23 SELLER'S KNOWLEDGE...................................... 16
11.3 BUYER'S REPRESENTATIONS AND WARRANTIES.......................... 16
11.3.1 AUTHORITY TO EXECUTE; ORGANIZATION...................... 16
11.3.2 FINANCIAL CONDITION..................................... 16
11.3.3 NO ENCUMBRANCE.......................................... 16
12. INDEMNIFICATION....................................................... 16
12.1 INDEMNIFICATION OF BUYER........................................ 16
12.2 DEFENSE OF CLAIMS AGAINST BUYER................................. 16
12.3 INDEMNIFICATION OF SELLER....................................... 17
12.4 DEFENSE OF CLAIMS AGAINST SELLER................................ 17
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13. CASUALTY OR CONDEMNATION.............................................. 17
13.1 CASUALTY........................................................ 17
13.2 CONDEMNATION.................................................... 18
14. COMMISSIONS........................................................... 18
14.1 PAYMENT OF THE SALES COMMISSION................................. 18
14.2 LEASING COMMISSION.............................................. 19
15. NOTICES............................................................... 19
16. MISCELLANEOUS......................................................... 20
16.1 TIME............................................................ 20
16.2 ATTORNEYS' FEES................................................. 20
16.3 NO WAIVER....................................................... 20
16.4 ENTIRE AGREEMENT................................................ 20
16.5 SURVIVAL........................................................ 20
16.6 SUCCESSORS AND ASSIGNS.......................................... 20
16.7 SEVERABILITY.................................................... 20
16.8 PURCHASE PRICE ALLOCATION....................................... 20
16.9 CAPTIONS........................................................ 21
16.10 EXHIBITS........................................................ 21
16.11 RELATIONSHIP OF THE PARTIES..................................... 21
16.12 GOVERNING LAW................................................... 21
16.13 REVIEW BY COUNSEL............................................... 21
16.14 CONFIDENTIALITY................................................. 21
16.15 COUNTERPARTS.................................................... 21
16.16 LICENSED REAL ESTATE BROKERS.................................... 21
17. LIQUIDATED DAMAGES.................................................... 21
18. DEFINITIONS........................................................... 22
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STANDARD FORM
PURCHASE AND SALE AGREEMENT
THIS PURCHASE AND SALE AGREEMENT ("AGREEMENT") is made and entered into
as of the 3rd day of June, 1997 (the "EFFECTIVE DATE") by and between Media
Arts Group, Inc., a Delaware corporation ("SELLER"), and Limar Realty Corp.
#36, a California corporation ("BUYER").
RECITALS
This Agreement is made with respect to the following facts and
circumstances:
A. Seller will own prior to the Closing (as defined in Section 5.1
below), certain real property commonly known as the Media Arts Building, with
the street address of 521 Charcot Avenue, San Jose, California, which real
property is referred to in this Agreement as the "Property" and is more
particularly defined below.
B. Seller is currently the lessee of the Property and pursuant to the
lease ("EXISTING LEASE") dated February 7, 1994, by and between Seller as
lessee and South Bay/Crip III Associated Joint Venture ("SOUTH BAY") as
landlord, as thereafter amended. Seller has an option to purchase the
Property.
C. An escrow ("SELLER ESCROW") for the purchase of the Property by
Seller from South Bay has, or will be established, at the Title Company (as
defined in Section 4.1 below).
D. Subject to the terms and conditions of this Agreement, and
immediately following purchase of the Property by Seller pursuant to its
option, Seller desires to sell and Buyer desires to purchase the Property
through an Escrow (as defined in Section 4.1 below) to be established at the
Title Company, which Escrow is to close simultaneously with the Seller Escrow
as more particularly described in this Agreement.
E. In connection with the Seller Escrow and in order to facilitate the
purchase of the Property by Seller, Buyer will, subject to the provisions of
this Agreement, loan to Seller certain funds as more particularly described
in this Agreement.
NOW, THEREFORE, in consideration of the mutual covenants contained
herein, Seller and Buyer agree as follows:
1. PURCHASE AND SALE.
1.1 PROPERTY. Subject to the terms and conditions hereof, Seller
hereby agrees to sell, convey and assign to Buyer, and Buyer hereby agrees to
purchase and accept from Seller on the Closing Date (as defined below) the
following (collectively, the "PROPERTY"):
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1.1.1. The real property consisting of approximately 6.58 acres
which is legally described on EXHIBIT 1.1.1 attached hereto, together with
any and all rights, privileges and easements, rights of way, and other
appurtenances used or connected with the beneficial use or enjoyment of such
land (the "LAND");
1.1.2 All buildings and other improvements and fixtures of
every kind and description located in, on, over, or under the Land including
without limitation that certain building consisting of approximately 90,000
square feet of net rentable area, any apparatus, equipment and appliances
incorporated therein and used in connection with the operation and occupancy
thereof, such as heating and air conditioning systems, facilities used to
provide any utility service, ventilation, or other services thereto, parking
lots or structures, landscaping and roadways (all of which are collectively
referred to as the "IMPROVEMENTS"); and
1.1.3 All right, title and interest of Seller in and to all
tangible personal property, if any, conveyed to Seller by South Bay in
connection with the Seller Escrow (the "PERSONAL PROPERTY").
1.2 REAL PROPERTY. The Land and Improvements are collectively
referred to as the "REAL PROPERTY".
1.3 ASSIGNMENT. In addition, Seller shall convey and assign to
Buyer all of the right, title and interest of Seller in and to (i) all
current licenses, permits, certificates of occupancy, approvals and
entitlements issued or granted in connection with the Real Property as well as
any and all development rights and any other intangible rights, interests or
privileges relating to or used in connection with the Real Property; (ii) the
right to use the current names of the Real Property, logos, trademarks,
tradenames and symbols and promotional materials; and (iii) all transferrable
warranties, guarantees or sureties relating to the Real Property. Such
assignment shall be made pursuant to the form described in Section 8.1.3
below ("ASSIGNMENT") and all of the above interests as described in this
Section 1.3 shall be referred to collectively as the "INTANGIBLE PROPERTY".
2. PURCHASE PRICE.
Buyer shall pay as the total purchase price for the Property
("PURCHASE PRICE") the sum of Seven Million Six Hundred Thousand Dollars
($7,600,000.00). The Purchase Price shall be paid as follows:
2.1 INITIAL DEPOSIT. Within three (3) business days of the
Effective Date, Buyer shall cause Two Hundred Fifty Thousand Dollars
($250,000.00)(the "INITIAL DEPOSIT) to be delivered into Escrow.
2.2 ADDITIONAL DEPOSIT. No later than the Due Diligence Date (as
defined in Section 6.1 below) and provided Buyer has waived or approved the
due diligence condition set forth in Section 7.2.5, Buyer will cause an
additional Two Hundred Fifty Thousand Dollars ($250,000.00)(the "ADDITIONAL
DEPOSIT") to be delivered into Escrow.
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2.3 INTEREST ON DEPOSIT. The Initial Deposit and the Additional
Deposit shall be held by the Title Company as an earnest money deposit
towards the Purchase Price. The Initial Deposit and thereafter the Additional
Deposit, if made, shall be held in Escrow in a federally insured interest
bearing account or other investment suitable for daily investment with any
interest accruing thereon to be paid or credited to Buyer. The Initial
Deposit shall sometimes be referred to as the "DEPOSIT" until the Additional
Deposit is delivered into Escrow, at which time the term "Deposit" shall
refer to the sum of the Initial Deposit and the Additional Deposit.
2.4 DISPOSITION OF DEPOSIT. At the Closing (as defined in Section
5.1 below) the Deposit shall be applied and credited toward the payment of
the Purchase Price. If Escrow does not close, and the Agreement is terminated
in a manner governed by Section 7.3 or 13, the Deposit will be disbursed to
Buyer as provided in such Sections. If the Escrow does not close and neither
Section 7.3 nor Section 13 applies, the Deposit together with interest
accrued thereon shall be promptly returned to Buyer unless the provisions of
Section 17 are applicable, in which case the disposition of the Deposit shall
be governed by the provisions of Section 17.
2.5 LOAN AMOUNT. As more particularly described in Section 5.3
below, Buyer shall be entitled to a credit against the Purchase Price in the
amount equal to the outstanding principal balance of the Loan (as defined in
Section 5.3 below) together with accrued and unpaid interest, if any.
2.6 CASH BALANCE. On or before the Closing, Buyer shall deliver
into Escrow in immediately available funds the balance of the Purchase Price.
3. TITLE; NEW LEASES.
3.1 VESTING OF TITLE. At Closing, Seller shall convey good and
marketable fee simple absolute title to the Real Property to Buyer by grant
deed (as further described in Section 8.1.1 below), free and clear of all
liens, encumbrances, easements, restrictions, rights, covenants and
conditions of any kind or nature whatsoever save and except only for the
Permitted Exceptions (as defined in Section 6.3 below). At Closing, Seller
shall further (i) convey to Buyer good title to the Personal Property, if
any, by bill of sale (as further described in Section 8.1.2 below) and (ii)
assign to Buyer good title to the Intangible Property by the Assignment, all
of which shall be conveyed and assigned free and clear of all liens,
encumbrances, security interests and adverse claims of any kind or nature
whatsoever.
3.2 BUYER'S TITLE INSURANCE. At Closing, the Title Company shall
issue to Buyer an ALTA extended coverage owner's form of title insurance
policy in the amount of the Purchase Price insuring that fee simple title to
the Real Property is vested in Buyer subject only to the Permitted Exceptions
("BUYER'S TITLE POLICY"). Buyer shall be entitled to request that the Title
Company provide, at Buyer's cost and expense, such additional endorsements to
the Buyer's Title Policy as Buyer may reasonably require, provided that such
endorsements shall be at no cost or additional liability to Seller and the
Closing shall not be delayed as a result of Buyer's request.
3.3 NEW LEASE. Following the Closing, the Seller will occupy the
Property as a tenant pursuant to a lease (the "NEW LEASE") to be entered into
by Seller as tenant and Buyer as landlord, which New Lease is to be effective
as of the Closing and is to be in the form attached
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hereto as EXHIBIT 3.3. Each of the Seller and Buyer agree to execute the New
Lease to be effective as of, and subject to the Closing. The Existing Lease
will terminate as of the closing of the Seller Escrow and Seller will deliver
to Buyer as of the Closing of the Escrow a Certificate of Termination in a
form reasonably acceptable to Buyer warranting the termination of the
Existing Lease.
4. ESCROW.
4.1 OPENING OF ESCROW. Seller shall deliver a fully executed
counterpart of this Agreement into escrow ("ESCROW") to be established at
Santa Clara Land Title Company, San Jose, California ("TITLE COMPANY") within
three (3) business days following the Effective Date. The Buyer shall cause
the Initial Deposit to be delivered into Escrow as provided in Section 2.1.
4.2 INSTRUCTIONS TO TITLE COMPANY. Seller and Buyer shall each be
entitled to submit escrow instructions to the Title Company in connection
with the Closing of the Escrow. Seller and Buyer shall in addition execute
such further escrow instructions as the Title Company may reasonably require
in connection with the Closing. In the event of any conflict between the
terms and conditions of this Agreement and the provisions of any escrow
instructions prepared by Seller, Buyer or the Title Company, the terms and
conditions of this Agreement shall control.
5. CLOSING LOAN.
5.1 CLOSING. The purchase and sale of the Property as contemplated
by this Agreement, including but not limited to the recordation of the Deed
(as defined in Section 8.1.1 below) and the completion of the other matters
required by this Agreement to be done contemporaneously (the "CLOSING") shall
occur no later than five (5) business days following the Due Diligence Date
or such earlier date as is selected by Buyer upon at least two (2) business
days prior written notice to Seller and the Title Company. The date on which
the Closing actually occurs shall be referred to as the "CLOSING DATE". It is
acknowledged that the Closing pursuant to this Agreement shall be
simultaneous with the closing of the Seller Escrow.
5.2 FAILURE TO CLOSE. If the Closing does not occur on or before
the date set forth in Section 5.1 above, then in the absence of a written
agreement between the parties to extend the Closing Date, either party hereto
may elect to terminate this Agreement upon giving written notice of such
termination to the other and to the Title Company. In such event, except in a
case where the provisions of Section 17 are applicable, the Deposit together
with interest accrued thereon shall be promptly returned to Buyer.
5.3 LOAN. In connection with the closing of the Seller Escrow, and
provided that as of the Closing hereunder, Seller is not in default pursuant
to this Agreement, Seller has delivered into Escrow all the matters required
to be delivered by Seller to effect the Closing and Buyer is otherwise
obligated to perform pursuant to this Agreement, then Buyer hereby agrees to
loan to Seller (the "LOAN") an amount sufficient to allow Seller to purchase
the Property and close the Seller Escrow in accordance with the provisions of
Seller's option provided that, in no event shall the Loan be in excess of the
sum of Five Million Nine Hundred Thousand Dollars ($5,900,000). The amount of
the Loan shall be funded by Buyer into the Seller Escrow in
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immediately available funds on or before the Closing Date. The Loan shall be
evidenced by a Promissory Note in the form attached hereto as EXHIBIT 5.3-1.
The Loan shall provide for an interest rate of 10% per annum, for accrual of
interest to commence on the date that Buyer places the Loan amount into the
Seller Escrow and for payment of the entire unpaid principal balance together
with any accrued and unpaid interest on or before 30 days following the close
of the Seller Escrow. The loan shall be secured by a Deed of Trust with
assignment of rents ("DEED OF TRUST") in the form attached hereto as EXHIBIT
5.3-2. As a condition of the obligation of Buyer to make the Loan, the Title
Company shall be unconditionally prepared to issue to Buyer, in connection
with the Seller Escrow, an ALTA Lender's Title Insurance Policy in the amount
of the Loan, insuring the lien of the Deed of Trust subject only to the
Permitted Exceptions (as defined below). In connection with the Close of the
Escrow, the lien of the Deed of Trust shall be reconveyed and Buyer shall be
entitled to a credit against the Purchase Price in the full amount of the
outstanding principal balance of the Loan, together with accrued and unpaid
interest, if any.
6. DUE DILIGENCE.
6.1 DUE DILIGENCE PERIOD. The period commencing as of the
Effective Date and continuing through the date ("DUE DILIGENCE DATE") which
is fifteen (15) business days following the Effective Date shall be referred
to as the "DUE DILIGENCE PERIOD".
6.2 AVAILABLE INFORMATION. Seller shall make available to Buyer
the following documents and materials (collectively, the "DUE DILIGENCE
MATERIALS"):
6.2.1 REQUESTED MATERIALS. Following the Effective Date
Buyer will deliver to Seller a list of documents and materials (e.g.
structural reports, environmental reports, building plans, property tax
bills, etc.) relating to the Property. Seller shall promptly furnish to Buyer
for its review copies of all such documents and materials in the possession
of Seller, reasonably accessible to Seller or in the possession of or
reasonably accessible to Seller's property manager, if any. The obligation of
Seller, as described in this Section 6.2.1 shall be limited to providing
copies of existing documents and materials and Seller shall have no
obligation to obtain any additional reports or incur any costs in connection
with any additional reports. Seller shall, however, immediately provide
copies to Buyer of any reports or similar documents, if any, as provided to
Seller by South Bay or its representative(s). Seller shall, in addition,
reasonably cooperate with Buyer in connection with obtaining any reports or
like documents from South Bay.
6.2.2 PROPERTY FILES. Seller shall make available to Buyer
and Buyer's agents and representatives, upon reasonable notice and during
normal business hours, all files in the possession of Seller, reasonably
accessible to Seller or in possession of or reasonably accessible to Seller's
property manager, if any, relating to the ownership, operation, construction,
use or occupancy of the Property, or any portion of the Property. Seller
shall furnish Buyer copies of such material relative to the Property as Buyer
may request. Seller shall, in addition, reasonably cooperate with Buyer in
providing Buyer with access to all files with respect to the Property made
available by or obtainable from South Bay or its representative(s).
6.3 TITLE REPORT; PERMITTED EXCEPTIONS. Within five (5) business
days after the Effective Date, Seller shall obtain and deliver to Buyer a
current preliminary title report ("TITLE REPORT") for the Real Property
prepared by the Title Company, together with a legible copy of
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the documents listed as exceptions therein. If Buyer does not receive the
Title Report and a legible copy of all such documents within five (5)
business days after the Effective Date, each of the other dates provided in
this Agreement, including, but not limited to the Due Diligence Date and the
Closing Date, shall be extended by one (1) day for each day that Buyer's
receipt of the Title Report and a legible copy of all such documents is
delayed. Seller shall, within ten (10) business days after the Effective
Date, obtain and deliver to Buyer and the Title Company a survey ("SURVEY")
prepared by a licensed engineer which Survey shall be reasonably current and
sufficient to provide the basis for an ALTA extended coverage owner's policy
of title insurance without boundary, encroachment or survey exceptions. In
connection with the Survey, Seller shall cause the Title Company to issue an
ALTA supplement to the Title Report reflecting any and all exceptions, if
any, indicated by the Survey ("ALTA SUPPLEMENT") or, in the alternative,
written confirmation ("NO SUPPLEMENT NOTICE") that no supplement to the Title
Report is necessary by reason of the Title Company's review of the Survey.
Within five (5) business days following receipt by Buyer of the Title Report,
copies of the documents listed as exceptions and the ALTA Supplement, or, in
the alternative, the No Supplement Notice (but in any event not later than
three (3) business days prior to the Due Diligence Date), Buyer shall give
notice ("TITLE NOTICE") to Seller of the exceptions to title as shown on the
Title Report and the ALTA Supplement, if any, approved by Buyer and those
disapproved by Buyer. Seller shall have three (3) business days after the
date on which the Title Notice is given (but no later than 5:00 p.m. on the
day one (1) business day prior to the Due Diligence Date) to have the
objected to title exceptions removed to the reasonable satisfaction of Buyer,
if Seller so elects. If within such time, Seller declines or fails to have
all of such title exceptions removed, Buyer shall have the option to either
(i) terminate this Agreement by notice to Seller, in which case all rights
and obligations hereunder of each party shall be at an end (except those
matters which are specifically stated in this Agreement to survive the
termination) and the Deposit together with interest accrued thereon shall be
promptly returned to Buyer; or (ii) elect to accept title to the Property as
it then is, but Buyer shall have no other option or remedy. Notwithstanding
any provisions to the contrary contained in this Agreement, Seller shall pay
(or cause to be paid) and remove all liens at or prior to the Closing
evidencing delinquent property taxes, deeds of trust or other contractual
monetary obligations. The title exceptions as shown on the Title Report (and
the ALTA Supplement, if any) approved by Buyer, as well as those title
exceptions, if any, initially disapproved by Buyer but thereafter accepted
shall be referred to herein as the "PERMITTED EXCEPTIONS". The Permitted
Exceptions shall include the possessory rights of Seller as tenant pursuant
to the New Lease. If Buyer fails to timely give the Title Notice to Seller or
fails to make the elections set forth in (i) or (ii) above on or before the
Due Diligence Date, then Buyer shall be deemed to have elected to terminate
this Agreement in which event all rights and obligations hereunder of each
party shall be at an end (except those matters which are specifically stated
in this Agreement to survive the termination) and the Deposit together with
interest thereon shall be promptly returned to Buyer.
6.4 INSPECTION; RIGHT OF ENTRY. Buyer shall have the right,
during the Due Diligence Period and subject to the terms and conditions of
Section 6.5 below, (i) to enter the Real Property to inspect the same
(including the performance of environmental audits of the Real Property in
accordance with the terms of Section 6.4.1 and 6.4.2 below), upon reasonable
notice to Seller, provided that Buyer does not unreasonably disturb any
business or other tenant operations or activities on the Real Property, and
(ii) to contact representatives of tenants and/or third parties who have
executed service contracts with Seller or Seller's representatives regarding
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the Real Property. Seller shall cooperate with Buyer in notifying tenants as
to Buyer's inspection thereof.
6.4.1 PHASE I ENVIRONMENTAL AUDIT. During the Due Diligence
Period, Buyer may conduct (or have conducted on its behalf by an
environmental auditor) a phase I environmental audit of the Real Property,
subject to the terms and conditions of Sections 6.4.2 and 6.5 below.
6.4.2 ENVIRONMENTAL CONDITIONS. In the event that Buyer shall
conduct a phase I environmental audit of the Real Property, Buyer shall
provide Seller with at least forty-eight (48) hours' prior written notice of
its intent thereof. Buyer shall not disclose to any third party, other than
Buyer's consultants, agents and attorneys associated with such environmental
investigation, the results of any of Buyer's inspections or testing of the
Real Property (collectively, "INVESTIGATIONS"). Prior to performing any of
the Investigations, Buyer shall obtain any required permits and
authorizations and shall pay all applicable fees required by any public body
or agency in connection therewith.
6.5 INDEMNITY; RETURN. Buyer shall indemnify, defend by counsel
reasonably acceptable to Seller, and hold Seller harmless from and against
any cost, expense, claim, liability or demand, including reasonable
attorneys' fees, arising from such entry by Buyer or from the performance of
any testing or other Investigations of the Real Property by Buyer, except
with respect to any loss or liability incurred by Seller resulting from the
mere discovery by Buyer of the presence of Hazardous Materials (as defined
below) at the Property or the existence of other defects with respect to the
Property. If this transaction does not close for any reason, Buyer shall
repair any damage to the Real Property resulting from Buyer's entry onto the
Real Property, including any tests and other Investigations. The aforesaid
indemnity and other agreements of Buyer set forth in this Section 6.5 shall
survive without limitation the termination or other expiration of this
Agreement.
6.6 GENERAL CONDITIONS. Buyer shall have the right to review and
approve, in its sole, absolute and subjective discretion, during the Due
Diligence Period, the Due Diligence Materials, title to the Property and any
physical or other items set forth in Sections 6.2, 6.3 and 6.4 above. In the
event that Buyer does not approve or waive each such item by giving written
notice of such approval and/or waiver to Seller on or before the Due
Diligence Date, this Agreement shall terminate, all rights and obligations
hereunder of each party shall be at an end (except those matters which are
specifically stated in the Agreement to survive the termination), and the
Deposit together with interest thereon shall be promptly returned to Buyer.
7. CONDITIONS TO CLOSING.
7.1 SELLER'S CONDITIONS. The obligation of Seller to sell and
convey the Property pursuant to this Agreement is subject to the satisfaction
on or before the Closing Date (or such earlier date as is specifically set
forth in this Agreement) of all of the following conditions precedent, which
conditions are for the benefit of Seller only and the satisfaction of which
may be waived only in writing by Seller:
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7.1.1 BUYER'S DELIVERIES. Delivery and execution by Buyer of
all monies, items and instruments required to be delivered by Buyer pursuant
to this Agreement;
7.1.2 BUYER'S REPRESENTATIONS. Buyer's warranties and
representations set forth herein shall be true and correct as of the Closing
Date;
7.1.3 BUYER'S PERFORMANCE. Buyer shall have performed each and
every agreement to be performed by Buyer pursuant to this Agreement;
7.1.4 SELLER'S PURCHASE. Seller shall have completed its
acquisition of the Property; and
7.1.5 NEW LEASE. Seller and Buyer shall have executed the
New Lease.
7.2 BUYER'S CONDITIONS. The obligation of Buyer to acquire the
Property pursuant to this Agreement is subject to the satisfaction on or
before the Closing Date (or such earlier date as is specifically set forth in
this Agreement) of all of the following conditions precedent which
conditions are for the benefit of Buyer only and the satisfaction of which
may be waived only in writing by Buyer:
7.2.1 SELLER'S DELIVERIES. Delivery and execution by Seller of
all instruments and other items required to be delivered by Seller pursuant
to this Agreement;
7.2.2 SELLER'S REPRESENTATIONS. Seller's warranties and
representations set forth herein shall be true and correct as of the Closing
Date;
7.2.3 SELLER'S PERFORMANCE. Seller shall have performed each
and every agreement to be performed by Seller pursuant to this Agreement;
7.2.4 BUYER'S TITLE POLICY. As of the Closing, the Title
Company shall have issued or shall have committed to issue, upon the sole
condition of the payment of its regularly scheduled premium, the Buyer's
Title Policy;
7.2.5 DUE DILIGENCE MATERIALS. Buyer's inspection and written
approval on or prior to the Due Diligence Date of the matters described in
Section 6.6 including the Due Diligence Materials, the Title Report and all
other physical, environmental, legal and other matters relating to the
Property which Buyer may, in Buyer's sole discretion, elect to investigate;
7.2.6 MATERIAL ADVERSE CHANGE. Between the Effective Date and
the Closing Date except as set forth in Section 13.1 and Section 13.2,
there shall have been no material adverse change in the physical condition of
the Property;
7.2.7 SELLERS' PURCHASE. Seller shall have completed its
acquisition of the Property; and
7.2.8 LEASEBACK. Seller and Buyer shall have executed the
New Lease.
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7.3 FAILURE OF CONDITIONS. If any of the conditions set forth in
Sections 7.1 or 7.2 are not timely satisfied or waived, for any reason other
than the default of Buyer or Seller under this Agreement, then this Agreement
and the rights and obligations of Buyer and Seller shall terminate and be of
no further force or effect except as to those matters as specifically stated
in this Agreement to survive termination, in which case the Title Company is
hereby instructed to return promptly to the party which placed such items
into Escrow all funds (including the Deposit together with interest accrued
thereon to be promptly returned to Buyer) and documents which are held by the
Title Company on the date of termination.
7.4 SATISFACTION OF CONDITIONS. The occurrence of the Closing
shall constitute satisfaction of conditions not otherwise specifically
satisfied or waived by Buyer or Seller.
8. DELIVERIES INTO ESCROW.
8.1 DELIVERIES BY SELLER. At least one (1) business day before the
Closing, Seller shall deliver or cause to be delivered into Escrow (with a
copy delivered concurrently to Buyer) the following documents duly executed
and acknowledged where appropriate:
8.1.1 DEED. Standard-form grant deed (the "DEED") in the form
set forth on EXHIBIT 8.1.1 to be attached hereto conveying the Real
Property to Buyer as provided in this Agreement;
8.1.2 BILL OF SALE. Bill of sale ("BILL OF SALE") in the form
set forth on EXHIBIT 8.1.2 to be attached hereto conveying the Personal
Property to Buyer;
8.1.3 ASSIGNMENT. The Assignment in the form set forth on
EXHIBIT 8.1.3 to be attached hereto;
8.1.4 FIRPTA. Certificate of non-foreign status to confirm
that Buyer is not required to withhold part of the Purchase Price pursuant to
Section 1445 of the Internal Revenue Code of 1986, as amended;
8.1.5 FORM 590. Franchise Tax Board Form (590);
8.1.6 NEW LEASE. Two original counterparts of the New Lease;
8.1.7 EXISTING LEASE. A certificate of termination as
described in Section 3.3; and
8.1.8 SELLER'S AUTHORITY. Such proof of Seller's authority
and authorization to enter into this Agreement and consummate the
transaction contemplated hereby and such proof of the power and authority of
the individual(s) executing and/or delivering any instruments, documents or
certificates on behalf of Seller to act for and bind Seller as may be
reasonably required by Title Company or Buyer.
8.2 DELIVERIES BY BUYER. Buyer shall deliver into Escrow the
following cash and shall, at least one (1) business day before the Closing,
deliver or cause to be delivered the
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following documents (with a copy delivered concurrently to Seller) duly
executed and acknowledged where appropriate:
8.2.1 CASH. The cash portion of the Purchase Price and such
additional sums as are necessary to pay the Buyer's share of closing costs,
prorations and any fees as more particularly set forth in Section 9 below;
8.2.2 ASSIGNMENT. The Assignment;
8.2.3 BUYER'S AUTHORITY. Such proof of Buyer's authority and
authorization to enter into this Agreement and consummate the transaction
contemplated by this Agreement, and such proof of the power and authority of
the individual(s) executing and/or delivering any instruments, documents or
certificates on behalf of Buyer to act for and bind Buyer as may be
reasonably required by Title Company or Seller;
8.2.4 NEW LEASE. Two original counterparts of the New Lease;
8.2.5 REQUEST FOR RECONVEYANCE. A Request for Reconveyance of
the Deed of Trust;
8.2.6 PROMISSORY NOTE. The original promissory note, having
been executed by Seller and delivered to Buyer in connection with the Seller
Escrow, which promissory note, on the occurrence of the Closing shall be
marked "paid" and delivered to Seller; and
8.2.7 OTHER DOCUMENTS. Such other documents as may be
reasonably necessary and appropriate to complete the Closing of the
transaction contemplated herein.
8.3 DELIVERY TO BUYER UPON CLOSING. Seller shall deliver
possession of the Property, subject to Seller's possessory rights as the
tenant of the Property pursuant to the New Lease to Buyer upon the Closing.
8.4 DELIVERY FOLLOWING CLOSING. Within one (1) business day
following the Closing, Seller shall deliver to Buyer: (i) all building plans
and specifications with respect to the Property which are in the possession
of Seller or reasonably accessible to Seller or its property manager; (ii)
all structural reviews, architectural drawings, engineering, soils, seismic,
geologic and architectural reports in the possession of Seller or reasonably
accessible to Seller or its property manager; and (iii) such other matters
and documents in the possession of Seller or reasonably accessible to Seller
or to its property manager as Buyer may reasonably request.
9. PRORATIONS; CLOSING COSTS; SECURITY DEPOSIT.
9.1 PRORATIONS.
9.1.1 TAXES AND ASSESSMENTS. All non-delinquent real estate
taxes on the Property shall be prorated through Escrow based on the actual
current tax bill as of 12:01 a.m. on the Closing Date. If after the Closing,
supplemental real estate taxes are assessed against the Property by reason of
any event occurring prior to the Closing Date, Buyer and Seller shall adjust
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the proration of the real estate taxes following the Closing. Any delinquent
taxes on the Property shall be paid at the Closing from funds accruing to
Seller. All assessments or installment payments thereof which are due and
payable prior to the Closing Date shall be paid at the Closing from funds
accruing to Seller. Seller shall have no obligation to pay any assessment
amounts not then due and payable.
9.1.2 OPERATING EXPENSES. It is acknowledged that the New
Lease is a NNN Lease obligating Seller as Tenant to pay all operating
expenses, including all costs relating to service contracts in connection
with the Property. Buyer shall have no obligation of any kind whatsoever for
any operating expenses accruing or attributable to the Property prior to the
Closing Date and Seller shall pay all such expenses. Further, commencing as
of the Closing Date and continuing thereafter, Seller as the tenant of the
Property pursuant to the New Lease shall be required to pay all operating
expenses accruing and attributable to the Property, and Buyer shall have no
responsibility for such expenses. Further, all service contracts in connection
with the Property shall, following the Closing, continue to be maintained by
Seller as the tenant of the Property pursuant to the New Lease and Buyer
shall have no responsibility to pay any costs or undertake any obligations in
connection with any service contracts with respect to the Property.
9.1.3 CALCULATION OF PRORATIONS. All prorations shall be made
on the basis of the actual number of days of the year and month which have
elapsed as of 12:01 a.m. Pacific Daylight Time on the Closing Date.
9.2 CLOSING COSTS.
9.2.1 SELLER'S COSTS. Seller shall pay (i) the premium for
the standard coverage CLTA portion of the Buyer's Title Policy; (ii) the cost
of the Survey; (iii) all county documentary and transfer taxes, and fifty
percent (50%) of the city transfer taxes; (iv) all escrow fees and costs,
including recording costs; and (v) all sales taxes, if any.
9.2.2 BUYER'S COSTS. Buyer shall pay (i) fifty percent (50%)
of the city transfer taxes; and (ii) the incremental premium for the ALTA
portion of Buyer's Title Policy and the premium for any endorsements.
9.3 SECURITY DEPOSITS. It is acknowledged that in connection with
the close of the Seller Escrow, Seller shall be entitled to retain any
security deposit having been paid by Seller to South Bay. As of the Closing
pursuant to the Escrow, Seller shall pay to Buyer through Escrow the amount
of any security deposit, if any, required to be paid by Seller pursuant to
the New Lease.
9.4 OTHER EXPENSES. Buyer and Seller shall each pay all legal and
professional fees and fees of other consultants incurred by Buyer and Seller
respectively.
10. OPERATION OF PROPERTY PENDING THE CLOSING. Following the Effective
Date and pending the Closing, the Seller shall operate the Property in
accordance with the following:
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10.1 NORMAL COURSE OF BUSINESS. Seller shall continue to operate,
manage and maintain the Property in such condition so that the Property shall
be in the same condition as of the Closing Date as it is as of the Effective
Date, reasonable wear and tear and casualty excepted. Seller shall maintain
all existing insurance policies in connection with the Property and shall
keep in effect and renew without modification all licenses, permits and
entitlements applicable to the Property. Seller shall not make any material
alterations to the Property or remove any Personal Property without the prior
written approval of Buyer.
10.2 FURTHER ENCUMBRANCES. Seller shall not voluntarily execute
any documents or otherwise take any action which will have the result of
conveying, transferring or encumbering the Property or any portion thereof in
any fashion whatsoever.
10.3 ADDITIONAL NEW LEASES. Other than the New Lease, which is to
be executed by Seller as tenant and Buyer as landlord, Seller shall not enter
into any other leases, rental agreements, or occupancy agreements either as
landlord or tenant or modify in any fashion any existing leases (except
termination of the Existing Lease) or undertake any assignment or sublease in
connection with any lease or in connection with the Property without the
prior written approval of Buyer, which approval may be withheld by Buyer in
its absolute discretion.
10.4 ENVIRONMENTAL MATTERS. Seller shall not (or permit any other
tenant of the Real Property or any portion thereof to) use, produce, process,
manufacture, generate, treat, handle, store or dispose of any Hazardous
Materials in, on or under the Real Property except in accordance with
applicable Environmental Law (as defined in Section 11.2.10 below) or release
any Hazardous Materials into the air, soil, surface water or ground water
comprising the Real Property.
11. REPRESENTATIONS AND WARRANTIES
11.1 NO REPRESENTATIONS OR WARRANTIES BY SELLER. Except as
expressly set forth in this Agreement, Seller has not made any warranty or
representation, express or implied, written or oral, concerning the Property.
11.2 SELLER'S REPRESENTATIONS AND WARRANTIES. Seller represents
and warrants to Buyer that:
11.2.1 AUTHORITY. This Agreement constitutes the valid and
binding obligation of Seller and is enforceable against Seller in accordance
with its terms, subject to bankruptcy, insolvency and similar laws affecting
the enforcement of creditors' rights generally and general equitable
principles. Seller is a corporation, validly formed, duly organized and in
good standing under the laws of the State of Delaware. Seller has full power
and authority to enter into and perform this Agreement. The execution and
delivery of this Agreement, delivery of money and all required documents,
Seller's performance of this Agreement and the transaction contemplated
hereby have been duly authorized by the requisite action on the part of
Seller. Neither the execution and delivery of this Agreement, nor the
transaction contemplated by this Agreement will conflict in any material
respect or constitute a breach under any agreement or instrument by which
Seller or the Property is bound.
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11.2.2 PENDING ACTIONS. Except as disclosed in writing to Buyer,
there are no pending or threatened actions, suits, arbitrations, claims or
proceedings, at law or in equity, including without limitation, any action or
proceeding for condemnation, affecting the Property of in which Seller is, or
to the best of Seller's knowledge, will be, a party by reason of Seller's
ownership of the Property.
11.2.3 GOVERNMENTAL REGULATIONS. Seller is not knowingly in
violation of governmental regulations relating to the Property including,
without limitation, the Americans With Disability Act, and Seller has not
received notice of any violations of governmental regulations relating to the
Property. To the best of Seller's knowledge, the Improvements are permitted
structures under applicable zoning and building laws and ordinances and the
present uses thereof are permitted uses under applicable zoning and building
laws and ordinances. To the best of Seller's knowledge, the conveyance of the
Property to Buyer will not violate any governmental regulations and will
include all rights necessary to permit continued compliance by the Property
will all governmental regulations.
11.2.4 LICENSES. To the best of Seller's knowledge, all licenses,
approvals, permits and certificates from governmental authorities or private
parties currently necessary for the use and operation of the Property, as it
is currently being used and operated, have been obtained.
11.2.5 TAXES. Except for the amounts disclosed by the tax bills for
all real property taxes and personal property taxes, and notices for any
assessments or bonds relating to the Property provided by Seller to Buyer, to
the best of Seller's knowledge, no real property taxes have been assessed
against the Property for the current tax year and no supplemental taxes or
assessments will be levied against the Property, resulting from work,
activities or improvements done to the Property by Seller.
11.2.6 UTILITIES. The Improvements are connected to and are served
by water, solid waste and sewage disposal, drainage, telephone, electricity
and other utility equipment facilities and services which are adequate for
the present use and operation of the Property and to the best of Seller's
knowledge, no fact or condition exists which would result in the termination
or impairment in the furnishing of utility services to the Improvements.
11.2.7 PHYSICAL DEFECTS. To the best of Seller's knowledge, there
are no material physical or mechanical defects or deficiencies in the
condition of the Property, including, but not limited to, the roofs, exterior
walls or structural components of the Improvements and the heating, air
conditioning, plumbing, ventilating, elevator, utility, sprinkler and other
mechanical and electrical systems, apparatus and appliances located in the
Improvements.
11.2.8 SOIL DEFECTS. To the best of Seller's knowledge, there are
no defects or conditions of the soil which will impair the present use and
operation of the Property.
11.2.9 INSURANCE NOTICE. Neither Seller nor, to the best of
Seller's knowledge, South Bay has received any notice from any insurance
company of any defects or inadequacies in any portion of the Real Property.
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11.2.10 HAZARDOUS MATERIALS. To the best of Seller's knowledge, all
operations or activities upon, or use or occupancy of the Real Property, or
any portion thereof, is in all material respects in compliance with all
state, federal and local laws and regulations governing or in any way
relating to the generation, handling, manufacturing, treatment, storage,
use, transportation, spillage, leakage, dumping, discharge or disposal of
Hazardous Materials. To the best of Seller's knowledge, except as set forth
on EXHIBIT 11.2.10 to be attached hereto, there is not present upon the Real
Property, or any portion thereof, any asbestos, or any structures, fixtures
or equipment containing asbestos. To the best of Seller's knowledge, and
except for matters, if any, disclosed in the environmental reports delivered
to Buyer and listed on EXHIBIT 11.2.10 to be attached hereto, Seller has no
current knowledge of, nor any reasonable cause to believe that, any release
of Hazardous Materials has occurred on or beneath the Real Property, and
neither Seller nor any tenant of the Real Property has been required by any
governmental agency to undertake any remediation activity with respect to any
Hazardous Materials on the Real Property. To Seller's knowledge, the
environmental reports listed on EXHIBIT 11.2.10 constitute all of the
environmental reports existing with respect to the Real Property. For
purposes of this Agreement, the term "HAZARDOUS MATERIALS" shall refer to any
material or substance defined as "hazardous substances", "hazardous
materials", "hazardous waste", "toxic substance", or related terms under any
federal, state or local law, ordinance or regulation or any court judgment
applicable to Seller or to the Real Property, relating to environmental
conditions (collectively, "ENVIRONMENTAL LAW") including, but not limited to,
those relating to the release, emission, storage, discharge or disposal of
substances defined therein. The Environmental Law includes, but is not
limited to, those acts commonly known as the Comprehensive Environmental
Response, Compensation and Liability Act of 1980, the Hazardous Materials
Transportation Act, the Clean Water Act, the Resource Conservation and
Recovery Act, the Toxic Substances Control Act, the Safe Drinking Water Act,
the Carpenter-Presley-Tanner Hazardous Substance Act, the Safe Drinking Water
and Toxics Enforcement Act, and all regulations adopted, publications
promulgated, orders issued and official interpretations announced pursuant to
those laws. In connection with the matters described above in this Section
11.2.10, Buyer shall, pursuant to Section 6.4.1, conduct its own Phase I
Environmental Audit with respect to the Property and thereby conduct an
independent investigation with respect to Hazardous Materials issues relating
to the Property.
11.2.11 MATERIAL FACTS. Seller has disclosed to Buyer all material
facts and conditions of which Seller has knowledge regarding the Property and
all instruments, documents, lists, schedules and items delivered to Buyer,
and prepared by Seller or its agents, will fairly present the information set
forth in a manner that is not misleading and will be true, complete and
correct in all material respects on the date of delivery and upon the Closing,
as they may be updated, modified or supplemented in accordance with this
Agreement.
11.2.12 LEASES. As of the date of this Agreement, except for the
Existing Lease between Seller as tenant and South Bay as landlord as
described above and as of the Closing, except for the New Lease, there are
and will be no leases, subleases, occupancy, tenancies or licenses in effect
pertaining to the Real Property or any portion thereof. The Existing Lease
shall be terminated as of the closing of the Seller Escrow and following the
Closing pursuant to the Escrow, the New Lease shall be the only lease,
rental, tenancy or occupancy agreement or license in effect pertaining to the
Real Property or any portion thereof.
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11.2.13 SERVICE CONTRACTS. There are no service or maintenance
contracts maintained with respect to the Property other than those service or
maintenance contracts maintained directly by Seller as the tenant of the Real
Property. Such service contracts as maintained by Seller in connection with
the Real Property are not being assigned pursuant to this Agreement and shall
continue following the Closing as the sole responsibility of Seller.
11.2.14 FINANCIAL RECORDS. To the best of Seller's knowledge, the
financial and other records affecting the Property and delivered to Buyer, are
complete and accurate in all material respects as of the date thereof, and
were prepared on a consistent basis in accordance with generally accepted
accounting principles.
11.2.15 ACCESS. To the best of Seller's knowledge, no fact or
condition exists which may result in the termination or reduction of the
current access from the Property to existing roads and highways.
11.2.16 FOREIGN PERSON. Seller is not a "foreign person" as defined
in Section 1445 of the Internal Revenue Code of 1986, as amended, and the
income tax regulations issued thereunder.
11.2.17 SQUARE FOOTAGE. The Improvements contain approximately
90,000 rentable square feet computed in accordance with BOMA standards.
11.2.18 GOOD TITLE. Following the closing of the Seller Escrow,
Seller will have good title to the Personal Property, if any, and to the
Intangible Property, free and clear of all liens, encumbrances, security
interest and adverse claims of any kind whatsoever.
11.2.19 CORRECT COPIES. To the best of Seller's knowledge, all
copies of documents delivered to Buyer or to be delivered to Buyer pursuant
to Section 6.2.1 are and will be accurate and complete copies of the
originals.
11.2.20 OPTION TO PURCHASE. Seller possesses a valid option to
purchase the Property, which option Seller represents will be timely
exercised so that Seller can timely deliver the Property to Buyer in
conformity with the provisions of this Agreement.
11.2.21 TRUE AS OF CLOSING. Each representation and warranty in
this Agreement is true, correct and complete in all material respects, and
those contained in this Section 11.2 shall be continuing and shall be true,
correct and materially complete as of the Closing with the same force and
effect as if remade by Seller in a separate certificate at that time and
shall survive the Closing.
11.2.22 MATERIAL CHANGES. Seller shall promptly notify Buyer of
any change in any condition with respect to the Property or any event or
circumstance which makes any representation or warranty of Seller under this
Agreement materially untrue or misleading, or any covenant of Seller under
this Agreement incapable of being performed.
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11.2.23 SELLER'S KNOWLEDGE. For purposes of this Section 11.2, all
references to Seller's knowledge shall be deemed to include the knowledge of
Seller's property manager, if any.
11.3 BUYER'S REPRESENTATIONS AND WARRANTIES. Buyer represents and
warrants to Seller that:
11.3.1 AUTHORITY TO EXECUTE; ORGANIZATION. This Agreement
constitutes valid and binding obligations of Buyer and is enforceable against
Buyer in accordance with its terms, subject to bankruptcy, insolvency and
similar laws affecting the enforcement of creditors' rights generally and
general equitable principles. Buyer represents that it is a corporation, is
validly formed and duly organized in good standing under the laws of the
State of California and has full power and authority to enter into and
perform this Agreement. The execution of this Agreement, delivery of money
and all required documents, Buyer's performance of this Agreement and the
transaction contemplated hereby have been duly authorized by the requisite
action on the part of Buyer and Buyer's board of directors.
11.3.2 FINANCIAL CONDITION. Buyer's financial condition is as
represented to Seller on the Effective Date and shall not have materially
adversely changed prior to the Closing Date.
11.3.3 NO ENCUMBRANCE. Prior to Closing, Buyer shall neither
encumber nor cause any liens to be created against the Property in any way,
nor shall Buyer, at any time, record this Agreement or a memorandum thereof.
12. INDEMNIFICATION.
12.1 INDEMNIFICATION OF BUYER. Seller hereby agrees to indemnify
Buyer against, and to hold Buyer harmless from, all losses, damages, costs
and expenses whatsoever including without limitation reasonable legal fees
and disbursements, incurred by Buyer relating to the Property which arise,
result from or relate to (i) acts, occurrences or matters that took place
prior to the Closing to the extent that any such claim described in this
clause (i) is covered by the comprehensive general liability insurance policy
maintained by Seller or otherwise covered pursuant to applicable insurance
coverage maintained by Seller and in this connection Seller represents and
warrants that Seller has during the period of its ownership maintained and
continues to maintain comprehensive general liability insurance coverage; or
(ii) any breach of any of the representations or warranties of Seller set
forth in Section 11.2 of this Agreement.
12.2 DEFENSE OF CLAIMS AGAINST BUYER. With respect to any claim
for which Buyer has requested indemnification under Section 12.1, Seller
shall be entitled to assume the defense of any related litigation,
arbitration or other proceeding, provided that Buyer may at its election and
expense, participate in such defense, and provided further that if there is
any difference of opinion or strategy with respect to the defense of such
action or the assertion of counterclaims to be brought with respect thereto,
Seller's counsel will, after consultation with Buyer's counsel, determine
that actual strategy, defense or counterclaim to be employed. At Seller's
reasonable request, Buyer will cooperate with Seller in the preparation of
any defense for any such claim and Seller will reimburse Buyer for any
reasonable expenses incurred in connection
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with such request. If Seller does not elect to assume the defense of any such
matter and such matter is defended by Buyer, Seller shall have the right, at
its sole expense, to employ separate counsel acceptable to Buyer and
participate in such defense, provided that if there is any difference of
opinion or strategy with respect to the defense of such action or the
assertion of counterclaims to be brought with respect thereto, Buyer's
counsel will, after consultation with Seller's counsel, determine the actual
strategy, defense and/or counterclaim to be employed.
12.3 INDEMNIFICATION OF SELLER. Buyer hereby agrees to indemnify
Seller against, and to hold Seller harmless from, all losses, damages, costs
and expenses whatsoever including without limitation reasonable legal fees
and disbursements, incurred by Seller relating to the Property which arise,
result from or relate to (i) acts, occurrences or matters that take place
subsequent to the Closing and during the period of Buyer's ownership of the
Property, to the extent that any such claim described in this clause (i) is
covered by the comprehensive general liability insurance policy maintained by
Buyer or otherwise covered pursuant to applicable insurance coverage
maintained by Buyer and in this connection Buyer represents and warrants that
Buyer will during the period of its ownership maintain comprehensive general
liability insurance coverage; or (ii) any breach of any of the
representations or warranties of Buyer set forth in Section 11.3 of this
Agreement.
12.4 DEFENSE OF CLAIMS AGAINST SELLER. With respect to any claim
for which Seller has requested indemnification under Section 12.3, Buyer
shall be entitled to assume the defense of any related litigation,
arbitration or other proceeding, provided that Seller may at its election and
expense, participate in such defense, and provided further that if there is
any difference or opinion or strategy with respect to the defense of such
action or the assertion of counterclaims to be brought with respect thereto,
Buyer's counsel will, after consultation with Seller's counsel, determine the
actual strategy, defense or counterclaim to be employed. At Buyer's
reasonable request, Seller will cooperate with Buyer in the preparation of
any defense for any such claim and Buyer will reimburse Seller for any
reasonable expenses incurred in connection with such request. If Buyer does
not elect to assume the defense of any such matter, and such matter is
defended by Seller, Buyer shall have the right, at its sole expense, to
employ separate counsel acceptable to Seller and participate in such defense,
provided that if there is any difference of opinion or strategy with respect
to the defense of such action or the assertion of counterclaims to be brought
with respect thereto, Seller's counsel will, after consultation with Buyer's
counsel, determine the actual strategy, defense and/or counterclaim to be
employed.
13. CASUALTY OR CONDEMNATION.
13.1 CASUALTY. Prior to the Closing, and notwithstanding the
pendency of this Agreement, the entire risk of loss or damage by earthquake,
flood, landslide, fire or other casualty shall be borne and assumed by
Seller, except as otherwise provided in this Section 13.1. If, prior to the
Closing, any part of the Real Property is damaged or destroyed by earthquake,
flood, landslide, fire or other casualty, Seller shall immediately notify
Buyer of such fact. If such damage or destruction is "material", Buyer shall
have the option to terminate this Agreement upon notice to Seller given not
later than ten (10) days after receipt of Seller's notice. For purposes of
this Section 13.1, "material" shall be deemed to be (i) any uninsured damage
or destruction to the Property; (ii) any insured damage or destruction where
the costs of repair or replacement is estimated to be Fifty Thousand Dollars
($50,000) or more or shall take more than one hundred
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(100) days to repair, or (iii) any insured damage or destruction where the
insurance proceeds available (plus deductible to be paid by Seller) is
insufficient to repair the Property so as to return the Property to its
condition prior to the occurrence of the damage or destruction; provided,
however, in the case of any material damage or destruction (except where the
cost of repair or replacement is estimated to be in excess of $200,000), upon
notice of Buyer's intent to terminate this Agreement based on material
damage, Seller may, at Seller's option, elect to repair such damage and
destruction and keep this Agreement in full force an effect and in such event
the Closing shall occur, provided that: (i) sufficient funds are held in
Escrow from the Purchase Price in an amount reasonably satisfactory to Buyer
so as to fully cover the cost of repair or replacement after giving effect to
any available insurance proceeds; (ii) Seller is contractually bound to make
the necessary repairs or replacements; and (iii) pursuant to the New Lease
there shall be no abatement of rent or any other amounts payable by Seller as
tenant, during the period following the Closing in which the repair or
replacement occurs. If Buyer does not exercise this option to terminate this
Agreement, or the casualty is not material, neither party shall have the
right to terminate this Agreement, but Seller shall assign and turn over to
Buyer, and Buyer shall be entitled to receive and keep all insurance proceeds
payable to it with respect to such destruction plus Seller shall pay over to
Buyer an amount equal to the deductible amount with respect to the insurance
and the parties shall proceed to the Closing pursuant to the terms hereof
without modification of the terms of this Agreement and without any reduction
in the Purchase Price. If Buyer does not elect to terminate this Agreement by
reason of any casualty, Buyer shall have the right to participate in any
adjustment in the insurance claim. If Buyer does terminate this Agreement
pursuant to this Section 13.1, this Agreement shall terminate, all rights and
obligations hereunder of each party shall be at an end and the Title Company
is hereby instructed to return promptly to the party which placed such items
into Escrow all funds (including the Deposit together with interest accrued
thereon to be promptly returned to Buyer) and documents which are held by the
Title Company on the date of termination.
13.2 CONDEMNATION. In the event that all or any portion of the
Real Property shall be taken in condemnation or under the right of eminent
domain after the Effective Date and before the Closing, Buyer may, at its
option either (a) terminate this Agreement by written notice thereof to
Seller and receive an immediate refund of the Deposit, together with any
interest earned thereon, or (b) proceed to close the transaction contemplated
herein pursuant to the terms hereof in which event Seller shall assign and
turn over to Buyer, and Buyer shall be entitled to receive and keep all awards
for the taking by eminent domain which accrue to Seller and there shall be no
reduction in the Purchase Price.
14. COMMISSIONS
14.1 PAYMENT OF THE SALES COMMISSION. Subject to the occurrence
of the Closing, Buyer agrees to pay in Escrow Ninety Thousand Dollars
($90,000,000) brokerage commission due from Buyer to Colliers Parrish
International, Inc., Buyer's broker, for the sale of the Property. Buyer
represents and warrants to the Seller that no other real estate broker or
agent has been authorized to act on Buyer's behalf. Buyer and Seller each
indemnifies the other party and agrees to defend and hold the other party
harmless from any and all demands or claims which now or hereafter may be
asserted against the other party for any brokerage fees, commissions or
similar types of compensation which may be claimed by any broker as a result
of the indemnifying party's acts in connection with this transaction, except
as otherwise provided herein.
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14.2 LEASING COMMISSION. Seller shall pay all leasing
commissions, if any, payable under the New Lease as of the Closing.
15. NOTICES.
All notices, requests or demands to a party hereunder shall be in
writing and shall be given or served upon the other party by personal
service, by certified return receipt requested or registered mail, postage
prepaid, or by Federal Express or other nationally recognized commercial
courier, charges prepaid, addressed as set forth below. Any such notice,
demand, request or other communication shall be deemed to have been given
upon the earlier of personal delivery thereof, five (5) business days after
having been mailed as provided above, or one (1) business day after delivery
through a commercial courier, as the case may be. Notices may be given by
facsimile and shall be effective upon the transmission of such facsimile
notice provided that the facsimile notice is transmitted on a business day
and a copy of the facsimile notice together with evidence of its successful
transmission indicating the date and time of transmission is sent on the day
of transmission by recognized overnight carrier for delivery on the
immediately succeeding business day. Each party shall be entitled to modify
its address by notice given in accordance with this Section 15.
If to Seller: Media Arts Group, Inc.
521 Charcot Avenue
San Jose, CA 95131
Attn: Bud Peterson
Fax: (408) 232-4822
With a copy to: Media Arts Group, Inc.
521 Charcot Avenue
San Jose, CA 95131
Attn: Jay Landrum, Esq.
Fax: (408) 324-2034
If to Buyer: Limar Realty Corp. #36
1730 South El Camino Real, Suite 400
San Mateo, CA 94402
Attn: Theodore H. Kruttschnitt
Fax: (415) 525-9345
With a copy to: H.L. (Bing) Heckman
Limar Financial Corporation
1730 South El Camino Real, Suite 400
San Mateo, CA 94402
Fax: (415) 525-9811
With a copy to: Walter F. Merkle, Esq.
Kay & Merkle
100 The Embarcadero, Penthouse
San Francisco, CA 94105
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Fax: (415) 512-9277
16. MISCELLANEOUS.
16.1 TIME. Time is of the essence in the performance of each
party's obligation hereunder.
16.2 ATTORNEYS' FEES. If any legal action, arbitration or other
proceeding is commenced to enforce or interpret any provision of this
Agreement, the prevailing party shall be entitled to an award of its
attorneys' fees and expenses. The phrase "prevailing party" shall include a
party who receives substantially the relief desired whether by dismissal,
summary judgment, judgment or otherwise.
16.3 NO WAIVER. No waiver by any party of the performance or
satisfaction of any covenant or condition shall be valid unless in writing
and shall not be considered to be a waiver by such party of any other
covenant or condition hereunder.
16.4 ENTIRE AGREEMENT. This Agreement contains the entire
agreement between the parties regarding the Property and supersedes all prior
agreements, whether written or oral, between the parties regarding the same
subject. This Agreement may only be modified in writing.
16.5 SURVIVAL. The provisions of this Agreement shall not merge
with the delivery of the Deed but shall, except as otherwise provided in this
Agreement, survive the Closing.
16.6 SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon
and inure to the benefit of the heirs, executors, administrators and
successors and assigns of Seller and Buyer; provided, however, that Buyer
shall not assign Buyer's rights and obligations pursuant to this Agreement to
any party without the prior written consent of Seller which consent shall not
be unreasonably withheld.
16.7 SEVERABILITY. In the case that any one or more of the
provisions contained in this Agreement are for any reason held to be invalid,
illegal or unenforceable in any respect, such invalidity, illegality or
unenforceability shall not affect any other provision hereof, and this
Agreement shall be construed as if such invalid, illegal or unenforceable
provision had never been contained herein.
16.8 PURCHASE PRICE ALLOCATION. Buyer and Seller agree to exert
their best efforts prior to Closing to agree on a mutual allocation of the
Purchase Price between Land, Improvements and Personal Property. In the event
that Buyer and Seller are unable to timely agree upon such an allocation,
Buyer and Seller agree that no allocation shall be referenced in this
Agreement or in any other agreements or documents executed in connection with
this Agreement.
16.9 CAPTIONS. Paragraph titles or captions contained in this
Agreement are inserted as a matter of convenience only and for reference, and
in no way define, limit, extend or describe the scope of this Agreement.
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16.10 EXHIBITS. All exhibits attached hereto shall be incorporated
herein by reference as if set out herein in full.
16.11 RELATIONSHIP OF THE PARTIES. The parties acknowledge that
neither party is an agent for the other party, and that neither party shall
or can bind or enter into agreements for the other party.
16.12 GOVERNING LAW. This Agreement and the legal relations
between the parties hereto shall be governed by and be construed in
accordance with the laws of the State of California.
16.13 REVIEW BY COUNSEL. The parties acknowledge that each party
and its counsel have reviewed and approved this Agreement, and the parties
hereby agree that the normal rule of construction to the effect that any
ambiguities are to be resolved against the drafting party shall not be
employed in the interpretation of this Agreement or any amendments or
exhibits hereto.
16.14 CONFIDENTIALITY. The parties hereto shall not disclose any
of the material terms of this Agreement (except to the extent as may be
required by law or as required by the Title Company or the officers,
directors, partners, lenders and employees of the parties hereto in the
ordinary course of business) without the prior written consent of the other
party.
16.15 COUNTERPARTS. This Agreement may be executed in
counterparts, each of which shall constitute an original. This Agreement
shall only be effective if a counterpart is signed by both Seller and Buyer.
16.16 LICENSED REAL ESTATE BROKERS. Seller hereby acknowledges
that (a) Limar Financial Corporation ("LFC"), an affiliate of Buyer, is a
licensed real estate broker under the laws of the State of California, (b)
Thomas Numainville and H.L. (Bing) Heckman, officers of LFC and Buyer, are
similarly so licensed and (c) no agency relationship has been created between
Buyer and Seller (or between LFC, Thomas Numainville or H.L. (Bing) Heckman
and Seller) with respect to the transactions subject to this Agreement.
17. LIQUIDATED DAMAGES.
If Buyer breaches this Agreement, and the transaction contemplated
by this Agreement fails to close solely by reason thereof, Seller shall be
entitled to terminate this Agreement and retain the amount of the Deposit
plus any accrued interest thereon (the "SPECIFIED SUM") as liquidated
damages. SELLER AND BUYER ACKNOWLEDGE THAT SELLER'S DAMAGES WOULD BE
DIFFICULT TO DETERMINE, AND THAT THE SPECIFIED SUM IS A REASONABLE ESTIMATE
OF SELLER'S DAMAGES. SELLER AND BUYER FURTHER AGREE THAT THIS SECTION IS
INTENDED TO AND DOES LIQUIDATE THE AMOUNT OF DAMAGES DUE SELLER, AND SHALL BE
SELLER'S EXCLUSIVE REMEDY AGAINST BUYER, BOTH AT LAW AND IN EQUITY ARISING
FROM OR RELATED TO A BREACH BY BUYER OF ITS OBLIGATIONS TO CONSUMMATE THE
TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT.
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Buyer's Initials Seller's Initials
18. DEFINITIONS. For ease of reference, the defined terms as employed
in this Agreement and as listed below are defined in the designated sections:
18.1 "Additional Deposit" as defined in section 2.2
18.2 "Agreement" as defined in first paragraph.
18.3 "ALTA Supplement" as defined in section 6.3
18.4 "Assignment" as defined in section 1.3
18.5 "Bill of Sale" as defined in section 8.1.2
18.6 "Buyer" as defined in first paragraph.
18.7 "Buyer's Title Policy" as defined in section 3.2
18.8 "Closing" as defined in section 5.1
18.9 "Closing Date" as defined in section 5.1
18.10 "Deed" as defined in section 8.1.1
18.11 "Deed of Trust" as defined in section 5.3
18.12 "Deposit" as defined in section 2.3
18.13 "Due Diligence Date" as defined in section 6.1
18.14 "Due Diligence Materials" as defined in section 6.2
18.15 "Due Diligence Period" as defined in section 6.1
18.16 "Effective Date" as defined in first paragraph.
18.17 "Environmental Law" as defined in section 11.2.10
18.18 "Escrow" as defined in section 4.1
18.19 "Existing Lease" as defined in recital B
18.20 "Hazardous Materials" as defined in section 11.2.10
18.21 "Improvements" as defined in section 1.1.2
18.22 "Initial Deposit" as defined in section 2.1
18.23 "Intangible Property" as defined in section 1.3
18.24 "Investigations" as defined in section 6.4.2
18.25 "Land" as defined in section 1.1.1
18.26 "Loan" as defined in section 5.3
18.27 "LFC" as defined in section 16.16
18.28 "New Lease" as defined in section 3.3
18.29 "No Supplement Notice" as defined in section 6.3
18.30 "Permitted Exceptions" as defined in section 6.3
18.31 "Personal Property" as defined in section 1.1.3
18.32 "Property" as defined in section 1.1
18.33 "Purchase Price" as defined in section 2
18.34 "Real Property" as defined in section 1.2
18.35 "Seller" as defined in first paragraph
18.36 "Seller Escrow" as defined in recital C
18.37 "South Bay" as defined in recital B
18.38 "Specified Sum" as defined in section 17
18.39 "Survey" as defined in section 6.3
18.40 "Title Company" as defined in section 4.1
18.41 "Title Notice" as defined in section 6.3
18.42 "Title Report" as defined in section 6.3
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and delivered as of the day and year first above written.
SELLER: BUYER:
MEDIA ARTS GROUP, INC. LIMAR REALTY CORP. #36
a Delaware corporation a California corporation
By: /s/ Bud Peterson By: /s/ Theodore H. Kruttschnitt
-------------------------- ------------------------------
Name: Bud Peterson Theodore H. Kruttschnitt
------------------------ President
Title: CFO
-----------------------
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LIST OF EXHIBITS
Exhibit 1.1.1 - Legal Description of Land
Exhibit 3.3 - Form of New Lease
Exhibit 5.3-1 - Form of Promissory Note
Exhibit 5.3-2 - Form of Deed of Trust
Exhibit 8.1.1 - Form of Grant Deed
Exhibit 8.1.2 - Form of Bill of Sale
Exhibit 8.1.3 - Form of Assignment
Exhibit 11.2.10 - Schedule of Environmental Matters and Reports
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EXHIBIT 1.1.1
LEGAL DESCRIPTION OF LAND
-------------------------
The land referred to in this Agreement is situated in the State of
California, County of Santa Clara, and is described as follows:
All that certain Real Property in the City of San Jose, County of Santa
Clara, State of California, described as follows:
All of Parcel B, as shown upon that certain Map entitled, "Parcel Map being a
Resubdivision of Parcel 1 as shown on the Parcel Map recorded in Book 316 of
Maps, at Page 21, Santa Clara County Records", which Map was filed for record
in the Office of the Recorder of the County of Santa Clara, State of
California, on February 3, 1976 in Book 367 of Maps, at Pages 27 and 28.
<PAGE>
EXHIBIT 3.3
FORM OF NEW LEASE