UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 8-K/A
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
The Securities Act of 1934
Date of Report (Date of earliest event reported) November 27, 1996
ARDEN REALTY, INC.
(Exact name of registrant as specified in its charter)
Maryland 1-12193 95-4578533
(State or other jurisdiction (Commission (I.R.S. Employer
of incorporation) File Number) Identification No.)
9100 Wilshire Boulevard, East Tower, Suite 700 90212
Beverly Hills, California
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (310) 271-8600
Item 7. Financial Statements and Exhibits
(a) Financial statements of properties acquired.
5200 West Century Boulevard
Statement of Revenue and Certain Expenses:
Report of Independent Auditors
Statement of Revenue and Certain Expenses for the
Period January 1, 1996 to December 19, 1996
Notes to Statement of Revenue and Certain Expenses
2730 Wilshire
Statement of Revenue and Certain Expenses:
Report of Independent Auditors
Statement of Revenue and Certain Expenses for the
Twelve Months Ended October 31, 1996
Notes to Statement of Revenue and Certain Expenses
10351 Santa Monica
Statement of Revenue and Certain Expenses:
Report of Independent Auditors
Statement of Revenue and Certain Expenses for the
Twelve Months Ended October 31, 1996
Notes to Statement of Revenue and Certain Expenses
Center Promenade
Statement of Revenue and Certain Expenses:
Report of Independent Auditors
Statement of Revenue and Certain Expenses for the
Period January 1, 1996 to December 17, 1996
Notes to Statement of Revenue and Certain Expenses
10350 Santa Monica
Statement of Revenue and Certain Expenses:
Report of Independent Auditors
Statement of Revenue and Certain Expenses for the
Period January 1, 1996 to December 27, 1996
Notes to Statement of Revenue and Certain Expenses
Sumitomo Bank Building
Statement of Revenue and Certain Expenses:
Report of Independent Auditors
Statement of Revenue and Certain Expenses for the
Period January 1, 1996 to December 20, 1996
Notes to Statement of Revenue and Certain Expenses
LA Corporate Center
Statement of Revenue and Certain Expenses:
Report of Independent Auditors
Statement of Revenue and Certain Expenses for the
Period January 1, 1996 to December 18, 1996
Notes to Statement of Revenue and Certain Expenses
Burbank Executive Center
Statement of Revenue and Certain Expenses:
Report of Independent Auditors
Statement of Revenue and Certain Expenses for the
Twelve Months Ended October 31, 1996
Notes to Statement of Revenue and Certain Expenses
(b) Pro forma financial information.
Pro Forma Condensed Combined Statement of Operations
(c) Exhibits.
10.33 Agreement of Purchase and Sale and Joint Escrow
Instructions for 1970 and 1990 East Grand Avenue, El
Segundo, California, by and between Continental Grand
Company and Arden Realty Limited Partnership
10.34 Purchase and Sale Agreement between Kennedy-
Wilson, Inc. and Arden Realty Limited Partnership
10.35 Agreement of Purchase and Sale by and between
Arden Realty Limited Partnership and Property Asset
Management Inc.
Report of Independent Auditors
Board of Directors and Stockholders
Arden Realty, Inc.
We have audited the accompanying statement of revenue and
certain expenses of 5200 West Century for the period January 1, 1996
to December 19, 1996. This statement of revenue and certain
expenses is the responsibility of the management of 5200 West
Century. Our responsibility is to express an opinion on the statement of
revenue and certain expenses based on our audit.
We conducted our audit in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about
whether the statement of revenue and certain expenses is free of
material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial
statement. An audit also includes assessing the accounting
principles used and significant estimates made by
management, as well as evaluating the overall financial statement
presentation. We believe that our audit provides a reasonable basis for
our opinion.
The accompanying statement of revenue and certain expenses was
prepared for the purpose of complying with the rules and
regulations of the Securities and Exchange Commission. Certain
expenses (described in Note 1) that would not be comparable to
those resulting from the proposed future operations of the
property are excluded and the statement is not intended to be a
complete presentation of the revenue and expenses of the property.
In our opinion, the statement of revenue and certain expenses
presents fairly, in all material respects, the revenue and
certain expenses, as defined above, of 5200 West Century for the
period January 1, 1996 to December 19, 1996, in conformity with
generally accepted accounting principles.
Ernst & Young LLP
Los Angeles, California
February 5, 1997
5200 West Century
Statement of Revenue and Certain Expenses
(In thousands)
For the Period January 1, 1996 to December 19, 1996
Revenue
Rental $ 1,021
Tenant reimbursements 115
Parking - net of expenses 40
Other 2
Total revenue 1,178
Certain Expenses
Property operating and maintenance 841
Real estate taxes 135
Insurance 212
Total certain expenses 1,188
Excess of certain expenses over revenue $ (10)
See accompanying notes to statement of revenue and certain expenses.
5200 West Century
Notes to Statement of Revenue and Certain Expenses
For the Period January 1, 1996 to December 19, 1996
1. Organization and Summary of Significant Accounting
Policies
Organization
The accompanying statement of revenue and certain expenses
includes the operations of 5200 West Century (the "Property")
located in Southern California which was acquired by Arden
Realty, Inc. (the "Company") from a nonaffiliated third party.
The Property was acquired for $11,400,000 and has approximately
310,910 rentable square feet.
Basis of Presentation
The accompanying statement has been prepared to comply with rules
and regulations of the Securities and Exchange Commission.
The accompanying statement is not representative of the actual
operations for the period presented as certain expenses that may
not be comparable to the expenses expected to be incurred by the
Company in the future operations of the Property have been
excluded. Excluded expenses consist of interest, depreciation and
amortization and property general and administrative costs not
directly comparable to the future operation of the Property.
Revenue Recognition
Rental revenue is recognized on a straight-line basis over the
terms of the related leases.
Risks and Uncertainties
The preparation of financial statements, in conformity with
generally accepted accounting principles, requires management to
make estimates and assumptions that affect the reported amounts
of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the
reported amounts of revenue and expenses during the reporting
period. Actual results could differ from those estimates.
5200 West Century
Notes to Statement of Revenue and Certain Expenses
(continued)
For the Period January 1, 1996 to December 19, 1996
2. Commercial Office Property
The future minimum lease payments to be received under existing
operating leases as of December 31, 1996, are as follows:
1997 $ 783,000
1998 750,000
1999 684,000
2000 575,000
2001 562,000
Thereafter 3,258,000
The above future minimum lease payments do not include specified
payments for tenant reimbursements of operating expenses.
Office space in the Property is generally leased to tenants under
lease terms which provide for the tenants to pay increases in
operating expenses in excess of specified amounts.
Report of Independent Auditors
Board of Directors and Stockholders
Arden Realty, Inc.
We have audited the accompanying statement of revenue and certain
expenses of 2730 Wilshire for the twelve months ended October 31,
1996. This statement of revenue and certain expenses is the
responsibility of the management of 2730 Wilshire. Our
responsibility is to express an opinion on the statement of
revenue and certain expenses based on our audit.
We conducted our audit in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether
the statement of revenue and certain expenses is free of material
misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial
statement. An audit also includes assessing the accounting
principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our
opinion.
The accompanying statement of revenue and certain expenses was
prepared for the purpose of complying with the rules and
regulations of the Securities and Exchange Commission. Certain
expenses (described in Note 1) that would not be comparable to
those resulting from the proposed future operations of the
property are excluded and the statement is not intended to be a
complete presentation of the revenue and expenses of the
property.
In our opinion, the statement of revenue and certain expenses
presents fairly, in all material respects, the revenue and
certain expenses, as defined above, of 2730 Wilshire for the
twelve months ended October 31, 1996, in conformity with
generally accepted accounting principles.
Ernst & Young LLP
Los Angeles, California
February 5, 1997
2730 Wilshire
Statement of Revenue and Certain Expenses
(In thousands)
For the Twelve Months Ended October 31, 1996
Revenue
Rental $1,039
Parking - net of expenses 46
Other 15
Total revenue 1,100
Certain Expenses
Property operating and maintenance 340
Real estate taxes 102
Insurance 44
Total certain expenses 486
Excess of revenue over certain expenses $ 614
See accompanying notes to statement of revenue and certain expenses.
2730 Wilshire
Notes to Statement of Revenue and Certain Expenses
For the Twelve Months Ended October 31, 1996
1. Organization and Summary of Significant Accounting Policies
Organization
The accompanying statement of revenue and certain expenses
includes the operations of 2730 Wilshire (the "Property") located
in Southern California which was acquired by Arden Realty, Inc.
(the "Company") from a nonaffiliated third party. The Property
was acquired for $9,500,000 and has approximately 67,820 rentable
square feet, of which 12,740 represents 16 multi-family housing
units, the rents of which are partially subsidized by the Housing
and Urban Development. The multi-family housing units are on
month to month leases.
Basis of Presentation
The accompanying statement has been prepared to comply with rules
and regulations of the Securities and Exchange Commission.
The accompanying statement is not representative of the actual
operations for the period presented as certain expenses that may
not be comparable to the expenses expected to be incurred by the
Company in the future operations of the Property have been
excluded. Excluded expenses consist of interest, depreciation and
amortization and property general and administrative costs not
directly comparable to the future operation of the Property.
Revenue Recognition
Rental revenue is recognized on a straight-line basis over the
terms of the related leases.
Risks and Uncertainties
The preparation of financial statements, in conformity with
generally accepted accounting principles, requires management to
make estimates and assumptions that affect the reported amounts
of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the
reported amounts of revenue and expenses during the reporting
period. Actual results could differ from those estimates.
2730 Wilshire
Notes to Statement of Revenue and Certain Expenses (continued)
For the Twelve Months Ended October 31, 1996
2. Commercial Office Property
The future minimum lease payments to be received under existing
operating leases as of December 31, 1996, are as follows:
1997 $991,000
1998 903,000
1999 888,000
2000 755,000
2001 528,000
Thereafter 569,000
The above future minimum lease payments do not include specified
payments for tenant reimbursements of operating expenses.
Office space in the Property is generally leased to tenants under
lease terms which provide for the tenants to pay increases in
operating expenses in excess of specified amounts.
Report of Independent Auditors
Board of Directors and Stockholders
Arden Realty, Inc.
We have audited the accompanying statement of revenue and certain
expenses of 10351 Santa Monica for the twelve months ended
October 31, 1996. This statement of revenue and certain expenses
is the responsibility of the management of 10351 Santa Monica.
Our responsibility is to express an opinion on the statement of
revenue and certain expenses based on our audit.
We conducted our audit in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether
the statement of revenue and certain expenses is free of material
misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial
statement. An audit also includes assessing the accounting
principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our
opinion.
The accompanying statement of revenue and certain expenses was
prepared for the purpose of complying with the rules and
regulations of the Securities and Exchange Commission. Certain
expenses (described in Note 1) that would not be comparable to
those resulting from the proposed future operations of the
property are excluded and the statement is not intended to be a
complete presentation of the revenue and expenses of the property.
In our opinion, the statement of revenue and certain expenses
presents fairly, in all material respects, the revenue and
certain expenses, as defined above, of 10351 Santa Monica for the
twelve months ended October 31, 1996, in conformity with
generally accepted accounting principles.
Ernst & Young LLP
Los Angeles, California
February 5, 1997
10351 Santa Monica
Statement of Revenue and Certain Expenses
(In thousands)
For the Twelve Months Ended October 31, 1996
Revenue
Rental $1,386
Tenant reimbursements 9
Parking - net of expenses 119
Other 7
Total revenue 1,521
Certain Expenses
Property operating and maintenance 527
Real estate taxes 81
Insurance 36
Total certain expenses 644
Excess of revenue over certain expenses $ 877
See accompanying notes to statement of revenue and certain expenses.
10351 Santa Monica
Notes to Statement of Revenue and Certain Expenses
For the Twelve Months Ended October 31, 1996
1. Organization and Summary of Significant Accounting Policies
Organization
The accompanying statement of revenue and certain expenses
includes the operations of 10351 Santa Monica (the "Property")
located in Southern California which was acquired by Arden
Realty, Inc. (the "Company") from a nonaffiliated third party.
The Property was acquired for $11,000,000 and has approximately
96,251 rentable square feet.
Basis of Presentation
The accompanying statement has been prepared to comply with rules
and regulations of the Securities and Exchange Commission.
The accompanying statement is not representative of the actual
operations for the period presented as certain expenses that may
not be comparable to the expenses expected to be incurred by the
Company in the future operations of the Property have been
excluded. Excluded expenses consist of interest, depreciation
and amortization and property general and administrative costs
not directly comparable to the future operation of the Property.
Revenue Recognition
Rental revenue is recognized on a straight-line basis over the
terms of the related leases.
Risks and Uncertainties
The preparation of financial statements, in conformity with
generally accepted accounting principles, requires management to
make estimates and assumptions that affect the reported amounts
of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the
reported amounts of revenue and expenses during the reporting
period. Actual results could differ from those estimates.
10351 Santa Monica
Notes to Statement of Revenue and Certain Expenses (continued)
For the Twelve Months Ended October 31, 1996
2. Commercial Office Property
The future minimum lease payments to be received under existing
operating leases as of December 31, 1996, are as follows:
1997 $1,374,000
1998 1,121,000
1999 991,000
2000 805,000
2001 677,000
Thereafter 804,000
The above future minimum lease payments do not include specified
payments for tenant reimbursements of operating expenses.
Office space in the Property is generally leased to tenants under
lease terms which provide for the tenants to pay increases in
operating expenses in excess of specified amounts.
Report of Independent Auditors
Board of Directors and Stockholders
Arden Realty, Inc.
We have audited the accompanying statement of revenue and certain
expenses of Center Promenade for the period January 1, 1996 to
December 17, 1996. This statement of revenue and certain
expenses is the responsibility of the management of Center
Promenade. Our responsibility is to express an opinion on the
statement of revenue and certain expenses based on our audit.
We conducted our audit in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether
the statement of revenue and certain expenses is free of material
misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial
statement. An audit also includes assessing the accounting
principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our
opinion.
The accompanying statement of revenue and certain expenses was
prepared for the purpose of complying with the rules and
regulations of the Securities and Exchange Commission. Certain
expenses (described in Note 1) that would not be comparable to
those resulting from the proposed future operations of the
property are excluded and the statement is not intended to
be a complete presentation of the revenue and expenses of the
property.
In our opinion, the statement of revenue and certain expenses
presents fairly, in all material respects, the revenue and
certain expenses, as defined above, of Center Promenade for the
period January 1, 1996 to December 17, 1996, in conformity with
generally accepted accounting principles.
Ernst & Young LLP
Los Angeles, California
February 5, 1997
Center Promenade
Statement of Revenue and Certain Expenses
(In thousands)
For the Period January 1, 1996 to December 17, 1996
Revenue
Rental $2,097
Tenant reimbursements 51
Total revenue 2,148
Certain Expenses
Property operating and maintenance 756
Real estate taxes 171
Insurance 50
Bad debts 5
Total certain expenses 982
Excess of revenue over certain expenses $1,166
See accompanying notes to statement of revenue and certain expenses.
Center Promenade
Notes to Statement of Revenue and Certain Expenses
For the Period January 1, 1996 to December 17, 1996
1. Organization and Summary of Significant Accounting Policies
Organization
The accompanying statement of revenue and certain expenses
includes the operations of Center Promenade (the "Property")
located in Southern California which was acquired by Arden
Realty, Inc. (the "Company") from a nonaffiliated third party.
The Property was acquired for $11,550,000 and has approximately
174,837 rentable square feet.
Basis of Presentation
The accompanying statement has been prepared to comply with rules
and regulations of the Securities and Exchange Commission.
The accompanying statement is not representative of the actual
operations for the period presented as certain expenses that may
not be comparable to the expenses expected to be incurred by the
Company in the future operations of the Property have been
excluded. Excluded expenses consist of interest, depreciation
and amortization and property general and administrative costs
not directly comparable to the future operation of the Property.
Revenue Recognition
Rental revenue is recognized on a straight-line basis over the
terms of the related leases.
Risks and Uncertainties
The preparation of financial statements, in conformity with
generally accepted accounting principles, requires management to
make estimates and assumptions that affect the reported amounts
of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the
reported amounts of revenue and expenses during the reporting
period. Actual results could differ from those estimates.
Center Promenade
Notes to Statement of Revenue and Certain Expenses (continued)
For the Period January 1, 1996 to December 17, 1996
2. Commercial Office Property
The future minimum lease payments to be received under existing
operating leases as of December 31, 1996, are as follows:
1997 $1,661,000
1998 1,462,000
1999 1,151,000
2000 683,000
2001 407,000
Thereafter 213,000
The above future minimum lease payments do not include specified
payments for tenant reimbursements of operating expenses.
Office space in the Property is generally leased to tenants under
lease terms which provide for the tenants to pay increases in
operating expenses in excess of specified amounts.
Report of Independent Auditors
Board of Directors and Stockholders
Arden Realty, Inc.
We have audited the accompanying statement of revenue and certain
expenses of 10350 Santa Monica for the period January 1, 1996 to
December 27, 1996. This statement of revenue and certain
expenses is the responsibility of the management of 10350 Santa
Monica. Our responsibility is to express an opinion on the
statement of revenue and certain expenses based on our audit.
We conducted our audit in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether
the statement of revenue and certain expenses is free of material
misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial
statement. An audit also includes assessing the accounting
principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our
opinion.
The accompanying statement of revenue and certain expenses was
prepared for the purpose of complying with the rules and
regulations of the Securities and Exchange Commission. Certain
expenses (described in Note 1) that would not be comparable to
those resulting from the proposed future operations of the
property are excluded and the statement is not intended to be a
complete presentation of the revenue and expenses of the property.
In our opinion, the statement of revenue and certain expenses
presents fairly, in all material respects, the revenue and
certain expenses, as defined above, of 10350 Santa Monica for the
period January 1, 1996 to December 27, 1996, in conformity with
generally accepted accounting principles.
Ernst & Young LLP
Los Angeles, California
February 5, 1997
10350 Santa Monica
Statement of Revenue and Certain Expenses
(In thousands)
For the Period January 1, 1996 to December 27, 1996
Revenue
Rental $629
Tenant reimbursements 3
Parking - net of expenses 58
Other 2
Total revenue 692
Certain Expenses
Property operating and maintenance 271
Real estate taxes 45
Insurance 11
Total certain expenses 327
Excess of revenue over certain expenses $365
See accompanying notes to statement of revenue and certain expenses.
10350 Santa Monica
Notes to Statement of Revenue and Certain Expenses
For the Period January 1, 1996 to December 27, 1996
1. Organization and Summary of Significant Accounting Policies
Organization
The accompanying statement of revenue and certain expenses
includes the operations of 10350 Santa Monica (the "Property")
located in Southern California which was acquired by Arden
Realty, Inc. (the "Company") from a nonaffiliated third
party. The Property was acquired for $4,300,000 and has approximately
42,292 rentable square feet.
Basis of Presentation
The accompanying statement has been prepared to comply with rules
and regulations of the Securities and Exchange Commission.
The accompanying statement is not representative of the actual
operations for the period presented as certain expenses that may
not be comparable to the expenses expected to be incurred by the
Company in the future operations of the Property have been
excluded. Excluded expenses consist of interest, depreciation
and amortization and property general and administrative costs
not directly comparable to the future operation of the Property.
Revenue Recognition
Rental revenue is recognized on a straight-line basis over the
terms of the related leases.
Risks and Uncertainties
The preparation of financial statements, in conformity with
generally accepted accounting principles, requires management to
make estimates and assumptions that affect the reported amounts
of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the
reported amounts of revenue and expenses during the reporting
period. Actual results could differ from those estimates.
10350 Santa Monica
Notes to Statement of Revenue and Certain Expenses (continued)
For the Period January 1, 1996 to December 27, 1996
2. Commercial Office Property
The future minimum lease payments to be received under existing
operating leases as of December 31, 1996, are as follows:
1997 $583,000
1998 402,000
1999 265,000
2000 156,000
2001 28,000
Thereafter 14,000
The above future minimum lease payments do not include specified
payments for tenant reimbursements of operating expenses.
Office space in the Property is generally leased to tenants under
lease terms which provide for the tenants to pay increases in
operating expenses in excess of specified amounts.
Report of Independent Auditors
Board of Directors and Stockholders
Arden Realty, Inc.
We have audited the accompanying statement of revenue and certain
expenses of Sumitomo Bank Building for the period January 1, 1996
to December 20, 1996. This statement of revenue and certain
expenses is the responsibility of the management of Sumitomo Bank
Building. Our responsibility is to express an opinion on the
statement of revenue and certain expenses based on our audit.
We conducted our audit in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether
the statement of revenue and certain expenses is free of material
misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial
statement. An audit also includes assessing the accounting
principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
The accompanying statement of revenue and certain expenses was
prepared for the purpose of complying with the rules and
regulations of the Securities and Exchange Commission. Certain
expenses (described in Note 1) that would not be comparable to
those resulting from the proposed future operations of the
property are excluded and the statement is not intended to be a
complete presentation of the revenue and expenses of the property.
In our opinion, the statement of revenue and certain expenses
presents fairly, in all material respects, the revenue and
certain expenses, as defined above, of Sumitomo Bank Building for
the period January 1, 1996 to December 20, 1996, in conformity
with generally accepted accounting principles.
Ernst & Young LLP
Los Angeles, California
February 5, 1997
Sumitomo Bank Building
Statement of Revenue and Certain Expenses
(In thousands)
For the Period January 1, 1996 to December 20, 1996
Revenue
Rental $1,926
Tenant reimbursements 79
Parking - net of expenses 254
Other 9
Total revenue 2,268
Certain Expenses
Property operating and maintenance 859
Real estate taxes 161
Insurance 51
Total certain expenses 1,071
Excess of revenue over certain expenses $1,197
See accompanying notes to statement of revenue and certain expenses.
Sumitomo Bank Building
Notes to Statement of Revenue and Certain Expenses
For the Period January 1, 1996 to December 20, 1996
1. Organization and Summary of Significant Accounting Policies
Organization
The accompanying statement of revenue and certain expenses
includes the operations of Sumitomo Bank Building (the
"Property") located in Southern California which was acquired by
Arden Realty, Inc. (the "Company") from a nonaffiliated third
party. The Property was acquired for $12,800,000 and has
approximately 110,641 rentable square feet.
Basis of Presentation
The accompanying statement has been prepared to comply with rules
and regulations of the Securities and Exchange Commission.
The accompanying statement is not representative of the actual
operations for the period presented as certain expenses that may
not be comparable to the expenses expected to be incurred by the
Company in the future operations of the Property have been
excluded. Excluded expenses consist of interest, depreciation and
amortization and property general and administrative costs not
directly comparable to the future operation of the Property.
Revenue Recognition
Rental revenue is recognized on a straight-line basis over the
terms of the related leases.
Risks and Uncertainties
The preparation of financial statements, in conformity with
generally accepted accounting principles, requires management to
make estimates and assumptions that affect the reported amounts
of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the
reported amounts of revenue and expenses during the reporting
period. Actual results could differ from those estimates.
Sumitomo Bank Building
Notes to Statement of Revenue and Certain Expenses (continued)
For the Period January 1, 1996 to December 20, 1996
2. Commercial Office Property
The future minimum lease payments to be received under existing
operating leases as of December 31, 1996, are as follows:
1997 $1,655,000
1998 1,223,000
1999 730,000
2000 385,000
2001 93,000
Thereafter -
The above future minimum lease payments do not includespecified
payments for tenant reimbursements of operating expenses.
Office space in the Property is generally leased to tenants under
lease terms which provide for the tenants to pay increases in
operating expenses in excess of specified amounts.
Report of Independent Auditors
Board of Directors and Stockholders
Arden Realty, Inc.
We have audited the accompanying statement of revenue and certain
expenses of LA Corporate Center for the period January 1, 1996 to
December 18, 1996. This statement of revenue and certain
expenses is the responsibility of the management of LA Corporate
Center. Our responsibility is to express an opinion on the
statement of revenue and certain expenses based on our audit.
We conducted our audit in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether
the statement of revenue and certain expenses is free of material
misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial
statement. An audit also includes assessing the accounting
principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our
opinion.
The accompanying statement of revenue and certain expenses was
prepared for the purpose of complying with the rules and
regulations of the Securities and Exchange Commission. Certain
expenses (described in Note 1) that would not be comparable to
those resulting from the proposed future operations of the
property are excluded and the statement is not intended to be a
complete presentation of the revenue and expenses of the property.
In our opinion, the statement of revenue and certain expenses
presents fairly, in all material respects, the revenue and
certain expenses, as defined above, of LA Corporate Center for
the period January 1, 1996 to December 18, 1996, in conformity
with generally accepted accounting principles.
Ernst & Young LLP
Los Angeles, California
February 5, 1997
LA Corporate Center
Statement of Revenue and Certain Expenses
(In thousands)
For the Period January 1, 1996 to December 18, 1996
Revenue
Rental $5,882
Tenant reimbursements 128
Other 288
Total revenue 6,298
Certain Expenses
Property operating and maintenance 2,090
Real estate taxes 367
Insurance 217
Other 207
Total certain expenses 2,881
Excess of revenue over certain expenses $3,417
See accompanying notes to statement of revenue and certain expenses.
LA Corporate Center
Notes to Statement of Revenue and Certain Expenses
For the Period January 1, 1996 to December 18, 1996
1. Organization and Summary of Significant Accounting Policies
Organization
The accompanying statement of revenue and certain expenses
includes the operations of LA Corporate Center (the "Property")
located in Southern California which was acquired by Arden
Realty, Inc. (the "Company"), from a nonaffiliated third party.
The Property was acquired for $41,850,000 and has approximately
389,293 rentable square feet.
Basis of Presentation
The accompanying statement has been prepared to comply with rules
and regulations of the Securities and Exchange Commission.
The accompanying statement is not representative of the actual
operations for the period presented as certain expenses that may
not be comparable to the expenses expected to be incurred by the
Company in the future operations of the Property have been
excluded. Excluded expenses consist of interest, depreciation
and amortization and property general and administrative costs
not directly comparable to the future operation of the Property.
Revenue Recognition
Rental revenue is recognized on a straight-line basis over the
terms of the related leases.
Risks and Uncertainties
The preparation of financial statements, in conformity with
generally accepted accounting principles, requires management to
make estimates and assumptions that affect the reported amounts
of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the
reported amounts of revenue and expenses during the reporting
period. Actual results could differ from those estimates.
LA Corporate Center
Notes to Statement of Revenue and Certain Expenses (continued)
For the Period January 1, 1996 to December 18, 1996
2. Commercial Office Property
The future minimum lease payments to be received under existing
operating leases as of December 31, 1996, are as follows:
1997 $6,304,000
1998 3,979,000
1999 1,715,000
2000 996,000
2001 473,000
Thereafter -
The above future minimum lease payments do not include specified
payments for tenant reimbursements of operating expenses.
Office space in the Property is generally leased to tenants under
lease terms which provide for the tenants to pay increases in
operating expenses in excess of specified amounts.
Report of Independent Auditors
Board of Directors and Stockholders
Arden Realty, Inc.
We have audited the accompanying statement of revenue and certain
expenses of Burbank Executive Center for the twelve months ended
October 31, 1996. This statement of revenue and certain
expenses is the responsibility of the management of Burbank Executive
Center. Our responsibility is to express an opinion on the
statement of revenue and certain expenses based on our
audit.
We conducted our audit in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether
the statement of revenue and certain expenses is free of material
misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial
statement. An audit also includes assessing the accounting
principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
The accompanying statement of revenue and certain expenses was
prepared for the purpose of complying with the rules and
regulations of the Securities and Exchange Commission. Certain
expenses (described in Note 1) that would not be comparable to
those resulting from the proposed future operations of the
property are excluded and the statement is not intended to be a
complete presentation of the revenue and expenses of the property.
In our opinion, the statement of revenue and certain expenses
presents fairly, in all material respects, the revenue and
certain expenses, as defined above, of Burbank Executive Center
for the twelve months ended October 31, 1996, in conformity
with generally accepted accounting principles.
Ernst & Young LLP
Los Angeles, California
February 7, 1997
Burbank Executive Center
Statement of Revenue and Certain Expenses
(In thousands)
For the Twelve Months Ended October 31, 1996
Revenue
Rental $2,353
Parking - net of expenses 173
Total revenue 2,526
Certain Expenses
Property operating and maintenance 823
Real estate taxes 185
Insurance 45
Total certain expenses 1,053
Excess of revenue over certain expenses $1,473
See accompanying notes to statement of revenue and certain expenses.
Burbank Executive Center
Notes to Statement of Revenue and Certain Expenses
For the Twelve Months Ended October 31, 1996
1. Organization and Summary of Significant Accounting Policies
Organization
The accompanying statement of revenue and certain expenses
includes the operations of Burbank Executive Center (the
"Property") located in Southern California which was acquired by
Arden Realty, Inc. (the "Company") from a nonaffiliated third
party. The Property was acquired for $13,000,000 and has
approximately 142,862 rentable square feet.
Basis of Presentation
The accompanying statement has been prepared to comply with rules
and regulations of the Securities and Exchange Commission.
The accompanying statement is not representative of the actual
operations for the period presented as certain expenses that may
not be comparable to the expenses expected to be incurred by the
Company in the future operations of the Property have been
excluded. Excluded expenses consist of interest, depreciation and
amortization and property general and administrative costs not
directly comparable to the future operation of the Property.
Revenue Recognition
Rental revenue is recognized on a straight-line basis over the
terms of the related leases.
Risks and Uncertainties
The preparation of financial statements, in conformity with
generally accepted accounting principles, requires management to
make estimates and assumptions that affect the reported amounts
of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the
reported amounts of revenue and expenses during the reporting
period. Actual results could differ from those estimates.
Burbank Executive Center
Notes to Statement of Revenue and Certain Expenses (continued)
For the Twelve Months Ended October 31, 1996
2. Commercial Office Property
The future minimum lease payments to be received under existing
operating leases as of December 31, 1996, are as follows:
1997 $2,186,000
1998 1,610,000
1999 1,319,000
2000 668,000
2001 601,000
Thereafter 675,000
The above future minimum lease payments do not include specified
payments for tenant reimbursements of operating expenses.
Office space in the Property is generally leased to tenants under
lease terms which provide for the tenants to pay increases in
operating expenses in excess of specified amounts.
Pro Forma Condensed Combined Statement of Operations (Unaudited)
The unaudited pro forma condensed combined statements of
operations for the year ended December 31, 1996 is presented as
if the Offering, the Formation Transactions, and the acquisitions
of the Properties acquired during 1996 prior to the Offering (the
"1996 Acquired Properties"), the acquisition of properties at the
time of the Offering of (the "Acquisition") and the acquisition
of the nine properties acquired subsequent to the Offering had all
occurred at the beginning of the year.
The pro forma condensed combined statement of operations are
not necessarily indicative of what the Company's results of
operations would have been assuming the completion of the
Formation Transactions, the Offering, and acquisitions at the
beginning of the period indicated, nor does it purport to project
the Company's results of operations for any future period.
<TABLE>
<CAPTION>
Arden Realty, Inc.
Pro Forma Condensed Combined Statement of Operations
For the year ended December 31, 1996
(Unaudited)
(in thousands except per share data)
<S> <C> <C> <C> <C> <C> <C> <C>
(A)
Equity in
Net loss of (C)
Arden Arden Noncombined (B) Pre-Acquisition (D)
Realty, Inc. Predecessors Noncombined Pro Forma Prior Period for Pre-Acquisition
October 9, January 1, January 1, to Acquisition Properties Period for
1996 to 1996 to 1996 to 1996 Acquired Acquisitions
December 31, October 8, October 8, Acquired at the time of Subsequent to
1996 1996 1996 Properties the Offering the Offering Total
Revenues
Revenues from
rental operations:
Rental $ 17,041 $32,287 $ 12,828 $3,923 $3,367 $15,805 $85,251
Tenant reimbursements 803 2,031 243 258 88 387 3,810
Parking,
net of expenses 1,215 3,692 846 308 195 658 6,914
Other rental operations 375 1,125 357 144 142 320 2,463
19,434 39,135 14,274 4,633 3,792 17,170 98,438
Other income 138 1,330 -- -- -- -- 1,468
Total revenue 19,572 40,465 104,274 4,633 3,792 17,170 99,906
Expenses
Property expenses 6,005 14,224 6,053 1,489 1,534 8,426 37,731
General and
administrative 753 1,758 -- -- -- -- 2,511
Interest 1,280 24,521 7,356 -- -- -- 3,157
Depreciation and
amortization 3,108 5,264 2,705 -- -- -- 11,077
Total expenses 11,146 45,767 16,114 1,489 1,534 8,426 84,476
Equity in net (loss) of
noncombined entities -- (336) 336 -- -- -- --
Income (loss) before
minority interests and
extraordinary items 8,426 (5,638) (1,504) 3,144 2,258 8,744 15,430
Minority interests (993) 721 (721) -- -- -- (993)
Income (loss) before
extraordinary items 7,433 (4,917) (2,225) 3,144 2,258 8,744 14,437
Extraordinary (loss)
gain on early
extinguishment of
debt, net of minority
interests share (13,105) 1,877 -- -- -- -- (11,228)
Net loss $ (5,672) $(3,040) $(2,225) $3,144 $2,258 $8,744 $ 3,209
Weighted average
common shares
outstanding before
conversion of
OP Units 21,679,500
Net (loss) income
per common share $(.26)
Pro Forma Arden Realty, Inc.
Adjustments Pro Forma
Revenues
Revenues from rental operations:
Rental $ 64 (E) $ 85,315
Tenant reimbursements -- 3,810
Parking, net of expenses -- 6,914
Other rental operations -- 2,463
64 98,502
Other income (1,253) (F) 215
Total revenue (1,189) 98,717
Expenses
Property expense 108 (G) 37,839
General and administrative 1,289 (H) 3,800
Interest (22,632) (I) 10,525
Depreciation and amortization 2,693 (J) 13,770
Total expenses (18,542) 65,934
Equity in net (loss)
of noncombined entities -- --
Income (loss) before minority
interests and extraordinary items 17,353 32,783
Minority interests (2,928) (K) (3,921)
Income (loss) before extraordinary
items 14,425 28,862
Extraordinary (loss) gain on early
extinguishment of debt, net of
minority interests share 11,228 (L) --
Net income $25,653 $28,862
Weighted average common shares
outstanding before conversion of OP Units 21,679,500
Net (loss) income per common share $1.33
(A) To account for Arden Predecessor entities on a post-
offering consolidated basis
(B) To record the pre-offering historical activity of 1996
Acquired Properties as defined in the Offering prospectus.
(C) To record the pre-offering historical activity of the
Acquisition Properties as defined in the Offering prospectus.
(D) To record the pre-acquisition combined financial
activity of the following acquisitions subsequent to the Offering:
Property Acquisition Date
10351 Santa Monica Blvd. October 1996
2730 Wilshire Boulevard November 1996
Burbank Executive Center November 1996
Grand Avenue Plaza November 1996
Los Angeles Corporate Center December 1996
Sumitomo Bank Building December 1996
5200 W. Century Blvd. December 1996
Center Promenade December 1996
10350 Santa Monica December 1996
(E) Increase in rental revenue to adjust the 1996 Acquired
Properties and the Acquisition Properties for straightline
rental revenue.
(F) Decrease in other income to eliminate non-recurring
construction fees which would not have been realized by the
Company and certain management fees that will not be earned.
(G) Increase in property general and administrative expense
related to additional property payroll costs relating to the
1996 Acquired Properties and the Acquisition Properties.
(H) Increase in general and administrative expenses related
to expected level of operations as a public real estate investment
trust.
(I) Decrease in interest expense:
Decrease in interest expense due to
repayment ofmortgage loans $(31,877)
Increase in interest expense related to the new
mortgage loan and line of credit with an
interest rate of LIBOR plus 1.5% and LIBOR
plus 1.75%, respectively, due in one year,
net of amounts capitalized 9,050
Increase in amortization of finance costs related to
the line of credit 195
Net decrease in interest expense $(22,632)
(J) Increase in depreciation expense:
Increase in depreciation expense to reflect a full
year of depreciation for the 1996 Acquired Properties,
the Acquisition Properties and acquisitions subsequent
to the Offering, utilizing a 40 year useful
life for buildings and a ten year useful life for
improvements $ 2,563
Increase in depreciation due to the fair value of
consideration paid in excess of book value of
interests in properties acquired from
nonaffiliates 130
$ 2,693
(K) To reflect adjustment for minority interest of 12% in
the Operating Partnership.
</TABLE>
Signatures
Pursuant to the requirements of the Securities Exchange Act
of 1934, the registrant has duly caused this report to be
signed on its behalf by the undersigned hereunto duly
authorized.
ARDEN REALTY, INC.
Date: February 11, 1997 By: /s/ Diana M. Laing
Diana M. Laing
Chief Financial Officer
AGREEMENT OF PURCHASE AND SALE
AND JOINT ESCROW INSTRUCTIONS
for
1970 and 1990 East Grand Avenue
El Segundo, California
By and Between
CONTINENTAL GRAND COMPANY,
A CALIFORNIA LIMITED PARTNERSHIP
as Seller
and
ARDEN REALTY GROUP LIMITED PARTNERSHIP,
A MARYLAND LIMITED PARTNERSHIP
as Buyer
Dated as of November 6, 1996
TABLE OF CONTENTS
Page
RECITALS
1. Agreement to Sell
2. Purchase Price
2.1 Payment of Purchase Price
3. Conditions Precedent
3.1
3.2 Exceptions to Title
3.3 Due Diligence Matters
4. Escrow Matters
4.1 Deliveries to Escrow by Seller
4.2 Deliveries Outside of Escrow
4.3 Deliveries to Escrow by Buyer
5. The Closing
5.1 Distribution of Funds and Documents
5.2 Closing Costs
6. Prorations
6.1 Items to be Prorated
6.2 Calculation
7. Condemnation or Destruction of Property
8. Representations, Warranties and Covenants
8.1 Representations, Warranties and
Covenants of Seller
8.2 Representations and Warranties of Buyer.
8.3 Survival
8.4 Interim Covenants
9. Indemnification
9.1 By Buyer
9.2 By Seller
9.3 Generally
10. Certain Remedies.
10.1 DISPOSITION OF ESCROW DEPOSIT
10.2 Post-Closing Matters
11. Brokers
11.1 Warranties
11.2 Commissions and Broker Waiver
11.3 Commissions and Broker Representation
12. Miscellaneous
12.1 Entire Agreement
12.2 Time of the Essence
12.3 Interpretation
12.4 Governing Law
12.5 Successors and Assigns
12.6 Notices
12.7 Third Parties
13. ARBITRATION OF CERTAIN DISPUTES
14. Legal Costs.
ESCROW HOLDER'S ACKNOWLEDGMENT
PURCHASE AGREEMENT AND JOINT ESCROW INSTRUCTIONS
1970 and 1990 East Grand Avenue
El Segundo, California
THIS AGREEMENT is made and entered into as of the 6th day of
November, 1996, by and between CONTINENTAL GRAND COMPANY, A
CALIFORNIA LIMITED PARTNERSHIP (hereinafter called "Seller") and
ARDEN REALTY GROUP LIMITED PARTNERSHIP, A MARYLAND LIMITED
PARTNERSHIP (hereinafter called "Buyer").
RECITALS
A. Seller is the owner of that certain real property
located at 1970 and 1990 East Grand Avenue in El Segundo,
California, consisting of land and the improvements thereon
including two office buildings containing approximately eighty
four thousand five hundred (84,500) square feet and a parking lot
consisting of approximately three hundred three (303) parking
spaces (collectively, the "Premises").
B. Buyer desires to purchase the Premises on the terms and
conditions hereinafter documented.
NOW, THEREFORE, in consideration of the mutual undertakings
of the parties hereto, it is hereby agreed as follows:
1. Agreement to Sell
Seller shall sell and Buyer shall purchase, subject to all
the terms and conditions hereof, all of the following described property
(collectively the "Property"):
(a) Land. That certain real property located at 1970 and
1990 East Grand Avenue in the City of El Segundo, California, as
more particularly described on Exhibit "A" attached hereto and
made a part hereof ("Land")
(b) Improvements. All buildings, structures, improvements
and fixtures on the Land belonging to Seller ("Improvements");
(c) Easements. All easements, interests in roadways,
strips and rights appurtenant to the Land if any;
(d) Licenses. To the extent assignable, all of Seller's
right, title and interest in and to all licenses, permits,
rights, contracts, water rights, mineral rights, privileges and
appurtenances pertaining to any of the foregoing; and
(e) Personal Property. All of Seller's right, title and
interest in and to all furniture, equipment, supplies, tools and
machinery, together with all of Seller's right, title and
interest in and to any plans, permits or drawings located on or
pertaining to the Property and belonging to Seller ("Personal
Property"). The Personal Property on or pertaining to the
Property shall not be removed from the date hereof and shall
become the property of the Buyer upon the Close of Escrow.
2. Purchase Price
The purchase price ("Purchase Price") for the Property
shall be the sum of Three Million Five Hundred Fifty Thousand
Dollars ($3,550,000); provided, however, that the Purchase Price
shall be increased to Three Million Six Hundred Thousand Dollars
($3,600,000) in the event that Buyer elects to extend the Closing
pursuant to subsection 3.3 and Section 4 below.
2.1 Payment of Purchase Price. The Purchase Price shall be
paid to Seller by Buyer as follows:
(a) Deposit. Buyer shall deliver Two Hundred Thousand
Dollars ($200,000) to Escrow Holder (defined below) as follows:
(i) Concurrently with the "Opening of Escrow" (as hereinafter
defined) Buyer shall deliver an initial deposit ("Initial
Deposit") in the form of a wire transfer, cash, or bank or
cashier's check in an amount equal to Fifty Thousand Dollars
($50,000) to Chicago Title Insurance Company ("Escrow Holder"),
(ii) Upon the expiration of the "Due Diligence Period" as defined
below in Section 3.1, Buyer shall deliver an additional deposit
("Additional Deposit") in an amount equal to One Hundred Fifty
Thousand Dollars ($150,000) to Escrow Holder. The Initial
Deposit and Additional Deposit shall together with all interest
accrued thereon constitute the deposit ("Deposit"). Escrow
Holder shall credit such Deposit plus interest against the
Purchase Price in accordance with the terms and provisions of
this Agreement. The Deposit shall be at all times invested by
Escrow Holder in the following investments ("Approved
Investments"): (i) United States Treasury obligations, (ii)
United States Treasury-backed repurchase agreements issued by a
major money center banking institution reasonably acceptable to
Seller, or (iii) such other manner as may be reasonably
acceptable to Buyer. The Deposit shall be disposed of by Escrow
Holder only as provided in this Agreement.
(b) Extension Deposit. In the event Buyer exercises
Buyer's Election (as described below) to extend the Due Diligence
Period and Closing Date as provided in Section 3.3(b) hereof,
Buyer shall increase the Deposit to Two Hundred Thousand Dollars
($200,000).
(c) Closing Payment. The Purchase Price, as adjusted by
the application of the Escrow Deposit and by the prorations and
credits specified herein, shall be paid in cash on the Closing
Date.
3. Conditions Precedent
The obligation of Buyer to purchase and Seller to sell
the Property as contemplated by this Agreement is subject to
satisfaction of each of the following conditions precedent (any
of which may be waived in writing by the party in whose favor
such condition exists) on or before the applicable date specified
for satisfaction of the applicable condition. If any of such
conditions are not fulfilled pursuant to the terms of this
Agreement on or before the Closing Date, then this Agreement
shall terminate and, in connection with any such termination made
in accordance with this paragraph 3, Seller and Buyer shall be
released from further obligation or liability hereunder (except
for those obligations and liabilities which, pursuant to the
terms of this Agreement, survive such termination) and Buyer
shall be entitled to a return of the Escrow Deposit. In the
event that the Escrow is cancelled by the Buyer because of non-
approval of conditions precedent hereto, Buyer agrees to execute
any and all required documents of the Escrow Holder or Seller to
confirm that the Escrow and this Agreement are terminated. Close
of Escrow shall constitute approval by each party of all matters
to which such party has a right of approval and a waiver of all
conditions.
3.1 Title Report. Seller shall cause a preliminary title
report ("Title Report") covering the Property issued by Chicago
Title Company in its capacity as title insurer hereunder ("Title
Company") to be delivered to Buyer within ten (10) days of the
date of this Agreement. In addition, Seller shall provide Buyer
with an updated ALTA Survey ("Updated Survey") of the Property
which Updated Survey shall be prepared to the Title Company's
standards for an extended coverage ALTA owner's title insurance
policy, showing the legal description and boundary lines of, and
all Improvements on, the Land, and all easements of record.
Unless Buyer shall deliver written notice of disapproval of the
Title Report ("Title Objections") prior to the later of (i)
expiration of the Due Diligence Period or (ii) ten (10) budiness
days after delivery of the Title Report and updated Survey, Buyer
shall be deemed to have approved the title exceptions disclosed
by the Title Report, and Updated Survey. Approval by Buyer of
any additional exceptions to title or survey matters which may be
disclosed by the Title Company after Buyer's receipt of the Title
Report or Updated Survey shall be a further condition precedent
to Buyer's obligation to purchase the Property. If any such
additional exceptions to title or survey matters are disclosed,
then unless Buyer gives written notice that it disapproves such
additional exceptions to title or survey matters, stating the
additional exceptions or survey matters so disapproved, on or
before the sooner to occur of the Closing Date or ten (10)
business days after receipt of written notice of such additional
exceptions or survey matters, Buyer shall be deemed to have
disapproved said additional title exceptions or survey matters.
If, for any reason, on or before the Closing Date Seller does not
cause any exceptions to title or survey matters which Buyer
disapproves to be removed at no cost or expense to Buyer, or
Buyer does not waive such disapproved exceptions or survey
matters on or before the Closing Date, then this Agreement shall
terminate. Notwithstanding anything to the contrary contained
herein, Seller shall be obligated to remove (or cause the Title
Company to insure over) any encumbrances securing any mortgage
loan obtained by Seller and any mechanics' liens for work
performed by Seller at the Property prior to the Closing.
3.2 Exceptions to Title Buyer shall accept title to the
Property, subject to the following exceptions (the "Permitted
Exceptions") to title:
(a) Real estate taxes and assessments not yet due and
payable;
(b) The printed exceptions which appear in the standard
form ALTA owner's policy of title insurance issued by Title
Company; and
(c) Such other exceptions to title as may be approved by
Buyer pursuant to the provisions of subparagraph 3.1 above.
Conclusive evidence of the availability of such title shall
be the willingness of Title Company to issue to Buyer on the
Closing Date a standard ALTA extended coverage owner's title
insurance policy ("Owner's Policy"), with such endorsements as
may be specified by Buyer in writing within the Title Review
Period, in the face amount of the Purchase Price, which policy
shall show (i) title to the Property to be vested of record in
Buyer, and (ii) the Permitted Exceptions to be the only
exceptions to title.
3.3 Due Diligence Matters
(a) Due Diligence Period. Except as otherwise provided
herein, on or before 5:00 p.m. (Pacific Standard Time) on
November 11, 1996 (the "Due Diligence Period"), Buyer shall have
completed all of Buyer's due diligence examinations, reviews and
inspections of all matters respecting the Property, including
such environmental and engineering tests and reports (including a
Phase I environmental audit and a structural engineering report)
and other inspections of the Property and review of applicable
federal, state and local laws, ordinances, rules, regulations,
permits, licenses, appraisals, financing documents, approvals and
orders and any other matters as Buyer shall deem necessary or
appropriate in its sole discretion, in order to determine whether
the Property is suitable for Buyer's intended use and purpose.
In the event Buyer determines that the condition of the Property
is not suitable, Buyer may terminate this Agreement by written
notice ("Termination Notice") to Seller and Escrow Holder on or
before the end of the Due Diligence Period. Failure by Buyer to
deliver a Termination Notice on or before the expiration of the
Due Diligence Period shall constitute approval by Buyer of its
due diligence examinations, reviews and inspections and its
election to proceed with the acquisition of the Property in
accordance with the terms of this Agreement unless the Buyer and
Seller agree to extend the Due Diligence Period.
(b) Extension of Due Diligence Period. Buyer, in its sole
discretion, may elect to extend the Due Diligence Period for an
additional ten (10) days by notifying the Seller on or before
5:00 p.m., on November 11, 1996 that Buyer elects to extend the
Due Diligence Period and pay to Seller ("Buyer's Election") an
increased Purchase Price for the Property of Three Million Six
Hundred Thousand Dollars ($3,600,000) ("Increased Purchase
Price"). Upon Buyer's Election, the Due Diligence Period shall
expire on November 21, 1996 at 5:00 p.m. and the Closing Date (as
defined in Section 4) shall be extended to December 10, 1996.
(c) Conduct of Due Diligence Reviews. Buyer shall
diligently and in good faith pursue its due diligence reviews
hereunder. Within five (5) days of the date of this Agreement,
Seller shall provide Buyer with copies of the following (to the
extent in Seller's possession or control): the original and as-
built plans and specifications for all Improvements on the
Property, including structural drawings, architectural,
mechanical, electrical, landscape, plumbing and fire sprinkler
drawings and specifications, soils, structural, environmental,
and hazardous materials reports relating to subsurface
conditions, grade plans, topographical maps, asbestos reports and
other plans and reports relating to the Property, copies of all
leases, licenses, service contracts (including parking, elevator,
heating and air conditioning, landscape maintenance, management
and brokerage agreements, warranties and instructions books for
all equipment at the Property, permits, variances, insurance
policies, maps, subdivision plans, certificates of occupancy,
building permits and other documentation and evidence that the
construction, present use, occupancy and operation of the
Property is authorized by and in compliance with all government
regulations, copies of Property tax bills and business tax bills
for the Property for the last two (2) years, copies of the most
recent utility bills for the Property and all other similar
records for the Property, to the extent available to Seller,
shall be provided to Buyer by Seller, for the of Buyer's due
diligence review. All due diligence examinations, reviews and
inspections conducted or to be conducted by Buyer have been and
shall be at Buyer's sole cost and expense (including, without
limitation, those related to appraisers, inspectors, auditors and
environmental and engineering consultants). Buyer shall have the
right to conduct all inspections and tests on the Property which
Buyer deems necessary. Buyer shall conduct its due diligence and
environmental reviews, inspections and examinations in a manner
so as to not cause damage, loss, cost or expense to Seller or the
Property, and Buyer will indemnify, defend and hold Seller and
the Property harmless from and against any such damage, loss,
cost or expense. The foregoing indemnification obligation shall
survive the closing of the transactions contemplated herein or
the earlier termination of this Agreement. Buyer shall promptly
return to Seller all documents and other materials furnished by
Seller to Buyer. Buyer shall keep all information or data
received or discovered in connection with any of the inspections,
reviews or examinations strictly confidential.
4. Escrow Matters
Upon execution of this Agreement, the parties shall
deposit an executed copy of this Agreement with Escrow Holder and
Buyer shall, concurrently therewith, place the Escrow Deposit
with Escrow Holder. Escrow Holder shall promptly execute this
Agreement upon receipt of this Agreement and an escrow shall be
established ("Escrow"). This Agreement shall serve as the
instructions to Escrow Holder to consummate the purchase and sale
contemplated hereunder. Seller and Buyer agree to execute such
additional and supplementary escrow instructions as may be
appropriate to enable Escrow Holder to comply with the terms of
this Agreement. If there is any conflict between the provisions
of this Agreement and any such additional or supplementary escrow
instructions, however, the terms of this Agreement shall control.
"Closing Date" means November 21, 1996, or such earlier date as
may be agreed upon by Buyer and Seller; provided, however, in
accordance with Section 2 and subsection 3.3(a), should Buyer
elect hereto to pay the Increased Purchase Price, to Seller for
the Property, then the Closing Date shall be extended to December
10, 1996. "Close of Escrow" shall occur on the Closing Date and
shall mean the day the transfer documents, required to be
recorded hereunder are in fact recorded in the Recorder's Office
of the County of Los Angeles.
4.1 Deliveries to Escrow by Seller. Prior to the Closing
Date, Seller shall deliver or cause to be delivered to Escrow
Holder the following:
(a) A duly executed and acknowledged grant deed ("Grant
Deed") in the form of Exhibit "B" attached hereto and made a part
hereof;
(b) A duly executed and acknowledged Bill of Sale ("Bill of
Sale") in the form of Exhibit "C" attached hereto and made a part
hereof;
(c) A duly executed and acknowledged certificate regarding
the "non-foreign" status of Seller satisfying the requirements of
Section 1445 of the Internal Revenue Code of 1986, as amended,
and the regulations thereunder;
(d) A "Withholding Exemption Certificate, Form 590" or in
the event that Seller is a non-California resident, a certificate
issued by the California Franchise Tax Board, pursuant to the
Revenue and Taxation Code Sections 18805 and 26131, stating
either the amount of withholding required from Seller's proceeds
or that Seller is exempt from such withholding requirement;
(e) A certificate ("Seller's Closing Certificate") updating
the representations and warranties of Seller contained in
subsection 8.1 hereof as of the Closing Date (with any changes
thereto being noted on such certificate); and
(f) Evidence reasonably satisfactory to Buyer and Escrow
Holder respecting the due organization of Seller as a limited
partnership and the due authorization and execution of this
Agreement and the documents required to be delivered hereunder
including a copy of this Agreement signed by all four of Seller's
general partners;
4.2 Deliveries Outside of Escrow.
On or before the Closing Date, Seller shall
deliver or cause to be delivered to Buyer the following:
(a) To the extent they are then in Seller's possession, and
have not been delivered to Buyer, all documents required by Buyer
in accordance with Section 3.3 above;
(b) All keys in Seller's possession for all improvements on
the Property;
(c) The originals of all Contracts which will remain in
effect after the Closing and all correspondence and existing
records prepared by Seller in its normal course of operations
specifically for the Property relating to, and necessary for, the
on-going operations and maintenance of the Property (which
materials may be either delivered at Closing or left at the
management office at the Property);
(d) Such additional documents as may be reasonably required
by Buyer and Escrow Holder in order to consummate the
transactions hereunder (provided the same do not materially
increase the costs to, or liability or obligations of, Seller in
a manner not otherwise provided for herein).
4.3 Deliveries to Escrow by Buyer
Prior to the Closing Date, Buyer shall deliver or
cause to be delivered to Escrow Holder the following:
(a) The Closing Payment, which amount shall be delivered to
Escrow Holder by wire transfer of immediately available federal
funds in accordance with separate wire instructions to be given
by Escrow Holder prior to the Closing Date;
(b) A duly executed and acknowledged Assignment and
Assumption Agreement;
(c) Evidence reasonably satisfactory to Seller and Escrow
Holder respecting the due organization of Buyer and the due
authorization and execution of this Agreement and the documents
required to be delivered hereunder; and
(d) Such additional documents as may be reasonably required
by Seller and Escrow Holder in or to consummate the transactions
hereunder (provided the same do not materially increase the costs
to, or liability or obligations of, Buyer in a manner not
otherwise provided for herein).
5. The Closing.
Escrow Holder shall close the Escrow on the Closing
Date by (i) causing the Grant Deed to be recorded in the
Recorder's Office of the County of Los Angeles at 8:00 a.m. on
the Closing Date, (ii) delivering the Closing Payment and the
Escrow Deposit to Seller and the other funds and documents as
provided in subparagraph 5.1 below, WHEN AND ONLY WHEN each of
the following conditions have been satisfied:
(a) All funds of Buyer and all documents of Seller
described in subparagraphs 4.1(a) through (d) above have been
delivered to Escrow Holder; and
(b) Title Company is prepared to deliver the Title Policy.
5.2 Distribution of Funds and Documents.
(a) All funds received by Escrow Holder under this
paragraph 5.1 shall be, until Close of Escrow, invested in
Approved Investments. Interest accruing to such account prior to
the Close of Escrow shall be for the account of Buyer, and
interest accruing on all sums due Seller after the Close of
Escrow shall be for the account of Seller.
(b) Upon Close of Escrow, Escrow Holder shall disburse the
Closing Payment and the Escrow Deposit to Seller.
(c) Escrow Holder shall cause the recorded Grant Deed to be
delivered to Buyer.
5.3 Closing Costs. Seller shall pay (i) one-half of the
escrow fees of Escrow Holder, (ii) the title insurance premium
(at a rate not in excess of standard issue rates) attributable to
a CLTA Owner's Policy of title insurance, (iii) the costs of the
Updated Survey, and (iv) documentary transfer taxes attributable
to the Grant Deed. Buyer shall pay (i) one-half of the escrow
fees of Escrow Holder, (ii) all costs and expenses related to
Buyer's due diligence examinations, reviews and inspections,
(iii) all recording charges attributable to the recordation of
any documents contemplated in this Agreement, and (iv) the
difference in cost between a standard CLTA Owner's Policy of
title insurance and an extended coverage ALTA Owner's Policy of
title insurance. Seller and Buyer shall each pay their
respective shares of prorations as hereinafter provided.
6. Prorations.
6.1 Items to be Prorated. The following shall be prorated
between Seller and Buyer as of the Closing Date (on the basis of
the actual number of days elapsed over the applicable period):
(a) All real estate and personal property taxes and
assessments on the Property for the current year.
(b) All customary operating expenses incurred in the
ordinary course of management and operation of the Property.
6.2 Calculation The prorations and payments shall be made
on the basis of a written statement submitted to Buyer and Seller
by Escrow Holder prior to the Close of Escrow and approved by
Buyer and Seller (which statement shall include a list of
delinquent rental amounts as of the Closing Date). In the event
any prorations or apportionments made under Section 6 shall prove
to be incorrect for any reason, then any party shall be entitled
to an adjustment to correct the same. Any item which cannot be
finally prorated because of the unavailability of information
shall be tentatively prorated on the basis of the best data then
available and reprorated when the information is available. In
the event that the transactions contemplated in this Agreement
are not closed in time for Seller to receive the funds to be paid
to Seller hereunder by 5:00 p.m., Pacific Standard Time, on the
Closing Date, then appropriate adjustments to compensate Seller
for any loss of interest and the like shall be made by the
parties.
7. Condemnation or Destruction of Property
In the event that, after the date hereof but prior to
the Closing Date, either any portion of the Property is taken
pursuant to eminent domain proceedings or any of the improvements
on the Property are damaged or destroyed by any casualty, Seller
shall have no obligation to repair or replace any such damage or
destruction. Seller shall, upon consummation of the transaction
herein provided, assign to Buyer all claims of Seller respecting
any condemnation or casualty insurance coverage, as applicable,
and all condemnation proceeds or proceeds from any such casualty
insurance received by Seller on account of any casualty (the
damage from which shall not have been repaired by Seller prior to
the Closing Date) as applicable, and Seller shall give Buyer a
credit equal to the deductible portion of Seller's insurance
policy attributable to the Property. In the event (i) the
condemnation award shall equal or exceed $250,000 or otherwise
materially and adversely affect access to or parking at the
Property, or (ii) the cost of repair of damage to the Property on
account of a casualty, shall equal or exceed $250,000 or
otherwise materially and adversely interfere with the operations
of the Property, Buyer may, at its option, terminate this
Agreement by notice to Seller, given on or before the Closing
Date.
8. Representations, Warranties and Covenants
8.1 Representations, Warranties and Covenants of. Seller
hereby represents and warrants that the following are true and
correct as of the date hereof:
(a) Leases. There are no Leases, occupancy rights,
licenses, amendments or agreements, oral or written, now in
effect with respect to occupancy at the Property. The prior
tenant occupied the Property pursuant to a net lease at the
rental rate of $108,298.49 per month and was responsible for
all maintainance and occupancy costs.
(b) Litigation. There is no pending nor, to Seller's
knowledge without the necessity of due diligence or
investigation, any threatened action, litigation, arbitration,
condemnation, administrative or other proceeding against the
Property or against Seller with respect to the Property before
any court, agency of government official.
(c) Compliance. Seller has received no notice from any
governmental authority having jurisdiction over the Property to
the effect that the Property is not in compliance with applicable
laws and ordinances or that Seller, with respect to the Property
is in violation of any government statutes, regulations,
restrictions, permits or approvals.
(d) Service Agreements. Seller has not entered into any
service agreements or contracts ("Service Agreements") or other
agreements, oral or written (other than as set forth in this
Agreement or provided to Buyer pursuant to subsection 3.3)
relating to the Property which will be in force on the Closing
Date, except as described herein, and Seller has not received any
notice of any material default thereunder that remains uncured.
Notwithstanding the foregoing, Seller has a month-to-month
landscaping service agreement for the Property, a security
service agreement for the Property which may be cancelled on
three days' notice to the security service and has maintained the
air conditioning equipment for the Property.
(e) Hazardous Substances. Seller has continuously leased
the Property to Hughes Aircraft and has no knowledge of any
conditions relating to Hazardous Material or any Environmental
Claim or any Environmental Compliance obligation, except as may
be reflected in the following documents heretofore submitted to
the Buyer:
i) PHASE I ENVIRONMENTAL SITE ASSESSMENT dated
August 1, 1996 prepared by Fugro West, Inc.;
ii) UNDERGROUND STORAGE TANK REMOVAL REPORT dated
August 1, 1996 prepared by Smith Environmental
Technologies Corporation;
iii) HAZARDOUS MATERIALS UNDERGROUND STORAGE CLOSURE
CERTIFICATION dated August 19, 1996 prepared by the
County of Los Angeles, Department of Public Works;
iv) ASBESTOS SURVEY REPORT dated August 1995 prepared by
Fugro West, Inc.; and
v) WALLBOARD AND JOINT COMPOUND INVESTIGATION REPORT
dated August 1996 prepared by Fugro West, Inc.
The term "Hazardous Material" means: (I)
asbestos, PCB, urea formaldehyde, any chemicals, flammable
substances or explosive, any radioactive materials (including
radon), any hazardous wastes or substances, any toxic wastes or
substances, or any other materials or pollutants which have, as
of the date of this Agreement, been determined to be hazardous by
any applicable Federal, state or local law, or, by regulations of
the U.S. Environmental Protection Agency, the U.S. Department of
Energy, the U.S. Department of Labor, the U.S. Department of
Transportation, and/or any instrumentality authorized to regulate
materials and substances in the environment which has
jurisdiction over the Property ("Environmental Agency"), or (II)
any oil, petroleum or petroleum or petroleum derived substance,
any drilling fluids, produced waters and other wastes associated
with the exploration, development, or production of crude oil,
which materials listed under items (I) and (II) above cause the
Property to be in material violation of any applicable
environmental laws or the regulations of any Environmental
Agency. The term "Hazardous Material" does not include the
following (the "Excluded Items") : (1) motor oil and gasoline
contained in vehicles not used primarily for the transport of
motor oil or gasoline, or (2) materials which are stored or used
in the ordinary course of a tenant's occupancy at (or Seller or
Seller's managing agents' operation of) the Property, or which
are stored, used, held, or disposed of in compliance with all
applicable laws or ordinance. The term "Environmental Claim"
means any third-party claim for personal injury, death and/or
property damage (other than property damage to the Property
itself) made, asserted or prosecuted by or on behalf of any
person or entity, including, without limitation, any governmental
entity, or any present or former tenant, and arising or allegedly
arising out of any Hazardous Material which was present or
released in, on, under, or about the Property (or any part). The
term "Environmental Compliance Obligation" means any requirement
imposed by an Environmental Agency to bring the Property into
compliance with applicable Federal, state, and local laws and
regulations directly relating to the existence in, on, under or
about the Property of any Hazardous Material.
(f) Due Authority. Seller is a limited partnership, duly
organized and validly existing under the laws of the State of
California, duly qualified to conduct its business and in good
standing in the State of California. Seller has the legal power,
right and authority to enter into this Agreement and the
instruments and documents referenced herein, and to consummate
the transactions contemplated hereby. The individual(s) executing
this Agreement and the instruments referenced herein on behalf of
Seller have the power, right and authority to bind Seller.
(g) Actions. All requisite action has been taken by Seller
and all requisite consents have been obtained in connection with
the entering into of this Agreement and the instruments and
documents referenced herein, and the consummation of the
transactions contemplated hereby, and no consent of any other
party is required.
(h) No Conflict. The execution and delivery of this
Agreement, the consummation of the transactions herein
contemplated, and compliance with the terms of this Agreement
shall not conflict with or result in a breach of any of the terms
of provisions of, or constitute a default under, any instrument
or agreement to which Seller is a party or, to Seller's
knowledge, by which any of the Property is or may be bound, or
any applicable regulation of any governmental agency, or any
judgment, order or decree of any court having jurisdiction over
Seller or, to Seller's knowledge, the Property. Notwithstanding
the foregoing, Seller's sale of the Property will accelerate the
balance due under any existing first deed of trust on the
Property which will be paid off at the Closing.
(i) Binding Obligations. This Agreement, is, and the other
Closing documents shall be at the time of their execution and
delivery, legal, valid, and binding obligations of Seller.
(j) "As Is" Sale Disclaimer. IT IS EXPRESSLY UNDERSTOOD
AND AGREED THAT BUYER IS ACQUIRING THE PROPERTY "AS IS" AND
"WHERE IS," IN ITS PRESENT STATE AND CONDITION AND WITH ALL
FAULTS, WITHOUT ANY REPRESENTATIONS OR WARRANTIES FROM SELLER
EXCEPT AS SPECIFICALLY PROVIDED IN THIS AGREEMENT. IN
PARTICULAR, AND NOT BY WAY OF LIMITATION EXCEPT AS EXPRESSLY
PROVIDED IN THIS AGREEMENT, SELLER MAKES NO REPRESENTATION OR
WARRANTY WITH RESPECT TO THE QUALITY, TITLE, PHYSICAL CONDITION,
VALUE, OPERATION OR MANAGEMENT OF THE PROPERTY, THE INCOME OR
EXPENSES FROM OR OF THE PROPERTY, THE COMPLIANCE OF THE PROPERTY
WITH APPLICABLE LAWS OR REGULATIONS, INCLUDING, WITHOUT
LIMITATION, ANY LAWS RELATING TO ZONING, SUBDIVISION, PLANNING,
BUILDING, FIRE SAFETY, EARTHQUAKE, HEALTH OR ENVIRONMENTAL
MATTERS, THE PRESENCE OR ABSENCE OF HAZARDOUS SUBSTANCES, OR THE
COMPLIANCE OF THE PROPERTY WITH ANY COVENANTS, CONDITIONS OR
RESTRICTIONS (WHETHER OR NOT OF RECORD). DURING THE INSPECTION
PERIOD, BUYER WILL HAVE MADE ALL OF THE INVESTIGATIONS BUYER
DEEMS NECESSARY IN PURCHASING THE PROPERTY. IF THIS AGREEMENT IS
NOT TERMINATED AND BUYER ACQUIRES THE PROPERTY AS PROVIDED
HEREIN, BUYER SHALL HAVE THEREBY APPROVED ALL ASPECTS OF THE
PROPERTY AND THIS TRANSACTION AND THEREBY WAIVES ANY CLAIM OR
LIABILITY AGAINST SELLER RESPECTING THE PROPERTY EXCEPT IN
CONNECTION WITH ANY REPRESENTATION OR WARRANTY OF SELLER HEREIN
WHICH WILL SURVIVE THE CLOSING BY SIX (6) MONTHS UNDER SECTION
8.3. ANY SPECIFIC KNOWLEDGE OF THE PROPERTY WHICH ACTUALLY COMES
TO THE ATTENTION OF BUYER PRIOR TO THE CLOSING, EITHER IN WRITING
BY SELLER OR DUE TO BUYER'S OWN INVESTIGATIONS, SHALL BE DEEMED
TO LIMIT ANY EXPRESS REPRESENTATIONS AND WARRANTIES MADE BY
SELLER IN THIS AGREEMENT SO AS TO REDUCE OR ELIMINATE ANY
LIABILITY WHICH SELLER MAY OTHERWISE HAVE HAD AS A RESULT OF SUCH
REPRESENTATIONS AND WARRANTIES. NOTWITHSTANDING THE FOREGOING,
AND NOTWITHSTANDING THE FACT THAT BUYER INTENDS TO CONDUCT ITS
OWN INVESTIGATION OF THE PROPERTY, SELLER AGREES THAT NOTHING
HEREIN SHALL RELIEVE SELLER OF ANY OBLIGATIONS WHICH SELLER HAS
UNDER ANY OTHER PROVISIONS OF THIS AGREEMENT, OR UNDER OTHER
DOCUMENTS ENTERED INTO CONCURRENTLY HEREWITH, OR IMPLIED BY LAW,
NOR SHALL ANY INSPECTION OR REVIEW CONSTITUTE A WAIVER BY BUYER
OF ITS RIGHTS TO ENFORCE ANY OF THE SAME.
8.2 Representations and Warranties of Buyer.
(a) Organization. Buyer is a limited partnership duly
organized, validly existing and in good standing under the laws
of the State of Maryland. Buyer has the legal power, right and
authority to enter in to this Agreement and the instruments and
documents referenced herein, and to consummate the transactions
contemplated hereby. The individual(s) executing this Agreement
and the instruments referenced herein on behalf of Buyer have the
power, right and authority to bind Buyer.
(b) Actions. All requisite action has been taken by Buyer
and all requisite consents have been obtained in connection with
the entering into of this Agreement and the instruments and
documents referenced herein, and the consummation of the
transactions contemplated hereby, and no consent of any other
party is required.
(c) No Conflict. The execution and delivery of this
Agreement, the consummation of the transactions herein
contemplated, and compliance with the terms of this Agreement
shall not conflict with or result in a breach of any of the terms
or provisions of, or constitute a default under, any instrument
or agreement to which Buyer is a party or any applicable
regulation of any governmental agency, or any judgment, order or
decree of any court having jurisdiction over Buyer.
(d) Binding Obligations. This Agreement is, and the other
Closing Documents shall be at the time of their execution and
delivery, legal, valid, and binding obligations of Buyer.
8.3 Survival. Any cause of action of a party for a breach
of the foregoing representations and warranties shall survive for
a period of six (6) months from the Closing Date, at which time
such representations and warranties (and any cause of action
resulting from a breach thereof not then in litigation) shall
terminate (such three year period being herein called the
("Survival Period").
8.4 Interim Covenants Until the Closing Date or the sooner
termination of this Agreement:
(a) Buyer and Seller acknowledge that the Property is
currently unoccupied and that Seller is doing the minimum
maintenance required pending the Closing. Notwithstanding the
foregoing, Seller shall maintain the Property in the same manner
as Seller maintained the Property prior to Seller's execution of
this Agreement, pursuant to Seller's normal course of business,
(such maintenance obligations not including extraordinary capital
expenditures or expenditures not incurred in such normal course
of business) subject to reasonable wear and tear and further
subject to destruction by casualty or other events beyond the
control of Seller.
(b) Seller shall not enter into any additional service
contracts, leases or other similar agreements without the prior
consent of Buyer, except those deemed reasonably necessary by
Seller which are cancelable on 30 days' notice.
(c) Seller has not actively offered the Property for lease
prior to Seller's execution of this Agreement, and pursuant to
Seller's normal course of business, will not actively offer the
Property for lease, but shall keep Buyer informed as to the
status of leasing prior to the Closing Date. From and after the
date hereof, Seller shall not enter into any new leases or
material modifications of existing leases without the consent of
Buyer in Buyer's sole discretion. Buyer shall also be permitted
to market the Property for lease during the Escrow period.
(d) Seller shall keep the Current Insurance (or insurance
containing substantial similar coverage) in full force and
effect.
(e) Seller shall not remove any fixtures, equipment or
personal property to be transferred to Buyer.
(f) If prior to Closing, Seller discovers any information
or facts which would materially change the representations and
warranties of Seller contained in this Agreement, Seller shall
reasonably promptly thereafter give notice to Buyer of such
information or facts.
9. Indemnification.
9.1 By Buyer. Buyer shall hold harmless, indemnify and
defend Seller from and against: (1) any and all third party
claims for Buyer's torts or breaches of contract related to the
Property and occurring on or after the Closing Date, (2) any and
all loss, damage or third party claims arising out of Buyer's
inspections or examinations of the Property prior to the Closing
Date.
9.2 By Seller. Seller shall hold harmless, indemnify and
defend Buyer from and against: (1) any and all third party claims
for Seller's torts or breaches of contract related to the
Property and occurring prior to the Closing Date; and (2) all
costs and expenses, including reasonable attorney's fees,
incurred by the Buyer as a result of such claims.
9.3 Generally. Each indemnification under this Agreement
shall be subject to the following provisions: The indemnitee
shall notify indemnitor of any such claim against indemnitee
within 30 days after it has notice of such claim, but failure to
notify indemnitor shall in no case prejudice the rights of
indemnitee under this Agreement unless indemnitor shall be
prejudiced by such failure and then only to the extent of such
prejudice. Should indemnitor fail to discharge or undertake to
defend indemnitee against such liability within 10 days after the
indemnitee gives the indemnitor written notice of the same, then
indemnitee may settle such liability, and indemnitor's liability
to indemnitee shall be conclusively established by such
settlement, the amount of such liability to include both the
settlement consideration and the reasonable costs and expenses,
including attorneys' fees, incurred by indemnitee in effecting
such settlement.
10. Certain Remedies.
10.1 DISPOSITION OF ESCROW IF THE TRANSACTION HEREIN
PROVIDED SHALL NOT BE CLOSED BY REASON OF SELLER'S DEFAULT (THE
PARTIES ACKNOWLEDGE THAT THEY ARE AWARE THAT THIS TRANSACTION IS
AN "AS IS" "WHERE IS" TRANSACTION SUBJECT TO BUYER'S DUE
DILIGENCE REQUIREMENTS) UNDER THIS AGREEMENT OR THE FAILURE OF
SATISFACTION OF THE CONDITIONS DESCRIBED IN PARAGRAPH 3 HEREOF OR
THE TERMINATION OF THIS AGREEMENT IN ACCORDANCE WITH THE TERMS
HEREOF, AND BUYER SHALL NOT HAVE DEFAULTED UNDER THIS AGREEMENT,
THEN THE ESCROW DEPOSIT SHALL BE RETURNED TO BUYER, AND NEITHER
PARTY SHALL HAVE ANY FURTHER OBLIGATION OR LIABILITY TO THE
OTHER; PROVIDED, HOWEVER, IF THE TRANSACTIONS HEREUNDER SHALL
FAIL TO CLOSE BY REASON OF SELLER'S DEFAULT, AND BUYER SHALL HAVE
FULLY PERFORMED ITS OBLIGATIONS HEREUNDER AND SHALL BE READY,
WILLING AND ABLE TO CLOSE, THEN BUYER SHALL BE ENTITLED TO
SPECIFICALLY ENFORCE THIS AGREEMENT (BUT NO OTHER ACTION, FOR
DAMAGES OR OTHERWISE, SHALL BE PERMITTED). IN THE EVENT THE
TRANSACTION HEREIN PROVIDED SHALL NOT CLOSE DUE TO DEFAULT OF
BUYER, THEN THE ESCROW DEPOSIT SHALL BE RETAINED BY OR DELIVERED
TO SELLER, AS APPLICABLE, AS FULL COMPENSATION AND LIQUIDATED
DAMAGES UNDER AND IN CONNECTION WITH THIS AGREEMENT. IN THE
EVENT THE TRANSACTION HEREIN PROVIDED SHALL CLOSE, THE ESCROW
DEPOSIT SHALL BE APPLIED AS A PARTIAL PAYMENT OF THE PURCHASE
PRICE. IN CONNECTION WITH THE FOREGOING, THE PARTIES RECOGNIZE
THAT SELLER WILL INCUR EXPENSE IN CONNECTION WITH THE TRANSACTION
CONTEMPLATED BY THIS AGREEMENT AND THAT THE PROPERTY WILL BE
REMOVED FROM THE MARKET; FURTHER, THAT IT IS EXTREMELY DIFFICULT
AND IMPRACTICABLE TO ASCERTAIN THE EXTENT OF DETRIMENT TO SELLER
CAUSED BY THE BREACH BY BUYER UNDER THIS AGREEMENT AND THE
FAILURE OF THE CONSUMMATION OF THE TRANSACTION CONTEMPLATED BY
THIS AGREEMENT OR THE AMOUNT OF COMPENSATION SELLER SHOULD
RECEIVE AS A RESULT OF BUYER'S BREACH OR DEFAULT. IN THE EVENT
THE SALE OF THE PROPERTY SHALL NOT BE CONSUMMATED ON ACCOUNT OF
BUYER'S DEFAULT, THEN THE RETENTION OF THE ESCROW DEPOSIT SHALL
BE SELLER'S SOLE AND EXCLUSIVE REMEDY UNDER THIS AGREEMENT BY
REASON OF SUCH DEFAULT, SUBJECT TO THE PROVISIONS OF PARAGRAPH 3
HEREOF.
/s/ MA /s/ EA /s/ HA /s/ EM /s/ RSZ
Seller's Initials Buyer's Initials
10.2 Post-Closing Matters. Nothing contained in paragraph
10.1 above shall limit either party's rights or remedies
respecting any breach, default or other obligation of a party
following the Close of Escrow hereunder; provided, however, the
foregoing shall not modify or amend any other limitation or
provision contained herein.
11. Brokers.
11.1 Warranties. Except as provided in paragraph 11.2
below, Seller represents and warrants to Buyer, and Buyer
represents and warrants to Seller, that other than CB Commercial
Real Estate Group, Inc. and Erwin Mooradian, no broker or finder
has been engaged by it, respectively, in connection with any of
the transactions contemplated by this Agreement or to its
knowledge is in any way connected with any of such transactions.
In the event of any other claim for broker's or finder's fee or
commissions in connection herewith, then Seller shall indemnify
and defend Buyer from the same if it shall be based upon any
statement or agreement alleged to have been made by Seller, and
Buyer shall indemnify and defend Seller from the same if it shall
be based upon any statement or agreement alleged to have been
made by Buyer. The indemnification obligations under this
subsection 11.1 shall survive the closing of the transactions
hereunder or the earlier termination of this Agreement.
11.2 Commissions and Broker Waiver. If and only if the sale
contemplated herein closes, Seller agrees to pay a commission to
CB Commercial Real Estate Group, Inc. and Erwin Mooradian. The
foregoing payments shall be the sole commissions, fees or
payments payable to the Brokers in connection with the
transactions hereunder. No commission, fee or payment shall be
payable to the Brokers except in the event of a sale hereunder
and if such sale does not close for any reason (including by
reason of a default by Seller or Buyer hereunder), no commission,
fee or other payment of any kind shall be payable to any of the
Brokers by Seller. Each of the Brokers shall produce evidence
satisfactory to Buyer of a valid and current broker's license
issued by the Department of Real Estate of the State of
California. It is expressly understood that no Brokers shall,
under any circumstances, be deemed a third party beneficiary of
this Agreement.
11.3 Commissions and Broker Representation. Buyer is
represented exclusively in this transaction by CB Commercial Real
Estate Group, Inc., a licensed California real estate broker, and
Seller is represented exclusively in this transaction by Erwin
Mooradian, a licensed California real estate broker.
12. Miscellaneous.
12.1 Entire Agreement. This Agreement contains the entire
agreement between the parties respecting the matters herein set
forth and supersedes all prior agreements between the parties
hereto respecting such matters. This Agreement may not be
modified or amended except by written agreement signed by both
parties.
12.2 Time of the Essence. Time is of the essence of this
Agreement.
12.3 Interpretation. Paragraph headings shall not be used
in construing this Agreement. Each party acknowledges that such
party and its counsel, after negotiation and consultation, have
reviewed and revised this Agreement. As such, the terms of this
Agreement shall be fairly construed and the usual rule of
construction, to the effect that any ambiguities herein should be
resolved against the drafting party, shall not be employed in the
interpretation of this Agreement or any amendments, modifications
or exhibits hereto or thereto.
12.4 Governing Law. This Agreement shall be construed and
enforced in accordance with the laws of the State of California.
12.5 Successors and Assigns. Buyer may assign or transfer
its rights or obligations under this Agreement without the prior
written consent of Seller (in which event such transferee shall
assume in writing all of the transferor's obligations hereunder.
Subject to the foregoing, this Agreement and the terms and
provisions hereof shall inure to the benefit of and be binding
upon the successors and assigns of the parties.
12.6 Notices. Any notice which a party is required or may
desire to give the other shall be in writing and shall be sent by
personal delivery or by mail (either [i] by United States
registered or certified mail, return receipt requested, postage
prepaid, [ii] by facsimile transmission (followed by overnight
delivery pursuant to clause [iii] hereafter, or [iii] by Federal
Express or similar generally recognized overnight carrier
regularly providing proof of delivery), addressed as follows
(subject to the right of a party to designate a different address
for itself by notice similarly given):
To Seller: Continental GrandCompany
15441 Milldale Drive
Los Angeles, California 90077-1605
Attn: Mr. Erwin Mooradian
Telephone: 310-476-7744
Facsimile: 310-471-7344
With a copy to: Astor & Phillips
800 Wilshire Boulevard, Suite 1500
Los Angeles, California 90017-2619
Attn: George Phillips, Esq.
Telephone: 213-680-8212
Facsimile: 213-891-2910
To Escrow Holder: Chicago Title Insurance Company
700 South Flower Street, Suite 900
Los Angeles, California 90017
Attn: Mr. Frank Jansen
Telephone: 213-488-4300
Facsimile: 213-488-4387
To Buyer: Arden Realty Group Limited Partnership
c/o Arden Realty Group, Inc.
9100 Wilshire Boulevard
East Tower, Suite 700
Beverly Hills, California 90212
Attn: Brigitta B. Troy
Telephone: 310-271-8600
Facsimile: 310-274-6218
With a copy to: Christensen, White, Miller, Fink,
Jacobs, Glaser & Shapiro, LLP
2121 Avenue of the Stars, 18th Floor
Los Angeles, California 90067
Attn: Alisa J. Freundlich
Telephone: 310-556-7862
Facsimile: 310-556-2920
Any notice so given by mail shall be deemed to have been given as
of the date of delivery (whether accepted or refused) established
by U.S. Post Office return receipt or the overnight carrier's
proof of delivery, as the case may be. Any such notice not so
given shall be deemed given upon receipt of the same by the party
to whom the same is to be given.
12.7 Third Parties. Nothing in this Agreement, whether
expressed or implied, is intended to confer any rights or
remedies under or by reason of this Agreement on any other person
other than the parties hereto and their respective successors and
assigns, nor is anything in this Agreement intended to relieve or
discharge the obligation or liability of any third persons to any
party to this Agreement, nor shall any provision give any third
parties any right of subrogation or action over or against any
party to this Agreement. This Agreement is not intended to and
does not create any third party beneficiary rights whatsoever.
13. ARBITRATION OF CERTAIN DISPUTES. ANY CONTROVERSY OR
CLAIM ARISING UNDER OR RELATING TO THE TERMS OF THIS AGREEMENT OR
ANY OF THE EXHIBITS ATTACHED TO IT, AND ANY PROCEEDINGS TO
ENFORCE THIS AGREEMENT OR RIGHTS UNDER THIS AGREEMENT AND ITS
EXHIBITS OTHER THAN THE "EXCLUDED MATTERS" (AS HEREINAFTER
DEFINED) SHALL BE SETTLED BY ARBITRATION IN THE CITY OF LOS
ANGELES, IN ACCORDANCE WITH THE COMMERCIAL ARBITRATION RULES OF
THE AMERICAN ARBITRATION ASSOCIATION. THE ARBITRATOR(S) SHALL
HAVE THE RIGHT TO DETERMINE THE SCOPE OF THEIR JURISDICTION AND
GRANT EQUITABLE RELIEF, INCLUDING, WITHOUT LIMITATION, THE RIGHT
TO ORDER THE EXPUNGEMENT OF ANY LIS PENDENS WHICH THE
ARBITRATOR(S) DEEM IMPROPER. THE PREVAILING PARTY SHALL BE
ENTITLED TO REASONABLE ATTORNEYS' FEES AND OTHER REASONABLE COSTS
INCURRED IN CONNECTION WITH THE ARBITRATION OR ANY OTHER
LITIGATION PLUS INTEREST ON THE AMOUNT OF ANY AWARD. JUDGMENT
UPON THE AWARD RENDERED BY THE ARBITRATOR(S) MAY BE ENTERED IN
ANY COURT HAVING JURISDICTION THEREOF. THIS PARAGRAPH MUST BE
INITIALED BELOW IN ORDER FOR THIS PARAGRAPH OF THE AGREEMENT TO
BE BINDING.
NOTICE: BY INITIALLING IN THE SPACE BELOW, YOU ARE
AGREEING TO HAVE ANY DISPUTE ARISING OUT OF THE MATTERS
INCLUDED IN THE "ARBITRATION OF DISPUTES" PROVISION
DECIDED BY NEUTRAL ARBITRATION AS PROVIDED BY
CALIFORNIA LAW, AND YOU ARE GIVING UP ANY RIGHTS YOU
MIGHT POSSESS TO HAVE THE DISPUTE LITIGATION IN A COURT
OR JURY TRIAL. BY INITIALLING IN THE SPACE BELOW, YOU
ARE GIVING UP YOUR JUDICIAL RIGHTS TO DISCOVERY AND
APPEAL, UNLESS SUCH RIGHTS ARE SPECIFICALLY INCLUDED IN
THE "ARBITRATION OF DISPUTES" PROVISION. IF YOU REFUSE
TO SUBMIT TO ARBITRATION 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
ARISING OUT OF THE MATTERS INCLUDED IN THE "ARBITRATION OF
DISPUTES" PROVISION TO NEUTRAL ARBITRATION.
/s/ MA /s/ EA /s/ HA /s/ EM /s/ RSZ
Seller's Initials Buyer's Initials
As used herein, "Excluded Matters" means any controversy,
claim or proceeding with respect to or otherwise related to a
breach or default of any representation or warranty contained in
this Agreement (which matters shall not be subject to the
arbitration provisions contained herein).
14. Legal Costs. The parties hereto agree that they shall
pay directly any and all legal costs which they have incurred on
their own behalf in the preparation of this Agreement, all deeds
and other agreements pertaining to this transaction and that such
legal costs shall not be part of the closing costs. In addition,
if either Buyer or Seller brings any suit or other proceeding
(including arbitration) with respect to the subject matter or the
enforcement of this Agreement, the prevailing party (as
determined by the court, agency or other authority before which
such suit or proceeding is commenced), in addition to such other
relief as may be awarded, shall be entitled to recover reasonable
attorneys' fees, expenses and costs of investigation actually
incurred. The foregoing includes, but is not limited to,
attorneys' fees, expenses and costs of investigation (including,
without limitation, those incurred in appellate proceedings),
costs incurred in establishing the right to indemnification, or
in any action or participation in, or in connection with, any
case or proceeding under the Bankruptcy Code.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the date first above written.
Seller
CONTINENTAL GRAND COMPANY,
a California limited partnership
By: /s/ Mihran S. Agbabian
Its: General Partner
By: /s/ Elizabeth Agbabian
Its: General Partner
By: /s/ Hrant Agbabian
Its: General Partner
By: /s/ Erwin Mooradian
Its: General Partner
Buyer:
ARDEN REALTY GROUP LIMITED PARTNERSHIP,
a Maryland Limited Partnership
By: ARDEN REALTY GROUP, INC.,
a Maryland corporation,
its General Partner
By: /s/ Richard Ziman
Its: Chairman & CEO
ESCROW HOLDER'S ACKNOWLEDGMENT
The undersigned hereby executes this Agreement to evidence
its agreement to act as Escrow Holder in accordance with the
terms of this Agreement.
Date: November 7, 1996 Chicago Title Insurance Company
By: /s/ Jane Little
Name: Jane Little
Title: Sr. Escrow Officer
The Company hereby agrees to furnish supplementally the omitted exhibits
and schedule to the Commission upon request.
PURCHASE AND SALE AGREEMENT
THIS PURCHASE AND SALE AGREEMENT (the "Agreement") is
entered into as of November 1, 1996, by and between KENNEDY-WILSON,
INC., a Delaware corporation ("Seller") and ARDEN REALTY
LIMITED PARTNERSHIP, a Maryland limited partnership
("Buyer"), as follows:
1. Definitions. In addition to the terms defined above,
each of the following terms, when used herein with an initial
capital letter, shall have the meaning ascribed to it as
follows, unless such meanings are expressly modified,
limited or expanded elsewhere in this Agreement.
(A) "Assignment and Assumption of Leases" shall mean the
document to be executed by Buyer and Seller at Closing,
whereby Seller shall assign to Buyer and Buyer shall assume
all of Seller's right, title and interest in the Leases.
(B) "Bill of Sale" shall mean the duly executed and
acknowledged bill of sale conveying title to the Personal
Property from Seller to Buyer,
(C) "Brokers" shall mean Madison Partners, representing
the Seller.
(D) "Building: shall mean the building located on the
Land.
(E) "Closing" shall mean the closing and consummation
of the purchase and sale of the Property at a location to be
mutually agreed upon pursuant to this Agreement.
(F) "Closing Date" shall mean December 10, 1996, at which
time the transactions described herein shall be consummated.
(G) "Deed" shall mean the duly executed and acknowledged
grant deed conveying title to the Real Property from Seller
to Buyer, in the form attached as Exhibit "I" hereto.
(H) "Defect" or "Defects" shall mean a lien, claim,
charge, security interest, encumbrance, easement,
assessment, restriction, tax or other such matter which
adversely affects title to the Property, other than the
Permitted Exceptions.
(I) "Earnest Deposit" shall mean the Two Hundred Thousand
and no/lOO Dollars ($200,000.00) to be deposited by Buyer
pursuant to Section 3 herein, together with any interest
accruing thereon. Upon expiration of the Contingency Period,
Buyer will deposit an additional Two Hundred Thousand
Dollars ($200,000.00) "Additional Deposit" pursuant to
Section 3 herein.
(J) "Escrow Holder" shall mean Chicago Title Company.
(K) "Improvements" shall mean improvements and
fixtures located on the Land, other than the Building,
including, but not limited to, the parking facilities, paved
areas and landscaping.
(L) "Contingency Period" shall mean the twenty-one
(21) calendar day period commencing on October 24, 1996 and
expiring on November 14, 1996, during which Buyers must
complete its due diligence.
(M) "Land" shall mean the land owned by Seller and
more particularly described on Exhibit "A" attached hereto,
together with all right and appurtenances pertaining
thereto, including any right, title and interest of Seller
in and to adjacent streets, easements or rights-of-way.
(N) "Leases" shall mean the leases entered into between
Seller or Seller's predecessor in interest and Tenants as
more particularly described on the Rent Roll, including any
amendments thereto, and any and all guaranties of the leases
(O) "Objections" shall have the meaning set forth in
Section 5.4.
(P) "Owner's Title Policy" shall mean an ALTA extended
form owner's policy (as revised as of 1970) of title
insurance for the Real Property to be issued by the Title
Company pursuant to the Title Commitment, with a liability
limit in the amount of the purchase price and wish such
endorsements as Buyer shall request.
(Q) "Permitted Exceptions" shall mean all matters
which affect the title to the real Property which are
consented to or waived by Buyer as more particularly
described in Section 5.3 and 5.4 hereof.
(R) "Personal Property" shall mean all fixtures,
equipment, supplies, machinery, furniture and furnishing as
Listed on Exhibit "B" attached hereto, and other personal
property (both tangible and intangible) including, without
limitation, architectural drawings (if any) of existing and
proposed structures owned by Seller and related to the Real
Property, as-built mechanical, electrical and structural
drawings, plans and specifications, if any, together with
seller's rights and obligations from and after the Closing
Date under those reports, studies, tests, surveys,
agreements, contracts, guarantees, warranties, licenses,
permits, approvals and land use entitlements which relate to
the Real Property, if any.
(S) "Property" shall mean the Real Property and
Personal Property collectively.
(T) "Purchase Price" shall mean the total purchase
price of Ten Million, Two Hundred and Fifty Thousand Dollars
($10,250,000) as more particularly described in Section 3
hereof.
(U) "Real Property" shall mean collectively the parcel of
Land being purchased and sold hereunder, together with the
Building and the Improvements located thereon, legally
described on Exhibit "A" attached hereto, with a common
address of 2730 Wilshire Boulevard and 1232 Harvard Street,
Santa Monica, California.
(V) "Rent Roll" shall mean a rent roll certified by the
Seller of Tenants in the Building substantially in the form
of the rent roll attached hereto as Exhibit "C".
(W) "Surveys" shall mean current surveys of the Real
Property to be obtained by Buyer as referenced herein.
(X) "Survey Objections" shall have the meaning set
forth in Section 5.2.
(Y) "Tenants" shall mean those tenants listed on the Rent
Roll.
(Z) "Title Commitment" shall mean the title commitment
to be obtained by Buyer as referenced in Section 5.3 herein.
(AA) "Title Company" shall mean Chicago Title Company.
(BB) "Title Objections" shall have the meaning set
forth in Section 5.3.
(CC) "Intangible Property" shall mean Seller's rights and
interests in any and all transferable or assignable permits,
building plans and specifications, certificates of
occupancy, operating permits, sign permits, development
rights and approvals, certificates, licenses, warranties and
guarantees, trade names, service marks, engineering, soils,
pest control and other reports relating to the Property,
tenant lists, advertising materials, and telephone exchange
numbers identified with the Property; and (b) all other
transferable intangible property, miscellaneous rights,
benefits or privileges of any kind or character with respect
to the Property.
(DD) "Service Agreements" shall mean Seller's rights
and interests in maintenance, service and other agreements
to which Seller is a party affecting the ownership, repair,
maintenance or operating of the Property. Service Agreements
shall not include any property management or leasing listing
agreements,
2. Agreement to Sell and Purchase. Seller hereby
agrees to sell and convey to Buyer, and Buyer hereby agrees
to purchase from Seller, the Property subject to the Leases,
and subject to the terms and conditions of this Agreement.
3. Purchase Price: Deliver of Possession.
(A) Buyer shall pay the Purchase Price to Seller as
follows:
(i) Buyer shall pay the Earnest Deposit to the
Title Company simultaneous with Buyer's and Seller's
execution of this Agreement. The Title Company shall deposit
the Earnest Deposit in a bank account and any interest
accruing thereon shall be added to and become part of the
Earnest Deposit. Unless Buyer has terminated this Agreement,
upon expiration of the Contingency Period, Buyer shall
deposit the Additional Deposit with the Title Company.
Subject to the terms of this Agreement, such Earnest Deposit
and Additional Deposit shall become non-refundable upon
expiration of the Contingency Period unless Buyer has
terminated this Agreement in the manner described below. At
Closing, the Earnest Deposit and Additional Deposit shall be
credited to the Purchase Price due to Seller;
(ii) Buyer shall deposit the balance of the
Purchase Price to the Title Company, as adjusted to provide
for the allocation of costs and prorations pursuant to
Section 6 herein, less the Earnest Deposit and Additional
Deposit, by confirmed wire transfer, or by check collectible
in same day funds in sufficient time to close this Escrow on
the Closing Date, or such earlier date as may be required by
the Title company under applicable law.
(B) Seller shall deliver possession of the Property to
Buyer at Closing, subject to the rights of the Tenants under
the Leases.
4. Conveyance of Title.
At Closing, (i) Seller shall convey to Buyer by Grant
Deed, marketable fee simple title to all of the Real
Property free and clear of any and all Defects, except for
the Permitted Exceptions; (ii) Seller shall assign to Buyer
all of Seller's right, title and interest as landlord under
the Leases, and Buyer shall assume all of Seller's rights,
duties, obligations and liabilities as Landlord thereunder;
(iii) Seller shall convey to Buyer title to all of Seller's
rights, title and interest to the Personal Property, free
and clear of any and all Defects, except for the Permitted
Encumbrances; and (vi) Seller shall assign to Buyer all of
Seller's right title and interest to service agreements and
intangible property.
5. Contingencies and Inspections.
5.1 Document Production. Immediately upon
execution of this Agreement, Seller shall provide to Buyer
copies of the following items, which to Seller's actual
knowledge are true, accurate and complete:
(i) all service and professional contracts with
respect to the Property which are currently in effect and
continue in effect following the Closing;
(ii) all warranties or guaranties currently in
effect and in Seller's possession, if any, related to the
Building and Improvements;
(iii) certificates of occupancy related to the
Property, if any;
(iv) any existing surveys and title insurance
policies relating to the Property;
Buyer agrees that if for any reason the Closing is not
consummated, Buyer will immediately return to Seller all
materials furnished to Buyer pursuant to this Section 5.1.
5.2 .Survey. Buyer, at its expense, may obtain a
current survey of the Property. If so, Buyer shall have
until the expiration of the Contingency Period to object to
Seller in writing to matters of the survey. Such written
notice shall state with specificity all of Buyer's
objections to matters of Survey in Buyer's sole discretion
which adversely affect marketability of title to the
Property, other than the Permitted Exceptions (the "Survey
Objection"). This contingency shall be deemed satisfied or
waived if Seller has not received written notice of Buyer's
objection to any such changes to the Survey within the
Contingency Period. Seller shall have no obligation to cure
any Survey Objection made by Buyer under this Paragraph 5.2.
5.3 Title and Title Insurance for the Real
Property.
(A) Buyer, at its sole cost and expense,
shall obtain the Title Commitment.
(B) Buyer's obligation to purchase the
Property is subject to Buyer's approval of any title matters shown on
the Title Commitment. Buyer shall have until the expiration
of the Contingency Period to object to Seller in writing to
any such title matters ("Title Objections"). This
contingency shall be deemed satisfied or waived if Seller
has not received written notice of Buyer's objection to any
such changes to the Title Commitment within the Contingency
Period.
5.4 Cure Period for Survey and Title Objections.
(A) Upon receipt of any objection notice
provided for herein, Seller may, but shall not be obligated
to, cure any or all of the Survey Objections and/or Title
Objections, as applicable (collectively the "Objections")
within fifteen (15) days of such notice. If Seller cures the
Objections within such fifteen (15) day period, or, if the
Objections are such that they cannot be cured within fifteen
(15) days and Seller has commenced curing the Objections and
thereafter diligently proceeds to perfect such cure (but in
no event beyond twenty (20) days unless agreed to in writing
by Buyer), or if any Survey or Title Objections can be cured
by the payment of money and Seller agrees such payment may
be made from Seller's proceeds at Closing, this Agreement
shall continue in full force and effect and the Closing Date
shall be adjusted accordingly. If Seller is unable to or
chooses not to cure the Objections as permitted above,
Seller shall notify Buyer in writing prior to the expiration
of the cure period of such failure to cure the Objections
and thereafter, Buyer may terminate this Agreement within 5
(five) days of receipt of Seller's notice of its inability
or failure to cure the Objections, at which time the Title
Company shall immediately return the Earnest Deposit to
Buyer, and neither party shall have any further obligations
hereunder, except for Buyer's obligation to repair under
Section 5.5 herein and the Surviving Covenants. If Seller
does not receive the notice from Buyer as provided herein,
Buyer shall be deemed to have waived the Objections that
Seller is unable to or chooses not to cure and this
Agreement shall remain in full force and effect with no
reduction in the Purchase Price.
(B) At Closing, the Real Property shall be
conveyed to Buyer free and clear of all Defects and subject
only to the Permitted Exceptions. If between the date hereof
and the Closing the Real Property shall become subject to
any defect, Seller, at its option and in Seller's sole and
absolute discretion, shall use reasonable efforts to cure or
correct such Defect on or before the Closing Date. If Seller
is unable to or elects not to cure or correct such Defect,
then Buyer shall elect either;
(i) to terminate this Agreement by sending
written notice to Seller within five (5) days after receipt
by Buyer of written notice from Seller of its option
election, in which event the Earnest Deposit shall be
returned to Buyer and the parties hereto shall be released
from any liability arising hereunder; or
(ii) to proceed to Closing under this
Agreement subject to the satisfaction by Seller at or prior
to Closing of such Defect. Provided, in the case of any
Defect that can be satisfied by the payment of money not to
exceed $25,000, Seller shall have the obligation at or prior
to Closing to elect to pay the amount necessary to satisfy
such Defect or arrange at Seller's expense for the Title
Company to issue the Title Policy without exception for such
Defect.
5.5 Physical and Financial Inspection
(A) During the Contingency Period, Seller shall
make the Property and the operating financial records of the
Property available for inspection by Buyer in the management
office for the Property in Santa Monica, California Such
records shall include, but not be limited to, the items set
forth on Exhibit "G" attached hereto. Buyer shall have the
right, at Buyer's expense, to make photocopies of such
operating financial records. Buyer may, at Buyer's expense,
conduct an engineering and/or market and economic
feasibility study of the Property and undertake such
physical, environmental, structural, and seismic inspections
of the Property and the Property's financial records as
Buyer deems appropriate. Such inspection shall be conducted
by Buyer at reasonable times and upon two (2) business days
advance written notice to Seller. Seller shall have the
right to designate a representative to accompany Buyer's
employees, agents, and independent contractors on any such
inspections. In connection with such entry, Buyer (a) shall
perform all inspections and investigations in a safe manner;
(b) shall not permit any hazardous condition caused by Buyer
or its agents to remain on the Property; (c) shall repair
any damage or disturbance to the Property caused by Buyer or
its agents; and (d) shall produce (or have all work
performed by contractors who maintain) general liability
insurance with minimum coverage amounts of $1,000,000 naming
Seller as an additional insured, evidence of which shall be
delivered to Seller prior to Buyer's first entry. Buyer
further agrees to indemnify, hold harmless, protect and
defend Seller (and its officers, directors, shareholders,
participants, employees, agents, representatives, successors
and assigns) and the Property from and against any and all
liabilities, liens, claims, damages, costs, expenses, suits
or judgments (including attorneys' fees and court costs) for
labor or services performed or materials furnished to or for
Buyer, or for personal injury or death or property damage
arising out of entry upon the Property by Buyer or its
employees, agents or independent contractors prior to the
Close of Escrow, provided Seller makes any claims within
sixty (60) days after Seller becomes aware of damage to the
Property or Seller's receipt of notice of any claim against
Seller or the Property, but in any event by not later than
one year after the date of this Agreement. Notwithstanding
any provision to this Agreement to the contrary, Buyer's
obligations under this Section 5 shall survive any
termination of this Agreement or the close of Escrow and
delivery of the Grant Deed to Buyer.
(B) On or before the last day of the Contingency
Period, Buyer, in its sole and absolute discretion, may
terminate this Agreement by providing written notice to
Seller of Buyer's termination. Upon receipt of such notice,
this Agreement shall terminate and the Title Company shall
immediately return the Earnest Deposit to Buyer, and neither
party shall have any obligation to the other, except for the
Surviving Covenants. If Buyer fails to provide such notice
of termination on or before the last day of the Contingency
Period, Buyer shall be deemed to have approved such
inspections and waived any unsatisfied contingencies or
conditions precedent to Closing and its right to terminate
this Agreement under this Section 5.5 and, this Agreement
shall remain in full force and effect,
(C) At Buyer's request at any time from and after
the date hereof until the date that is one (1 ) year after
the Closing Date, Seller shall, at Buyer's expense, provide
to Buyer's designated independent auditor access to the
books and records of the Property, regarding the period for
which Buyer is required to have audited financial statements
prepared with respect to the Property as may be required by
the Securities and Exchange Commission, to the extent that
such books, records and related information are in Seller's
possession or control and relate to the period during which
Seller held title to the Property. Seller agrees to fully
cooperate with Buyer's auditor in order to provide said auditor
with all information necessary or desirable in order to enable
said auditor to opine that a statement of operating income
prepared for a period prior to the Closing date presents
fairly, in all material respects, the results of operation
of the Property in conformity with generally accepted
accounting principles.
5.6 Environmental Review. Buyer, at its option and
expense may, within the Contingency Period and on a timely
basis, elect to obtain a Phase I Environmental Site
Assessment of the Property. If so, by no later than the
expiration of the Contingency Period, Buyer, in its sole and
absolute discretion, may terminate this Agreement by
providing written notice to Seller. Upon receipt of such
notice, Agreement shall terminate and the Title Company
shall immediately return the Earnest Deposit to Buyer, and
neither party shall have any obligation to the other, except
for the Surviving Covenants. If Buyer fails to provide such
notice of termination within such five (5) day period, Buyer
shall be deemed to have approved the environmental report
and waived its right to terminate this Agreement under this
Section 5.6 and this Agreement shall remain in full force
and effect.
If Buyer so determines that a Phase II Environmental Site
Assessment of the Property is necessary or desirable,
subject to obtaining the prior written consent of Seller,
which consent shall not be unreasonably withheld or delayed,
Buyer shall have the right to obtain same, at its expense,
by no later than the expiration of the Contingency Period.
Buyer shall furnish Seller with a copy of the Phase II
Environmental Site Assessment of the Property promptly
following the receipt thereof by Buyer.
5.7 Buyer's Review. Buyer's obligation to purchase the
Property is subject to Buyer's review and approval, in its
sole and absolute discretion, of (i) the Leases, (ii) any
operating, maintenance, or service agreements affecting the
Property, (iii) local zoning ordinances, (iv) land use and
other governmental regulations, laws, permits and approvals
that apply to the Property, (v) Certificates of Occupancy,
if any, issued with respect to the Property, (vi) any
engineer's or architect's certifications with respect to the
physical condition and structure of the Property (vii)
tenant improvement plans and floor plans, reports of
Insurance carriers regarding claims history, insurance
certificates, all correspondence regarding hazardous
materials, all broker commission agreements, any agreements
which survive the Closing, property tax bills for the last
three (3) years, tenant credit reports, all crime or
security reports; and (viii) any agreements or documents
requested by Buyer as provided herein.
5.8 Estoppel Certificates and Non-disturbance/Attornment
Agreements, Seller shall use its best efforts to promptly provide
to Buyer Estoppel Certificates executed by Tenants occupying at
least seventy percent (70%) of the total occupied space in
the office building, which shall include every tenant which
leases in excess of two thousand five hundred (2,500)
rentable square feet pursuant to the Leases in form and
content satisfactory to Buyer substantially in the form of
Exhibit "D" attached hereto and incorporated herein by
reference. Buyer's obligation to close Escrow shall be
conditioned upon Buyer's receipt prior to the Closing Date
of the requisite number of Estoppel Certificates from
Tenants. If Seller is unable to obtain any such Estoppel
Certificates, then Seller shall execute and deliver same to
Buyer on behalf of the applicable Tenants. Seller shall have no
liability for any Estoppel Certificates executed by Seller
which is replaced by a Tenant Estoppel Certificate
subsequently received. Seller shall reasonably cooperate
with Buyer, at Buyer's expense, in obtaining non-disturbance
and attornment agreements from all Tenants prior to the
Closing as to any financing which Buyer places upon the
Property at the Closing,
5.9 Damage to Property; Eminent Domain. In the event of
either (i) damage to or destruction of the Property in
excess of $100,000, or damage or destruction which is
uninsured. or (ii) the commencement or threat of
commencement of eminent domain, or similar proceedings
against the Property, Buyer shall have the right to
terminate this Agreement in accordance with the provisions
of Section 7 herein.
6. Costs and Prorations,
6.1 Costs. Seller shall pay any transfer tax and
conveyance fees, prepayment fees or prepayment penalties
required under any existing mortgages encumbering the
Property, Seller's legal fees, the CLTA portion of the
premium due for the Title Insurance Policy to be issued to
Buyer, and one half of the fee due the Title Company for its
services as Escrow Agent. Buyer shall pay for all recording
fees related to the recording of the deed and any other
documents to be recorded related to the transfer of the
Property. Buyer shall also pay for the cost of the Survey,
the ALTA portion of the premium due for the Title Insurance
Policy to be issued to Buyer, the cost of any Environmental
Report, Buyer's legal fees, and one half of the fee due the
Title Company for its services as Escrow Agent. Any other
fees, charges or expenses incurred in connection with the
consummation of the transaction contemplated herein shall be
paid by Seller or Buyer in accordance with local custom
applicable to similar transactions.
6.2 Prorations. All prorations for non-delinquent real
estate taxes, and other costs normally prorated between a
seller and buyer in a commercial real estate transaction in
the Los Angeles, California area shall be prorated as of the
Closing Date. All prorations shall be calculated on the
basis of a 365day year. By not later than two (2) business
days prior to the Closing Date, the Title Company shall
provide, for review and approval by Seller and Buyer, an
estimated statement of all prorations.
6.3 Rents. Rents, additional rents, operating costs, and
other income of the Property (other than security deposits)
collected by Seller from the Tenants for the month of
Closing shall be prorated through the date of Closing.
Seller hereby acknowledges that Buyer shall not be legally
responsible to Seller for the collection of any uncollected
rent or other income under the Leases that is past due or
otherwise due and payable as of the date of Closing. Buyer
agrees that if (i) any of the Tenants are in arrears on the
date of Closing in the payment of rental or other charges
under any of the Leases and (ii) upon Buyer's receipt after
Closing of any rental or other payment from any of the
Tenants and Buyer's payment of any costs of collection
incurred, if the defaulting tenant is, or after application
of a portion of such payment shall be, current under its
lease in the payment of all accrued rental and other charges
that become due and payable after the date of Closing, then
Buyer shall refund to Seller, out of and to the extent of
the portion of such payment remaining after Buyer deducts
therefrom any and all sums due and owing it and from such
tenants after the date of Closing, an amount up to the full
amount of any arrearage existing on the date of Closing
6.4 Operating Costs Pass-Throughs, Etc. Operating
costs pass-throughs, percentage rentals, additional rentals
and other retroactive rental escalations, sums or charges
payable by Tenants which accrue prior to the Close of Escrow
but are not then due and payable, shall be prorated as of
the Close of Escrow; provided, however, no payment thereof
shall be made to Seller until Buyer collects same from the
Tenants. When Buyer collects such operating costs pass
throughs, percentage rentals or other retroactive rental
escalations, sums or charges from a Tenant, Seller shall be
due an amount equal to all such operating costs pass
throughs, percentage rentals or other retroactive rental
escalations, sums or charges accruing prior to-the Close of
Escrow, computing same on a per diem basis after amortizing
them over the respective periods for which such items are
payable. Payments of such prorated amounts collected by
Buyer shall be made to Seller upon receipt and shall be
accompanied by a report showing how same was calculated and
such supporting documentation as Seller reasonable requests.
Where the Leases contain Tenant obligations for taxes,
common area expenses, maintenance, utilities, assessments,
or additional charges of any nature (the "Tenant Charges"),
and where Seller shall have collected any Tenant Charges
thereof in excess of amounts owed by Seller for such Tenant
Charges for the period prior to the Closing Date, there
shall be an adjustment and credit given to Buyer for such
excess amounts collected. Buyer shall apply all such excess
amounts tot he charges owed by Buyer for such items for the
period after the Closing Date and, if required by the
Leases, shall rebate or credit Tenants with any remainder.
If, pursuant to the leases, the Tenants are entitled to
payments by the Landlord (other than a return of security
deposits) in excess of the amounts credited to Buyers at
closing for the lease year in which the Closing Date falls,
Seller shall be responsible for a portion of such payment as
determined on the basis of a fraction, the denominator of
which shall be twelve (12) and the numerator of which shall
be the number of months (or part thereof) in such lease year
prior to the Closing Date. Prorations for any partial months
shall be calculated on a daily basis. Buyer shall be
responsible for the remainder.
6.5 Utilities. Final readings on all gas, water and
electric meters shall be made as of the date of Closing, if
possible. If finer readings are not possible, gas, water and
electricity charges will be prorated based on the most
recent period for which costs are available with a
subsequent cash adjustment to be made between Buyer and
Seller within thirty (30) days after Closing. Any deposits
made by Seller with utility companies shall be returned to
Seller. Buyer shall be responsible for making all
arrangements for the continuation of utility services.
6.6 Management Agreement Cancellation. Any existing
management agreement then in effect with respect to the
Property shall be canceled by Seller and terminated
effective as of the Closing Date and Seller shall pay any
cancellation or termination fees.
6.7 Leasing Listing Agreement Cancellation Any existing
leasing listing agreement then in effect with respect to the
Property shall be canceled by Seller and terminated
effective as of the Closing Date.
6.8 Commissions Seller shall pay in full all leasing
commissions due in connection with the origination of the
Leases entered into by Seller or Leases renewed by Seller as
of or prior to the Closing Date without contribution or
proration from Buyer.
6.9 Prepaid Rentals. Rentals received by Seller
attributable to periods after the Closing Date shall be
credited to Buyer and debited to Seller at the Closing.
6.10 Credits. At Closing, Seller shall credit to Buyer
in cash an amount equal to all cash security deposits held
by Seller under the Leases. After Closing, Buyer shall
assume full responsibility for such security deposits of
Tenants which have been credited to Buyer. Seller shall,
without recourse, assign to Buyer any Letters of Credit in
its Possession which may have been furnished to Seller by
tenants pursuant to Leases, if any.
6.11 Adjustments. To the extent that the amount of any
of the above items shall not be available for exact
proration as of the Closing Date, Seller and Buyer agree to
make any necessary adjustments to the prorations between the
Seller and Buyer as of the Closing Date. Any such prorations
not determined or not agreed upon by the Closing shall be
paid by Buyer to Seller, or by Seller to Buyer, as the case
may be, in cash as soon as practicable after the Closing,
but in no event later than sixty (60) calendar days after
the Closing. By not later than sixty (60) days after the
Closing, Seller shall provide to Buyer a final post-closing
reconciliation reflecting all credits, debits, and
prorations.
7. Risk of Loss; Eminent Domain.
7.1 Damage to Property. Buyer shall be obligated to
purchase the Property for the Purchase Price, without regard
to the occurrence of any damage or destruction of or to the
Property prior to Closing that involves less than $100,000
of damage. Seller shall assign to Buyer any insurance
proceeds or other sums sufficient to repair the damage or
destruction caused by any such occurrence. Between the
Execution Date and the Closing, Seller shall keep all
insurance policies on the Property currently maintained by
it in full force and effect.
With regard to the occurrence of any damage or
destruction of or to the Property prior to the Closing that
involves more than $100,000 of damage, Buyer shall have the
right to terminate this Agreement by written notice to the
Seller prior to the Closing Date, in which event this
Agreement shall be void and of no further force and effect
and the Earnest Deposit shall be returned to Buyer as
Buyer's sole remedy. In the event Buyer does not terminate
this Agreement, Seller shall assign any insurance proceeds
to Buyer and will credit Buyer at Closing an amount equal to
the deductible amount attributable to such insurance policy.
If the parties cannot reach final and binding agreement on
such matters on or before the Closing Date, this Agreement
shall be void and of no further force and effect and the
Earnest Deposit shall be returned to Buyer as Buyer's sole
remedy.
7.2 Eminent Domain. If, after the execution of this
Agreement and prior to the Closing Date, Seller shall
receive notice of the commencement or threatened
commencement of eminent domain or other like proceedings
against the Real Property or any portion thereof, Seller
shall immediately notify Buyer in writing, and Buyer shell
elect, within ten (10) business days from and after the
later of such notice or Buyer's independent discovery of
such threatened or pending proceedings, by written notice to
Seller, either:
(i) to not close the transaction contemplated hereby,
in which even this Agreement shall be void and of no further
force and effect and the Earnest Deposit shall be
immediately return to Buyer as Buyer's sole remedy; or
(ii) to close the transaction contemplated hereby in
accordance with the terms and conditions contained herein,
but subject to such proceedings, in which event the Purchase
Price shall remain the same and Seller shall transfer and
assign to Buyer at Closing all rights, title and interest to
any and all condemnation proceeds. If Buyer elects to
purchase the property after receipt of such notice, Buyer
shall have the right and obligation to control and pay for
all appropriate action with regard to such eminent domain or
like proceedings, including but not limited to,
negotiations, litigation, settlement, appraisals and
appeals.
If Buyer does not make such election within the aforesaid
ten (10) business day time period, Buyer shall be deemed to
have elected to close the transaction contemplated hereby in
accordance with this Section 7.2 (ii).
8. Notices. Each notice required or permitted to be given
hereunder shall be in writing and shall comply with the
requirements of this Section 8. Any notice by either party
to the other shall be deemed to be duly given if: (a) either
(i) hand delivered to the person(s) listed below for the
appropriate party, or (ii) by telephone facsimile
transmittal to the facsimile telephone number of the
appropriate party listed below, in which event proof of
delivery shall be by telephone records, and (b) a duplicate
of such notices shall be sent by registered or certified
mail to the appropriate address set forth below (or at such
other address as may hereafter be designated by the
appropriate party). Notice shall be deemed effective at the
time of hand delivery or transmission of the telephone
facsimile and upon deposit of the notice in the United
States Mail for registered or certified delivery.
The addresses and facsimile telephone numbers of the
parties to which notices are to be sent shall be those set
forth below:
As to Seller:
WILLIAM J. MCMORROW
Chief Executive Officer
Kennedy-Wilson, Inc.
530 Wilshire Boulevard, Suite 101
Santa Monica, CA 90401
Telephone: (310) 314-8400
FAX: (310) 314-8510
With a copy to:
Kent Y. Mouton, Esq.
KULIK, GOTTESMAN & MOUTON
1880 Century Park East, Suite 1150
Los Angeles, CA 90067
Telephone: (3t0) 557-9200
FAX: (310) 557-0224
As to Buyer:
ARDEN REALTY LIMITED PARTNERSHIP
c/o ARDEN REALTY GROUP, INC.
9100 Wilshire Boulevard, Suite 700E
Beverly Hills, CA 9O212
Attention: Brig Troy
Telephone: (310) 271-8600
Facsimile: (310) 274-8218
With a copy to:
JEFFER, MANGELS, BUTLER & MARMARO LLP
2121 Avenue of the Stars, 10th Floor
Los Angeles, CA 90067
Attention: Scott M. Kalt, Esq.
Telephone: (310) 785-5314
Facsimile. (310) 203-0567
Any party shall have the right from time to time to change the
address or telephone number to which notices to it shall be sent
by giving the other party or parties at least five (5) days prior
written notice of the changed address or additional addresses.
9. Documents at Closing, All of the following documents shall
be in a form and substance reasonably acceptable to the parties
and their legal counsel and deposited with Escrow Agent prior to
or on the Closing Date:
9.1 Seller's Documents. Seller shall execute and /or
deliver the following to Buyer at Closing:
(i) The Grant Deed, Bill of Sale, Assignment and
Assumption of Leases, and lien affidavit (if required) acceptable
to the Title Company, all duly executed by Seller and
acknowledged.
(ii) An affidavit, duly executed by Seller, that Seller
is not a "foreign person" within the meaning of Section 1445 of
the Internal Revenue Code, and a certificate under California
Revenue and Taxation Code Section 18662 In statutory form
sufficient to provide that Buyer shall have no withholding
requirement under the California Revenue and Taxation Code Section
18662.
(iii) Certification by Seller that the representations
and warranties of Seller contained in this Agreement remain true
and accurate as of the Closing Date.
(iv) A current Rent Roll within forty-eight (48)
hours of Closing.
(v) A master key or duplicate key for all locks in the
Building and Improvements.
(vi) Appropriate corporate resolutions authorizing the
sale of the Property and the execution of all documents to be
executed by Seller.
(vii) An Assignment and Assumption of service
agreements and intangible property which are assumable and which
Buyer elects to assume, in the form of the agreement attached
hereto as Exhibit "F".
(viii) Copies of all Service Agreements executed by
Seller or which are in effect relating to the Property.
(ix) The original Leases and warranties and
guaranties in effect as of
the Closing Date.
(x) Any drawings, surveys, site plans, permits,
licenses, or certificates of occupancy relating to the Property
and in the possession of Seller.
(xi) Copy of letters to be sent to Tenants advising them
of the sale of the Property by Seller to Buyer and setting
forth the address of Buyer, in the form attached hereto as Exhibit
"H".
9.2 Buyer's Documents. Buyer shall pay the cash portion of
the Purchase Price to the Title Company at Closing as required by
Section 3, and Buyer shall execute and/or deliver the following to
Seller at Closing:
(i) The Assignment and Assumption of Leases duly
executed by Seller and Buyer.
(ii) A partnership resolution signed by the General
Partner of the Buyer evidencing, the authorization by the General
Partner of the Buyer of the entering into and consummation by
Buyer of the transactions set forth in this Agreement.
(iii) Certification by Buyer that the representations
and warranties of Buyer contained in this Agreement remain, true
and accurate.
(iv) Such other documents and assurances as shall be
reasonably required by Seller.
(v) An Assignment and Assumption of the service
agreements and
intangible property.
9.3 Closing Conditions. Closing shall be subject to all of
the following conditions precedent (the "Closing Conditions"):
(i) Covenants; Seller shall have performed fully all
covenants set forth in Paragraphs 5.8, 9.1 and 11 herein, except
to the extent to which Seller's full performance has been
prevented, impaired, or excused by Buyer's acts or omissions.
(ii) Representations: Seller's representations set forth
in this Agreement shall be true and correct as of the Closing
Date. Buyer's sole remedy in the event Buyer discovers prior to
the Closing Date that any representation is materially untrue or
incorrect shall be to terminate this Agreement and receive its
entire Deposit.
(iii) Title Insurance Policy: The Title Company shall be
ready, willing and able to issue, upon payment of the Title
Company's regularly scheduled premium, the Owner's Title Policy.
(iv) There has been no material change in the
condition, operations or income relating to the Property.
10. Representations.
10.1 Representation by Seller. Seller hereby
represents to Buyer that as of the Execution Date:
(i) Seller is a duly organized corporation under the
laws of the State of Delaware and Seller has the power and
authority to enter into this Agreement.
(ii) To the best of Seller's knowledge, Seller has good
and marketable title to the Property.
(iii) Seller has the legal authority to sell the
Property, and all documents to be signed by Seller in connection
herewith have been or will be duly authorized, executed and
delivered by Seller.
(iv) To the best of Seller's knowledge, all taxes
(rental, real and personal) relating to the Property have been
paid; there are no special assessments with respect to the
Property that are due and payable; and Seller has no actual
knowledge of any pending or threatened assessments or condemnation
proceedings relating to the Property.
(v) To the best of Seller's knowledge, there are no
outstanding claims relating to the Property or any suits, actions,
proceedings or claims to be asserted by or against current or
former employees, suppliers, tenants or subcontractors or
otherwise relating to the Property.
(vi) To the best of Seller's knowledge, Seller has not
received any written notice from any governmental agency or
private land owner of any violation or encroachment on any right-
of-way or easement.
(vii) To the best of Seller's knowledge, all management
and service agreements relating to the Property have been provided
to Buyer and are listed on Exhibit "F".
(viii) The property management agreement currently in
effect with respect to the Property will terminate at Closing and
will not survive Closing.
(ix) True and correct copies of all of the Leases and
any subleases and occupancy agreements in Seller's possession have
been provided to Buyer; that all of such Leases are in full force
and effect; that, there are no other documents or agreements with
respect to the Tenants or regarding occupancy of the Property
other than the Leases; that, except as set forth in the Leases,
there are no options to renew, no options to purchase, options to
terminate; nor are there any rent concessions given to any of the
tenants, and except as set forth on such Exhibit "C", all rental
and other payments due under such leases, as of the date hereof,
have been paid in full: that, except as set forth on Exhibit "C",
the tenants under such Leases are not, as of the date hereof, in
default thereunder; that as of the date hereof, there are no
commissions or other fees payable to any person, entity or agent
with respect to the execution of such Leases; Seller, as landlord,
has received no written notice from any tenant that Seller is in
default or not complying with Seller's obligations, as landlord,
under any Lease; that, except for any work to be done subsequent
to the date hereof pursuant to the provisions of any Lease, any
and all decorating, painting, renovation or construction work
required to be done under the provisions of any such Leases as of
the Closing Date has been, or as of the Closing Date, as Seller's
expense, will be fully complete and paid for.
(x) That Seller has not received any written notice
contemplated or actual special assessment or reassessments for
general real estate tax purposes affecting the Property.
(xi) To the best of Seller's knowledge, there are no
actions, suits, or proceedings pending or threatened against or
relating to Seller or the Property in any court or before any
administrative agency. This warranty will not be deemed untrue or
violated as to any mechanic's liens against the Land and
Improvements existing at the Closing, against which Seller has
caused the Title Company to insure Buyer.
(ix) That Seller is not subject to any commitment,
obligation or agreement, including, any right of first refusal or
option to purchase granted to a third party which would or could
prevent it from completing the sale of the Property under this
Agreement or which would bind Buyer subsequent to consummation of
this Agreement.
(ix) That there are no outstanding accounts payable or
mechanic's liens in favor of any contractor, materialmen, or
laborer or any other person or entity in connection with the
construction, repair or renovation of any portion of the Property;
that there has not been any work performed or materials supplied
to the Property or contracts entered into for work to be performed
or materials to be supplied to the Property in the sixty (60) days
prior to the date hereof which has not been, or at the Closing
will not be, fully paid for, which could give rise to the filing
of such liens against the Property; and that, except for those
items of expense and contracts authorized in writing by Buyer
hereafter, Seller shall be responsible for any and all claims for
mechanic's liens and accounts payable that have arisen or may
subsequently arise due to contracts entered into for and/or any
work performed on, or materials supplied to, the Property prior to
the Closing Date, and Seller shall and does hereby agree to
defend, indemnify and hold Buyer and Buyer's nominee or designee
harmless from and against any and all such mechanics' liens,
accounts payable and any other contracts of commitment relating to
the Property. This warranty will not be deemed untrue or violated
as any mechanic's liens against Land and Improvements existing at
the Closing, against which Seller has caused the Title Company to
insure Buyer.
(xiv) Seller hereby certifies that Seller is not a "non-
resident alien", "foreign corporation", "foreign partnership",
"foreign trust., or "foreign estate" within the meaning of the
Internal Revenue Code of 1954, as amended, and the regulations
thereunder, and the Seller agrees, at the Closing, to deliver into
escrow any affidavit or certificate in confirmation of the same.
(xv) Except as otherwise disclosed to buyer, to the best
of Seller's knowledge without inquiry, no toxic or hazardous
chemicals, wastes or substances, of any kind whatsoever,
including, without limitation, asbestos, PCB's, radioactive
substances, petroleum or petroleum by-products or urea
formaldehyde have been generated, released, stored or disposed of,
on or at the Property or any immediately adjacent property owned
by Seller (excepting only currently lawful quantities maintained
in accordance with commercially reasonable standards and
applicable environmental laws). Seller hereby advises Buyer that a
five hundred (500) gallon diesel fuel storage tank is located on
the property.
(xvi) To the best of Seller's knowledge, Seller is not
aware of any material facts regarding the Property which have not
been disclosed to Buyer.
(xvii) To the best of Seller's knowledge, Seller is not
aware of any inaccuracy or incompleteness in any of the
information or documents furnished by Seller to Buyer pursuant to
this Agreement.
10.2 Representations by Buyer. Buyer hereby represents to
Seller that as of the date hereof, Buyer is a duly organized and
validly existing partnership under the laws of the State of
Maryland, and Buyer has the power and authority to enter into this
Agreement and take all necessary action and to execute any
documents or instruments required in order to consummate the
transactions contemplated herein.
10.3 Remedies.
IN THE EVENT THE CLOSING AND THE CONSUMMATION OF THE
TRANSACTION HEREIN CONTEMPLATED DOES NOT OCCUR AS HEREIN PROVIDED
BY REASON OF ANY DEFAULT OF BUYER, BUYER AND SELLER AGREE THAT IT
WOULD BE IMPRACTICAL AND EXTREMELY DIFFICULT TO ESTIMATE THE
DAMAGES SUFFERED BY SELLER AS A RESULT OF BUYER'S FAILURE TO
COMPLETE THE PURCHASE OF THE PROPERTY PURSUANT TO THIS AGREEMENT,
AND THAT UNDER THE CIRCUMSTANCES EXISTING AS OF THE DATE OF THIS
AGREEMENT, THE LIQUIDATED DAMAGES PROVIDED FOR IN THIS PARAGRAPH
REPRESENT A REASONABLE ESTIMATE OF THE DAMAGES WHICH SELLER WILL
INCUR AS A RESULT OF SUCH FAILURE; PROVIDED, HOWEVER THAT THIS
PROVISION WILL NOT LIMIT SELLER'S RIGHT TO RECEIVE REIMBURSEMENT
FOR ATTORNEYS' FEES NOR WAIVE OR AFFECT BUYER'S INDEMNITY
OBLIGATIONS AND SELLER'S RIGHT TO THOSE INDEMNITY OBLIGATIONS
UNDER THIS AGREEMENT, THEREFORE BUYER AND SELLER DO HEREBY AGREE
THAT A REASONABLE ESTIMATE OF THE TOTAL NET DETRIMENT THAT SELLER
WOULD SUFFER IN THE EVENT THAT BUYER DEFAULTS AND FAILS TO
COMPLETE THE PURCHASE OF THE PROPERTY IS AN AMOUNT EQUAL TO THE
DEPOSIT (WHICH INCLUDES ANY ACCRUED INTEREST THEREON) SAID AMOUNT
WILL BE THE FULL, AGREED AND LIQUIDATED DAMAGES FOR THE BREACH OF
THIS AGREEMENT BY BUYER. THE PAYMENT OF SUCH AMOUNT AS LIQUIDATED
DAMAGES IS NOT INTENDED AS A FORFEITURE OR PENALTY, BUT IS
INTENDED TO CONSTITUTE LIQUIDATED DAMAGES TO SELLER. UPON
DEFAULT BY BUYER. THIS AGREEMENT WILL BE TERMINATED AND
NEITHER PARTY SHALL HAVE ANY FURTHER RIGHTS OR OBLIGATIONS
HEREUNDER, EACH TO THE OTHER EXCEPT FOR THE RIGHT OF SELLER
TO COLLECT SUCH LIQUIDATED DAMAGES FROM BUYER AND ESCROW
HOLDER. SELLER HEREBY WAIVES THE PROVISIONS OF CALIFORNIA
CIVIL CODE SECTION 3389.
Buyer's Initial /s/ VJC Seller's Initials /s/ WJM
Notwithstanding the foregoing provisions of this Section
10.3, in the event any of Buyer's warranties and
representations are true as of the Execution Date, but become
untrue after the Execution Date without the intentional act
of Buyer, then Seller's sole remedy shall be to terminate
this Agreement.
10.4 Property "As-Is".
(a) No Side Agreements or Representations. No person
acting on behalf of Seller, including any broker, is
authorized to make, and by execution hereof, Buyer
acknowledges that no person has made, any representation,
agreement, statement, warranty, guarantee or promise
regarding the Property or the transaction contemplated herein
or the zoning, feasibility of building any other
improvements, physical condition, marketability or other
status of the Property except as may be expressly set forth
in this Agreement. No representation, warranty, agreement,
statement, guarantee or promise, if any made by any given
person acting on behalf of Seller which is not contained in
this Agreement will be valid or binding on
Seller. Except as expressly set forth in this Agreement,
Seller makes no representations or warranties regarding any
aspect of the Property. Buyer purchases the Property after
having made an independent evaluation and decision to
purchase the Property, including but not limited to geologic
and seismic hazards that may affect the Property. Except as
expressly set forth in this Agreement, Seller makes no
representations or warranties with respect to, but in no way
limited to, the following pertaining the Property, (i) that
there are no physical, structural, or mechanical defects or
violations of any laws or regulations applicable to the
Property; (ii) that all water, sewer, gas, electric,
telephone, and drainage facilities and all other utilities
required by law and by the normal operation of the Property
are all connected with valid permits, and/or are
available or adequate to service the Property and to permit
full compliance with all requirements of law; (iii) that all
licenses, permits, easements and rights-of-way, including
proof of dedication, required from all governmental
authorities having jurisdiction over the Property or from
private parties to permit the present use of the Property
and to insure vehicular and pedestrian ingress and egress to
the Property from public roads at all access points currently
being used having been properly obtained; or (iv) the
existence of nonexistence of hazardous substances.
Buyer acknowledges that the Property may be subject to
the provisions of the Subdivision Map Act (Government Code
Section 66410 et seq.). Seller makes no representations or
warranties regarding compliance thereunder.
(b) 'AS-IS' Purchase. Buyer represents and warrants
to Seller that Buyer has independently and personally
inspected the Property and improvements, if any, and the
Buyer has entered into this Agreement based upon such
personal examination and inspection. Except for the
representations made by Seller in this Agreement or as
otherwise set forth herein, Buyer agrees that Buyer will
accept the Property, at Close of Escrow, in its then
condition, AS-IS, WHERE-IS and WITH ALL FAULTS ACCEPTED,
including without limitation, those faults and conditions
specifically referenced in this Agreement. The Purchase
Price has been negotiated with the mutual understanding that
Buyer's costs associated with ownership, development,
operation and management of the Property are uncertain.
Buyer acknowledges that neither Seller nor its agents have
made any representation or warranty (except for those set
forth above), express or implied, written or oral, to Buyer
or any agent of Buyer with respect to any matter concerning
the Property, including without limitation, its physical
condition. Buyer acknowledges that neither Seller nor its
agents have made any representation or warranty to Buyer
concerning the income that can be expected from the Property
or expenses to be generated by operation, development, or
management of the Property. In purchasing the Property, Buyer
conducted a thorough inspection and review of the Property
and subject to the terms of this Agreement, has relied
entirely on its own independent investigation and analysis of
the Property and Buyer acknowledges that except as expressly
set forth in this Agreement, (i) Seller has not made any
representation or warranty, expressed or implied, written or
oral, to Buyer concerning any of the matters described above,
or any other matter, and (ii) any oral or written information
supplied by Seller to Buyer in respect of the Property was
intended by Seller and has been used by Buyer solely as a
basis for Buyer to conduct its own investigation and analysis
of the Property and except as expressly set forth in this
Agreement, Buyer has
not relied on any such written or oral information supplied
or provided by Seller to Buyer. It is not contemplated that
the Purchase Price will be increased it these costs prove to
be less than expected nor will the Purchase Price be reduced
if the Buyer's plan leads to higher cost projections. The
sole remedy of the Buyer will be to terminate this Agreement
as provided herein prior to the end of the Contingency
Period.
11. Covenants by Seller. Seller hereby covenants and
promises to and for the benefit of Buyer as follows:
11.1 Compliance With Laws. Seller will not
voluntarily commit any action that will result in a violation
after the execution date hereof of any applicable statute,
ordinance, regulation, order or other law, including, without
limitation, zoning or environmental regulations concerning
use of the Property or the existence or construction of the
Improvements.
11.2 Actions Pending. Seller shall notify Buyer
promptly of any lawsuits, condemnation proceedings, rezoning,
or other governmental order or action or any threat thereof
actually known to Seller which would affect the Property,
11.3 Amendments to Leases. Seller shall not enter
into any new leases or assign, modify, terminate (unless the
tenant thereunder shall have materially defaulted in the
performance of any of its obligations under the Lease) or
amend the Leases in any respect without Buyer's prior written
consent, which consent shall not be unreasonably withheld. If
Buyer does not disapprove any request of Seller regarding a
Lease within five (5) days of such request, Buyer shall be
deemed to have approved such request.
11.4 Insurance Policies The existing insurance
policies currently in effect with respect to liability claims
arising in connection with the Property, or equivalent
coverage, shall remain continuously in effect from the date
hereof to the Closing Date.
11.5 No Further Encumbrances After the date hereof,
Seller shall not enter into any agreement or cause any matter
to be recorded that may constitute an exception to title to
the Property or be binding on Buyer after the Closing Date,
without the prior written consent of Buyer, which consent
Buyer may withhold in its reasonable discretion.
11.6 Financial Statements. To deliver to Buyer
the items identified under the heading "Post Closing" on
Exhibit "G" attached hereto as soon as reasonably practicable
after the Closing Date.
12. Indemnification.
(a) Indemnification of Buyer. Seller hereby agrees to
indemnify Buyer against, defend and hold Buyer harmless from,
all liabilities, losses, damages, costs and expenses,
including without limitation, reasonable legal fees and
disbursements, incurred by Buyer relating to the Property
which arise or result from claims caused by acts, occurrences
or matters that took place prior to the Close of Escrow.
(b) Indemnification of Seller. Buyer hereby agrees to
indemnify Seller against, defend and hold Seller harmless
from, all liabilities, losses, damages, costs and expenses,
including without limitation, legal fees and disbursements,
incurred by Seller relating to the Property which arise or result
from claims caused by acts, occurrences or matters that take place
after the Close of Escrow.
13. Miscellaneous
13.1 Broker. At the Closing, Seller shall pay from
funds accruing to Seller through Escrow, (i) any brokerage
commission and fees owed to Seller's broker, Madison Partners
("Madison") in connection with transaction contemplated by
this Agreement pursuant to Seller's separate agreement with
Madison, Seller represents and warrants to Buyer, and Buyer
represents and warrants to Seller, that no other broker or
finder has been engaged by it, respectively, in connection
with any of the transactions contemplated by this Agreement,
or to its knowledge is in any way connected with any of such
transactions. In the event of any such claims for additional
brokers' or finders' fees or commissions in connection with
the negotiation, execution or consummation of this Agreement,
then Buyer shall indemnify, save harmless and defend Seller
from and against such claims if they shall be based upon any
statement or representation or agreement by Buyer, and Seller
shall indemnify, save harmless and defend Buyer if such claims
shall be based upon any statement, representation or agreement
made by Seller.
13.2 Entire Agreement. This Agreement constitutes
the entire agreement between Buyer and Seller with respect to the
Property and may not be amended except by written instrument
executed by Buyer and Seller. Any other agreements, written
or oral, between Buyer and Seller with respect to the
property are hereby superseded in their entirety by this
Agreement.
13.3 Headings, The section headings are inserted
for convenience only and are in no way intended to describe,
interpret, define or limit the scope or content of this
Agreement or any provision hereof.
13.4 Construction. Words of any gender used in
this Agreement shall be held and construed to include any other
gender, words in the singular number shall be held to include
the plural, and vice verse, unless the context requires
otherwise.
13.5 Applicable Law This Agreement shall be
construed and interpreted in accordance with the laws of the State of
California.
13.6 Successors and Assigns. This Agreement shall
be binding upon and inure to the benefit of the parties hereto
and their respective heirs, successors and assigns. Neither
Buyer nor Seller shall assign all or any portion of its
rights under this Agreement without the prior written consent
of the other.
13.7 Surviving Covenants. Notwithstanding any
provisions hereof to the contrary, the Surviving Covenants
shall survive the Closing and any termination of this
Agreement.
13.8 Counterparts. This Agreement may be executed
in two (2) or more counterparts.
13.9 Time of the Essence. Time is of the essence
as to the time for Closing and as to all other rights and
obligations of Buyer and Seller hereunder.
13.10 Real Estate Licenses. The parties hereto
acknowledge that both Buyer and Seller are licensed as Real
Estate Brokers in the State of California.
13.11 Confidentiality, Buyer shall keep all information
and reports obtained from Seller relating to the Property and to
this Agreement confidential and shall not disclose any such confidential
information to any other person or entity without obtaining prior written
consent from Seller.
IN WITNESS WHEREOF, Buyer and Seller have executed this
Agreement under seal by their duly authorized partners or officers.
SELLER; KENNEDY-WILSON, INC.
a Delaware corporation
By: /s/ William J.McMorrow
William J. McMorrow
Chief Executive Officer
BUYER:
ARDEN REALTY LIMITED PARTNERSHIP,
a Maryland limited partnership
By: ARDEN REALTY, INC.,
a Maryland corporation, its
Sole General Partner
By: /s/ Victor J. Coleman
Name: Victor J.Coleman
Its: President & COO
The Company hereby agrees to furnish supplementally
the omitted exhibits and schedules to the Commission
upon request.
AGREEMENT OF PURCHASE AND SALE
BY AND BETWEEN
ARDEN REALTY LIMITED PARTNERSHIP,
a Maryland limited partnership ("BUYER")
AND
PROPERTY ASSET MANAGEMENT INC.,
a Delaware corporation ("SELLER")
TABLE OF CONTENTS
Page
1. Certain Basic Definitions
2. Sale of Property: Purchase Price
3. Escrow: Closing Conditions.
4. Leasing.
5. Delivery and Possession
6. Commissions
7. Damage or Destruction: Condemnation
8. Seller's Representations and Warranties
9. Buyer's Representations and Warranties
10. Default.
11. Waiver of Trial by Jury.
12. Attorney's Fees
13. Notices
14. Amendment; Complete Agreement
15. Governing Law
16. Severability.
17. Counterparts, Headings and Defined Terms
18. Time of the Essence
19. Waiver.
20. Third Parties
21. Additional Documents
22. Independent Counsel
23. Condition of Property
24. No Warranties
25. Governmental Approvals
26. Release
27. Assignment
28. Successors and Assigns
29. Exhibits
30. No Reservation of Property.
31. Duty of Confidentiality
32. Audit Rights
AGREEMENT OF PURCHASE AND SALE
THIS AGREEMENT OF PURCHASE AND SALE ("Agreement") is made as of
November 22, 1996 ("Effective Date"), by and between ARDEN REALTY
LIMITED PARTNERSHIP, a Maryland limited partnership ("Buyer") and
PROPERTY ASSET MANAGEMENT INC., a Delaware corporation (together
with its successors and assigns, collectively, "Seller").
For valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, Buyer and Seller agree as follows:
AGREEMENT
1. Certain Basic Definitions. For purposes of this
Agreement, the following terms shall have the following
definitions:
1.1 Buyer's Address means 9100 Wilshire Boulevard,
Suite 700 East, Beverly Hills, CA 90212.
1.2 Close of Escrow. The date the Escrow (as hereinafter
defined) closes.
1.3 Closing Date means the date the close of escrow occurs,
which shall be November 26, 1996.
1.4 Contingency Period means the period commencing on the
Effective Date and expiring at 5:00 P.M., Pacific Standard Time,
on November 25, 1996.
1.5 Deposit means the amount of One Hundred Thousand
Dollars ($100,000).
1.6 Escrow Holder means the Walnut Creek, California office
of First American Title Insurance Company.
1.7 Escrow Holder's Address means 1850 Mt. Diablo Blvd.,
Suite 300, Walnut Creek, California 94596.
1.8 Purchase Price means the sum of Thirteen Million
Dollars ($13,000,000).
1.9 Real Property means the real property known as 300 E.
Magnolia Blvd. and 333 No. Glenoaks Blvd., Burbank, California,
which real property is more particularly described in
Exhibit "A".
1.10 Seller's Address means c/o GMAC Capital Mortgage
Corporation, 550 California Street, 12th Floor, San Francisco,
California 94104, Attention: Duane Hewlett.
2. Sale of Property: Purchase Price.
2.1 Sale of Property. Seller shall sell the Real Property
and all buildings and other improvements located on the Real
Property ("Improvements" and, together with the Real Property and
all right, title and interest of Seller in and to the Leases,
defined below, and in any supplies, furniture, fixtures and
equipment located on the Real Property and Improvements, are
collectively referred to herein as the "Property") to Buyer, and
Buyer shall purchase the Property from Seller, for the Purchase
Price on the terms and conditions of this Agreement.
2.2 Purchase Price. The Purchase Price shall be payable as
follows:
2.2.1 Deposit. The Deposit shall be delivered by Buyer
to Escrow Holder upon execution of this Agreement, in the form of
cash or cashier's check drawn on good and sufficient funds on a
federally insured bank in the State of California and made
payable to the order of Escrow Holder, and shall be deposited by
Escrow Holder pursuant to the provisions of Section 3.1. The
Deposit, plus accrued interest thereon, shall be refunded to
Buyer if any of the conditions in Section 3.3 are not satisfied
or waived by Buyer and Buyer notifies Seller and Escrow Holder in
writing that Buyer is terminating this Agreement pursuant to
Section 3.5 of this Agreement within one (1) calendar day after
the expiration of the Contingency Period. Upon the satisfaction
or waiver by Buyer of the conditions in Section 3.3, the Deposit
shall belong to Seller and immediately upon the Closing, Escrow
Holder shall pay Seller the amount of the Deposit without further
written instructions to Escrow Holder.
2.2.2 Balance. Buyer shall deposit into Escrow an
amount in immediately available federal funds equal to the
Purchase Price minus the Deposit during the period the Deposit
was in Escrow ("Cash Balance"), as reduced by the amount of any
credits due, or increased by the amount of any items chargeable
to, Buyer under this Agreement. Buyer shall deposit the Cash
Balance into Escrow in the form of immediately available federal
funds before the Closing Date (or such earlier date as is
required by Escrow Holder) such that Escrow Holder will be in a
position to disburse the cash proceeds to Seller on the Closing
Date.
2.3 Interest. All funds received from or for the account
of Buyer shall be deposited by Escrow Holder in an interest-
bearing account with a federally insured state or national bank
or savings and loan association ("Account") located in California
and approved in writing by Seller.
3. Escrow: Closing Conditions.
3.1 Escrow. Upon the execution of this Agreement by Buyer
and Seller, the parties shall open an escrow ("Escrow") for the
consummation of the sale of the Property to Buyer pursuant to the
terms of this Agreement. Not later than two (2) business days
prior to the Closing Date, Buyer and Seller shall each deposit
with Escrow Holder written instructions covering the Close of
Escrow. In the absence of such instructions, Escrow Holder shall
be authorized to invest the Deposit in accordance with
Section 2.3 above.
3.2 Closing Date. The Escrow shall close on the Closing
Date, provided that all conditions to the Close of Escrow set
forth in this Agreement have been satisfied or waived in writing
by the party intended to be benefitted thereby.
3.3 Buyer's Conditions to Closing. The Close of Escrow is
subject to and contingent on the satisfaction of the following
conditions:
3.3.1 Inspection. Buyer's approval of the physical
condition of the Property at Buyer's sole cost and expense within
the Contingency Period.
(a) Buyer shall have the right to commence Buyer's
physical inspection of the Property within three (3) business
days following the Effective Date upon two (2) business days
prior notice to Seller and after Seller's receipt of written
evidence that Buyer has procured the insurance required by
Section 3.3.1(c), which may be a certificate of insurance.
Buyer's physical inspection of the Property shall be conducted
during normal business hours at a time mutually acceptable to
Buyer and Seller. Such inspection shall be conducted in a manner
that does not disturb the present tenants and occupants of the
Property and Buyer and Buyer's agent shall perform inspections
only while accompanied by one or more representatives of Seller.
(b) Buyer acknowledges that prior to the expiration of
the Contingency Period: (i) Buyer has or will have conducted
such surveys and inspections, and made such boring, percolation,
geologic, environmental and soils tests and other studies of the
Property; and (ii) Seller has provided Buyer with adequate
opportunity to make such inspection of the Property (including an
inspection for zoning, land use, environmental and other laws,
regulations and restrictions) as Buyer has, in Buyer's
discretion, deemed necessary or advisable as a condition
precedent to Buyer's purchase of the Property and to determine
the physical, environmental and land use characteristics of the
Property, including without limitation, its subsurface) and its
suitability for Buyer's intended use.
(c) Buyer shall obtain or cause its consultants to
obtain, at Buyer's sole cost and expense prior to commencement of
any investigative activities on the Property, a policy of
commercial general liability insurance covering any and all
liability of Buyer and Seller with respect to or arising out of
any investigative activities. Such policy of insurance shall be
kept and maintained in force during the term of this Agreement
and so long thereafter as necessary to cover any claims of
damages suffered by persons or property resulting from any acts
or omissions of Buyer, Buyer's employees, agents, contractors,
suppliers, consultants or other related parties. Such policy of
insurance shall have liability limits of not less than Three
Million Dollars ($3,000,000) combined single limit per occurrence
for bodily injury, personal injury and property damage liability.
Such insurance policy shall name Seller as an additional insured
and shall be in form and substance and issued by an insurance
company licensed to do business in the State of California and
satisfactory to Seller.
(d) Buyer shall protect, indemnify, defend and hold
the Property, Seller and Seller's officers, directors,
shareholders, participants, affiliates, employees,
representatives, invitees, agents and contractors free and
harmless from and against any and all claims, damages, liens,
stop notices, liabilities, losses, costs and expenses, including
reasonable attorneys' fees and court costs, resulting from
Buyer's inspection and testing of the Property, including,
without limitation, repairing any and all damages to any portion
of the Property, arising out of or related (directly or
indirectly) to Buyer's conducting such inspections, surveys,
tests, and studies. Buyer shall keep the Property free and clear
of any mechanics' liens or materialmen's liens related to Buyer's
right of inspection and the activities contemplated by
Section 3.3.1. The Buyer's indemnification obligations set forth
herein shall survive the Close of Escrow and shall not be merged
with the Deed (as hereinafter defined) and shall survive the
termination of this Agreement and Escrow prior to the Close of
Escrow.
(e) It is understood by the parties that Seller does
not make any representation or warranty, express or implied, as
to the accuracy or completeness of any information contained in
Seller's files or in the documents produced by Seller, including,
without limitation, any environmental audit or report. Buyer
acknowledges that Seller and Seller's affiliates shall have no
responsibility for the contents and accuracy of such disclosures,
and Buyer agrees that the obligations of Seller in connection
with the purchase of the Property shall be governed by this
Agreement irrespective of the contents of any such disclosures or
the timing or delivery thereof.
3.3.2 Preliminary Title Report. Buyer's approval of
(i) a current extended coverage, owner's preliminary title report
for the Real Property issued by First American Title Insurance
Company ("Title Company") (which together with legible copies of
all exceptions are collectively referred to as the "PTR"), and
(ii) all exceptions to title described in Schedule B of the PTR.
(a) Within ten (10) calendar days after execution of
this Agreement, Seller shall deliver to Buyer a copy of the PTR.
If Buyer does not expressly object in writing to any exception or
other matter in the PTR by the end of the Contingency Period,
then Buyer shall be deemed to have approved the PTR and all
exceptions set forth therein. Buyer and Seller agree that Buyer
shall have until the end of the Contingency Period to review the
PTR in its entirety, including, without limitation, the legal
description of the Real Property and all title exceptions
referred to in the PTR. If Buyer disapproves of any item in the
PTR within the Contingency Period, then Buyer shall so notify
Seller in writing, specifying in detail the reasons for Buyer's
disapproval.
(b) If Buyer disapproves of any item in the PTR within
the Contingency Period, Buyer shall have the right either (i) to
waive such exceptions to title, and proceed to take title to the
Real Property subject to such exceptions, without any deduction
or offset in the Purchase Price, and without any cause of action
against Seller, or (ii) to terminate this Agreement and the
Escrow by giving written notice of such termination to Seller and
to Escrow Holder, on or before the end of the Contingency Period.
Buyer's failure to provide Seller or Escrow Holder with such
written notice of termination on or before the end of the
Contingency Period shall constitute Buyer's election under clause
(i) above.
3.3.3 Due Diligence Items. Buyer's approval of all Due
Diligence Items (as defined below) within the Contingency Period.
Seller shall deliver to Buyer or make available for Buyer's
review copies of the items ("Due Diligence Items") set forth in
Sections (a) through (h).
(a) Any building plans, drawings and specifications in
Seller's actual possession relating to the Property ("Building
Plans").
(b) All written rental agreements, leases and
occupancy agreements in Seller's actual possession currently
affecting the Property ("Leases").
(c) A rent statement ("Rent Statement") prepared by
Seller containing: (i) the current rental income and rent
payment dates under each of the Leases; (ii) the date through
which rent has been paid by each of the tenants ("Tenants") under
the Leases; (iii) the commencement and expiration date of each of
the Leases; and (iv) the amount of all deposits ("Tenant
Deposits") held by Seller under each of the Leases.
(d) All property management, landscaping, air
conditioning, janitorial and other service contracts relating to
the Property, if any, that are in Seller's actual possession and
that will remain in effect after the Closing ("Service
Contracts").
(e) PTR, as defined in Section 3.3.2.
(f) The Phase I environmental report dated August 24,
1995, prepared by ATEC Associates, Job No. 45-07-09500182
("Environmental Report").
(g) Any income statement or balance sheet, if any, in
Seller's actual possession, regarding the operation of the
Property ("Operating Statements").
(h) Any other documents in Seller's actual possession
reasonably requested in writing by Buyer that bind the Property
or materially affect its use, provided such documents are not
confidential, proprietary or privileged.
3.3.4 Estoppel Certificates.
Buyer's receipt of tenant estoppel certificates
substantially in the form of Exhibit "F" ("Tenant
Estoppel Certificates") for Tenants occupying 85% of
the square footage of the Improvements and by all
Tenants occupying 3,500 or more square feet therein on
or before the end of the Contingency Period. Buyer
hereby acknowledges that Buyer shall rely on the
information set forth in any Tenant Estoppel
Certificate and such information shall supersede the
information provided to Buyer in the Rent Statement.
3.4 Approval Procedure. Buyer shall notify Seller of
Buyer's disapproval, if at all, of the matters described in
Sections 3.3.1, 3.3.2, 3.3.3 and 3.3.4 by written notice
delivered to Seller and Escrow Holder within the applicable time
periods specified in such Sections, but in no event later than
the one (1) calendar day after the expiration of the Contingency
Period. Buyer's failure to disapprove any of the matters
described in Sections 3.3.1. 3.3.2, 3.3.3 and 3.3.4 in the manner
and within the applicable time periods provided for herein shall
be deemed Buyer's approval of such matter and waiver of such
condition.
3.5 Termination.
3.5.1 Termination Upon Disapproval. This Agreement
shall terminate at Buyer's option upon Buyer's disapproval of any
of the matters described in Sections 3.3.1, 3.3.2, 3.3.3 and
3.3.4, within the time period specified in such Section for such
approval, but in no event later than one (1) calendar day after
the expiration of the Contingency Period. In no event shall
Buyer have the right to disapprove any such item any later than
one (1) calendar day after the expiration of the Contingency
Period. Upon termination of this Agreement pursuant to this
Section 3.5.1: (a) each party shall promptly execute and deliver
to Escrow Holder such documents as Escrow Holder may reasonably
require to evidence such termination; (b) Escrow Holder shall
return all documents to the respective parties who delivered such
documents to Escrow; (c) Escrow Holder shall return all funds
deposited into Escrow by Buyer together with any accrued interest
on such funds; (d) Buyer shall pay Escrow Holder's title and
escrow cancellation fees; (e) Buyer shall return to Seller all
Due Diligence Items in Buyer's possession; (f) Buyer shall
deliver to Seller all reports generated by Buyer or at Buyer's
direction in connection with Buyer's due diligence; and
(g) except as provided in Section 1, the respective obligations
of Buyer and Seller under this Agreement shall terminate;
provided, however, notwithstanding the foregoing, Buyer's
indemnity obligations under Section 3.3.1(d) and Buyer's
obligations under Section 31 shall survive any such termination
of the Agreement, and the termination of this Agreement shall not
release any other indemnity obligation of Buyer.
3.5.2 Good Faith Determination. Buyer shall approve or
disapprove the matters described in Sections 3.3.1, 3.3.2, 3.3.3
and 3.3.4, according to the good faith judgment of Buyer.
3.6 Title and Title Insurance.
3.6.1 Deed. Seller shall convey title to the Real
Property and Improvements to Buyer by grant deed in the form of
Exhibit "B" attached hereto ("Grant Deed").
3.6.2 Assignment of Leases. Seller shall assign,
without recourse, to Buyer Seller's right, title and interest in
the Leases, subject to any rights of consent as provided therein,
pursuant to an assignment in the form of Exhibit "C" attached
hereto ("Assignment of Leases").
3.6.3 Assignment of Service Contracts. Seller shall
assign, without recourse, to Buyer, Seller's right, title and
interest in the Service Contracts, subject to any rights of
consent as provided therein, pursuant to an assignment in the
form of Exhibit "D" attached hereto ("Assignment of Service
Contracts").
3.6.4 Bill of Sale. Seller shall quitclaim, without
recourse, all of Seller's right, title and interest, if any, to
the tangible personal property owned by Seller and used in the
operation of the Property pursuant to a Bill of Sale in the form
of Exhibit "E" attached hereto ("Bill of Sale").
3.6.5 Buyer's Title Policy. At the Close of Escrow,
Escrow Holder shall cause the Title Company to issue to Buyer a
1987 ALTA Extended Coverage Owner's Policy of Title Insurance
("ALTA Title Policy") which:
(a) shall be written with liability in the amount of
the Purchase Price; and
(b) shall insure title to the Property, to be vested
in Buyer, subject only to the following exceptions ("Permitted
Exceptions"): (i) the standard printed exceptions set forth in
the Title Policy; (ii) general and special real property taxes
and assessments for the current fiscal year, a lien not yet due
and payable; (iii) the Leases; (iv) such other exceptions as
Buyer has approved or is deemed to have approved pursuant to
Section 3.3.2; and (v) any exceptions directly or indirectly
caused by Buyer.
3.6.6 ALTA Policy. Buyer shall pay for the difference
between the cost of the ALTA Policy and a 1988 CLTA Standard
Coverage Owner's Policy of Title Insurance ("Title Policy") and
for the cost of any other increase in the amount or scope of
title insurance if Buyer elects to increase the amount or scope
of title insurance coverage provided in the Title Policy. Buyer
shall pay for all endorsements not included in the Title Policy.
Buyer shall pay for the cost of any survey that the Title Company
requires for issuance of such ALTA Policy.
3.7 Closing Costs and Charges.
3.7.1 Seller's Costs. Seller shall pay (a) all expenses
and charges incurred in connection with the discharge of
delinquent taxes, if any, which may be required in order for the
Title Company to issue the Title Policy in accordance with
Section 3.6.5; (b) all documentary transfer taxes payable in
connection with the transfer of the Property; (c) the premium for
the Title Policy; and (d) one-half (1/2) of Escrow Holder's fees
in connection with the Escrow.
3.7.2 Buyer's Costs. Buyer shall pay (a) all recording
fees payable in connection with the transfer of the Property; and
(b) one-half (1/2) of Escrow Holder's fees in connection with the
Escrow.
3.7.3 Other Costs. All other costs, if any, shall be
apportioned in the customary manner for real property
transactions in the County where the Real Property is located.
3.21 Deposit of Documents and Funds by Seller. Not later
than two (2) business days prior to the Closing Date, Seller
shall deposit the following items into Escrow, each of which
shall be duly executed and acknowledged by Seller where
appropriate.
3.8.1 The Deed.
3.8.2 A counterpart of the Assignment of Leases.
3.8.3 A counterpart of the
Assignment of Service Contracts.
3.8.4 A counterpart of the Bill of Sale.
3.8.5 An affidavit sworn by an officer of
Seller to the effect that Seller is not a "foreign
person" as that term is defined in Section 1445(f)(3)
of the Internal Revenue Code of 1986, as amended, and
Sections 18805 and 26131 of the California Revenue and
Taxation Code, as amended ("Certification").
3.8.6 A Real Estate Withholding Exemption
Certificate, California Form 590-RE ("Exemption
Certificate").
3.8.7 Other documents that may reasonably be
required by Escrow Holder to close the Escrow in
accordance with this Agreement.
3.9 Deposit of Documents and Funds by Buyer. Not later
than two (2) business days prior to the Closing Date, Buyer shall
deposit the following items into Escrow, each of which shall be
duly executed and acknowledged by Buyer where appropriate:
3.9.1 The Cash Balance, reduced by the amount of any
credits due to Buyer under this Agreement, and increased by the
amount of all items chargeable to Buyer under this Agreement.
3.9.2 A counterpart of the Assignment of Leases.
3.9.3 A counterpart of the Assignment of Service
Contracts.
3.9.4 A counterpart of the Bill of Sale.
3.9.5 Other documents and funds that may reasonably be
required by Escrow Holder to close the Escrow in accordance with
this Agreement.
3.10 Delivery of Documents and Funds at Closing. Provided
that all conditions to Closing set forth in this Agreement have
been satisfied or, as to any condition not satisfied, waived by
the party intended to be benefitted thereby, on the Closing Date
Escrow Holder shall conduct the Closing by recording or
distributing the following documents and funds in the following
manner:
3.10.1 Recorded Documents. Record the Deed in the
Official Records of the County in which the Real Property is
located.
3.10.2 Buyer's Documents. Deliver to Buyer: (a) the
ALTA Policy; (b) the original Certification; (c) an original
counterpart of the Assignment of Leases, executed by Seller;
(d) an original counterpart of the Assignment of Service
Contracts, executed by Seller; (e) an original counterpart of the
Bill of Sale, executed by Seller; (f) the original Exemption
Certificate; and (g) an original counterpart and an endorsed copy
of the recorded Deed, executed by Seller.
3.10.3 Seller's Documents. Deliver to Seller: (a) an
original counterpart of the Assignment of Leases, executed by
Buyer; (b) an original counterpart of the Assignment of Service
Contracts, executed by Buyer; (c) an original counterpart of the
Bill of Sale, executed by Buyer; and (d) an original counterpart
and an endorsed copy of the recorded Deed executed by Buyer.
3.10.4 Purchase Price. Deliver to Seller the Purchase
Price, plus such other funds, if any, as may be due to Seller by
reason of credits under this Agreement, less all items chargeable
to Seller under this Agreement.
3.11 Prorations and Adjustments.
3.11.1 Taxes. Seller and Buyer shall prorate real
property taxes and assessments on the Real Property and
Improvements as of the Close of Escrow for the current fiscal
year based on the most current official real property tax
information available from the County Assessor's office where the
Real Property is located or other assessing authorities; or the
declarant or owners' association under any declaration of
covenants, conditions and restrictions encumbering the Real
Property. If real property tax and assessment figures for the
current fiscal year are not available, real property taxes shall
be prorated based on the real property taxes for the previous
fiscal year. Seller shall pay any real property taxes
attributable to the period of Seller's ownership of the Property.
Seller reserves the right to meet with governmental officials and
to contest any reassessment concerning or affecting Seller's
obligations under this Section 3.11.1.
3.11.2 Rent. Seller and Buyer shall prorate rental
income and all other amounts payable by Tenants under the Leases
based on the actual rental income that has been paid, and other
amounts that have been paid under the Leases (excluding
delinquent amounts) as shown in the Rent Statement as of the
Close of Escrow unless superseded by any information set forth in
any written notice from Seller to Escrow Holder and Buyer. In
the event that as of the Closing Date, any Tenant is delinquent
in the payment of rent, and reimbursements for common area
maintenance, operating expenses or real or personal property
taxes that accrued prior to the Closing Date, including such
amounts that have been billed but remain unpaid as at the Closing
Date, said delinquent sums shall remain the property of Seller
and no proration with respect thereto shall be made as of the
Close of Escrow. Buyer will use its best efforts to collect all
such delinquent sums and remit the balance thereof, if any, to
Seller. Buyer shall advise Seller of all such collection efforts
including sending Seller copies of all correspondence and memos
and similar documentation with respect thereto. Further, Seller
may and, if requested by Seller to do so, Buyer will, seek legal
relief on behalf of Seller for the collection of such delinquent
rent. Buyer shall not take or permit to be taken any action
which could compromise, settle, release or otherwise impair any
claim or right of Seller with respect to any such delinquent
sums.
3.11.3 Security Deposits. There shall be a credit or
adjustment against the Purchase Price for any Tenant Deposits
held by Seller as indicated on the Rent Statement.
3.11.4 Utilities and Other Expenses.
(a) Utilities. Seller shall notify all water, gas,
electric and other utility companies servicing the Real Property
and Improvements (collectively, "Utility Companies") of the sale
of the Property to Buyer and shall request that all Utility
Companies send Seller a final bill for the period ending on the
last day prior to the Close of Escrow. Buyer shall notify all
Utility Companies servicing the Real Property and Improvements
that as of the Close of Escrow, Buyer shall own the Property and
that all utility bills for the period commencing on the Close of
Escrow are to be sent to Buyer. In addition to the Purchase
Price, Buyer shall pay to Seller the amount of all utility
deposits that are on deposit with utility companies and Seller
shall assign to Buyer all of Seller's right, title and interest
in any such utility deposits. If any of the Utility Companies
sends Seller or Buyer a bill for a period in which the Close of
Escrow occurs, Buyer and Seller shall prorate such bills outside
the Escrow. In connection with such proration, it shall be
presumed that utility charges were uniformly incurred during the
billing period.
(b) Past Due Operating Expenses. Buyer and Seller
shall prorate outside of Escrow all past due expenses of
operating the Property which are applicable to any period prior
to the Close of Escrow in accordance with Section 3.11.2, based
upon actual days elapsed. Seller shall have the right to review
and copy Buyer's books and records in order to facilitate any
such proration or collection by either party.
3.11.5 Prorations. All prorations shall be made as of
the Close of Escrow on the basis of the actual days of the month
in which the Closing occurs. All rents, income and profits
derived from the Property, if any, along with all expenses (other
than taxes addressed in Section 3.11.1) shall be prorated at the
Closing with appropriate debits and credits to the accounts of
Buyer and Seller so that, as between Buyer and Seller, Seller
shall receive, as appropriate, all of the same to the extent duly
allocable to the period ending on the date immediately prior to
the Closing Date, and Buyer shall receive, as appropriate, all of
the same to the extent duly allocable to the period commencing
upon the Closing Date.
3.11.6 Credit for Roof. Buyer shall receive a credit
against the purchase price of Fifty Thousand Dollars ($50,000)
for repairs to be made by Buyer to the roof of the Improvements.
4. Leasing.
4.1 Leasing. Seller shall have the right to enter into any
proposed lease affecting the Property ("Proposed Lease") or to
modify any existing lease (a "Lease Modification"), subject to
Buyer's right of approval, as described below. Provided Buyer is
not in default under this Agreement, prior to signing each
Proposed Lease and prior to executing any Lease Modification,
Seller shall submit the Proposed Lease or Lease Modification to
Buyer for Buyer's approval, which approval shall not be
unreasonably withheld, conditioned or delayed. Buyer shall
notify Seller in writing of Buyer's approval or disapproval of
each Proposed Lease or Lease Modification submitted to Buyer
within five (5) business days after Buyer's receipt thereof.
Buyer's failure to disapprove any Proposed Lease or Lease
Modification in accordance with the procedure and within the five
(5) business day period specified in this Section 4.1 shall be
deemed to constitute Buyer's approval of such Proposed Lease or
Lease Modification. Any notice of disapproval of a Proposed
Lease or Lease Modification by Buyer shall set forth in detail
Buyer's specific objections thereto. Seller may submit a
Proposed Lease or Lease Modification to Buyer for approval after
Seller's execution thereof, provided the Proposed Lease or Lease
Modification contains appropriate conditions regarding Buyer's
approval of the Proposed Lease or Lease Modification.
4.2 Leasing After Closing Date. Notwithstanding anything
to the contrary contained in this Agreement, Seller shall have
the right without Buyer's approval to enter into any Proposed
Lease or Lease Modification if for any reason Escrow has not
closed by the Closing Date.
4.3 Leasing Expenses. All leasing expenses for Proposed
Leases or Lease Modifications entered into after the Effective
Date and approved by Buyer pursuant to Section 4.1 hereof
including for the completion of tenant improvements and payment
of tenant allowances and payment of broker's commission, shall be
prorated between Seller and Buyer so that, as between Buyer and
Seller, Seller shall bear as appropriate, all of the sums to the
extent duly allocable to the period ending on the date
immediately prior to the Closing Date, and Buyer shall bear, as
appropriate, all of the sums to the extent duly allocable to the
period commencing on the Closing Date. If Buyer disapproves any
Proposed Lease or Lease Modification, Seller nonetheless shall
have the right to execute any such Proposed Lease or Lease
Modification and Seller shall bear all leasing expenses in
connection therewith including, without limitation, leasing
commissions, tenant improvements and concessions (including those
due after the Close of Escrow). Upon the Close of Escrow, Buyer
shall assume all obligations of Seller under or in connection
with any of the Leases, regardless of when such obligations
actually arose, including for the completion of tenant
improvements and payment of tenant improvement allowances, and
payment of broker's commissions.
4.4 Operation of Property. Between the date of the
execution of this Agreement and the Closing, Seller shall:
(i) maintain the Property in its present condition, ordinary wear
and tear excepted; (ii) maintain all casualty, liability and
hazard insurance currently in force with respect to the Property;
and (iii) operate, manage and enter into contracts with respect
to the Property, in the same manner done by Seller prior to the
Effective Date, maintaining present services and sufficient
supplies and equipment for the operation and maintenance of the
Property in the same manner as prior to the Effective Date;
provided, however, that Seller shall not enter into any service
contract that cannot be terminated within thirty (30) days.
5. Delivery and Possession. Seller shall deliver
possession of the Property to Buyer at the Close of Escrow,
subject to the rights of the Tenants under the Leases.
6. Commissions. Buyer and Seller each represent and
warrant to the other that they are unaware of any commission,
finder's fee or brokerage fee arising out of the transactions
contemplated by this Agreement. Buyer shall indemnify and hold
Seller harmless from and against any and all liabilities, claims,
demands, damages, costs and expenses, including, without
limitation, reasonable attorneys' fees and court costs, in
connection with claims for any such commissions, finders' fees or
brokerage fees arising out of Buyer's conduct or the inaccuracy
of the foregoing representation and/or warranty of Buyer.
7. Damage or Destruction: Condemnation.
7.1 Uniform Act. This Agreement shall be governed by the
Uniform Vendor and Purchaser Risk Act as set forth in
Section 1662 of the California Civil Code ("Act") as supplemented
by this Section 7. For purposes of the Act, (a) a taking by
eminent domain of a portion of the Property shall be deemed to
affect a "material part" of the Property if the estimated value
of the portion of the Property taken exceeds ten percent (10%) of
the Purchase Price, and (b) the destruction of a "material part"
of the Property shall be deemed to mean an insured or uninsured
casualty to the Property following Buyer's inspection of the
Property and prior to the Close of Escrow having an estimated
cost of repair which equals or exceeds ten percent (10%) of the
Purchase Price.
7.2 Definitions. The phrase "estimated value" shall mean
an estimate obtained from a M.A.I. appraiser, who has at least
five (5) years experience evaluating property located in the
County where the Real Property is located, similar in nature and
function to that of the Property, selected by Seller and approved
by Buyer, and the phrase "estimated cost of repair" shall mean an
estimate obtained from an independent contractor selected by
Seller and approved by Buyer. Buyer shall not unreasonably
withhold, condition or delay Buyer's approval under this Section.
7.3 Notice; Credit to Buyer. Buyer shall have the right to
terminate this Agreement if all or a material part of the
Property is destroyed without fault of Buyer or a material part
of the Property is taken by eminent domain. Buyer shall give
written notice of Buyer's election to terminate this Agreement
under the Act within five (5) business days after Buyer first
learns of any damage to or condemnation of the Property which
entitles Buyer to terminate this Agreement. If Buyer does not
give such notice, then this Agreement shall remain in effect and
upon the Close of Escrow, Seller shall assign to Buyer (a) any
insurance proceeds payable with respect to such damage; or
(b) the entire award payable with respect to such condemnation
proceeding, whichever is applicable.
8. Seller's Representations and Warranties. Seller
represents and warrants to Buyer that as of the date of this
Agreement and as of the Closing Date:
8.1 Seller's Existence and Authority.
(a) Seller is duly organized, validly existing, and in good
standing under the laws of the state of its formation.
(b) Seller has the full power and authority to execute,
deliver and perform its obligations under this Agreement.
8.2 Section 1445(f) IRC. Seller is not a "foreign person"
within the meaning of Section 1445(f)(3) of the Internal Revenue
Code.
9. Buyer's Representations and Warranties. Buyer
represents and warrants to Seller that as of the date of this
Agreement and as of the Closing Date:
9.1 If Buyer is other than an individual, Buyer is duly
organized, validly existing, and in good standing under the laws
of the state of its formation.
9.2 Buyer has the full power and authority to execute,
deliver and perform Buyer's obligations under this Agreement.
9.3 This Agreement constitutes a legal, valid and binding
obligation of Buyer enforceable in accordance with its terms,
except as enforceability may be limited by the application of
bankruptcy, insolvency, reorganization, moratorium or similar
laws or by equitable principles affecting creditors' rights
generally or the rights of buyers and sellers of real or personal
property generally.
9.4 The execution, delivery and performance of Buyer's
obligations under this Agreement and the consummation of the
transactions contemplated hereby (i) will not result in a breach
or violation of any contract, commitment or restriction to which
Buyer is a party or by which Buyer is bound; and (ii) do not
require any consent, approval or other authorization of any
person, entity or authority not previously obtained.
10. Default.
10.1 Liquidated Damages - Deposit.
NOTWITHSTANDING ANYTHING TO THE CONTRARY CONTAINED IN THIS
AGREEMENT, IF BUYER HAS NOT TERMINATED THIS AGREEMENT WITHIN
ONE (1) CALENDAR DAY AFTER THE EXPIRATION OF THE CONTINGENCY
PERIOD AND IF THE SALE OF THE PROPERTY TO BUYER IS NOT
CONSUMMATED FOR ANY REASON OTHER THAN SELLER'S DEFAULT UNDER
THIS AGREEMENT, SELLER SHALL BE ENTITLED TO RETAIN THE
DEPOSIT AND ALL INTEREST ACCRUED THEREON AS SELLER'S
LIQUIDATED DAMAGES. THE PARTIES AGREE THAT IT WOULD BE
IMPRACTICABLE AND EXTREMELY DIFFICULT TO ASCERTAIN THE
ACTUAL DAMAGES SUFFERED BY SELLER AS A RESULT OF BUYER'S
FAILURE TO COMPLETE THE PURCHASE OF THE PROPERTY PURSUANT TO
THIS AGREEMENT, AND THAT UNDER THE CIRCUMSTANCES EXISTING AS
OF THE DATE OF THIS AGREEMENT, THE LIQUIDATED DAMAGES
PROVIDED FOR IN THIS SECTION REPRESENTS A REASONABLE
ESTIMATE OF THE DAMAGES WHICH SELLER WILL INCUR AS A RESULT
OF SUCH FAILURE PRIOR TO THE EXPIRATION OF THE CONTINGENCY
PERIOD, PROVIDED, HOWEVER, THAT THIS PROVISION SHALL NOT
LIMIT SELLER'S RIGHT TO RECEIVE REIMBURSEMENT FOR ATTORNEYS'
FEES, NOR WAIVE OR AFFECT SELLER'S RIGHTS AND BUYER'S
OBLIGATIONS UNDER SECTIONS 3.3.1(D), 7, 26 AND/OR 31 OF THIS
AGREEMENT. THE PARTIES ACKNOWLEDGE THAT THE PAYMENT OF SUCH
LIQUIDATED DAMAGES IS NOT INTENDED AS A FORFEITURE OR
PENALTY WITHIN THE MEANING OF CALIFORNIA CIVIL CODE
SECTION 3275 OR 3369, BUT IS INTENDED TO CONSTITUTE
LIQUIDATED DAMAGES TO SELLER PURSUANT TO CALIFORNIA CIVIL
CODE SECTIONS 1671, 1676, AND 1677. THE PARTIES HAVE SET
FORTH THEIR INITIALS BELOW TO INDICATE THEIR AGREEMENT WITH
THE LIQUIDATED DAMAGES PROVISION CONTAINED IN THIS SECTION.
SELLER'S INITIALS:/s/ MW BUYER'S INITIALS: /s/ RSZ
10.1 Default by Seller. If the Property is not conveyed to
Buyer as and when required by the terms of this Agreement
solely by reason of a default by Seller, or if Seller should
otherwise be in default under this Agreement, Buyer shall
have such rights and remedies as may exist under this
agreement, or at law or in equity, including, without
limitation, the right to specific performance and/or
damages; provided, however, in no event shall Buyer have the
right to receive consequential damages or damages on account
of any lost profits.
10.2 No Contesting Liquidated Damages. As material
consideration to each party's agreement to the liquidated damages
provisions stated above, each party hereby agrees to waive any
and all rights whatsoever to contest the validity of the
liquidated damage provisions for any reason whatsoever,
including, but not limited to, that such provision was
unreasonable under circumstances existing at the time this
Agreement was made.
10.3 Remedies. If either party breaches its obligations
hereunder, then the other party may, without terminating this
Agreement, suspend performance until such breach is cured. If
Buyer breaches this Agreement, Seller may terminate this
Agreement and retain the Deposit as liquidated damages without
waiving any of Seller's other rights and remedies. The
obligations of Seller under this Agreement shall be without
recourse to the assets of any officer, shareholder, director, or
employee of Seller or any parent company, affiliate or subsidiary
of Seller.
11. Waiver of Trial by Jury. Seller and Buyer, to the
extent they may legally do so, hereby expressly waive any right
to trial by jury of any claim, demand, action, cause of action,
or proceeding arising under or with respect to this Agreement, or
in any way connected with, or related to, or incidental to, the
dealings of the parties hereto with respect to this Agreement or
the transactions related hereto or thereto, in each case whether
now existing or hereafter arising, and irrespective of whether
sounding in contract, tort, or otherwise. To the extent they may
legally do so, Seller and Buyer hereby agree that any such claim,
demand, action, cause of action, or proceeding shall be decided
by a court trial without a jury and that any party hereto may
file an original counterpart or a copy of this section with any
court as written evidence of the consent of the other party or
parties hereto to waiver of its or their right to trial by jury.
12. Attorney's Fees. If any action or proceeding or
arbitration is commenced by either party to enforce their rights
under this Agreement or to collect damages as a result of the
breach of any of the provisions of this Agreement, the prevailing
party in such action or proceeding or arbitration, including any
bankruptcy, insolvency or appellate proceedings, shall be
entitled to recover all reasonable costs and expenses, including,
without limitation, reasonable attorneys' fees and court costs,
in addition to any other relief awarded by the court or
arbitrator.
13. Notices. All notices, demands, approvals, and other
communications provided for in this Agreement shall be in writing
and shall be effective upon the earliest of the following to
occur: (a) when delivered to the recipient; or (b) three (3)
business days after deposit in a sealed envelope in the United
States mail, postage prepaid by registered or certified mail,
return receipt requested, addressed to the recipient as set forth
below. All notices to Seller shall be sent to Seller's Address.
All notices to Buyer shall be sent to Buyer's Address. All
notices to Escrow Holder shall be sent to Escrow Holder's
Address. If the date on which any notice to be given hereunder
falls on a Saturday, Sunday or legal holiday, then such date
shall automatically be extended to the next business day
immediately following such Saturday, Sunday or legal holiday.
The foregoing addresses may be changed by written notice given in
accordance with this Section 13.
14. Amendment; Complete Agreement. All amendments and
supplements to this Agreement must be in writing and executed by
Buyer and Seller. This Agreement contains the entire agreement
and understanding between Buyer and Seller concerning the subject
matter of this Agreement and supersedes all prior agreements,
terms, understandings, conditions, representations and
warranties, whether written or oral, made by Buyer or Seller
concerning the Property or the other matters which are the
subject of this Agreement. This Agreement has been drafted
through a joint effort of the parties and their counsel and,
therefore, shall not be construed in favor of or against either
of the parties.
15. Governing Law. This Agreement shall be governed by and
interpreted in accordance with the laws of the State of
California.
16. Severability. If any provision of this Agreement or
application thereof to any person or circumstance shall to any
extent be invalid or unenforceable, the remainder of this
Agreement (including the application of such provision to persons
or circumstances other than those to which it is held invalid or
unenforceable) shall not be affected thereby, and each provision
of this Agreement shall be valid and enforced to the fullest
extent permitted by law.
17. Counterparts, Headings and Defined Terms. This
Agreement may be executed in counterparts, each of which shall be
an original, but all of which together shall constitute one
agreement. The headings to sections of this Agreement are for
convenient reference only and shall not be used in interpreting
this Agreement. Unless expressly stated to the contrary, all
references to "days" in this Agreement mean calendar days, and
"business days" mean calendar days excluding Saturdays, Sundays,
and California state bank holidays.
18. Time of the Essence. Time is of the essence of this
Agreement.
19. Waiver. No waiver by Buyer or Seller of any of the
terms or conditions of this Agreement or any of their respective
rights under this Agreement shall be effective unless such waiver
is in writing and signed by the party charged with the waiver.
20. Third Parties. This Agreement is entered into for the
sole benefit of Buyer and Seller and their respective permitted
successors and assigns. No party other than Buyer and Seller and
such permitted successors and assigns shall have any right of
action under or rights or remedies by reason of this Agreement.
21. Additional Documents. Each party agrees to perform any
further acts and to execute and deliver such further documents
which may be reasonably necessary to carry out the terms of this
Agreement.
22. Independent Counsel. Buyer and Seller each acknowledge
that: (i) they have been represented by independent counsel in
connection with this Agreement; (ii) they have executed this
Agreement with the advice of such counsel; and (iii) this
Agreement is the result of negotiations between the parties
hereto and the advice and assistance of their respective counsel.
The fact that this Agreement was prepared by Seller's counsel as
a matter of convenience shall have no import or significance.
Any uncertainty or ambiguity in this Agreement shall not be
construed against Seller because Seller's counsel prepared this
Agreement in its final form.
23. Condition of Property. Buyer represents and warrants
that, as specified in Section 3.3.1 hereof, Buyer has, or shall
have inspected and conducted tests and studies of the Property,
and that Buyer is familiar with the general condition of the
Property. Buyer understands and acknowledges that the Property
may be subject to earthquake, fire, floods, erosion, high water
table, dangerous underground soil conditions, hazardous materials
and similar occurrences that may alter its condition or affect
its suitability for any proposed use. Seller shall have no
responsibility or liability with respect to any such occurrence.
Buyer represents and warrants that Buyer is acting, and will act
only, upon information obtained by Buyer directly from Buyer's
own inspection of the Property. Notwithstanding anything to the
contrary contained in this Agreement, the suitability or lack of
suitability of the Property for any proposed or intended use, or
availability or lack of availability of (a) permits or approvals
of governmental or regulatory authorities, or (b) easements,
licenses or other rights with respect to any such proposed or
intended use of the Property shall not affect the rights or
obligations of the Buyer hereunder.
24. No Warranties. The Property is purchased and sold "AS
IS". The Purchase Price and the terms and conditions set forth
herein are the result of arm's-length bargaining between parties
familiar with transactions of this kind, and said price, terms
and conditions reflect the fact that Buyer shall have the benefit
of, and is relying upon, no statements, representations or
warranties whatsoever, made by or enforceable against Seller
relating to the condition, operations, dimensions, descriptions,
soil condition, suitability, compliance or lack of compliance
with any state, federal, county or local law, ordinance, order,
permit or regulation, or any other attribute or matter of or
relating to the Property, including, without limitation, (i) the
structural integrity of the Improvements, (ii) the conformity of
the Improvements to any plans or specifications for the Property,
including any plans and specifications that may have been or may
be provided to Buyer, (iii) the conformity of the Property to
past, current or future applicable zoning or building code
requirements, (iv) the existence of soil instability, past soil
repairs, soil additions or conditions of soil fill, or
susceptibility to landslides, (v) the sufficiency of any
undershoring, (vi) the sufficiency of any drainage, (vii) whether
the Property is located wholly or partially in a flood plain or a
flood hazard boundary or similar area, (viii) the existence or
non-existence of toxic or hazardous wastes or materials or
friable asbestos or asbestos containing construction materials
in, on or about the Property, (ix) any other matter affecting the
stability or integrity of the land, or any buildings or
improvements situated on or as part of the Property, (x) the
fitness or suitability of the Property for Buyer's intended use,
(xi) the potential further development of the Property, (xii) the
existence of vested land use, zoning or building entitlements
affecting the Property. Buyer represents, warrants and covenants
to Seller that, except for Seller's express representations and
warranties specified in this Agreement, Buyer is relying solely
upon Buyer's own investigation of the Property. If Seller
obtains or has obtained the services, opinions or work product of
surveyors, architects, engineers, Escrow Holder, governmental
authorities or any other person or entity with respect to the
Property, Buyer and Seller agree that Seller shall do so only for
the convenience of both parties, and the reliance by Buyer upon
any such services, opinions or work product shall not create or
give rise to any liability of or against Seller. Buyer
acknowledges that Buyer has reviewed and approved the
Environmental Report.
25. Governmental Approvals. Nothing contained in this
Agreement shall be construed as authorizing Buyer to apply for a
zone change, variance, subdivision maps, lot line adjustment or
other discretionary governmental act, approval or permit with
respect to the Property prior to the Close of Escrow, and Buyer
agrees not to do so without Seller's prior written approval,
which approval may be withheld in Seller's sole and absolute
discretion. Buyer agrees not to submit any reports, studies or
other documents, including, without limitation, plans and
specifications, impact statements for water, sewage, drainage or
traffic, environmental review forms, or energy conservation
checklists to any governmental agency, or any amendment or
modification to any such instruments or documents prior to the
Close of Escrow unless first approved by Seller, which approval
Seller may withhold in Seller's sole discretion. Buyer's
obligation to purchase the Property shall not be subject to or
conditioned upon Buyer's obtaining any variances, zoning
amendments, subdivision maps, lot line adjustment or other
discretionary governmental act, approval or permit.
26. Release. Buyer shall rely solely upon Buyer's own
inspection of the Property in determining the Property's physical
condition. Buyer waives Buyer's right to recover from and hereby
releases Seller, Seller's parent company, affiliates and
subsidiaries, and their respective directors, officers,
participants, employees and agents, any and all damages, losses,
liabilities, costs or expenses whatsoever, and claims therefor,
whether direct or indirect, known or unknown, or foreseen or
unforeseen, which may arise from or be related to (i) the
physical condition of the Property and/or (ii) the Property's
compliance, or lack of compliance with any federal, state or
local laws or regulations applicable thereto, and all
regulations, rulings, and orders promulgated or adopted pursuant
thereto. 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 THE CREDITOR
DOES NOT KNOW TO EXIST IN HIS FAVOR AT THE TIME OF EXECUTING THE
RELEASE, WHICH IF KNOWN TO HIM MUST HAVE MATERIALLY
AFFECTED THE SETTLEMENT WITH THE DEBTOR.
In this connection and to the extent permitted by law, Buyer
hereby agrees, represents and warrants that Buyer realizes and
acknowledges that factual matters now unknown to it may have
given or may hereafter give rise to causes of action, claims,
demands, debts, controversies, damages, costs, losses and
expenses which are presently unknown, unanticipated and
unsuspected, and Buyer further agrees, represents and warrants
that the waivers and releases herein have been negotiated and
agreed upon in light of that realization and that Buyer
nevertheless hereby intends to release, discharge and acquit
Seller from any such unknown causes of action, claims, demands,
debts, controversies, damages, costs, losses and expenses which
might in any way be included as a material portion of the
consideration given to Seller by Buyer in exchange for Seller's
performance hereunder.
Seller has given Buyer material concessions regarding this
transaction in exchange for Buyer agreeing to the provisions of
this Section 26. Seller and Buyer have each initialed this
Section 26 to further indicate their awareness and acceptance of
each and every provision hereof.
SELLER'S INITIALS:/s/ MW BUYER'S INITIALS:/s/ RSZ
27. Assignment. Buyer may assign its rights and
obligations hereunder to an entity controlled by or under common
control with Buyer without obtaining Seller's prior written
consent. In no event shall any such assignment relieve Buyer
from its obligations under this Agreement. Any other purported
or attempted assignment or delegation without obtaining Seller's
prior written consent shall be void and of no effect.
28. Successors and Assigns. Subject to the restrictions on
transfer set forth in Section 28, this Agreement shall be binding
upon and inure to the benefits of the heirs, successors and
assigns of the parties hereto. In no event shall Buyer have any
right to delay or postpone the Closing to create a partnership,
corporation or other form of business association or to obtain
financing to acquire title to the Property or to coordinate with
any other sale, transfer, exchange or conveyance.
29. Exhibits. Each reference to an exhibit in this
Agreement shall mean the exhibit attached to this Agreement.
Each such exhibit is incorporated herein by this reference.
30. No Reservation of Property. The preparation and/or
delivery of unsigned drafts of this Agreement shall not create
any legally binding rights in the Property and/or obligations of
the parties, and Buyer and Seller acknowledge that this Agreement
shall be of no effect until it is duly executed by Buyer and
Seller. Buyer understands and agrees that Seller shall have the
right to continue to market the Property and/or to negotiate with
other potential purchasers of the Property until the expiration
of the Contingency Period and the satisfaction or waiver in
writing of all conditions to the obligations of Buyer under this
Agreement.
31. Duty of Confidentiality. Buyer and Seller covenant,
represent and warrant that each shall keep all information and/or
reports obtained from the other, or related to or connected with
the Property, the other party, or this transaction, confidential
and will not disclose any such information to any person or
entity without obtaining the prior written consent of the other
party, which consent shall not be unreasonably withheld,
conditioned or delayed. This covenant shall terminate upon the
Close of Escrow. The parties agree to issue a joint press
release upon the Close of Escrow.
32. Audit Rights. At Buyer's request at any time from and
after the date hereof until the date that is one (1) year after
the Closing, Seller shall, at Buyer's expense, provide to Buyer's
designated independent auditor access to the books and records of
the Property, regarding the period for which Buyer is required to
have audited financial statements prepared with respect to the
Property as may be required by the Securities and Exchange
Commission, to the extent that such books, records and related
information are in Seller's possession or control and relate to
the period during which Seller held title to the Property.
IN WITNESS WHEREOF, Buyer and Seller do hereby execute this
Agreement as of the date first written above.
BUYER:
ARDEN REALTY LIMITED PARTNERSHIP,
a Maryland limited partnership
By: /s/ Richard S. Ziman
Richard S. Ziman,
Chairman of the Board and
Chief Executive Officer
SELLER:
PROPERTY ASSET MANAGEMENT INC.
a Delaware corporation
By: /s/ M. Walsh
Its: Senior Vice President
The Company hereby agrees to furnish supplementally the ommitted
exhibits and schedules to the Commission upon request.
