UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
The Securities Act of 1934
Date of Report (Date of earliest event reported) March 2, 1998
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 2. Acquisition or Disposition of Assets
On March 2, 1998, Arden Realty, Inc. (collectively with its
subsidiaries, the "Company"), acquired a portfolio of 50
primarily office and R&D/industrial properties (the "LBA
Portfolio"), aggregating approximately 5.2 million rentable
square feet for a purchase price of approximately $614.5 million,
which was based on arm's-length negotiations. In connection with
the acquisition of the LBA Portfolio, the Company also issued
warrants to purchase 2.5 million shares of the Company's common
stock, at a price of $29.59 per share, subject to adjustment.
The LBA Portfolio consists of 34 office properties containing
approximately 3.6 million rentable square feet, 15 R&D/industrial
properties containing approximately 1.5 million rentable square
feet, and one retail property containing 144,225 rentable square
feet, all located in Southern California.
The LBA Portfolio was purchased from AEW/LBA Acquisition Co.,
LLC, a California limited liability company, AEW/LBA Acquisition
Co. II, LLC, a California limited liability company, Cal
Portfolio VI, L.L.C., a Delaware limited liability company, and
AEW/LBA Acquisition Co. IV, LLC a California limited liability
company, Spectrum Huntington Center, LLC, a California limited
liability company, Spectrum Chicago Avenue, LLC, a California
limited liability company, Spectrum Waples Street, LLC, a
California limited liability company, and Spectrum Lambert Plaza,
LLC, a California limited liability company.
The Company financed this acquisition in part with: (i) $618.8
million in proceeds from its secondary offering of 23,000,000
shares of common stock (the "Offering"), (ii) $58.7 million in
proceeds from its two additional offerings of 881,950 and
1,303,965 shares of common stock to institutional buyers, (iii)
borrowing of $20.0 million on its line of credit from a group of
banks led by Wells Fargo Bank, (iv) borrowing of $200.0 million
in a mortgage note from Lehman Brothers Realty Corporation, and
(v) the issuance of 203,420 operating partnership units in Arden
Realty Limited Partnership with an approximate value of $5.8
million. The balance of proceeds from the foregoing financing
transactions was used to repay the Company's $300 million
revolving line of credit and for working capital. The
$200,000,000 mortgage note payable is secured by 40 properties in
the LBA Portfolio.
Inclusive of this acquisition, the Company's portfolio consists
of 127 properties comprising 16.4 million rentable square feet
and 16 apartment units.
Item 7. Financial Statements and Exhibits
(a) Financial statements of properties acquired.
The required financial statements were filed on February
2, 1998 on Form 8-K and are herein incorporated by reference.
(b) Pro forma financial information.
ARDEN REALTY, INC.
PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
The following unaudited pro forma condensed consolidated
balance sheet as of September 30, 1997 is presented as if the
following transactions had been consummated on September 30,
1997: (i) the acquisition of properties acquired subsequent to
September 30, 1997 and prior to December 30, 1997 (the "Fourth
Quarter 1997 Acquired Properties") (ii) the acquisition of
properties acquired from December 31, 1997 through January 31,
1998 (the "Acquired Properties"), and the LBA Portfolio; (iii)
the closing of a four month, $200 million bridge loan facility
(the "Bridge Facility"); and (iv) the completion of the Company's
public offering of 23,000,000 shares of common stock (the
"Offering") and the two additional offerings of 881,950 (the
"First Unit Trust") and 1,303,965 (the "Second Unit Trust")
shares of common stock.
The following unaudited pro forma condensed consolidated
statements of operations for the nine months ended September 30,
1997 and for the year ended December 31, 1996 are presented as if
each of the following transactions had occurred on January 1,
1996: (i) the consummation of the initial public offering (the
"IPO") and related formation transactions in connection with the
IPO, the prior offering in July 1997 of 13,750,000 shares of
Common Stock (the "Prior Offering"), the Offering, the First Unit
Trust and the Second Unit Trust; (ii) the acquisition of
properties acquired during 1996 (the "1996 Acquisitions"); (iii)
the acquisition of properties acquired between January 1, 1997
and December 30, 1997 (the "1997 Acquisitions"); (iv) the
acquisition of the Acquired Properties and the LBA Portfolio; and
(v) the closing of the Bridge Facility.
The pro forma condensed consolidated financial statements
assume no refinancing of the Bridge Facility, which the Company
expects will be refinanced within four months.
The pro forma condensed consolidated financial statements are
not necessarily indicative of what the actual financial position
or results of operations would have been had the Company
completed the transactions described above, nor do they purport
to represent the future financial position of the Company.
<TABLE>
ARDEN REALTY, INC.
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
AS OF SEPTEMBER 30, 1997
(unaudited)
(in thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
PRO FORMA ADJUSTMENTS
FOURTH QUARTER FIRST SECOND
ARDEN 1997 ACQUIRED ACQUIRED UNIT UNIT BRIDGE LBA
REALTY, INC. PROPERTIES(A) PROPERTIES(B) OFFERING(C) TRUST(D) TRUST(E) FACILTY(F) PORTFOLIO(G)
ASSETS
Commercial
properties - net $925,539 $245,775 $154,213 $619,900
Cash and cash equivalents 6,945 (4,702) (8,781) $618,758 $23,622 $35,055 $200,000 (590,500)
Restricted cash 4,000 -- -- -- -- -- -- --
Rents and other receivables 3,932 4,000 -- -- -- -- -- --
Mortgage notes
receivable - net 14,392 -- -- -- -- -- -- --
Deferred rent 8,033 -- -- -- -- -- -- --
Prepaid financing and
leasing costs - net 10,996 -- -- -- -- -- -- --
Prepaid expenses and
other assets 4,264 (650) -- -- -- -- -- --
Total assets $978,101 $244,423 $145,432 $618,758 $23,622 $35,055 $200,000 $ 29,400
LIABILITY AND STOCKHOLDERS'
EQUITY
Mortgage loans payable $180,000 57,200 83,670 -- -- -- 200,000 --
Unsecured lines of credit 45,900 135,000 61,024 -- -- -- -- 20,000
Account payable and
accrued expenses 17,013 -- -- -- -- -- -- --
Security deposits 5,986 -- -- -- -- -- -- --
Dividends payable 14,177 -- -- -- -- -- -- --
Total liabilities 263,076 192,200 144,694 -- -- -- 200,000 20,000
Minority interest 47,178 52,223 738 -- -- -- -- 5,800
Stockholders' equity:
Common stock 354 -- -- 230 9 13 -- --
Additional paid-in capital 667,493 -- -- 618,528 23,613 35,042 -- 3,600
Retained earnings -- -- -- -- -- -- -- --
Total stockholders' equity 667,847 -- -- 618,758 23,622 35,055 -- 3,600
Total liabilities and
stockholders' equity $978,101 $244,423 $145,432 $618,758 $23,622 $35,055 $200,000 $29,400
</TABLE>
<TABLE>
<S> <C> <C>
ARDEN
REALTY, INC.
OTHER(H) PRO FORMA
ASSETS
Commercial properites - net $1,945,427
Cash and cash equivalents $(261,924) 18,473
Restricted cash -- 4,000
Rents and other receivables -- 7,932
Mortgage notes receivable - net -- 14,392
Deferred rent -- 8,033
Prepaid financing and
leasing costs - net -- 10,996
Prepaid expenses and
other assets -- 3,614
Total assets $(261,924) $2,012,867
LIABILITIES AND STOCKHOLDERS'
EQUITY
Mortgage loans payable -- $ 520,870
Unsecured lines of credit (261,924) --
Accounts payable and
accrued expenses -- 17,013
Security deposits -- 5,986
Dividends payable -- 14,177
Total liabilties (261,924) 558,046
Minority interest -- 105,939
Stockholders' equity:
Common stock -- 606
Additoinal paid-in capital -- 1,348,276
Retained earnings -- --
Total Stockholders' equity -- 1,348,882
Total liabilities and
stockholders' equity (261,924) $2,012,867
</TABLE>
<TABLE>
ARDEN REALTY, INC.
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997
(unaudited)
(in thousands, except per share data)
<S> <C> <C> <C> <C> <C>
Pro Forma Adjustments
Pre-Acquisition Acquired
Period Properties
Arden for the 1997 and LBA Other Arden Realty,
Realty, Inc. Acquisitions(J) Portfolio(K) Adjustments Inc. Pro Forma
REVENUE
Rental $80,740 $40,756 $52,000 $1,518(L) $175,014
Tenant reimbursements 3,593 2,269 2,930 -- 8,792
Parking, net of expenses 5,267 1,681 1,585 -- 8,533
Other 1,451 300 461 -- 2,212
91,614 45,006 56,976 1,518 194,551
Other income 563 -- -- 1,685(M) 2,248
Total revenue 91,614 45,006 56,976 3,203 196,799
EXPENSES
Property expenses 29,175 14,403 20,528 2,676(N) 66,782
REIT general and
administrative 2,828 -- -- 922(O) 3,750
Interest 13,723 -- -- 10,664(P) 24,387
Loss on valuation of
derivative 3,111 -- -- -- 3,111
Depreciation and
amortization 13,261 -- -- 19,221(Q) 32,482
Total expenses 62,098 14,403 20,528 33,483 130,512
Income before minority
interest 29,516 30,603 36,448 (30,280) 66,287
Minority interest (3,105) (1,308)(S) -- (924)(R) (5,337)
Net income $26,411 $29,295 $36,448 $(31,204) $ 60,950
Weighted average common
shares outstanding 25,440 60,629
Net income per
common share $1.04 $1.01
Supplemental net income per share
reflecting the pro forma effects
solely of the Offering, the First
Unit Trust, Second Unit Trust
and the acquisition of the LBA
Portfolio(U) $1.09
</TABLE>
See accompanying notes
<TABLE>
ARDEN REALTY, INC.
PRO FORMA CONDENSED CONSOLIDATED 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> <C>
PRO FORMA ADJUSTMENTS
ARDEN ARDEN NET LOSS OF
REALTY, INC. PREDECESSORS NONCOMBINED
CONSOLIDATED COMBINED ENTITIES PRE-ACQUISITION ACQUIRED
OCT.9,1996 JAN.1,1996 JAN.1,1996 PERIOD FOR PROPERTIES ARDEN
TO TO TO THE 1996 1997 AND LBA OTHER REALTY,INC
DEC.31,1996 OCT.8,1996 OCT.8,1996 ACQUISITIONS(I) ACQUISITIONS(J) PORTFOLIO(K) ADJUSTMENTS PRO FORMA
REVENUE
Rental $17,041 $32,287 $12,828 $23,095 $72,422 $60,492 $4,837(L) $223,002
Tenant reimbursements 803 2,031 243 733 3,400 4,343 -- 11,553
Parking, net of
expenses 1,215 3,692 846 1,161 2,961 2,026 -- 11,901
Other 375 1,125 357 606 562 662 -- 3,687
19,434 39,135 14,274 25,595 79,345 67,523 4,837 250,143
Other income 138 1,330 -- -- -- -- 1,002(M) 2,470
Total revenue 19,572 40,465 14,274 25,595 79,345 67,523 5,839 252,613
EXPENSES
Property expenses 6,005 14,224 6,053 11,449 26,569 24,581 3,961(N) 92,842
General and
administrative 753 1,758 -- -- -- -- 2,489(O) 5,000
Interest 1,280 24,521 7,356 -- -- -- (39)(P) 33,118
Depreciation and
amortization 3,108 5,264 2,705 -- -- -- 31,146(Q) 42,223
Total expenses 11,146 45,767 16,114 11,449 26,569 24,581 37,557 173,183
Equity in net(los) of
noncombined entities -- (336) 336 -- -- -- -- --
Income (loss) before
minority interest and
extraordinary items 8,426 (5,638) (1,504) 14,146 52,776 42,942 (31,718) 79,430
Minority interest (993) 721 (721) -- (1,725)(S) -- (3,747)(R) (6,465)
Income (loss) before
extraordinary items 7,433 (4,917) (2,225) 14,146 51,051 42,942 (35,465) 72,965
Extraordinary (loss) gain
on early extinguishment
of debt, net of
minority interests share (13,105) 1,877 -- -- -- -- 11,228(T) --
Net (loss) income $ (5,672) $(3,040) $(2,225) $14,146 $51,051 $42,942 $(24,237) $72,965
Weighted average common
shares iutstanding 21,680 60,615
Net (loss) income per
common share $ (0.26) $1.20
Supplemental net income
per share reflecting
the pro forma effects
solely of the Offering,
the First Unit Trust, the
Second Unit Trust and the
acquisition of the LBA
Portfolio (U) $ .29
</TABLE>
See accompanying notes.
ARDEN REALTY, INC.
NOTES TO PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
1. ADJUSTMENTS TO THE PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
The adjustments to the Pro Forma Condensed Consolidated Balance
Sheet as of September 30, 1997 are as follows:
A. Acquisition of the Fourth Quarter 1997 Acquired Properties
with $5,352,000 of cash and deposits, a $4,000,000 receivable,
proceeds of $57,200,000 from mortgage loans payable and
$135,000,000 from the unsecured lines of credit, and the issuance
of 822,400 operating partnership units with an approximate value
of $24,723,000. The Company purchased a 75% interest in World
Savings Center and has an option to purchase the remaining 25%
interest beginning on March 15, 1998.
Purchase price and actual and estimated additional closing
costs of the Fourth Quarter 1997 Acquired Properties are as
follows:
Fourth Quarter 1997 Acquired Properties Purchase Price
Northpoint $ 21,900,000
145 South Fairfax 7,400,000
Bernardo Regency 6,550,000
Thousand Oaks Portfolio 35,100,000
City Centre 33,300,000
Wilshire Pacific Plaza 15,500,000
Glendale Corporate Center 15,325,000
World Savings Center* 83,200,000
Total** $218,275,000
* Represents the Company's 75% interest plus additional acquisition costs.
** Including the consolidated 25% minority interest in the World
Savings Center, additions to Commercial Properties-net totaled
$245,775,000
B. Acquisition of the Acquired Properties with $8,781,000 of
cash, proceeds of $83,670,000 from mortgage loans payable and
$61,024,000 from the unsecured lines of credit.
Purchase price and actual and estimated additional closing
costs of the Acquired Properties are as follows:
Acquired Properties Purchase Price
9201 Sunset $ 28,800,000
Activity Business Center 14,900,000
Sunset Pointe Plaza 8,475,000
9100 Wilshire 65,100,000
Westlake Gardens 7,300,000
1100 Glendon* 28,900,000
Total** $ 153,475,000
* Represents the Company's 97.5% interest plus additional closing costs.
** Including the consolidated 2.5% minority interest in 1100
Glendon, additions to Commercial Properties - net totaled
$154,213,000.
C. Sale of 23,000,000 shares of common stock at $28.3125 per
share in the Offering.
Gross proceeds from Offering $ 651,187,500
Costs associated with the Offering (32,430,000)
$ 618,757,500
Par value of common stock $ 230,000
Additional paid in capital on
proceeds from sale of common stock 618,527,500
$ 618,757,500
D. Sale of 881,950 shares of common stock at $28.3125 per share,
net of approximately $1,348,000 of offering costs and underwriting
discounts.
E. Sale of 1,303,965 shares of common stock at $28.375 per
share, net of approximately $1,945,000 of offering costs and underwriting
discounts.
F. Closing of a $200,000,000 Bridge Facility in connection
with acquisition of the LBA Portfolio.
G. Acquisition of the LBA Portfolio for approximately
$619,900,000, including estimated closing costs of $1,800,000 and
the issuance of warrants to purchase 2.5 million shares of the
Company's Common Stock at an exercise price of $29.59, subject to
adjustment, for an approximate value of $3,600,000 million, with
proceeds from the Offering, the First Unit Trust, Second Unit
Trust and Bridge Facility.
H. Repayment of the unsecured lines of credit with proceeds from
the Offering, First Unit Trust and Second Unit Trust.
2.ADJUSTMENTS TO THE PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
The pro forma adjustments reflected in the Pro Forma Condensed
Consolidated Statements of Operations for the nine months ended
September 30, 1997 and the year ended December 31, 1996 are set
forth below:
I. Represents the pre-acquisition period for the 17 properties
acquired in 1996.
<TABLE>
1996 ACQUISITIONS
FOR THE YEAR ENDED DECEMBER 31, 1996
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
400 Imperial 100 12501 10351 Grand
Corporate 5832 9665 Bank West Imperial 303 Santa 2730 Avenue
Pointe Bolsa Wilshire Tower Broadway Highway Glenoaks Monica Wilshire Plaza
Revenue
Rental $390 $80 $548 $1,351 $1,554 $1,387 $1,980 $1,134 $ 960 $--
Tenant reimbursement 103 -- 19 29 107 40 48 11 -- --
Parking, net of expenses 28 10 58 124 88 66 129 99 43 --
Other 23 -- 32 15 74 4 138 7 12 --
Total revenues 544 90 657 1,519 1,823 1,497 2,295 1,251 1,051 --
Property expenses 123 8 203 574 581 578 956 551 451 --
Excess of revenue over
certain expenses $421 $82 $454 $ 945 $1,242 $ 919 $1,339 $ 700 $ 564 $--
</TABLE>
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C>
Burbank
Executive
Plaza and Los
California Angeles 5200 Sumitomo 10350
Federal Center Corporate West Bank Santa
Building Promenade Center Century Building Monica Total
Revenue
Rental $2,156 $2,097 $5,882 $1,021 $1,926 $629 $23,095
Tenant reimbursement -- 51 128 115 79 3 733
Parking, net of expenses 164 -- -- 40 254 58 1,161
Other -- -- 288 2 9 2 606
Total revenues 2,320 2,148 6,298 1,178 2,268 692 25,595
Property expenses 976 982 2,881 1,188 1,070 327 11,449
Excess of revenue over
certain expenses $1,344 $1,166 $3,417 $ (10) $1,198 $365 $14,146
</TABLE>
J. Represents the actual pre-acquisition results for the 1997 Acquisitions:
<TABLE>
The 1997 Acquisitions
For the Year Ended December 31, 1996
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Whittier
Financial
Clarendon
Crest, and Noble South
535 Santa California 6800 Professional Bay 8383 Parkway
Brand Monica Twin Centre Owensmouth Center Centre Wilshire Center
Revenue
Rental $707 $1,455 $5,580 $532 $794 $2,691 $6,628 $ 911
Tenant reimbursements 74 57 225 26 5 143 -- 92
Parking, net of expenses 90 136 228 -- 51 -- 832 --
Other -- 2 15 5 -- 26 31 --
Total revenues 871 1,650 6,048 563 850 2,860 7,491 1,003
Property expenses 459 417 1,757 485 347 1,270 2,876 276
Excess of revenue
over certain expenses $412 $1,233 $4,291 $ 78 $503 $1,590 $4,624 $ 727
</TABLE>
<TABLE>
<S> <C> <C>
1000
Town Center
Centerpointe and
La Palma Mariner Court
Revenue
Rental $ 9,222 $3,798
Tenant reimbursements 797 93
Parking, net of expenses 9 --
Other 38 --
Total revenues 10,066 3,891
Property expenses 2,834 1,350
Excess of revenue over
certain expenses $ 7,232 $2,541
</TABLE>
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Harbor Carlsberg South Bay
Pacific Crown 299 Corporate 1821 Corporate 120 Technology
Gateway II Cabot Euclid Center Dyer Center Spalding Center
Revenue
Rental $3,355 $3,002 $-- $776 $593 $1,679 $693 $ 985
Tenant reimbursements 87 71 -- -- 133 30 55 25
Parking, net of expenses -- -- -- -- -- 61 46 --
Other 144 41 -- 5 -- 19 8 1
Total revenues 3,586 3,114 -- 781 726 1,789 802 1,011
Property expenses 1,205 897 -- 246 92 713 429 371
Excess of revenue over
certain expenses $2,381 $2,217 $-- $535 $634 $1,076 $373 $ 640
</TABLE>
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
1370 Foremost 145
Valley Renaissance Professional South Bernardo
Vista Court Center Northpoint Fairfax Regency
Revenue
Rental $1,322 $1,422 $856 $2,809 $1,012 $ 666
Tenant reimbursements 116 46 12 229 45 12
Parking, net of expenses -- -- 5 172 51 --
Other -- -- -- -- -- --
Total revenues 1,449 1,468 873 3,210 1,108 678
Property expenses 537 296 144 1,073 400 191
Excess of revenue over
certain expenses $ 912 $1,172 $729 $2,137 $ 708 $ 487
</TABLE>
<TABLE>
<S> <C> <C> <C> <C> <C>
Glendale
Corporate
Thousand Center and World
Oaks City Wilshire Savings
Portfolio(1) Centre Pacific Plaza Center Total
Revenue
Rental $3,165 $3,366 $2,895 $11,497 $72,422
Tenant reimbursements -- 409 134 484 3,400
Parking, net of expenses -- -- 302 978 2,961
Other 4 160 63 -- 562
Total revenues 3,169 3,935 3,394 12,959 79,345
Property expenses 720 1,578 1,504 4,111 26,569
Excess of revenue over
certain expenses $2,449 $2,357 $1,890 $ 8,848 $52,776
</TABLE>
(1) One of the six properties in the portfolio is included
only as of July 18, 1996.
Pre-Acquisition Period of the 1997 Acquisitions
For the Nine Months Ended September 30, 1997
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Whittier
Financial
Clarendon
10780 Crest, and Noble South
535 Santa California 6800 Professional Bay 8383 Parkway
Brand Monica Twin Centre Owensmouth Center Centre Wilshire Center
Revenue
Rental $147 $402 $1,265 $153 $266 $764 $2,459 $410
Tenant reimbursements 3 4 51 1 1 32 -- 22
Parking, net of expenses 14 38 58 -- -- -- 344 --
Other rental operations -- -- 3 -- -- 3 32 --
Total revenues 164 444 1,377 154 267 799 2,835 432
Property expenses 98 120 395 121 129 304 1,127 88
Excess of revenue over
certain expenses $ 66 $324 $982 $33 $138 $495 $1,708 $344
</TABLE>
<TABLE>
<S> <C> <C>
1000
Town Center
Centerpointe and
La Palma Mariner Court
Revenue
Rental $3,712 $2,196
Tenant reimbursements 356 59
Parking, net of expenses 4 5
Other rental operations 69 2
Total revenues 4,141 2,262
Property expenses 1,020 759
Excess of revenue over $3,121 $1,503
certain expenses
</TABLE>
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Habor Carlsberg South Bay
Pacific Crown 299 Corporate 1821 Corporate 120 Technology
GatewayII Cabot Euclid Center Dyer Center Spalding Center
Revenue
Rental $1,973 $1,871 $-- $419 $371 $958 $435 $784
Tenant reimbursements 117 58 -- -- 77 28 26 22
Parking, net of expenses -- -- -- -- -- 32 29 --
Other 10 5 -- -- -- 10 7 1
Total revenues 2,100 1,934 -- 419 448 1,028 497 807
Property expenses 692 507 -- 153 59 322 209 219
Excess of revenue over
certain expenses $1,408 $1,408 $-- $266 $389 $ 706 $288 $588
</TABLE>
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
1370 Foremost 145
Valley Renaissance Professional South Bernardo
Vista Court Center Northpoint Fairfax Regency
Revenue
Rental $ 736 $644 $761 $2,301 $748 $518
Tenant reimbursements 308 26 5 235 58 6
Parking, net of expenses -- -- -- 159 35 --
Other 2 1 3 1 1 --
Total revenues 1,046 671 769 2,696 842 524
Property expenses 359 261 143 833 302 159
Excess of revenue over
certainexpenses $ 687 $410 $626 $1,863 $540 $365
</TABLE>
<TABLE>
<S> <C> <C> <C> <C> <C>
Glendale
Corporate
Thousand Center and World
Oaks City Wilshire Savings
Portfolio Centre Pacific Plaza Center Total
Revenue
Rental $3,221 $2,709 $1,813 $8,720 $40,756
Tenant reimbursements -- 272 160 342 2,269
Parking, net of expenses -- -- 211 752 1,681
Other 5 144 1 -- 300
Total revenues 3,266 3,125 2,185 9,814 45,006
Property expenses 692 1,110 894 3,328 14,403
Excess of revenue over
certain expenses $2,534 $2,015 $1,291 $6,486 $30,603
</TABLE>
K. Represents the actual results for the Acquired Properties
and LBA Portfolio.
<TABLE>
Acquired Properties and LBA Portfolio
For the Year Ended December 31, 1996
<S> <C> <C> <C> <C> <S> <C> <C> <C>
Activity Sunset
9201 Business Pointe 9100 Westlake 1100 LBA
Sunset Center Plaza Wilshire Gardens Glendon Portfolio Total
Revenue
Rental $3,357 $1,489 $870 $4,690 -- $3,421 $46,665 $60,492
Tenant reimbursements 20 59 6 112 -- 308 3,838 4,343
Parking, net of expenses 661 -- -- 813 -- 342 210 2,026
Other 5 -- 7 -- -- 42 608 662
Total revenues 4,043 1,548 883 5,615 -- 4,113 51,321 67,523
Property expenses 1,332 253 324 2,666 -- 1,608 18,398 24,581
Excess of revenue
over certain expenses $2,711 $1,295 $559 $2,949 -- $2,505 $32,923 $42,942
</TABLE>
<TABLE>
Acquired Properties and LBA Portfolio
For the Nine Months Ended September 30, 1997
<S> <C> <C> <C> <C> <S> <C> <C> <C>
Activity Sunset
9201 Business Pointe 9100 Westlake 1100 LBA
Sunset Center Plaza Wilshire Gardens Glendon Portfolio Total
Revenue
Rental $2,790 $1,205 $796 $3,846 -- $2,835 $40,525 $52,000
Tenant reimbursements 27 48 4 64 -- -- 2,787 2,930
Parking, net of expenses 554 -- -- 744 -- -- 287 1,585
Other 12 6 4 13 -- 16 410 461
Total revenues 3,383 1,259 804 4,667 -- 2,851 44,012 56,976
Property expenses 1,142 196 253 1,822 -- 1,278 15,837 20,528
Excess of revenue over
certain expenses $2,241 $1,063 $551 $2,845 -- $1,573 $28,175 $36,448
</TABLE>
<TABLE>
<S> <C> <C>
NINE MONTHS ENDED YEAR ENDED
SEPTEMBER 30, 1996 DECEMBER 31, 1997
L. Increase in rental revenue:
Increase in rental revenue to adjust the
1996 Acquisitions and the 1997
Acquisitions to straightline rental
revenue calculated as though the
properties were purchased at
January 1, 1996 $ 1,073 $ 2,792
Increase in rental revenue to adjust the
Acquired Properties and LBA Portfolio to
straightline rental revenue calculated
as though the properties were acquired at
January 1, 1996. 445 2,045
Net increase in rental Revenue $1,518 $ 4,837
M. Increase in other income:
Decrease in other income to eliminate
nonrecurring construction fees
which would not have been realized by the
Company and certain management fees that
will not be earned. -- $ (1,253)
Increase in other income relating to
interest income from the mortgage notes
receivable $ 1,123 $ 1,506
Increase in other income relating to the
amortization of the discount on
the mortgage notes receivable 344 459
Increase in interest income related to
the note receivable from Forest City 218 290
Net increase in other income $1,685 $1,002
N. Increase in property general and
administrative expenses
Increase in property general and
administrative expenses related to
additional property payroll costs
relating to the 1997 Acquisitions
for the nine months ended September 30,
1997 and the 1996 Acquisitions
and 1997 Acquisitions for the year ended
December 31, 1996 $1,027 $1,762
Increase in property general and administrative
expenses related to additional property payroll
costs relating to Acquired Properties and the
LBA Portfolio for the nine months ended
September 30, 1997 and year ended
December 31, 1996. 1,649 2,199
Net increase in property general and
administrative expenses $2,676 $3,961
</TABLE>
O.Increase in general and administrative expenses related to
expected level of operations as a public real estate
investment trust and the incremental increase relating to the
management of additional properties.
NINE MONTHS ENDED YEAR ENDED
SEPTEMBER 30, 1997 DECEMBER 31, 1996
P. Increase (decrease) in interest expense:
Decrease in interest expense due to
repayment of mortgage loans and
lines of credit. $(13,723) $(33,157)
Increase in interest expense related
to increases in secured mortgage
loans and the closing of the Bridge
Facility with fixed and variable
interest rates ranging from
7% to 9.21% 23,937 31,865
Increase in amortization of finance
costs related to the lines of credit
and mortgage loans payable. 450 1,253
Net increase (decrease) in interest
expense $ 10,664 $ (39)
Q. Increase in depreciation expense:
Increase in depreciation expense to reflect
a full nine months of depreciation for the
1997 Acquisitions for the nine months ended
September 30, 1997 and a full year of
depreciation for the 1996 Acquisitions and
1997 Acquisitions for the year ended
December 31, 1996, utilizing a 40 year useful
life for buildings and a 10 year useful
life for improvements. $ 7,919 $ 15,947
Increase in depreciation expense to reflect a full
nine months of depreciation for the Acquired
Properties and LBA Portfolio for the nine months
ended September 30, 1997 and year ended December 31,
1996 utilizing a 40 year useful life for buildings
and a 10 year useful life for improvements. 11,302 15,069
Increase in depreciation due to the fair value
of consideration paid in excess of book value
of interests in properties acquired from
nonaffiliates in connection with the completion
of the IPO. -- 130
Net increase in depreciation expense $ 19,221 $ 31,146
R. To reflect adjustment for minority interest of 6.2% and 6.1%
for the nine months ended September 30, 1997 and year ended
December 31, 1996, respectively, in the Operating Partnership.
S. To reflect Forest City's 25% interest in World Savings Center.
T. To eliminate net extraordinary loss related to early extinguishment of debt.
U. Additional pro forma net income per share information is included below.
The following table sets forth the pro forma effects of solely
the Offering, the First Unit Trust, the Second Unit Trust, and
the purchase of the LBA Portfolio (in thousands, except per share data):
NINE MONTHS ENDED YEAR ENDED
SEPTEMBER 30, 1997 DECEMBER 31, 1996
Historical net income $26,411 $(5,672)
Arden Predecessors combined net loss -- (3,040)
Pro forma net income of the LBA Portfolio,
net of interest expense from the Bridge
Facility 18,200 19,623
44,611 10,911
Common Stock outstanding, on a
historical basis 25,440 21,680
Common Stock issued in the
Offering, the First Unit Trust
and Second Unit Trust to
purchase the LBA Portfolio 15,477 15,477
40,917 37,157
Net income per share reflecting
the pro forma effects of the Offering, the
First Unit Trust and Second Unit Trust
and purchase of the LBA Portfolio 1.09 .29
(c) Exhibits.
10.1 Agreement for Purchase and Sale by and among AEW/LBA
Acquisition Co., LLC, a California limited liability
company, AEW/LBA Acquisition Co. II, LLC, a California
limited liability company, Cal Portfolio VI, L.L.C., a
Delaware limited liability company, AEW/LBA Acquisition Co.
IV, LLC, a California limited liability company, Spectrum
Huntington Center, LLC, a California limited liability
company, Spectrum Chicago Avenue, LLC, a California limited
liability company, Spectrum Waples Street, LLC, a California
limited liability company, Spectrum Lambert Plaza, LLC, a
California limited liability company, and Arden Realty,
Inc., a Maryland corporation.
10.2 Closing Agreement dated March 2, 1998.
10.3 Warrant Agreement dated as of March 2, 1998 by and among
Arden Realty, Inc., a Maryland corporation and AEW/LBA
Acquisition Co. II, LLC, a California limited liability company.
23.1 Consent of independent auditors.
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: March 16, 1998 By: /s/ Diana M. Laing
Diana M. Laing
Executive Vice President,
Chief Financial Officer
AGREEMENT FOR PURCHASE AND SALE
OF
AEW/LBA PORTFOLIO
DECEMBER 15, 1997
TABLE OF CONTENTS
ARTICLE PAGE
I Basic Definitions
II Purchase and Sale
III Conditions Precedent
IV Covenants, Warranties and Representations
V Deposit
VI Closing
VII Miscellaneous
* Exhibit A -- Sellers & Properties
* Exhibit B -- Confirmation Letter
* Exhibit C -- Disclosure Materials List & Statement
* Exhibit D -- Tenant Lists
* Exhibit E -- Major Tenant Rent Rolls
* Exhibit F -- OP Unit Consideration
* Exhibit G -- Title Reports
* Exhibit H -- Allocated Purchase Price
* Exhibit I -- Transfer Document Forms
* Exhibit J -- In-Negotiation Leases
* Exhibit K -- Management Terms
** Exhibit L -- Warrant Agreement
* Exhibit M -- Capital Projects
* These Exhibits have not been filed with the Commision, but will be
supplementally provided to the Commission upon request.
** The Warrant Agreement is filed separates as Exhibit 10.3 to the
Company's current report on Form 8-K dated March 2, 1998.
AGREEMENT FOR PURCHASE AND SALE
OF
AEW/LBA PORTFOLIO
THIS AGREEMENT FOR PURCHASE AND SALE is made and
entered into as of December 15, 1997, by and among AEW/LBA
Acquisition Co., LLC, a California limited liability company
("AEW/LBA I"), AEW/LBA Acquisition Co. II, LLC, a California
limited liability company ("AEW/LBA II"), Cal Portfolio VI,
L.L.C., a Delaware limited liability company ("Cal VI"), and
AEW/LBA Acquisition Co. IV, LLC, a California limited liability
company ("AEW/LBA IV"), Spectrum Huntington Center, LLC, a
California limited liability company, Spectrum Chicago Avenue ,
LLC, a California limited liability company, Spectrum Waples
Street, LLC, a California limited liability company and Spectrum
Lambert Plaza, LLC, a California limited liability company,
(collectively, the "Sellers" and, individually, each a "Seller")
and Arden Realty, Inc., a Maryland corporation and a publicly
traded Real Estate Investment Trust ("Buyer"). Spectrum
Investments, L.P., a California limited partnership ("Spectrum
I") and Spectrum Investments II, L.P., a California limited
partnership ("Spectrum II"), joins in this agreement as a Seller
for the purposes set forth in Section 2.1 below. Spectrum
Huntington Center, Spectrum Chicago Avenue , Spectrum Waples and
Spectrum Lambert shall be referred to collectively as the "Asset
Funds." Sellers and their respective interests in the
Properties (as defined below) are identified more precisely on
Exhibit A to this Agreement.
RECITALS
A. The Sellers hold ownership of a portfolio of
properties situated in Southern California listed on Exhibit A to
this Agreement and defined below with greater specificity as the
"Properties."
B. Buyer desires to purchase (or to acquire and
thereafter assign the rights to purchase pursuant to Section 7.3
below) and each of Sellers desires to sell, subject to the terms
and conditions contained in this Agreement, the entirety of its
right, title and interest in the Properties.
AGREEMENT
NOW, THEREFORE, Buyer and Sellers do hereby agree as
follows:
ARTICLE I
BASIC DEFINITIONS
"Additional Exceptions" shall have the meaning set
forth in Section 2.7(a).
"Additional Title Exception Notice" shall have the
meaning set forth in Section 2.7(b).
"Adverse Matters" shall refer to facts or circumstances
relating to the status of any Property (including, without
limitation, inaccuracies in the Disclosure Materials) identified
by Buyer during the Confirmation Period which diminish the fair
market value of the Property from that premised upon the
information set forth in the Disclosure Materials, provided that
in no event shall any of the following constitute Adverse
Matters: (i) any matters included or disclosed in the
Disclosure Materials or set forth in Section B of the Disclosure
List & Statement, (ii) competitive, general or specific market
conditions, (iii) changes in legislative or administrative laws
or regulations, (iv) the Permitted Exceptions, (v) methodologies
of or express assumptions in financial projections, calculations
or reports included within the Disclosure Materials or (vi) any
matters otherwise known by Buyer as of the date of this Agreement
or which Buyer should have known or anticipated as of this date
had Buyer conducted a reasonably diligent review, to the standard
of a prudent institutional investor, of all information available
in the Disclosure Materials and considered all information
otherwise available to members of the public generally prior to
the date of this Agreement.
"Allocated Purchase Price" shall refer, as to each
Property, to the portion of the Purchase Price allocated to such
Property pursuant to the methodology set forth on Exhibit H to
this Agreement.
"Closing Date" shall mean the earlier of (a) February
27, 1998 or (b) the later to occur of (i) the date 10 business
days following the Company's completion of financings (i.e.,
public offering or private placement of Buyer's equity
securities, debt transactions, joint venture or any combination
of the foregoing) in which the proceeds received by the Company
are adequate to consummate the transaction contemplated by this
Agreement or (ii) January 30, 1998, provided that (A) the
deadline set forth in clause (a) shall be subject to extension to
March 31, 1998, if Buyer increases the Deposit by the additional
amount of $5,000,000 on or prior to February 27, 1998, in
accordance with Section 5.1 below and (B) if the Closing Date
would occur within the period January 31, 1998 through February
7, 1998, based upon the foregoing provisions, Sellers
nevertheless shall have the right, exercisable by written notice
given to Buyer within 2 business days following receipt of
Buyer's notice of the event described in clause (b)(i), to extend
the Closing Date to February 9, 1998. Buyer shall provide
Sellers with notice of the event described in clause (b)(i) above
within 2 business days following such event.
"Confirmation Letter" shall mean the letter in the form
attached as Exhibit B to this Agreement to be delivered by Buyer
to Seller on or prior to the close of the prescribed Confirmation
Period pursuant to Section 3.2 below.
"Confirmation Period" shall mean the period commencing
on the date of this Agreement, and ending at 5:00 p.m. Los
Angeles, California time on January 13, 1998, provided that the
Confirmation Period may end earlier at Buyer's election upon
delivery by Buyer to Seller of the Confirmation Letter
(representing the conclusive waiver by Buyer of any further
Confirmation Period).
"Contract Period" shall mean the period from the date
of this Agreement through and including the Closing Date.
"Contracts" shall mean all maintenance, service and
other operating contracts, equipment leases and other
arrangements or agreements to which any Seller is a party
affecting the ownership, repair, maintenance, management, leasing
or operation of the Properties.
"Deferred Property" shall have the meaning set forth in
Section 2.6(d) below.
"Deleted Property" shall have the meaning set forth in
Section 2.6(d) below.
"Disclosure Materials" shall mean those materials
described in Section A of the Disclosure Materials List &
Statement to which Buyer has been afforded access and review
rights prior to the date of this Agreement.
"Disclosure Materials List & Statement" shall mean the
statement set forth as Exhibit C to this Agreement.
"Hazardous Materials" shall mean any substances,
materials, wastes, pollutants or contaminants now or in the
future defined or listed in or subject to reporting,
investigation, permitting, remediation, licensing or other
regulatory requirements under any environmental laws or
regulations, including, without limitation, any inflammable
explosives, radioactive materials, asbestos, polychlorinated
biphenyls, trichloroethylene, tetrachloroethylene,
perchloroethylene and other chlorinated solvents, petroleum
products and by-products and other substances with toxic or
hazardous characteristics.
"Improvements" shall mean, as to each of the
properties listed on Exhibit A, the right, title and interest of
the Seller in ownership of such property in any and all
structures, buildings, facilities, parking areas or other
improvements situated on such property's Land and all related
fixtures, improvements, building systems and equipment
(including, without limitation, HVAC, security and life safety
systems)
"In-Negotiation Leases" shall refer to those leases or
modifications to existing Leases listed on Exhibit J to this
Agreement.
"Intangible Property" shall mean, as to each Real
Property, the right, title and interest of the Seller in
ownership of such Real Property in: (a) any and all permits,
entitlements, filings, building plans, specifications and working
drawings, certificates of occupancy, operating permits, sign
permits, development rights and approvals, certificates,
licenses, warranties and guarantees, engineering, soils, pest
control, survey, environmental, appraisal, market and other
reports relating to the property; (b) all trade names, service
marks, tenant lists, advertising materials and telephone exchange
numbers identified with the property; (c) the Contracts and the
Leases; (d) claims, awards, actions, remedial rights and
judgments relating to the property; (e) all books, records, files
and correspondence relating to the property and (f) all other
transferable intangible property, miscellaneous rights, benefits
or privileges of any kind or character with respect to the
property, provided that the Intangible Property shall not include
any Seller's name or any right to the references "AEW," "LBA" or
"AEW/LBA."
"Land" shall mean, as to each of the properties listed
on Exhibit A, the land component of the property as described
with precision in the Title Reports.
"Leases" shall mean, as to each Real Property, all
leases, rental agreements or other agreements (including all
amendments or modifications thereto) which entitle any person to
the occupancy or use of any portion of the Real Property.
"Material Adverse Matters Amount" shall refer, as to
any Property, to the amount, if any, by which any Adverse
Matters relating to such Property would effect a diminution in
the fair market value of the Property (after netting against such
Adverse Matters the effect of any inaccuracies in the Disclosure
Materials discovered during the Confirmation Period which would
increase the fair market value of the Property) in excess of
$150,000. The measure of any Adverse Matters relating to a
Property up to such $150,000 shall not be aggregated in the
calculation of the measure of either the Material Adverse
Matters Amount or the Pool Adverse Matters Amount.
"OP Units" shall refer to limited partnership interests
in the Operating Partnership.
"Operating Partnership" shall refer to Arden Realty
Limited Partnership, a Maryland limited partnership in which
Buyer is the general partner.
"Permitted Exceptions" The various matters affecting
title to the Properties that are approved or deemed approved by
Buyer pursuant to Section 2.7 below.
"Personal Property" shall mean, as to each Real
Property, all furniture, furnishings, trade fixtures and other
tangible personal property directly or indirectly owned by the
Seller in ownership of such Real Property that is located at and
used exclusively in connection with the operation of the Real
Property. The personal property shall include all such tangible
personal property used in connection with the Properties situated
in the field offices (but not the Newport Beach or San Diego
headquarters offices) staffed by LBA, Inc. as the asset manager
of the Properties.
"Pool Adverse Matters Amount" shall refer to the
aggregate amount of all Material Adverse Matters Amounts.
"Property" shall mean, with respect to each of the
properties described on Exhibit A, the Real Property, the
Personal Property and the Intangible Property. Collectively,
such properties shall be referred to as the "Properties."
"Real Property" shall mean, as to each property listed
on Exhibit A, the Land, the Improvements and all rights,
privileges, easements, and appurtenances to the Land or the
Improvements, including without limitation any air, development,
water, hydrocarbon or mineral rights held by any Seller, all
licenses, easements, rights-of-way, claims, rights or benefits,
covenants, conditions and servitudes and other appurtenances used
or connected with the beneficial use or enjoyment of the Land or
the Improvements and all rights or interests relating to any
roads, alleys or parking areas adjacent to or servicing the Land
or the Improvements.
"Rent Rolls" shall refer to the information schedules
to be set forth as Exhibit E to this Agreement pertaining to
Leases covering premises in excess of nine thousand (9,000)
square feet of rentable area.
"Tenant Lists" shall mean the schedules of tenants
attached to this Agreement as Exhibit D.
"Title Company" shall mean Commonwealth Land Title
Company, 50 Federal Street, Boston, Massachusetts 02110; Attn:
Mr. Terrence Miklas (Telephone: 617\695-0042).
"Title Reports" shall refer to the preliminary title
reports listed on Exhibit G to this Agreement and issued by the
Title Company with respect to each of the Real Properties.
"Warrant Agreement" shall refer to the agreement set
forth as Exhibit L to this Agreement.
"Warrants" shall have the meaning set forth in the
Warrant Agreement.
ARTICLE II
PURCHASE AND SALE
Section 2.1 Purchase and Sale. Sellers agree to sell
the Properties, and Buyer agrees to purchase or cause to be
purchased the Properties upon all of the terms, covenants and
conditions set forth in this Agreement. Subject to the
satisfaction of the terms and conditions of agreements between
Spectrum I and Eastrich No. 162 LLC, as the members of AEW/LBA I,
and Spectrum II and Eastrich No. 175, LLC, as member of AEW/LBA
II, certain of the Properties held by AEW/LBA I, AEW/LBA II or
both shall be subject to disposition to Spectrum I or Spectrum II
prior to the Closing in redemption of certain of Spectrum I's
interests in AEW/LBA I or Spectrum II's interests in AEW/LBA II.
Spectrum I and Spectrum II, automatically and without further
agreement or documentation and upon assumption of title to any
Property, shall assume AEW/LBA's obligations as a Seller to
consummate the sale of such Properties to Buyer on the Closing
Date in accordance with all of the terms and provisions of this
Agreement. Sellers acknowledge that the consummation of the
foregoing distribution and redemption transactions is not a
condition to the performance by Sellers of this Agreement. Buyer
acknowledges that Spectrum I and Spectrum II actively
participated in the negotiation of the terms of this Agreement.
Section 2.2 Purchase Price. The aggregate purchase
price for the Properties (the "Purchase Price") shall be the sum
of Six Hundred Fourteen Million Five Hundred Forty Two Thousand
Dollars (U.S. $614,542,000), subject to adjustment in accordance
with Sections 2.3 [Adjustments] and 6.3 [Prorations] below. The
entire amount of the Purchase Price so adjusted (less the Deposit
delivered pursuant to Article V below) shall be payable by Buyer
to Sellers through (a) the issuance of any OP Units described in
Section 2.4(a) below and (b) payment in cash of the entire
balance on the Closing Date through the escrow described in
Section 6.1 below. In addition to the Purchase Price, Buyer
shall issue and deliver the Warrants as additional consideration
pursuant to the Warrant Agreement and the provisions of Section
2.4(b) below. Sellers shall provide Buyer with a written
statement and direction not later than five business days prior
to the Closing Date as to the allocation and disposition of the
Purchase Price among the persons and entities constituting
Sellers.
Section 2.3 Adjustments. In addition to the
prorations contemplated by Section 6.3 below, (a) the Purchase
Price shall be decreased by the aggregate amount of the Allocated
Purchase Prices of any Deleted Properties, (b) the portion of the
Purchase Price payable on the Closing Date shall be reduced by
the Allocated Purchase Price of any Deferred Properties, (c) the
Purchase Price shall be decreased by the aggregate amount of any
adjustments effected pursuant to Section 2.6 below, (d) the
Purchase Price (and the Allocated Purchase Price for the Orange
Financial Center Property) shall be reduced by the further amount
of One Million Dollars ($1,000,000) and (e) the Purchase Price
shall be reduced by the total of (and the Allocated Purchase
Price for each identified Property shall be reduced by) the
following amounts: Huntington Beach I & II -- $100,000; The
Plaza -- $100,000; Centrelake -- $75,000; Airport Commerce Center
$23,000; and Safari/Hunter Business Center -- $18,000, provided
that should Buyer not elect to purchase the BTS Properties (as
defined in and pursuant to Section 2.9 below), the reductions in
the Purchase Price and the Allocated Purchase Price reductions
set forth in this clause (e) shall be 50% of the foregoing numbers.
Section 2.4 Equity Consideration.
(a) The Asset Funds, Spectrum I and Spectrum II (or
not more than 12 designated nominees) shall have the right to
receive OP Units in lieu of up to an aggregate of Thirty-Five
Million Dollars ($35,000,000) cash consideration otherwise
payable to such parties for the transfer of Properties held by
the Asset Funds, Spectrum I or Spectrum II -- all in accordance
with the terms, conditions, limitations and procedures described
in Exhibit F to this Agreement. The Asset Funds, Spectrum I and
Spectrum II shall notify Buyer in writing of the exercise of such
elective right and the measure of OP Units to be issued to any
electing party in lieu of cash consideration not later than 10
days prior to the Closing Date.
(b) AEW/LBA II shall receive additional consideration
in the form of the Warrants for the purchase of an aggregate of
2,500,000 shares of the common stock of Buyer to be issued in the
form, exercisable for the price and subject to the terms of the
Warrant Agreement attached as Exhibit L to this Agreement.
Buyer and AEW/LBA II shall execute and deliver the Warrant
Agreement and Buyer shall issue the Warrants on the Closing Date.
Notwithstanding the foregoing or the terms of the Warrant
Agreement, AEW/LBA II may require that the Warrants be issued to
one or more designees on the Closing Date.
Section 2.5 Buyer's Review and Sellers' Disclaimer.
(a) Buyer acknowledges that Sellers have afforded
Buyer and its agents and representatives an opportunity to review
all of the Disclosure Materials prior to the date of this
Agreement and , subject to the express terms of this Agreement,
that Buyer has completed such review to its satisfaction. Buyer
has assumed fully the risk that Buyer has failed completely and
adequately to review and consider any or all of such materials.
But for Buyers' expression of satisfaction with the content of
the Disclosure Materials, Buyer would not have entered into this
Agreement; but for Buyer's expression of such satisfaction and
assumption of any risk as to the character of its review and
consideration of the Disclosure Materials, Sellers would not have
entered into this Agreement. Nevertheless, during the
Confirmation Period, Buyer shall be permitted to make a further
review of information relating to the physical, legal, economic
and environmental condition of the Properties to determine
whether any Adverse Matters exist with respect to the Properties
and the extent of any such Adverse Matters. Following the
Confirmation Period, Buyer shall have the continuing right of
inspection and review, but no right to assert an Adverse Matter
on the basis of such review. The rights and obligations of the
parties arising out of Buyer's determination and assertion prior
to the close of the Confirmation Period that such Adverse Matters
do exist shall be limited and solely governed by the provisions
of Section 2.6 below.
(b) Buyer's exercise of the rights of review and
confirmation set forth in subsection (a) shall be subject to the
following limitations: (i) any entry onto any Property by Buyer,
its agents or representatives, shall be during normal business
hours, following reasonable prior notice to Sellers and, at
Sellers' discretion, accompanied by a representative of Sellers;
(ii) Buyer shall not conduct any drilling, test borings or other
disturbance of any Property for review of soils, compaction,
environmental, structural or other conditions without Sellers'
prior written consent (which shall not be unreasonably withheld);
(iii) any discussions or interviews with any third party, any
constituent partner or member of any Seller, any tenants of a
Property or their respective personnel, at Sellers' election,
shall be conducted in the presence of Sellers or their
representatives; (iv) any discussions or interviews with
employees at any Property shall be limited to designated senior
employees and, at Sellers' election, shall be conducted in the
presence of Sellers or their representatives; (v) Buyer shall
exercise reasonable diligence not to disturb the use or occupancy
or the conduct of business at any Property; and (vi) Buyer shall
indemnify, defend and hold Sellers harmless from all loss, cost,
and expense relating to personal injury or property damage
resulting from any entry or inspections performed by Buyer, its
agents or representatives. Sellers shall at all times exercise
reasonable diligence to provide Buyer with access or information
that Buyer requests, but shall bear no liability if Sellers are
not able to afford Buyer such access or information.
(c) Buyer acknowledges (i) that Buyer has entered
into this Agreement with the intention of making and relying upon
its own investigation of the physical, environmental, economic
and legal condition of the Properties, (ii) that, other than
those specifically set forth in Article IV below or in any
document to be delivered pursuant to Section 6.1 below, Sellers
are not making and have not at any time made any warranty or
representation of any kind, expressed or implied, with respect to
the Properties, including, without limitation, warranties or
representations as to habitability, merchantability, fitness for
a particular purpose, title (other than Sellers' limited warranty
of title set forth in the Deeds), zoning, tax consequences,
latent or patent physical or environmental condition, utilities,
operating history or projections, valuation, projections,
compliance with law or the truth, accuracy or completeness of the
Disclosure Materials, (iii) that other than those specifically
set forth in Article IV below or in any document to be delivered
pursuant to Section 6.1 below, Buyer is not relying upon and is
not entitled to rely upon any representations and warranties made
by Sellers or anyone acting or claiming to act on any of Sellers'
behalf, (iv) that the Disclosure Materials include soils,
environmental and physical reports prepared for Sellers by third
parties as to which Buyer has no right of reliance, Buyer has
conducted an independent evaluation and Sellers have made no
representation whatsoever as to accuracy, completeness or
adequacy, (v) that Sellers did not develop or construct the
Properties and that the Properties were acquired by Sellers
solely for investment purposes within a period of approximately
30 months prior to the date of this Agreement, (vi) that Sellers
possess limited historical operating or capital information for
the Properties since many of the Properties were acquired from
former lenders post-foreclosure and not from the Property's
developers or long-term owners, (vii) that the Properties were
purchased by Sellers prior to full recovery of Southern
California real estate markets and many remain in the process of
recovery and stabilization and (viii) that the Disclosure
Materials include economic projections which reflect assumptions
as to future market status and future Property income and expense
with respect to the Properties which are inherently uncertain and
as to which Sellers have not made any guaranty or representation
whatsoever. Buyer further acknowledges that it has not received
from Sellers any accounting, tax, legal, architectural,
engineering, property management or other advice with respect to
this transaction and is relying solely upon the advice of its own
accounting, tax, legal, architectural, engineering, property
management and other advisors. Except as expressly set forth in
this Agreement or in any document to be delivered pursuant to
Section 6.1 below, based upon the order of Buyer's familiarity
with and due diligence relating to the Properties and pertinent
knowledge as to the markets in which the Properties are situated
and in direct consideration of Sellers' decision to sell the
Properties to Buyer for the Purchase Price and not to pursue
available disposition alternatives, Buyer shall purchase the
Properties in an "as is, where is and with all faults" condition
on the Closing Date and assumes fully the risk that adverse
latent or patent physical, environmental, economic or legal
conditions may not have been revealed by its investigations.
Sellers and Buyer acknowledge that the compensation to be paid to
Sellers for the Properties has taken into account that the
Property is being sold subject to the provisions of this Section
2.5. Sellers and Buyer agree that the provisions of this Section
2.5 shall survive closing.
(d) Consistent with the foregoing and subject solely
to the covenants set forth in Section 4.2 and the representations
set forth in Section 4.1 or in any document to be delivered
pursuant to Section 6.1 below and the limitations on
representations set forth in Section 4.4, effective as of the
Closing Date, Buyer, for itself and its agents, affiliates,
successors and assigns, hereby releases and forever discharges
Sellers, their respective members, beneficial owners, agents,
affiliates, successors and assigns (collectively, the
"Releasees") from any and all rights, claims and demands at law
or in equity, whether known or unknown at the time of this
agreement, which Buyer has or may have in the future, arising out
of the physical, environmental, economic or legal condition of
the Properties, including, without limitation, all claims in tort
or contract and any claim for indemnification or contribution
arising under the Comprehensive Environmental Response,
Compensation, and Liability Act (42 U.S.C. Section 9601, et.
seq.) or any similar federal, state or local statute, rule or
ordinance relating to liability of property owners for
environmental matters. Without limiting the foregoing, Buyer,
upon closing, shall be deemed to have waived, relinquished and
released Sellers and all other Releasees from and against any and
all matters arising out of latent or patent defects or physical
conditions, violations of applicable laws and any and all other
acts, omissions, events, circumstances or matters affecting the
Properties [excepting as set forth in the representations set
forth in Section 4.1 or in any document to be delivered pursuant
to Section 6.1 below]. For the foregoing purposes, Buyer hereby
specifically waives the provisions of Section 1542 of the
California Civil Code and any similar law of any other state,
territory or jurisdiction. Section 1542 provides:
A general release does not extend to claims which
the creditor does not know or suspect to exist in his
favor at the time of executing the release, which if
known by him must have materially affected his
settlement with the debtor.
Buyer hereby specifically acknowledges that Buyer has carefully
reviewed this subsection and discussed its import with legal
counsel and that the provisions of this subsection are a material
part of this Agreement.
/s/ VJC
Buyer
(e) Buyer shall indemnify, defend and hold Sellers
harmless from and against any and all losses, damages, causes of
action, costs and expenses (including without limitation,
reasonable attorneys' fees and costs), claims and liabilities in
connection with or relating directly or indirectly to the
Properties and arising out of or resulting from acts or omissions
occurring from and after the Closing Date.
Section 2.6 Material Adverse Matters.
(a) On or prior to the close of the Confirmation
Period, Buyer shall deliver to Sellers the Confirmation Letter in
the form attached as Exhibit B to this Agreement confirming
Buyer's satisfaction as to the absence of any Material Adverse
Matters Amounts other than as specified in the Confirmation
Letter and waiving any further right or need to conduct further
review or investigation for such purposes. Buyer's failure to
deliver to Sellers on or prior to the close of the Confirmation
Period an executed Confirmation Letter in the form attached as
Exhibit B, without modification or qualification in any manner
whatsoever (whether material or immaterial) -- excepting an
enumeration of identified Material Adverse Matters Amounts and
an explanation of the related Adverse Matters, shall be deemed
conclusively as Buyer's confirmation of the absence of any
Material Adverse Matters Amounts. Notwithstanding the foregoing,
the Confirmation Letter shall not identify any Material Adverse
Matters Amounts or Adverse Matters (and neither Buyer nor
Sellers shall have any rights or obligations arising out of the
existence of any Adverse Matters) unless the Pool Adverse
Matters Amount is in excess of Twelve Million Dollars
($12,000,000) (the "Trigger Amount"). Other than breaches of
Sellers' representations and warranties expressly set forth in
Section 4.1 below which are discovered following the close of the
Confirmation Period, neither Buyer nor Sellers shall have any
rights or obligations based upon (and Buyer specifically waives
any rights or claims relating to) Adverse Matters not identified
in the Confirmation Letter for any reason whatsoever, including,
without limitation, (i) mandatory exclusion from the
Confirmation Letter because the level of materiality required to
yield a Material Adverse Matters Amount as to a Property has not
been reached, (ii) mandatory exclusion because the Pool Adverse
Matters Amount does not exceed the Trigger Amount, or (iii)
Buyer's failure or inability for any reason to identify such
Adverse Matters prior to the close of the Confirmation Period.
(b) If the aggregate Material Adverse Matters Amounts
does so exceed the Trigger Amount, the Confirmation Letter shall
set forth: (i) the identity of any Properties as to which Buyer
has identified any Material Adverse Matters Amounts, (ii) the
exact nature of the claimed Adverse Matters for each affected
Property which contributed to such Material Adverse Matters
Amounts and the manner in which the claimed Adverse Matters have
an adverse effect on the value of the related Property and (iii)
reasonably detailed evidence of the existence of such Adverse
Matters and Buyer's rationale for and calculation of the Material
Adverse Matters Amounts set forth.
(c) If the Confirmation Letter does so identify
Material Adverse Matters Amounts, then, for a period ending five
(5) business days following the close of the Confirmation
Period, Buyer and Sellers shall negotiate in good faith (but
otherwise as a matter within each party's sole discretion) to
determine whether the parties can reach a mutually acceptable
reduction in the Purchase Price to reflect the identified Adverse
Matters, provided that the maximum reduction in the Purchase
Price and the reduction as to which the parties shall negotiate
shall be the amount by which the actual Pool Adverse Matters
Amount exceeds the Trigger Amount. Buyer acknowledges that in no
event shall any reduction reflect Material Adverse Matters
Amounts up to and including the Trigger Amount. The parties
further acknowledge that neither participation in nor any
statements made in the course of such discussions shall represent
or be interpreted as an admission or agreement as to the
existence, character or measure of any Adverse Matters.
(d) In any event, if the parties are not able to reach
and execute a written agreement evidencing a mutually
satisfactory Purchase Price adjustment within
such five (5) business day negotiation period, Sellers shall
provide Buyer with written notice (the "Election Notice") within
an additional period of three (3) business days informing Buyer
that Sellers, in Sellers' sole discretion: (i) dispute the
existence or measure of Adverse Matters or Material Adverse
Matters Amounts as to Properties identified in the Election
Notice or (ii) withdraw Properties identified in the Election
Notice from the sale to Buyer. Any Property identified as the
subject of dispute under clause (i) above shall be referred to as
a "Deferred Property." Any Property withdrawn under clause (ii)
above shall be referred to as a "Deleted Property." In any
event, Sellers' Election Notice shall identify a sufficient
number of Deleted Properties and Deferred Properties to reduce
the aggregate of the Material Adverse Matters Amounts pertaining
to the remaining Properties to less than the Trigger Amount.
(e) If Sellers have elected to dispute any Adverse
Matters or the calculation of any Material Adverse Matters
Amounts under subsection (d)(i) above, such dispute shall be
submitted promptly to arbitration pursuant to Section 7.5 below.
Buyer and Sellers, respectively, shall remain fully obligated to
purchase and sell both the Deferred Properties and all other
Properties (excepting any Deleted Properties) on the terms and
conditions set forth in this Agreement, provided that (i) the
Purchase Price payable on the Closing Date applicable to all
other Properties shall be reduced by the Allocated Purchase Price
of the Deferred Properties, (ii) the Closing Date with respect to
the Deferred Properties shall be deferred to that date ten (10)
business days following the issuance of a final decision in
arbitration, (iii) an amount equal to three percent (3%) of the
Allocated Purchase Price for each Deferred Property shall be
retained by Title Company as a continuing Deposit subject to
disposition in accordance with Section 5.1 below as to such
Deferred Property and (iv) the Allocated Purchase Price with
respect to each Deferred Property shall be subject to any
reduction determined in arbitration. Notwithstanding anything
to the contrary set forth in this Agreement, however, the
aggregate amount of any reduction in the Allocated Purchase
Prices payable for the Deferred Properties awarded in the
arbitration decision shall be reduced by an amount equal to the
Trigger Deficit (as defined below) [based on the parties'
agreement that Buyer shall receive no credit or reduction on
account of the Pool Adverse Matters Amount below the Trigger
Amount]. The "Trigger Deficit" shall refer to the amount by
which the Trigger Amount exceeds the Pool Adverse Matters Amount
pertaining to the Properties purchased by Buyer on the Closing Date.
(f) If Sellers have elected to withdraw a Deleted
Property, Buyer and Sellers, respectively, shall have no further
obligation to purchase or sell the Deleted Properties, shall
remain obligated to purchase and sell all other Properties and
the Purchase Price payable on the Closing Date applicable to all
other Properties shall be reduced by the Allocated Purchase
Prices of the Deleted Properties.
Section 2.7 Title Exceptions.
(a) Buyer acknowledges that Buyer has reviewed and
approved as part of the Disclosure Materials: Sellers' existing
title insurance policies; the Title Reports issued by the Title
Company with respect to each of the Properties; documents and
information pertaining to the exceptions to title listed in the
Title Reports; and ALTA/ATSM surveys with respect to each of the
Properties. Buyer has secured and may continue to secure during
the Confirmation Period any additional title report or survey
updates desired by Buyer. Any title exceptions or issues
disclosed by title or survey updates, disclosed by Sellers to
Buyer or otherwise identified by Buyer which are not within the
definition of Permitted Exceptions shall be referred to as
"Additional Exceptions." Buyer, in any event, shall endeavor in
good faith to cause the Title Company to delete or insure over
any Additional Exceptions prior to Buyer's expression of such
matters in an Additional Exception Notice (as described below).
Buyer shall have the right to request that the Title Company
provide at Buyer's sole cost and expense any reinsurance or
endorsements Buyer shall request with respect to Permitted
Exceptions, Additional Exceptions or otherwise, provided that the
issuance of such reinsurance or endorsements shall not be a
condition to or delay the closing. Sellers, moreover, shall
exercise reasonable efforts to cause Title Company to honor Title
Company's undertaking to issue to Buyer title insurance policies
substantially in the form of Sellers' existing policies with
modification to reflect intervening title matters, provided that
Sellers make no representation or covenant as to the
enforceability or performance of such Title Company undertaking.
(b) Buyer shall have the right to deliver a notice to
Sellers identifying any Additional Exceptions (the "Additional
Title Exception Notice ") on or prior to the close of the
Confirmation Period. Buyer's failure to deliver any such notice
in timely fashion shall be deemed an approval of any Additional
Exceptions disclosed to Buyer in any title or survey updates,
disclosed to Buyer by Sellers in writing or otherwise discovered
by Buyer during the Confirmation Period. Buyer shall have no
right to deliver an Additional Exception Notice following the
close of the Confirmation Period. If Buyer delivers an
Additional Exception Notice within such period, Buyer and Seller
shall promptly attempt to agree upon the method or cost to cure
or remove such Additional Exception or, if not susceptible to
cure or removal, an appropriate reduction in the Allocated
Purchase Price for the affected Property. If Sellers and Buyer
are unable to agree upon a resolution within five (5) business
days following Sellers' receipt of an Additional Exception
Notice, Sellers shall elect, at its option and by written notice
given not later than the date of Sellers' delivery of an Election
Notice under Section 2.6(d) above, (i) to terminate this
Agreement with respect to the affected Property, in which event
such Property shall be treated as a Deleted Property or (ii)
submit the existence of the Additional Exception, the character
of a satisfactory cure or the measure of appropriate price
reduction to arbitration in accordance with the terms of Section
7.5, in which case the Property shall be treated as a Deferred
Property. Notwithstanding the foregoing, Buyer shall not have
the right to object to any Additional Exception if Title Company
is willing (and is commercially reasonable in its decision)
affirmatively to insure or endorse over such Additional Exception
at Sellers' expense and Buyer's objection would be unreasonable.
(c) "Permitted Exceptions" shall include and refer to:
all Leases, any and all exceptions to title set forth in the
Title Reports or the surveys included within the Disclosure
Materials; zoning ordinances and regulations and other laws or
regulations governing use or enjoyment of the Property; matters
affecting title created by or with the consent of Buyer; liens to
secure taxes and assessments not yet due and payable; and
customary utility easements and other matters which do not
materially and adversely affect the use, occupancy, development
(as to any undeveloped Properties) or value of a Property.
Notwithstanding the foregoing, Sellers shall remove at Sellers'
sole cost and expense on or prior to the Closing Date and there
shall not be treated as Permitted Exceptions: any liens of any
mortgages or deeds of trust securing indebtedness of Sellers
(including, without limitation, the liens securing indebtedness
in favor of Chase Manhattan Bank, as agent); tax judgment,
mechanics and other liens for monetary obligations that are not
assumed by Buyer (for such purposes, all assessments collected
with ad valorem real estate taxes shall be assumed by Buyer and
represent Permitted Exceptions); and any title matters created in
violation of Sellers' covenant set forth in Section 4.2(e) below.
Buyer shall have the right to pay on the Closing Date and offset
against the Purchase Price the amount of any of indebtedness
secured by mortgage lien, tax judgment, mechanics and other lien
for monetary obligations that are not assumed by Buyer and which
Sellers have failed to remove on or prior to the Closing Date.
(d) Sellers shall have no obligation to execute any
affidavits or indemnifications in connection with the issuance of
Buyer's title insurance excepting only customary affidavits as to
authority, the rights of tenants in occupancy, the status of
mechanics' liens and other affidavits or indemnifications
necessary to address matters of title which Sellers are obligated
to remove or cure pursuant to this Section 2.7.
Section 2.8 Transitional Management. Buyer and LBA
Inc., a California corporation ("LBA"), shall execute a
management agreement on the Closing Date engaging LBA to afford
management services with respect to all or certain of the
Properties for a term and subject to the terms and conditions set
forth on Exhibit K to this Agreement (the "Management
Agreement"). Buyer and LBA shall negotiate and diligently pursue
the finalization of the precise form of the Management Agreement
promptly following the date of this Agreement. Notwithstanding
the foregoing or any other provision of this Agreement to the
contrary, the execution of the Management Agreement shall not be
a condition to the performance of any of the obligations of
Sellers or Buyer under this Agreement. Neither the failure of
LBA and Buyer to agree as to the execution form of the Management
Agreement for any reason, nor any breach by LBA or Buyer of the
obligations to negotiate in good faith or to execute the final
Management Agreement shall affect the rights and obligations of
the Sellers or other rights and obligations of Buyer under this
Agreement. If, however, LBA should fail to perform its
obligations under this Section 2.8, Buyer shall retain any rights
and remedies against LBA arising at law or in equity out of such
breach; if Buyer should fail to perform its obligations under
this Section 2.8, LBA shall retain any such rights and remedies
against Buyer arising out of such breach.
Section 2.9 Build-To-Suit Properties.
In addition to the Properties set forth on Exhibit A, Buyer shall
purchase from AEW/LBA II and AEW/LBA II shall sell to Buyer those
certain properties commonly referrred to as the Cymer and Comcast
Build-To-Suit properties and more fully described on Exhibit A-1
(the "BTS Properties") subject to the following terms and
conditions: (a) Buyer shall have until 5 p.m. Los Angeles time
on January 30, 1997 to conduct and complete Buyer's due diligence
as to the BTS Properties and to determine, in Buyer's sole
discretion and to be expressed by written notice to AEW/LBA II,
whether Buyer elects to purchase the BTS Properties (which
election shall be made as to both or neither of the BTS
Properties); (b) if Buyer so elects to purchase, Buyer shall
deposit with the Title Company a deposit on account of the BTS
Properties in an amount equal to 3% of the aggregate projected
purchase price for the BTS Properties (as determined in good
faith by the parties prior to execution of the agreement
contemplated in the last sentence of this Section); (c) if Buyer
so elects to purchase, Buyer shall be obligated to purchase each
of the BTS Properties following AEW/LBA II's substantial
completion of the improvements at such BTS Property (as evidenced
by architect certification and issuance of requisite certificates
of occupancy) and the commencement of the term of the lease
currently in place with respect to the BTS Property; (d) the
purchase price for the BTS Property shall be the annual
stabilized net operating income for the BTS Property (as
determined by methodologies and assumptions consistent with those
engaged with respect to the Properties) divided by a
capitalization rate of eight and one-half percent (8.5%); (e)
the calculation of the purchase price shall exclude from the
rental income any amortization of tenant improvement costs
expended by AEW/LBA II in excess of the allowance defined in the
lease, provided that Buyer shall reimburse AEW/LBA II at the
closing for the amount of such costs; and (f) AEW/LBA II
shall assign to Buyer all warranties, guaranties and contract
rights relating to the general contractor or otherwise relating
to the construction of the improvements. Buyer and AEW/LBA II
shall negotiate in good faith and execute a separate agreement
consistent with the foregoing and otherwise satisfactory to each
party to document their respective rights and obligations as to
the purchase of the BTS Properties. In no event shall a failure
to conclude or perform such Agreement for any reason operate as a
condition or affect the parties other obligations under this Agreement.
ARTICLE III
CONDITIONS PRECEDENT
Section 3.1 Conditions.
(a) Notwithstanding anything in this Agreement to the
contrary, Buyer's obligation to purchase the Properties shall be
subject to and contingent upon the satisfaction or waiver of the
following conditions precedent:
(i) The willingness, upon the sole condition of
the payment of any regularly scheduled premium, of the
Title Company to issue American Land Title Association
extended coverage Owner's Policies of Title Insurance
[1992 Form] (the "Title Policy") insuring Buyer (or
Buyer's permitted assignee or nominee) that title to
each Real Property is vested of record in Buyer (or
Buyer's permitted assignee or nominee) on the Closing
Date subject only to the printed conditions and
exceptions of such policy [deleting, however, co-
insurance provisions and creditors' rights exceptions]
and the Permitted Exceptions;
(ii) The absence of a Pool Adverse Matters Amount
in excess of $75,000,000 (including, for such purposes,
the measure of any Material Adverse Matters Amounts
relating to Properties that would otherwise be treated
as Deleted Properties or Deferred Properties); and
(iii) Sellers' performance or tender of
performance of all material closing obligations under
this Agreement.
(b) Notwithstanding anything in this Agreement to the
contrary, Sellers' obligation to sell the Properties shall be
subject to and contingent upon the satisfaction or waiver of the
following conditions precedent:
(i) The satisfaction or Buyer's written
waiver of the conditions set forth in subparagraph
(a)(i) above;
(ii) The absence of a Pool Adverse Matters
Amount in excess of $75,000,000 (including, for
such purposes, the measure of any Material Adverse
Matters Amounts relating to Properties that would
otherwise be treated as Deleted Properties or
Deferred Properties); and
(iii) Buyer's performance or tender of
performance of all material closing obligations
under this Agreement.
Section 3.2 Failure or Waiver of Conditions Precedent.
If any of the conditions set forth in Section 3.1 are not
fulfilled or waived, the party benefited by such condition may,
by written notice to the other party, terminate this Agreement,
whereupon all rights and obligations hereunder of each party
shall be at an end. Either party may, at its election, at any
time or times on or before the date specified for the
satisfaction of the condition, waive in writing the benefit of
any of the conditions set forth in Section 3.1(a) and 3.1(b)
above. In any event, Buyer's consent to the close of escrow
pursuant to this Agreement shall waive any remaining unfulfilled
conditions. If this Agreement is terminated by Buyer as a result
of the failure of any condition set forth in Section 3.1(a) or by
Seller as a result of the failure of the condition set forth in
Section 3.1(b)(ii), Seller shall return the full amount of the
Deposit to Buyer. Notwithstanding the foregoing:
(a) If Buyer desires to terminate this Agreement based
upon Buyer's determination and assertion in the Confirmation
Letter that the Pool Adverse Matters Amount is in excess of
$75,000,000, Sellers shall have the right, exercisable by
written notice given to Buyer within 5 business days
following Buyer's notice of intent to terminate for failure
of such condition, to submit the measure of the Pool Adverse
Matters Amount to arbitration in accordance with the
provisions of Section 7.5 below. In such event, the
termination of this Agreement shall be deferred until a
decision in arbitration confirming a Pool Adverse Matters
Amount in excess of the requisite $75,000,000. If the
decision in arbitration denies the existence of a Pool
Adverse Matters Amount in such requisite amount, the Closing
Date shall occur 10 business days following the arbitration
decision, subject to the other terms and conditions in this
Agreement.
(b) If Buyer desires to terminate this Agreement based
upon a failure of the condition set forth in Section
3.1(a)(i) above, Sellers may elect to terminate this
Agreement with respect to the affected Property, in which
event such Property shall be treated as a Deleted Property;
and
(c) If Buyer desires to terminate this Agreement based
upon a failure of the condition set forth in Section
3.1(a)(iii) above and the performance failure upon which
such termination would be based is by any of the Asset
Funds, Sellers may elect, by written notice given by the
AEW/LBA Sellers, to require Buyer to waive the effect of
such condition failure as to and complete the purchase and
sale of all Properties other than those held by the
breaching Asset Fund. In such event, (i) the Purchase Price
payable on the Closing Date shall be reduced by the
Allocated Purchase Price for the Property of the breaching
Asset Fund and (ii) Buyer shall retain any rights and
remedies against such breaching party as are afforded in
this Agreement.
ARTICLE IV
COVENANTS, WARRANTIES AND REPRESENTATIVES
Section 4.1 Sellers' Warranties and Representations.
Each of Sellers identified in the introductory language to
subsections (a) through (d) below expresses to Buyer the
representations and warranties set forth below as of the date of
this Agreement, provided that each of such representations and
warranties shall be deemed expressly qualified by any information
set forth on the Disclosure Materials List & Statement.
(a) All Sellers. Each of Sellers represents and
warrants with respect to itself as follows:
(i) The Seller has full power and lawful authority to
enter into and carry out the terms and provisions of this
Agreement and to execute and deliver all documents which are
contemplated by this Agreement, and all actions of the Seller
necessary to confer such power and authority upon the persons
executing this Agreement (and all documents which are
contemplated by this Agreement) on behalf of the Seller have been taken;
(ii) The Seller's execution and delivery of this
Agreement, the consummation of the transactions contemplated
hereby and the performance of the Seller's obligations under the
instruments required to be delivered by the Seller at the
Closing, do not and will not require the consent, approval or
other authorization of, or registration, declaration or filing
with, any governmental authority (excepting the recordation of
closing documents contemplated in this Agreement) and do not and
will not result in any violation of, or default under, any term
or provision of any agreement, instrument, mortgage, loan
agreement or similar document to which the Seller is a party or
by which the Seller is bound;
(iii) There is no litigation, investigation or
proceeding pending or, to the best of the Seller's knowledge,
contemplated or threatened against the Seller which would impair
or adversely affect the Seller's ability to perform its
obligations under this Agreement or any other instrument or
document related hereto; and
(iv) The Seller is not a "foreign person" as defined
in Internal Revenue Code 1445(f)(3).
(b) CAL VI Property Status. CAL VI represents and
warrants as follows with respect to each Property owned by CAL
VI, as identified under the caption "CAL VI" on Exhibit A to this
Agreement:
(i) To CAL VI's knowledge, the Tenant List for each
Property is true, correct and complete in all material respects
as of the date of this Agreement. To CAL VI's knowledge, each
Lease identified on the Tenant List is in full force and effect
and, except as disclosed in the Disclosure Materials List and
Statement, CAL VI is not in material default and has not received
written notice of any material default by the tenant or the
landlord under the Lease;
(ii) To CAL VI's knowledge, CAL VI has received no
written notice from any governmental authorities that eminent
domain proceedings for the condemnation of any Property or any
part of a Property are pending;
(iii) To CAL VI's knowledge, CAL VI has received no
written notice of any threatened or pending litigation against
CAL VI which would materially and adversely affect any Property;
(iv) To CAL VI's knowledge, CAL VI has received no
written notice from any governmental authority that the
improvements constituting any Property are presently in violation
of any applicable building codes;
(v) To CAL VI's knowledge, CAL VI has received no
written notice from any governmental authority that the current
use of any Property is presently in violation of any applicable
zoning, land use or other law, order, ordinance, rule or
regulation affecting the Property, that any investigation has
been commenced or is contemplated with respect to any such
possible failure of compliance and CAL VI has not received
written notice from any insurance company or Board of Fire
Underwriters any written notice of any defect or inadequacy in
connection with a Property or its operation;
(vi) To CAL VI's knowledge, there are no service
contracts with respect to any Property that are not cancelable by
the owner of the Property within 30 days after written notice
from such owner excepting as disclosed in the Disclosure Statement;
(vii) Except as set forth in the environmental reports
included within the Disclosure Materials and any reports or
studies prepared by or for Buyer: (i) to CAL VI's knowledge, CAL
VI has received no written notice of the presence of any
Hazardous Materials presently deposited, stored, or otherwise
located on, under, in or about any Property which require
reporting to any governmental authority or are otherwise not in
compliance with environmental laws, regulations and orders; and
(ii) to CAL VI's knowledge, there are no underground storage
tanks on any Property;
(viii) To CAL VI's knowledge, the Rent Rolls
constituting Exhibit E to this Agreement accurately identify as
to each Lease covering premises in excess of nine thousand
(9,000) rentable square feet: the date of the Lease and all
material amendments; the expiration date of the current term of
the Lease; the measure of any security deposit held by Cal VI;
the current base rental payable under such Lease; and the
approximate area of the premises.
(c) AEW/LBA Property Status. AEW/LBA I, AEW/LBA II
and AEW/LBA IV (collectively, the "AEW/LBA Sellers") represent
and warrant as follows with respect to each Property owned by any
of such entities, as identified under the captions "AEW/LBA I,"
"AEW/LBA II" and "AEW/LBA IV" on Exhibit A to this Agreement:
(i) To the AEW/LBA Sellers' knowledge, the Tenant List
for each Property is true, correct and complete as of the date of
this Agreement. To the AEW/LBA Sellers' knowledge, each Lease
identified on the Tenant List is in full force and effect and,
except as disclosed in the Disclosure Materials List and
Statement, the AEW/LBA Sellers are not in material default and
have not received written notice of any material default by the
tenant or the landlord under the Lease;
(ii) To the AEW/LBA Sellers' knowledge, the AEW/LBA
Sellers have received no written notice from any governmental
authorities that eminent domain proceedings for the condemnation
of any Property or any part of a Property are pending;
(iii) To the AEW/LBA Sellers' knowledge, the AEW/LBA
Sellers have received no written notice of any threatened or
pending litigation against any AEW/LBA Seller which would
materially and adversely affect any Property;
(iv) To the AEW/LBA Sellers' knowledge, the AEW/LBA
Sellers have received no written notice from any governmental
authority that the improvements constituting any Property are
presently in violation of any applicable building codes;
(v) To the AEW/LBA Sellers' knowledge, the AEW/LBA
Sellers have received no written notice from any governmental
authority that the current use of the Property is presently in
violation of any applicable zoning, land use or other law, order,
ordinance, rule or regulation affecting the Property, that any
investigation has been commenced or is contemplated with respect
to any such possible failure of compliance and the AEW/LBA
Sellers have not received written notice from any insurance
company or Board of Fire Underwriters any written notice of any
defect or inadequacy in connection with a Property or its
operation;
(vi) To the AEW/LBA Sellers' knowledge, there are no
service contracts with respect to any Property that are not
cancelable by the owner of the Property within 30 days after
written notice from such owner excepting as disclosed in the
Disclosure Statement;
(vii) Except as set forth in the environmental reports
included within the Disclosure Materials and any reports or
studies prepared by or for Buyer: (i) to the AEW/LBA Sellers'
knowledge, the AEW/LBA Sellers have received no written notice of
the presence of any Hazardous Materials presently deposited,
stored, or otherwise located on, under, in or about any Property
which require reporting to any governmental authority or are
otherwise not in compliance with environmental laws, regulations
and orders; and (ii) to the AEW/LBA Sellers' knowledge, there are
no underground storage tanks on any Property;
(viii) To AEW/LBA's knowledge, the Rent Rolls
constituting Exhibit E to this Agreement accurately identify as
to each Lease covering premises in excess of nine thousand
(9,000) rentable square feet: the date of the Lease and all
material amendments; the expiration date of the current term of
the Lease; the measure of any security deposit held by AEW/LBA;
the current base rental payable under such Lease; and the
approximate area of the premises.
(d) Asset Funds Property Status. The Asset Funds
represent and warrant as follows with respect to each Property
owned by any of such entities, as identified under the captions
"Asset Funds" on Exhibit A to this Agreement:
(i) To the Asset Funds' knowledge, the Tenant List for
each Property is true, correct and complete as of the date of
this Agreement. To the Asset Funds' knowledge, each Lease
identified on the Tenant List is in full force and effect and,
except as disclosed in the Disclosure Materials List and
Statement, the Asset Funds are not in material default and have
not received written notice of any material default by the tenant
or the landlord under the Lease;
(ii) To the Asset Funds' knowledge, the Asset Funds
have received no written notice from any governmental authorities
that eminent domain proceedings for the condemnation of any
Property or any part of a Property are pending;
(iii) To the Asset Funds' knowledge, the Asset Funds
have received no written notice of any threatened or pending
litigation against any Asset Fund which would materially and
adversely affect any Property;
(iv) To the Asset Funds' knowledge, the Asset Funds
have received no written notice from any governmental authority
that the improvements constituting any Property are presently in
violation of any applicable building codes;
(v) To the Asset Funds' knowledge, the Asset Funds
have received no written notice from any governmental authority
that the current use of the Property is presently in violation of
any applicable zoning, land use or other law, order, ordinance,
rule or regulation affecting the Property, that any investigation
has been commenced or is contemplated with respect to any such
possible failure of compliance and the Asset Funds have not
received written notice from any insurance company or Board of
Fire Underwriters any written notice of any defect or inadequacy
in connection with a Property or its operation;
(vi) To the Asset Funds' knowledge, there are no
service contracts with respect to any Property that are not
cancelable by the owner of the Property within 30 days after
written notice from such owner excepting as disclosed in the
Disclosure Statement;
(vii) Except as set forth in the environmental reports
included within the Disclosure Materials and any reports or
studies prepared by or for Buyer: (i) to the Asset Funds'
knowledge, the Asset Funds have received no written notice of the
presence of any Hazardous Materials presently deposited, stored,
or otherwise located on, under, in or about any Property which
require reporting to any governmental authority or are otherwise
not in compliance with environmental laws, regulations and
orders; and (ii) to the Asset Funds' knowledge, there are no
underground storage tanks on any Property;
(viii) To the Asset Fund's knowledge, the Rent Rolls
constituting Exhibit E to this Agreement accurately identify as
to each Lease covering premises in excess of nine thousand
(9,000) rentable square feet: the date of the Lease and all
material amendments; the expiration date of the current term of
the Lease; the measure of any security deposit held by the Asset
Funds; the current base rental payable under such Lease; and the
approximate area of the premises.
* * * * *
For the foregoing purposes, (A) the terms "Sellers' knowledge" or
"CAL VI's knowledge" or words of similar effect shall mean the
current actual, subjective knowledge of Messrs. Phil Belling,
Steven Layton or Paul Slye, and (B) the term "Asset Funds'
knowledge" or words of similar effect shall mean the current
actual, subjective knowledge of Messrs Phil Belling or Steven
Layton. Such individuals' knowledge shall not include
information or material which may be in the possession of any of
the Sellers or the named individuals, but of which the named
individuals are not actually aware. Sellers shall have no
liability for the breach of any representations or warranties
absent an arbitrated or judicial finding that the named
individuals knowingly withheld information from Buyer with
respect to the subject matter of the representation or warranty
or falsified information delivered to and relied upon by Buyer
and that such action amounted to a violation of a representation
or warranty expressly set forth in this Agreement. None of the
named individuals whose sole knowledge is imputed to a Seller
under this Section nor any party other than the Seller affording
a representation shall bear responsibility for any breach of such
representation.
Section 4.2 Sellers' Covenants. Seller hereby
covenants and agrees as follows:
(a) During the Contract Period, Sellers will exercise
reasonable and good faith efforts to operate and maintain the
Properties in a manner consistent with current practices;
(b) During the Contract Period, Sellers will not sell
or otherwise dispose of any significant items of Personal
Property unless replaced with an item of like value, quality and
utility;
(c) During the Contract Period, Sellers shall not enter
into or modify any Contracts relating to the operation or
maintenance of a Property, except for those entered into in the
ordinary course of business and which are cancelable upon not
more than thirty (30) days prior notice or those otherwise
approved by Buyer, which approval shall not be unreasonably
withheld and shall be deemed given if Buyer should fail to
approve or disapprove proposed Contract matters in writing within
3 business days following Seller's written request. At Buyer's
written request, Sellers shall deliver notice of termination on
the Closing Date as to any and all Contracts that Buyer desires
to terminate, provided that such termination shall be effective
following any notice or waiting period for such termination
described in the Contract and that Sellers shall not be required
to bear any termination or cancellation fee or charge that may be
assessed under such Contract based upon an early termination.
Buyer specifically acknowledges that Sellers shall have the
right to complete the execution of contracts for the provision of
parking services by Allright Parking at the Properties at 5161
Lankershem, 150 Colorado and 1919 Santa Monica Boulevard,
provided that the terms and conditions of such agreements are
consistent with prevailing market standards and, in any event,
are terminable upon not more than 30 days' prior written notice.
Notwithstanding the foregoing, Sellers shall terminate all
property management agreements relating to the Properties as of
the Closing Date.
(d) During the Contract Period, Sellers will not
execute or modify in any material fashion any Leases, (i) as to
leases or modifications pertaining to premises in excess of 5,000
rentable square feet , without promptly notifying Buyer of the
proposed Lease or modification and providing Buyer with copies of
the proposed lease or modification documents and (ii) as to any
lease or modification, other than (A) on terms within the range
of the leasing guidelines negotiated reasonably and in good
faith by the parties prior to the close of the Confirmation
Period and initialed to confirm approval or (B) with Buyer's
prior consent, which consent shall be deemed given as to the In-
Negotiation Leases (and the budgets for leasing costs attendant
to such leases set forth on Exhibit J), shall be deemed given if
Buyer should fail to approve or disapprove proposed lease matters
in writing within 5 business days following Seller's written
request and shall not be unreasonably withheld with respect to
matters or terms not addressed in the approved leasing
guidelines. Buyer shall exercise its rights of approval of
leasing matters in good faith. Sellers shall exercise reasonable
efforts to continue to lease the Properties in a fashion
consistent with current practices;
(e) During the Contract Period, Sellers shall not
voluntarily create, consent to or acquiesce in the creation of
liens or exceptions to title other than the Permitted Exceptions
without Buyer's prior written consent, provided that (i) Buyer
shall not unreasonably withhold or delay consent to any proposed
matters affecting title necessary to maintain or enhance the
value of the pertinent Property and (ii) Buyer and AEW/LBA II
shall negotiate in good faith and shall execute on the Closing
Date an easement agreement on terms reasonably satisfactory to
Buyer and AEW/LBA II relating to the Tower Plaza Retail Property
and the adjacent undeveloped property to be retained by AEW/LBA
II which affords rights of after hours and other parking/access
rights required for the operation, use and development of the
properties in distinct ownership and establishes an equitable
cost sharing arrangement with respect to common or shared facilities;
(f) During the Contract Period, Sellers shall maintain
all-risk policies of property insurance and rental loss insurance
for the Improvements in coverage, terms and conditions and with
deductibles substantially consistent with Sellers' property
insurance package currently in effect (the terms of which are set
forth in the Disclosure Materials); and
(g) Sellers shall cooperate with Buyer in Buyer's
pursuit, at Buyer's cost, of recertifications of surveys,
environmental and physical inspection reports prepared for
Sellers with respect to the Properties for the benefit of Buyer,
Buyer's nominee in title or any lender. Buyer's securing of
such certifications shall not operate as a condition to closing.
Section 4.3 Buyer's Warranties and Representations.
Buyer hereby represents and warrants to Sellers that the follow
ing are true as of the date of this Agreement:
(a) Buyer is a duly formed and validly existing
corporation under the law of the state of its formation and in
good standing under the laws of the States of Maryland and
California and Buyer has the full right, authority and power to
enter into this Agreement, to consummate the transactions
contemplated herein and to perform its obligations hereunder and
under those documents and instruments to be executed by it at the
closing, and each of the individuals executing this Agreement on
behalf of Buyer is authorized to do so, and this Agreement
constitutes a valid and legally binding obligation of Buyer
enforceable against Buyer in accordance with its terms.
(b) Buyer's execution and delivery of this Agreement,
the consummation of the transactions contemplated hereby and the
performance of Buyer's obligations under the instruments required
to be delivered by Buyer at the closing, do not and will not
result in any violation of, or default under, any term or
provision of any agreement, instrument, mortgage, loan agreement
or similar document to which Buyer is a party or by which Buyer
is bound.
(c) There is no litigation, investigation or
proceeding pending or, to the best of Buyer's knowledge,
contemplated or threatened against Buyer which would impair or
adversely affect Buyer's ability to perform its obligations under
this Agreement or any other instrument or document related
hereto.
Section 4.4 Survival/Limitations.
(a) Subject to subsection (b) below, the parties agree
that Sellers' warranties and representations contained in
Sections 4.1 (b), (c) and (d) of this Agreement shall survive
Buyer's purchase of the Properties and the Closing Date for a
period ending on the earlier to occur of (i) 45 calendar days
following the termination or expiration of the Management
Agreement or (ii) 75 calendar days following the Closing Date
(the "Limitation Period"). Such termination as of the close of
the Limitation Period shall apply to known as well as unknown
breaches of such warranties or representations. Subject to
subsection (b) below, Buyer's waiver and release set forth in
Section 2.5 shall apply fully to liabilities under such
representations and warranties. Buyer specifically acknowledges
that such termination of liability represents a material element
of the consideration to Sellers.
(b) Any claim of Buyer based upon a breach of any
representation or warranty set forth in Sections 4.1(b), (c) or
(d) or breach of a covenant set forth in Section 4.2 shall be
expressed, if at all, in writing delivered to Sellers promptly
following Buyer's discovery and setting forth in reasonable
detail the basis and character of the claim (a "Claim Notice").
Notwithstanding the foregoing, (i) any matters identified by
Buyer during the Confirmation Period which would represent both
breaches of representation and Adverse Matters shall be treated
solely as the latter and shall not be the subject of any claim
for breach of representation under this Article IV, (ii) Buyer
shall not make any claim on account of a breach of
representations and warranties or breach of Section 4.2 with
respect to any Property unless and until the aggregate measure of
such claims with respect to such Property exceeds $150,000 and
only to the extent that such aggregate exceeds such figure, (iii)
Sellers' aggregate liability for claims arising out of such
representations and warranties and breaches of Section 4.2 shall
not exceed $20,000,000, and (iv) Buyer shall have the right to
deliver to Sellers Claim Notices with respect to any breach of
representation or warranty or Section 4.2 covenants discovered by
Buyer following the close of the Confirmation Period but prior to
the Closing Date solely if such notice is delivered prior to the
Closing Date. Following receipt of such a pre-closing Claim
Notice, Sellers may elect, by written notice to Buyer given not
later than the Closing Date, to terminate this Agreement as to
the Property to which such pre-closing Claim Notice relates and
such Property shall be treated as a Deleted Property. If Sellers
fail to elect to treat any Property which is the subject of a pre-
closing Claim Notice as a Deleted Property, the closing as to
such Property shall be conducted on the Closing Date. As to both
such pre-closing Claim Notices and as to all Claim Notices
received following the Closing Date, Buyer shall have the right
to proceed against Sellers for actual monetary damages based upon
such Claim Notice -- subject to the cure rights set forth below
and the limitations set forth above and in the final three
sentences of Section 5.2.
(c) The Sellers who have expressed a representation or
warranty or who have breached a covenant set forth in Section 4.2
for which a Claim Notice has been received shall have a period of
30 days within which to cure such breach, or, if such breach
cannot reasonably be cured within 30 days, an additional
reasonable time period of up to an additional 60 days, so long as
such cure has been commenced within such 30 days, is at all times
diligently pursued. If the breach is not cured after actual
written notice and within such cure period, Buyer's sole remedy
shall be an action at law for damages against the breaching
Seller or Sellers, which must be commenced, if at all, within the
Limitation Period; provided, however, that if within the
Limitation Period Buyer gives a Claim Notice and the Sellers
commence to cure and thereafter terminate such cure effort, Buyer
shall have an additional 30 days from the date of written notice
from the Sellers of such termination within which to commence an
action at law for damages as a consequence of the failure to
cure. The existence or pendency of such cure rights shall not
delay the Closing Date as to a Property not designated as a
Deleted Property.
ARTICLE V
DEFAULT
Section 5.1 Buyer's Default & Deposit.
Contemporaneously with the execution of this Agreement, Buyer has
delivered to Title Company, for deposit into the escrow described
in Section 6.1 below, cash in an amount equal to Twenty Million
Dollars ($20,000,000) (the "Deposit"). In addition, Buyer shall
have the right to extend from February 27, 1998 to March 31, 1998
the Closing Date deadline set forth in clause (a) of the
definition of the "Closing Date" set forth in Article I if Buyer
delivers to Title Company for deposit into such escrow the
additional amount of Five Million Dollars ($5,000,000) on or
prior to February 27, 1998. Such additional deposited funds for
all purposes shall constitute part of the Deposit. In the event
that this transaction is consummated as contemplated by this
Agreement, then the entire amount of the Deposit, together with
any interest accrued thereon, shall be credited against the
Purchase Price. The entire amount of the Deposit, together with
any interest accrued thereon, shall be returned immediately to
Buyer in the event that the transaction fails to close for
reasons other than Buyer's failure to perform material
obligations under this Agreement. IN THE EVENT THE TRANSACTION
CONTEMPLATED BY THIS AGREEMENT SHOULD FAIL TO CLOSE FOR THE
REASON THAT BUYER FAILS TO PERFORM MATERIAL OBLIGATIONS UNDER
THIS AGREEMENT, THE ENTIRE AMOUNT OF THE DEPOSIT, PLUS ACCRUED
INTEREST, SHALL BE RETAINED BY SELLERS AS LIQUIDATED DAMAGES.
BUYER AND SELLERS HEREBY ACKNOWLEDGE AND AGREE THAT SELLERS'
DAMAGES IN THE EVENT OF SUCH A BREACH OF THIS AGREEMENT BY BUYER
WOULD BE DIFFICULT OR IMPOSSIBLE TO DETERMINE, THAT THE AMOUNT OF
THE DEPOSIT PLUS ACCRUED INTEREST IS THE PARTIES' BEST AND MOST
ACCURATE ESTIMATE OF THE DAMAGES SELLERS WOULD SUFFER IN THE
EVENT THE TRANSACTION PROVIDED FOR IN THIS AGREEMENT FAILS TO
CLOSE, AND THAT SUCH ESTIMATE IS REASONABLE UNDER THE
CIRCUMSTANCES EXISTING ON THE DATE OF THIS AGREEMENT. BUYER AND
SELLERS AGREE THAT SELLERS' RIGHT TO RETAIN THE DEPOSIT PLUS
ACCRUED INTEREST SHALL BE THE SOLE REMEDY OF SELLERS IN THE EVENT
OF A BREACH OF THIS AGREEMENT BY BUYER.
ACCEPTED AND AGREED TO:
BUYER'S INITIALS /s/ VJC SELLERS' INITIALS /s/ MLD /s/ MLD /s/ MLD
/s/ MLD /s/ PB /s/ PB /s/ PB
/s/ PB /s/ PB /s/ PB /s/ PB
This Section 5.1 is intended only to liquidate and limit Sellers'
rights to damages arising due to Buyer's failure to purchase the
Properties and shall not limit the indemnification obligations of
Buyer pursuant to (A) the Confidentiality Agreement dated October
27, 1997 executed by Buyer for the benefit of Sellers, (B) any
other documents delivered pursuant to this Agreement or (C)
Sections 2.5(b), 2.5(e), 7.2, 7.9 and 7.13 of this Agreement.
Notwithstanding the foregoing provisions of this Section 5.1, if
this transaction would fail to close by reason of a failure of
condition based upon Buyer's failure to perform material pre-
closing obligations during the Contract Period (i.e., obligations
excluding the obligation to pay the Purchase Price and otherwise
to close the transaction by performance of the covenants set
forth in Article VI), Buyer shall have a period of 5 business
days within which to cure such breach to the reasonable
satisfaction of Sellers before such breach shall constitute a
default triggering Sellers' remedy set forth in this Section 5.1.
Section 5.2 Sellers' Default. If (a) the conditions
precedent set forth in Section 3.1(b) shall have been satisfied
or waived (provided that Buyer shall not be required to tender
formally the Purchase Price but only to demonstrate the
commitment of immediately available funds to pay such Purchase
Price and (b) Sellers shall fail to perform its material closing
obligations under this Agreement, then, in addition to the return
of the Deposit set forth in Section 5.1 above, Buyer shall have
the right to recover its actual monetary damages from Sellers, up
to an aggregate maximum amount of Twenty Million Dollars
($20,000,000) or to pursue an action for specific performance.
The foregoing maximum damages amount shall not apply to claims
based upon breach of Sections 7.2, 7.9 or 7.13 of this Agreement.
Any liabilities relating to breach of representation and warranty
shall be subject to the additional limitations set forth in
Section 4.4 above. In no event shall Sellers be liable to Buyer
for any consequential or punitive damages based upon any breach
of this Agreement, including breaches of representation or
warranty. Buyer further agrees that recourse for any liability
of the Sellers under this Agreement or any document or instrument
delivered simultaneously or in connection with or pursuant to
this Agreement shall be limited solely to the Properties and,
following the closing, to the extent of the Purchase Price
allocated and distributed to the Sellers. Subject to applicable
principles of fraudulent conveyance, in no event shall Buyer seek
satisfaction for any obligation from any shareholders, officers,
directors, employees, agents, legal representatives, successors
or assigns of such trustees or beneficiaries, nor shall any such
person or entity have any personal liability for any such
obligations of any Seller.
ARTICLE VI
CLOSING
Section 6.1 Escrow Arrangements. An escrow for the
purchase and sale contemplated by this Agreement has been opened
by Buyer and Sellers with Title Company. At least one business
day prior to the Closing Date, Sellers and Buyer shall each
deliver escrow instructions to Title Company consistent with this
Article VI, and designating Title Company as the "Reporting
Person" for the transaction pursuant to Section 6045(e) of the
Code. In addition, the parties shall deposit in escrow, at least
one business day prior to the Closing Date (unless otherwise
provided below in this Section 6.1) the funds and documents
described below:
(a) Sellers shall deposit (or cause to be deposited):
(i) a duly executed and acknowledged grant deed
pertaining to the Real Property portion of each of the
Properties, each in the form attached to this Agreement as
Exhibit I-A (collectively, the "Deeds");
(ii) a duly executed bill of sale pertaining to the
Personal Property portion of each of the Properties, each in the
form attached to this Agreement as Exhibit I-B (collectively, the
"Bills of Sale");
(iii) a duly executed counterpart assignment and
assumption pertaining to the Intangible Property portion of each
of the Properties, each in the form attached to this Agreement as
Exhibit I-C (collectively, the "Assignments of Intangibles");
(iv) a duly executed counterpart assignment and
assumption pertaining to the Leases, each in the form attached to
this Agreement as Exhibit I-D (collectively, the "Assignments of
Leases");
(v) a certificate from each Seller certifying the
information required by the California Revenue and Taxation Code
to establish that the transaction contemplated by this Agreement
is exempt from the tax withholding requirements of the State of
California (the "California Certificate");
(vi) a certificate from each Seller certifying the
information required by 1445 of the Code to establish, for the
purposes of avoiding Buyer's tax withholding obligations, that
Seller is not a "foreign person" as defined in 1445(f)(3) of the
Code (the "FIRPTA Certificate");
(vii) a counterpart Warrant Agreement duly executed by
AEW/LBA II; and
(viii) each of the instruments contemplated for
execution and delivery by the identified parties described in
Exhibit F in connection with the issuance of the equity interests
described in such Exhibit.
In addition, Seller shall deliver to Buyer on the Closing Date,
outside of escrow, to the extent in Seller's possession or
control, the originals of all Leases, Contracts and tenant files
and all keys to the Properties.
(b) Buyer shall deposit:
(i) on or prior to the close of business on the
business day immediately prior to the Closing Date, immediately
available funds sufficient to pay the balance of the Purchase
Price, plus sufficient additional cash to pay Buyer's share of
all escrow costs and closing expenses;
(ii) a duly executed counterpart for each of the
Assignments of Intangibles and Assignments of Leases;
(iii) a certificate duly executed by Buyer in favor of
Sellers confirming the waivers and acknowledgments set forth in
Sections 2.5 and 4.4 above;
(iv) a counterpart Warrant Agreement duly executed by
Buyer and the duly issued Warrants contemplated by the Warrant
Agreement; and
(v) each of the instruments contemplated for execution
and delivery by Buyer or the Operating Partnership described in
Exhibit F in connection with the issuance of the equity interests
described in such Exhibit.
Section 6.2 Closing. Escrow Company shall close escrow on
the Closing Date by:
(a) recording the Deeds;
(b) causing Title Company to issue the Title Policies
to Buyer;
(c) delivering to Buyer the Bills of Sale, the FIRPTA
Certificate, the California Certificate and counterparts for the
Warrant Agreement executed by AEW/LBA I and each of the
Assignments of Intangibles and Assignments of Leases executed by
Sellers;
(d) delivering to Sellers (i) a counterpart for each
of the Assignments and Assumption of Intangible Property executed
by Buyer, (ii) the certificate described in Section 6.1(b)(iii)
above, and (iii) funds in the amount of the Purchase Price, as
adjusted for credits, prorations and closing costs in accordance
with this Article VI and as allocated pursuant to the direction
of the Sellers;
(e) delivering to AEW/LBA II the counterpart
Warrant Agreement executed by Buyer and the issued Warrants; and
(f) delivering to the identified transferees the
instruments delivered into escrow by Buyer described in Section
6.1(b)(iv) above.
Section 6.3 Prorations.
(a) Taxes. Real estate taxes, personal property taxes
and any general or special assessments with respect to the
Properties which are not the direct payment obligation of tenants
pursuant to the Leases (as opposed to a reimbursement obligation)
shall be prorated as of the Closing Date -- to the end that
Sellers shall be responsible for all taxes and assessments that
are allocable to any period prior to the Closing Date and Buyer
shall be responsible for all taxes and assessments that are
allocable to any period from and after the Closing Date. If the
actual amount of taxes, assessments or other amounts to be
prorated for the year in which the closing occurs is not known as
of the Closing Date, the proration shall be based on the parties'
reasonable estimates of such taxes, assessments and other
amounts. To the extent any real or personal property taxes
subject to apportionment in accordance with the foregoing are, as
of the Closing Date, the subject of any appeal filed by or on
behalf of Sellers, then notwithstanding anything to the contrary
contained in this subparagraph, (i) no apportionment of the taxes
being appealed shall occur at the closing, but instead such
apportionment shall be deferred until the outcome of the appeal
is final and the amount of taxes owing becomes fixed at which
time Sellers shall be responsible for all such taxes that are
allocable to any period prior to the Closing Date and Buyer shall
be responsible for all such taxes that are allocable to any
period from and after the Closing Date, and (ii) Sellers shall
provide Buyer with adequate security, either in the form of a
bond or by escrowing the amounts being appealed, to assure Buyer
that Sellers' portion of such tax liability, including any
penalty, will be available. To the extent any taxes which are
the subject of an appeal have been paid by Sellers under protest
and the appeal results in Buyer receiving a credit toward future
tax liability or a refund, then Buyer shall, within ten (10) days
following receipt of such refund or notice of such credit, pay to
Sellers the full amount of such refund or credit allocable to the
period prior to the Closing Date, excluding, however, any portion
of such refund or credit that is required to be passed through to
the tenants pursuant to any Leases or to other parties by existing contract.
(b) Prepaid Expenses. Buyer shall be charged for
those prepaid expenses paid by Sellers directly or indirectly
allocable to any period from and after the Closing Date,
including, without limitation, annual permit and confirmation
fees, fees for licenses and all security or other deposits paid
by Sellers to third parties which Buyer elects to assume and to
which Buyer then shall be entitled to the benefits and refund
following the Closing Date.
(c) Property Income and Expense . The following
prorations and adjustments shall occur as of the closing. Prior
to the Closing Date, Seller shall provide all information to
Buyer required to calculate such prorations and adjustments and
representatives of Buyer and Seller shall together make such calculations:
(i) General. Subject to the specific provisions of
clauses (ii), (iii) and (iv) below, income and expense shall be
prorated on the basis of a 30-day month and on a cash basis
(except for items of income and expense that are payable less
frequently than monthly, which shall be prorated on an accrual
basis). All such items attributable to the period prior to the
Closing Date shall be credited to Sellers; all such items
attributable to the period on and following the Closing Date
shall be credited to Buyer. Buyer shall be credited in escrow
with (a) any portion of rental agreement or lease deposits which
are refundable to the tenants and have not been applied to
outstanding tenant obligations in accordance with the terms of
the applicable Lease and (b) rent prepaid beyond the Closing
Date. Sellers shall transfer Sellers entire interest in any
letters of credit or certificates of deposit held by Sellers as
the deposits described in clause (a) above and shall diligently
cooperate with Buyer in obtaining any reissuance or confirmation
of the effect of the transfer of such instruments. Buyer shall
not be entitled to any interest on rental agreement or lease
deposits or prepaid rent accrued on or before the Closing Date,
except to the extent any such amount of interest is refundable or
payable to any tenant under a Lease. Sellers shall be credited
in escrow with any refundable deposits or bonds held by any
utility, governmental agency or service contractor, to the extent
such deposits or bonds are assigned to Buyer on the Closing Date.
(ii) Leasing Costs. Buyer shall be credited in escrow
with any leasing commissions, tenant improvements or other
allowances to be paid or endured by Buyer on or after the Closing
Date with respect to the current term of any Lease or Lease
modification executed, or any extension term or expansion of
premises exercised, in each case, prior to the date of this
Agreement (other than any In-Negotiation Leases executed prior to
this date), and Sellers shall pay on or before the Closing Date
all such items payable prior to the Closing Date. Sellers shall
be credited in escrow with any leasing commissions, tenant
improvement or other allowances paid or endured by Sellers prior
to or during the Contract Period to the extent such items relate
to (A) the In-Negotiation Leases or (B) other Leases or Lease
modifications executed or extensions of terms or expansions of
premises that are exercised after the date of this Agreement and
are equitably allocable to that portion of the stabilized term
(i.e. the term following the tenant's entry into occupancy and
commencement of unabated rental obligations) of any such Lease
following the Closing Date. Buyer shall assume all obligations
for any leasing commissions, tenant improvement or other
allowances payable following the Closing Date with respect to the
In-Negotiation Leases or such other Leases or Lease modifications
executed following the date of this Agreement. Any expenditures
or commitments to expenditures (and, therefore, any credit to
Sellers based on Sellers' expenditures prior to the Closing Date)
relating to the In-Negotiation Leases in excess of the amounts
budgeted on Exhibit E shall be subject to Buyer's specific
approval; similarly, any expenditures or commitments to
expenditures relating to Leases or modifications executed
following the date of this Agreement in excess of the amounts
budgeted and approved as part of Buyer's approval of the Lease
shall be subject to Buyer's specific approval.
(iii) Capital Projects. Sellers shall be responsible
for the costs and expenses relating to the completion of each of
the items of capital improvement set forth on Exhibit M on or
prior to the Closing Date. If any of such items have not been
completed on or prior to the Closing Date, Buyer shall receive a
credit against the Purchase Price based upon that portion of the
amount set forth with respect to such item on Exhibit M as the
parties shall in good faith determine is necessary to complete
the item and Buyer shall assume the responsibility for all such costs.
(iv) Rents. (A) Rents payable by tenants under the
any Leases, shall be prorated as and when collected (whether such
collection occurs prior to, on, or after the Closing Date).
Buyer shall receive a credit for the amounts actually received
before the Closing Date and which pertain to any period after the
Closing Date. Buyer shall not receive a credit at the closing
for any rents for the month in which the closing occurs which are
in arrears and have not then been received. As to any tenants
who are delinquent in the payment of rent on the Closing Date,
Buyer shall use reasonable efforts (but shall not be required to
commence legal action or terminate or evict a tenant) to collect
or cause to be collected such delinquent rents following the
Closing Date. Any and all rents so collected by Buyer
following the closing (less a deduction for all reasonable
collection costs and expenses incurred by Buyer) shall be
successively applied (after deduction for Buyer's reasonable
collection costs) to the payment of (x) rent due and payable in
the month in which the closing occurs, (y) rent due and payable
in the months succeeding the month in which the closing occurs
(through and including the month in which payment is made) and
(z) rent due and payable in the months preceding the month in
which the closing occurs. If all or part of any rents or other
charges received by Buyer following the closing are allocable to
Sellers pursuant to the foregoing sentence, then such sums shall
be promptly paid to Sellers. Sellers reserve the right to pursue
any damages remedy Sellers may have against any tenant with
respect to such delinquent rents, but shall have no right to
exercise any other remedy under the Lease (including, without
limitation, termination or eviction) and shall not commence any
legal action against a tenant for a period of 90 days following
the Closing Date.
(B) Any percentage rent, escalation charges for
real estate taxes, parking charges, operating and maintenance
expenses, escalation rents or charges, electricity charges, cost
of living increases or any other charges of a similar nature
other than fixed or base rent under the Leases (collectively, the
"Additional Rents") shall be prorated as of the Closing Date
between Buyer and Sellers on or before the date which is sixty
(60) days following the end of the calendar year in which the
closing occurs based on the actual number of days of the year and
month which shall have elapsed as of the Closing Date. Prior to
the end of the calendar year in which the closing occurs, Sellers
shall provide Buyer with information regarding Additional Rents
which were received by Sellers prior to closing and the amount of
reimbursable expenses paid by Sellers prior to closing. On or
before the date which is thirty (30) days following the end of
the calendar year in which the closing occurs, Buyer shall
deliver to Sellers a reconciliation of all expenses reimbursable
by tenants under the Leases, and the amount of Additional Rents
received by Sellers and Buyer relating thereto (the
"Reconciliation"). Upon reasonable notice and during normal
business hours, each party shall make available to the other all
information reasonably required to confirm the Reconciliation.
In the event of any overpayment of Additional Rents by the
tenants to Sellers, Sellers shall promptly, but in no event later
than fifteen (15) days after receipt of the Reconciliation, pay
to Buyer the amount of such overpayment and Buyer, as the
landlord under the particular Leases, shall pay or credit to each
applicable tenant the amount of such overpayment. In the event
of an underpayment of Additional Rents by the tenants to Sellers,
Buyer shall pay to Sellers the amount of such underpayment within
fifteen (15) days following Buyer's receipt of any such amounts
from the tenants.
(d) Adjustments to Prorations. After the closing, the
parties shall from time to time, as soon as is practicable after
accurate information becomes available and in any event within
180 days following the Closing Date, recalculate and reapportion
any of the items subject to proration or apportionment (i) which
were not prorated and apportioned at the closing because of the
unavailability of the information necessary to compute such
proration, or (ii) which were prorated or apportioned at the
closing based upon estimated or incomplete information, or (iii)
for which any errors or omissions in computing prorations at the
closing are discovered subsequent thereto, and thereafter the
proper party shall be reimbursed based on the results of such
recalculation and reapportionment. Unless otherwise specified
herein, all such reimbursements shall be made on or before thirty
(30) days after receipt of notice of the amount due. Any such
reimbursements not timely paid shall bear interest at a per annum
rate equal to ten percent (10%) from the due date until all such
unpaid sums together with all interest accrued thereon is paid if
payment is not made within ten (10) days after receipt of a bill therefor.
Section 6.4 Other Closing Costs.
(a) Sellers shall pay (i) 50% of any governmental
documentary transfer or transaction taxes or fees due on the
transfer of the Properties and (ii) 50% of any escrow or other
costs charged by or reimbursable to the Title Company.
(b) Buyer shall pay (i) 50% of any governmental
documentary transfer or transaction taxes or fees due on the
transfer of the Properties, (ii) any title premium in connection
with the issuance of the Title Policies (including endorsements,
standard or extended coverage and any related survey update
costs), and (iii) 50% of any escrow or other costs charged by or
reimbursable to the Title Company.
(c) Notwithstanding the foregoing, Sellers shall bear
a portion of the total amount payable by Buyer pursuant to
subsections (b)(i) and (ii) if and to the extent that such total
amount exceeds the incremental title premiums attributable to
extended (as opposed to standard) coverage and the cost of all
endorsements or reinsurance charges by more than $500,000.
Section 6.5 Further Documentation. At or
following the close of escrow, Buyer and Sellers shall execute
any certificate or other instruments required by this Agreement,
law or local custom or otherwise reasonably requested by the
other party to effect the transactions contemplated by this Agreement.
Section 6.6 Cooperation in Exchange. The parties
acknowledge and agree that Buyer and certain Sellers may elect to
assign their interest in this Agreement to an exchange
facilitator for the purpose of completing an exchange of the
Properties or interests in the Properties in a transaction which
will qualify for treatment as a tax deferred exchange pursuant to
the provisions of Section 1031 of the Internal Revenue Code of
1986 and applicable state revenue and taxation code sections (a
"1031 Exchange"). Each party agrees to cooperate with any party
so electing in implementing any such assignment and 1031
Exchange, provided that such cooperation shall not entail any
material additional expense to the non-electing party, cause such
party to take title to any other property or cause such party
exposure to any liability or loss of rights or benefits
contemplated by this Agreement. No such assignment by any party
shall relieve such party from any of its obligations hereunder,
nor shall such party's ability to consummate a tax deferred
exchange be a condition to the performance of such party's
obligations under this Agreement.
Section 6.7 Assignment of Indemnities. Buyer
and Sellers acknowledge that Sellers shall transfer and assign to
Buyer at the Closing, as part of the Intangible Property,
Sellers' rights and interests in and to any indemnifications or
covenants from third parties relating to the environmental
condition of the Properties (reserving solely Sellers' rights to
the benefit of such indemnifications and covenants protecting
Sellers with respect to Sellers ownership of the Properties).
Following the Closing, Buyer and Sellers shall cooperate in the
pursuit of any and all claims arising under such instruments,
which cooperation shall include, as required, Sellers' expression
and pursuit of claims for the benefit of Buyer -- provided that
such pursuit is at Buyer's cost and does not expose Sellers to
material additional liability.
ARTICLE VII
MISCELLANEOUS
Section 7.1 Damage or Destruction.
(a) Buyer shall be bound to purchase each of the
Properties as required by the terms of this Agreement without
regard to the occurrence or effect of any damage to or
destruction of any of the Properties or condemnation of any
Property by right of eminent domain, provided that the occurrence
of any damage or destruction involves repair costs of less than
the greater of $750,000 or ten percent (10%) of the Property's
Allocated Purchase Price, and any condemnation does not affect
the use and value of the affected Property in other than a minor
or immaterial manner. If Buyer is so bound to purchase a
Property notwithstanding the occurrence of damage, destruction or
condemnation, then upon the closing: (i) in the event of damage
covered by insurance or an immaterial condemnation, Buyer shall
receive a credit against the Allocated Purchase Price for such
Property in the amount (net of collection costs and costs of
repair reasonably incurred by Sellers and not then reimbursed) of
any insurance proceeds or condemnation award collected and
retained by Sellers as a result of any such damage or destruction
or condemnation plus (in the case of damage) the amount of the
deductible portion of Sellers' insurance policy, and Seller shall
assign to Buyer all rights to such net insurance proceeds or
condemnation awards as shall not have been collected prior to the
close of escrow; and (ii) in the event of damage not covered by
insurance, Buyer shall receive a credit (not to exceed the
greater of $750,000 or ten percent (10%) of the Property's
Allocated Purchase Price for each affected Property) in the
amount of the estimated cost to repair the damage.
(b) If, prior to the Closing Date, any Property
suffers damage or destruction that involves repair costs in
excess of the greater of $750,000 or ten percent (10%) of the
Property's Allocated Purchase Price or condemnation which
affects the use and value of the Property in other than a minor
and immaterial manner, then either Buyer or Seller may elect to
treat such Property as a Deleted Property by giving written
notice of such election to the other party promptly following the
event of damage, destruction or condemnation. In the event of
the deletion of any Property pursuant to this Section 7.1(b), the
parties shall be bound to consummate the purchase and sale of the
balance of the Properties in accordance with this Agreement and
the Purchase Price shall be reduced by an amount equal to the
Allocated Purchase Price of the Deleted Property.
(c) Buyer and Sellers acknowledge that the 5161
Lankershem Property has experienced some damage from construction
and excavation for the underground MTA system in the adjacent
street. Sellers shall assign to Buyer all rights to any claims
against the MTA or any other party responsible for such damage,
any insurance company insuring such responsible party and
Sellers' insurance company. Should no proceeds or compensation
be available other than through claims on Seller's insurance,
Sellers shall be responsible for any costs not covered based on
the insurance deductible amount. Sellers shall pay to Buyer any
net insurance proceeds or compensation received not expended in
the repair of the Property prior to the Closing Date.
Section 7.2 Fees & Commissions.
(a) Each party to this Agreement warrants to the
other that, except as otherwise provided in subparagraph
(b) below, no person or entity can properly claim a right to a
real estate or investment banker's commission, finder's fee,
acquisition fee or other brokerage-type compensation
(collectively, "Real Estate Compensation") based upon the acts of
that party with respect to the transaction contemplated by this
Agreement. Each party hereby agrees to indemnify and defend the
other against and to hold the other harmless from any and all
loss, cost, liability or expense (including but not limited to
attorneys' fees and returned commissions) resulting from any
claim for Real Estate Compensation by any person or entity based
upon such acts.
(b) The parties hereby acknowledge that Smith
Barney Inc. and Lehman Brothers have acted as Sellers'
investment bankers in connection with this transaction. Sellers
shall be responsible for paying any commission or fees due to
such parties in connection with this transaction.
Section 7.3 Successors and Assigns. Buyer may
not assign any of Buyer's rights or duties hereunder without the
prior written consent of Sellers, provided that Buyer may assign
all or any part of its rights to the Operating Partnership or any
other entity in which Buyer or the Operating Partnership directly
or indirectly holds not less than voting/decision-making control
and a 51% economic interest.
Section 7.4 Notices. All notices or other
communications required or provided to be sent by either party
shall be in writing and shall be sent by United States Postal
Service, postage prepaid or certified mail, return receipt
requested, by any nationally known overnight delivery service, by
courier, by facsimile transmission with answer-back acknowledged
or in person. All notices shall be deemed to have been given
forty-eight (48) hours following deposit in the United States
Postal Service or upon personal delivery if sent by overnight
delivery service, courier, facsimile or personally delivered.
All notices shall be addressed to the party at the address below:
To Sellers:
c/o Layton-Belling & Associates
4440 Von Karman Boulevard
Newport Beach, CA 92660
Attn: Phil Belling
and
c/o AEW Capital Management, L.P.
225 Franklin Street
Boston, Massachusetts 02110
Attn: James Finnegan
with a copy to: Heller, Ehrman, White & McAuliffe
333 Bush Street
San Francisco, CA 94104
Attn: Brian Smith
and a copy to: Goodwin, Procter & Hoar
Exchange Place
Boston, MA 02109
Attn: Ettore Santucci
and a copy to: Orrick, Herrington & Suttcliffe
777 So. Figueroa Street
Los Angeles, CA 90017
Attn: Richard Mendelson
To Buyer: Arden Realty, Inc.
9100 Wilshire Boulevard
East Tower, Suite 700
Beverly Hills, CA 90212
Attn: Victor Coleman
with a copy to: Pircher, Nichols & Meeks
1999 Avenue of the Stars
Suite 2600
Los Angeles, CA 90067
Attn: Gary Laughlin
Any address or name specified above may be changed by notice
given to the addressee by the other party in accordance with this
Section 7.4. The inability to deliver because of a changed
address of which no notice was given, or rejection or other
refusal to accept any notice, shall be deemed to be the receipt
of the notice as of the date of such inability to deliver or
rejection or refusal to accept. Any notice to be given by any
party hereto may be given by the counsel for such party.
Section 7.5 ARBITRATION OF DISPUTES. CONTROVERSIES OR
CLAIMS TO BE SUBMITTED TO ARBITRATION PURSUANT TO SECTIONS 2.6,
2.7 OR 3.2 ABOVE SHALL BE RESOLVED BY ARBITRATION CONDUCTED IN
ACCORDANCE WITH THE UNITED STATES ARBITRATION ACT (TITLE 9, U.S.
CODE, SECTION 1 et seq.) ("U.S. ARBITRATION ACT") AND UNDER THE
COMMERCIAL RULES OF THE AMERICAN ARBITRATION ASSOCIATION ("AAA
RULES"). THE ARBITRATOR(S) SHALL GIVE EFFECT TO STATUTES OF
LIMITATION IN DETERMINING ANY CLAIM. ANY CONTROVERSY CONCERNING
WHETHER AN ISSUE IS ARBITRABLE SHALL BE DETERMINED BY THE
ARBITRATOR(S).
JUDGMENT UPON THE ARBITRATION AWARD MAY BE ENTERED IN ANY COURT
HAVING JURISDICTION. THE INSTITUTION AND MAINTENANCE OF AN
ACTION FOR JUDICIAL RELIEF OR PURSUIT OF A PROVISIONAL OR
ANCILLARY REMEDY SHALL NOT CONSTITUTE A WAIVER OF THE RIGHT OF
ANY PARTY, INCLUDING THE PLAINTIFF, TO SUBMIT THE CONTROVERSY OR
CLAIM TO ARBITRATION IF ANY OTHER PARTY CONTESTS SUCH ACTION FOR
JUDICIAL RELIEF.
NOTICE: BY INITIALING 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 LITIGATED IN A
COURT OR JURY TRIAL. BY INITIALING IN THE SPACE BELOW, YOU ARE
GIVING UP YOUR JUDICIAL RIGHTS TO DISCOVERY AND APPEAL, UNLESS
THOSE RIGHTS ARE SPECIFICALLY INCLUDED 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.
BUYER'S INITIALS /s/ VJC SELLERS' INITIALS /s/ MLD /s/ MLD /s/ MLD
/s/ MLD /s/ PB /s/ PB /s/ PB /s/ PB
/s/ PB /s/ PB /s/ PB
Section 7.6 Seller Representatives. Buyer shall
be entitled to rely upon any notice, approval or decision
expressed by the following individuals acting on behalf of all
Sellers: Marc L. Davidson or such other individual or individuals
designated by AEW/LBA Sellers.
Section 7.7 Time. Time is of the essence of
every provision contained in this Agreement.
Section 7.8 Incorporation by Reference. All of
the exhibits attached to this Agreement or referred to herein and
all documents in the nature of such exhibits, when executed, are
by this reference incorporated in and made a part of this Agreement.
Section 7.9 Attorneys' Fees. In the event any
dispute between Buyer and any of Sellers should result in
litigation, the prevailing party shall be reimbursed for all
reasonable costs incurred in connection with such litigation,
including, without limitation, reasonable attorneys' fees and costs.
Section 7.10 Construction. The parties
acknowledge that each party and its counsel have reviewed and
revised this Agreement and that the normal rule of construction
to the effect that any ambiguities are to be resolved against the
drafting party shall not be employed in the interpretation of
this Agreement or any amendments or exhibits hereto.
Section 7.11 Governing Law. This Agreement shall
be construed and interpreted in accordance with and shall be
governed and enforced in all respects according to the laws of
the State of California (without giving effect to conflicts of
laws principles).
Section 7.12 Operating Records. Sellers agree to
make available to Buyer from time to time, but not more
frequently than quarterly, upon reasonable notice, for a period
of two years following the Closing Date, Sellers' operating
records for the Properties, to the extent Sellers have such
operating records, in order to permit Buyer to prepare such
historical financial statements for the Properties as Buyer
requires to satisfy legal or contractual obligations. Sellers
shall have no obligation to prepare any operating statements or
incur any expense in connection with the provisions of this section.
Section 7.13 Confidentiality. Buyer and Sellers
each acknowledge and agree that this Agreement and the terms and
conditions set forth are to be kept confidential unless and until
the closing occurs on the Closing Date in accordance with and
subject to the terms of this Section 7.13. Each party shall be
entitled to discuss and disclose the transaction with employees,
agents, consultants, lenders, clients and representatives of such
party -- each of whom shall be directed by the disclosing party
to maintain such information in confidence. Buyer's public
release of information with respect to the pendency of the
transaction shall be subject to the review and reasonable
approval of Sellers to the extent that such release relates to
Sellers; Sellers' public release of information shall be subject
to Buyer's review and reasonable approval. Buyer, as a public
entity, shall be permitted to disclose any matter relating to the
contemplated transaction as Buyer may determine as necessary or
desirable in connection with fulfilling its obligations under
state and federal securities laws, provided that Buyer shall
exercise good faith efforts to avoid or limit such disclosure and
that the identities of the beneficial ownership of Sellers shall
not be disclosed without Sellers' prior written discretionary
consent unless demonstrably required by law. Sellers shall have
no responsibility with respect to the timing or content of any
such disclosures whatsoever and Buyer shall indemnify and defend
Sellers with respect to any liability based upon a violation of
securities laws or regulations arising out of any inaccuracies in
Buyer's disclosures pertaining to this Agreement or the
contemplated transactions.
Section 7.14 Counterparts. This Agreement may be
executed in one or more counterparts. All counterparts so
executed shall constitute one contract, binding on all parties,
even though all parties are not signatory to the same counterpart.
Section 7.15 Entire Agreement. Excepting solely
that certain Confidentiality Agreement dated as of October 27,
1997, this Agreement and the attached exhibits, which are by this
reference incorporated herein, and all documents in the nature of
such exhibits, when executed, contain the entire understanding of
the parties and supersede any and all other written or oral understanding.
IN WITNESS WHEREOF, Sellers and Buyer have
executed this Agreement as of the day and year first written
above.
Buyer: Solely for the purposes of
Section 2.4(a) above:
Arden Realty, Inc.
Arden Realty Limited
Partnership, a Maryland limited
By:/s/ Victor J. Coleman partnership
Name: Victor J. Coleman By: Arden Realty, Inc.
Its: President & COO
By:/s/ Victor J. Coleman
Name: Victor J. Coleman
Its: President & COO
Sellers: AEW/LBA Acquisition Co. II,
LLC, a California limited
AEW/LBA Acquisition Co., LLC, liability company
a California limited liability
company By: Eastrich No. 175, LLC, a California
By: Eastrich No. 162, LLC, a limited liability company, its
California Member Manager
limited liability company, its
Member Manager By: AEW Partners, L.P., a
Delaware limited
By: AEW Partners, L.P., a partnership, its Member Manager
Delaware limited
partnership, its Member Manager By: AEW/L.P., its
General Partner
By: AEW/L.P., its General Partner
By: AEW, Inc., its
General Partner
By: AEW, Inc., its General Partner
By:/s/ Marc L. Davidson
Marc L. Davidson
By:/s/ Marc L. Davidson Its: Vice-President
Marc L. Davidson
ts: Vice-President
AEW/LBA Acquisition Co. IV, CAL Portfolio VI, L.L.C., a
LLC, a California limited Delaware limited liability
liability company company
By: Eastrich No. 162, LLC, a By: AEW/LBA Acquisition Co.
California III, LLC, a
limited liability company, its California limited liability
Member Manager company, its
Authorized Member
By: AEW Partners, L.P., a
Delaware limited By: Eastrich No. 197, LLC,
partnership, its Member Manager a California
limited liability company, its
By: AEW/ L.P., its Member Manager
General Partner
By: AEW Partners, L.P., a Delaware
By: AEW, Inc. its
General Partner limited partnership, its Member Manager
By: AEW/L.P., its
By:/s/ Marc L. Davidson General Partner
Marc L. Davidson By: AEW, Inc., its General Partner
Its: Vice-President
By:/s/ Marc L. Davidson
Marc L. Davidson
Its: Vice-President
Spectrum Waples Street, LLC, a Spectrum Lambert Plaza, LLC, a
California limited liability California limited liability
company company
By: LBA, Inc., its Manager By: LBA, Inc., its Manager
By:/s/ Phil Belling By:/s/ Phil Belling
Name: Phil Belling Name: Phil Belling
Its: Authorized Signatory Its: Authorized Signatory
Spectrum Huntington Avenue, Spectrum Chicago Avenue , LLC,
LLC, a California limited a California limited liability
liability company company
By: LBA, Inc., its Manager By: LBA, Inc., its Manager
By:/s/ Phil Belling By: /s Phil Belling
Name: Phil Belling Name: Phil Belling
Its: Authorized Signatory Its: Authorized Signatory
Solely for the purposes of Solely for the purposes
Section 2.8: described in Section 2.1:
Spectrum Investments L.P., a
LBA, Inc., a California California limited partnership
corporation
By: LBA, Inc., its General
Partner
By:/s/ Phil Belling
Name: Phil Belling
Its: Authorized Signatory By:/s/ Phil Belling
Name: Phil Belling
Its: Authorized Signatory
Spectrum Investments II L.P., a
California limited partnership
By: LBA, Inc., its General Partner
By:/s/ Phil Belling
Name: Phil Belling
Its: Authorized Signatory
March 2, 1998
Arden Realty, Inc.
Arden Realty Limited Partnership
9100 Wilshire Boulevard
Beverly Hills, CA 90212
Closing Agreement
Ladies and Gentleman:
We refer to that certain Agreement for Purchase and
Sale of AEW/LBA Portfolio (the "Agreement") dated as of December
15, 1997 executed by and among you as the "Buyer" and the set of
"Sellers" defined in and signatory to the Agreement. All
capitalized terms not otherwise defined in this Closing Agreement
shall have the meanings provided in the Agreement. We write to
confirm certain matters relating to such Agreement, specifically,
that the parties agree as follows:
1. Consistent with Section 6.3(c)(i) of the Agreement in which
the parties agreed that (a) Sellers would transfer Sellers'
entire interest in any letters of credit or certificates of
deposit held by Sellers as lease deposits, and that (b) Sellers
would diligently cooperate with Buyer in obtaining any reissuance
or confirmation of the effect of the transfer of such documents,
Sellers and Buyer hereby agree that, following Closing, for any
letter of credit or other collateral held as a lease deposit in
lieu of cash (i) Sellers will cooperate to the extent necessary
to transfer such collateral to Buyer, and (ii) until such time as
the transfer or reissuance of such collateral is effective, Buyer
may request, at Buyer's expense, for Sellers to effect a draw on
a letter of credit or a foreclosure on collateral, with delivery
to Buyer of proceeds from such draw or foreclosure. Sellers
specifically acknowledge that Sellers have not afforded Buyer a
credit and have not transferred to Buyer as of the Closing Date
funds in the approximate amount of $1.25 million representing a
security deposit from PSB Lending at the Carlsbad Corporate
Center Property. Sellers shall transfer such funds upon Buyer's
request following Buyer's establishment of the necessary
segregated account for such purposes.
2. Buyer and AEW/LBA II agree that the option deposit held by
AEW/LBA II from 1st Capital Bancorp with respect to the leasing
of space at Von Karman Corporate Center shall be prorated between
the parties as part of the post-closing reconciliations based
upon the portion of the option period falling before and after
the Closing Date.
3. Notwithstanding the fact that in the Agreement, the legal
description for the Cymer Technology Center includes Lot 43 of
Bernardo Industrial Park Unit No. 17 according to Map thereof No.
10480 filed in the Office of County Recorder of San Diego County,
California, on September 23, 1982 (the "Cymer Parking Lot"), the
parties hereby acknowledge that the Cymer Parking Lot will be
retained by Sellers as part of the Cymer Build-to-Suit and that
an easement agreement affording rights of parking over the Cymer
Parking Lot will be executed for recordation on the Closing Date,
and that there will be no corresponding credit or debit to Buyer
or reduction or increase in Purchase Price due to the fact that
the Cymer Parking Lot is not being transferred as part of the
Agreement or that the parking easement shall be executed. Buyer
and Sellers further agree to cooperate and exercise diligent
efforts to secure the prompt execution by Cymer of the lease
amendments proposed to the Cymer Technology lease and the Cymer
Build-To-Suit lease substantially in the forms approved by Buyer
and Sellers as of this date to reflect the retention of and
easement over the Cymer Parking Lot. The parties further
acknowledge that such lease amendments shall divide the rental
assessed Cymer for the Cymer Parking Lot between the two leases
in proportion to the number of parking spaces allocated to the
respective properties in the Cymer Parking Lot.
4. Buyer shall have the option to purchase from AEW/LBA II the
Cymer Build-To-Suit Property (the "Cymer BTS"), subject to the
following terms and conditions: (a) Buyer shall have until 5
p.m. Los Angeles time on May 2, 1998, to determine, in Buyer's
sole discretion and to be expressed by written notice to AEW/LBA
II, whether Buyer elects to purchase the Cymer BTS; (b) if Buyer
so elects to purchase, Buyer shall deposit with the Title Company
a deposit on account of the BTS Properties in an amount equal to
3% of the aggregate projected purchase price for the Cymer BTS
(as determined in good faith by the parties prior to execution of
the agreement contemplated in the last sentence of this Section);
(c) if Buyer so elects to purchase, Buyer shall be obligated to
purchase the Cymer BTS following AEW/LBA II's substantial
completion of all landlord improvements at the Cymer BTS and the
commencement of the term of the lease currently in place with
respect to the Cymer BTS; (d) the purchase price for the Cymer
BTS shall be the annualized stabilized net operating income for
the Cymer BTS divided by a capitalization rate of eight and one-
half percent (8.5%); (e) the calculation of the purchase price
shall exclude from the rental income any amortization of tenant
improvement costs expended by AEW/LBA II in excess of the
allowance defined in the lease, provided that Buyer shall
reimburse AEW/LBA II at the closing for the amount of such costs;
and (f) AEW/LBA II shall assign to Buyer all warranties,
guaranties and contract rights relating to the general contractor
or otherwise relating to the construction of the improvements.
Buyer and AEW/LBA II shall negotiate in good faith and execute a
separate agreement consistent with the foregoing and otherwise
satisfactory to each party to document their respective rights
and obligations as to the option to purchase the Cymer BTS.
5. Buyer acknowledges the existence of that certain mechanic's
lien filed against the Westridge property by C.S.I. Inc. ("CSI")
relating to a contract for services between CSI and a tenant of
the property, Depositech, Inc. which by its express terms only
applies to the leasehold premises of Depositech. Sellers
currently hold certificates of deposit, cash or deposits, in an
amount in excess of the mechanic's lien claim, from Depositech,
and such certificates, cash or deposits are specifically
designated to secure all costs incurred by the tenant in
connection with tenant improvements to the tenant's leasehold
premises. The parties acknowledge that at closing, Sellers will
transfer (consistent with the terms of Paragraph 1 above) such
deposit to Buyer, and that thereafter Sellers will bear no
liability to address the removal of such mechanic's lien from the
property;
6. Buyer acknowledges that Section 2.1 of the Agreement, which
contemplates distributions of some assets from AEW/LBA I and/or
AEW/LBA II to Spectrum entities before the final transfer of
those assets to Buyer, shall apply instead to similar
distributions of assets, prior to their final distribution to
Buyer, from AEW/LBA IV and CAL VI to Spectrum I and to Spectrum
III, respectively;
7. Buyer acknowledges that on the signature page to the
Agreement (a) one of the Seller entities, Spectrum Huntington
Center, LLC, was mis-identified as Spectrum Huntington Avenue,
LLC, and (b) the general partner of Spectrum Investments, L.P.
and Spectrum Investments II, L.P., LBA Fund I, Inc., was mis-
identified as LBA, Inc. Buyer hereby acknowledges that
consistent with the correction of such mis-identifications,
Spectrum Huntington Center, LLC (and not Spectrum Huntington
Avenue, LLC) and LBA Fund I Inc. (and not LBA Inc.) will be the
signatories on various Closing Documents, where appropriate.
8. Pursuant to Section 6.3(c)(iii) of the Agreement, Sellers
are responsible for the costs and expenses relating to the
completion of each of the items of capital improvement set forth
on Exhibit M to the Agreement on or prior to the Closing Date.
For any such items which have not been completed on or prior to
the Closing Date, the Agreement further states that Buyer will
receive a credit against the Purchase Price based upon that
portion of the amount set forth with respect to such item on
Exhibit M as the parties in good faith determine is necessary to
complete the item. Buyer shall thereafter assume the
responsibility for all such costs. Consistent with the
foregoing:
(a) Buyer hereby acknowledges that, for any
Exhibit M item for which no credit has been given to
Buyer (other than the item described in subsection (b)
below with reference to Carlsbad Corporate Center),
Buyer shall have a period of 15 business days following
the Closing Date in which to confirm the completion of
items on Exhibit M or to identify in writing to Sellers
any Exhibit M items not completed. If Buyer so
identifies any incomplete items in timely fashion and
in fact such items are not complete, Sellers shall
refund to Buyer that portion of the amount set forth
with respect to such item on Exhibit M as the parties
shall in good faith determine is necessary to complete
the item and Buyer shall assume the responsibility for
all such costs.
(b) Buyer and Sellers confirm that Sellers have
commenced but not completed the project described on
Exhibit M with reference to Carlsbad Corporate Center -
- the construction of a parking lot and related
improvements (the "Carlsbad Project"). Buyer,
therefore, shall receive a credit on the Closing Date
in the amount of the $444,737 representing the current
estimated cost to complete the Carlsbad Project (the
"Estimated Cost"). To date, the scope and plans for
the project have been defined and are under review for
the issuance of requisite governmental approvals.
Promptly following receipt of such approvals, Buyer and
Sellers shall cooperate to secure bids from three
qualified parking lot construction contractors for the
construction of the Carlsbad Project. The character of
the process of securing bids and the selection of the
bidding contractors shall be subject to the approval of
both Buyer and Sellers. Buyer shall have full control
and decision authority with respect to the award of the
bid, construction contract terms and the execution of
the Carlsbad Project. If the amount of the low bid
secured through the approved bidding process is less
than the Estimated Cost, Buyer shall refund to Sellers
the amount of the difference within 30 days following
the execution of the contracts; if the amount of the
low bid is in excess of the Estimated Cost, Sellers
shall pay the amount of the difference to Buyer within
30 days following execution of the contracts.
9. Buyer and Sellers agree that the amounts of any credits
afforded Sellers on the Closing Date on account of amounts paid
by Sellers on construction and related contracts on tenant
improvement or other capital projects the costs of which are
borne by Buyer pursuant to the Agreement shall be subject to the
reconciliation provisions of the Agreement,.
10. Buyer and AEW/LBA II acknowledge that the parties shall
cooperate following the Closing Date to transfer to Buyer any
rights and obligations of AEW/LBA as the declarant or manager
under property owner associations affecting the Properties,
including those affecting Airport Commerce Center and 1501 Hughes
Freeway Business Park. To that end, AEW/LBA shall transfer to
Buyer any and all association books, records, accounts or funds
held by AEW/LBA -- all in accordance with any procedures
prescribed under the associations' governing documents.
11. Notwithstanding Buyer's failure to proceed with the purchase
of the BTS Properties and the proviso at the close of Section 2.3
of the Agreement, Buyer shall be entitled to the full amount of
the credits set forth in subsection 2.3(e) of the Agreement.
12. Buyer and CAL VI acknowledge that CAL VI has disclosed to
Buyer, without representation or warranty, the expression of
tenant concerns as to air quality within the Camarillo Business
Park building and reports prepared by third party consultants
with respect to such matters. Consistent with the Agreement,
Buyer has assumed fully the risk of such adverse conditions.
Notwithstanding the foregoing and without implying any
representation, warranty, indemnity or other undertaking not
expressly set forth in the Agreement, CAL VI agrees that the
release set forth in Section 2.5(d) of the Agreement shall not
operate to waive rights, if any, Buyer may possess with respect
to claims relating to injuries arising out of adverse air quality
conditions during CAL VI's ownership of Camarillo Business Park.
Nor shall the limitations of Section 4.4 operate to limit any
such extra-contract rights, if any, that Buyer may possess with
respect to the Camarillo Business Park air quality matter.
13. Sellers represent that Exhibit A to this letter sets forth
under the heading "Deposit per LBA" a materially accurate list of
the amounts collected by the Seller in ownership of the
identified Property as the security deposit from the identified
tenant. Sellers make no representation as to Buyer's ability to
collect any additional amount as a security deposit from such
tenant.
14. Buyer acknowledges that AEW/LBA II has disclosed to Buyer a
complaint and related lis pendens filed as Case No. 718225 in the
Superior Court of San Diego County relating to the assertions of
Fairfield Properties Inc. ("Fairfield") of a breach by AEW/LBA II
of certain rights of second refusal afforded in Fairfield's lease
at Sorrento Valley Science Park (the "Fairfield Matter"). Buyer
and AEW/LBA II, in a collaborative effort to permit AEW/LBA II to
address the Fairfield Matter in an efficient and effective manner
and to achieve certain beneficial leasing at the Sorrento Valley
Property have agreed as follows:
(a) AEW/LBA shall cause the Title Company to
remove the lis pendens filed as part of the Fairfield
Matter affecting the first and second floors of 5510
Morehouse Drive at the Sorrento Valley Property as an
exception to the vestee's title set forth in the Title
Policy issued by the Title Company for the Sorrento
Valley Property.
(b) AEW/LBA II acknowledges that AEW/LBA and not
Buyer shall be responsible for any loss or damage
suffered by Fairfield based upon the alleged breach of
the Fairfield lease described as the Fairfield Matter.
Provided that Arden performs consistent with the
undertakings set forth in subsections (c) and (d)
below, AEW/LBA II shall indemnify, defend and hold
harmless Buyer from and against any claim for such
damages asserted by Fairfield against Buyer arising out
of the Fairfield Matter, including, without limitation,
all reasonable costs and expenses and attorneys' fees
suffered or incurred by Buyer in connection with such a
claim (provided that AEW/LBA II shall control in good
faith any settlement with respect to such damage
claims).
(c) AEW/LBA II is in the process of finalizing
the terms of an agreement with Ogden Environmental &
Energy ("Ogden") with respect to the termination of
certain premises occupied by Ogden on the first floor
of 5510 Morehouse Drive and the execution of a new
lease at 5590 Morehouse Drive. The parties acknowledge
that the termination of Ogden's existing lease would
permit AEW/LBA II to mitigate any claim by Fairfield by
offering Ogden's space to Fairfield for lease at market
terms. Based on consideration afforded Buyer in this
letter and the closing process and based on Buyer's
review and approval of the current proposed term sheet
governing the proposed Ogden transaction set forth as
Exhibit B to this letter, Buyer agrees following the
Closing Date to pursue with due diligence (and with the
cooperation and involvement of AEW/LBA II) the
negotiation and finalization of the terms of the Ogden
lease transaction. If so finalized, Buyer shall
execute and assume the landlord's rights and
obligations under a lease with Ogden consistent in all
material respects with that described on Exhibit B.
(d) Consistent with the foregoing and based on
other consideration afforded Buyer as part of the
closing process, Buyer further agrees following the
Closing Date to pursue with due diligence (and with the
cooperation and involvement of AEW/LBA II) the offer,
negotiation and finalization of the terms of a lease
with Fairfield for the space vacated by Ogden in 5510
Morehouse Drive consistent in all material respects
with that described on Exhibit C to this letter and to
execute and assume the landlord's rights and
obligations under such lease.
(e) Arden shall bear the costs, including legal
fees, tenant improvements and leasing commissions,
incurred in connection with the preparation, execution
and performance of the leases/amendments evidencing the
Exhibit B and Exhibit C leasing transactions.
(f) AEW/LBA II shall bear any incremental costs
incurred which relate to the defense or settlement of
the Fairfield Matter.
15. As contemplated by Section 4.2(c) of the Agreement, Sellers
confirm that Sellers have terminated all property management
agreements affecting the Properties on or prior to the Closing
Date and have terminated or provided written notice of
termination under agreements for the performance of leasing
brokerage services. Sellers further confirm that all such
agreements terminate upon sale, upon written notice or within 30
days following written notice.
16. Buyer and Sellers agree that leasing commissions in the
approximate amount of $104,000 otherwise payable or reimbursable
to Sellers by Buyer in accordance with the provisions of Section
6.3(c)(ii) of the Agreement shall not be so paid or reimbursed to
the extent that such fees would be payable to LBA, Inc.
17. AEW/LBA I confirms that it has paid the sum of approximately
$10,000 representing the sole amount assessed to date on account
of a Public Facilities Fee in connection with the development of
the movie theater project at the Tower Plaza Property designated
by the City of Temecula as Project PA95-0114 pursuant the
Agreement for Payment of Public Facilities Fee entered into with
the City dated March 25, 1997. AEW/LBA I acknowledges and agrees
that it shall be fully responsible for the timely payment of any
additional assessment of a Public Facilities Fee under the City
agreement relating to the development of the project by AEW/LBA
I. Buyer shall provide AEW/LBA I with notice and copies of any
such assessment provided to Buyer by the City.
18. Buyer and Brea Tech Associates, LLC, an entity with
beneficial ownership consistent with that of AEW/LBA I, shall
negotiate in good faith and finalize within 15 business days
following the Closing Date a definitive agreement affording the
following rights with respect to the Tower Plaza Retail Property
and the portion of the Tower Plaza retail area consisting of the
proposed "Michael's" development pad, the contiguous development
pad and related common area retained by AEW/LBA I and transferred
to Brea Tech Associates following the closing (the "Pads"):
(a) If, at any time within 12 months following
the Closing Date, Arden or any affiliate (but no
successor-in-ownership to Arden) desires to sell the
Tower Plaza Retail Property and the Pads in a unified
sale to a third party, Arden shall have the right to
"drag" Brea Tech along to participate in such sale.
The allocation of the aggregate purchase price between
the parties in such a unified sale shall be subject to
agreement or, in the absence of agreement, to
determination pursuant to a methodology to be set forth
in the definitive agreement. Arden and Brea shall
cooperate in any such unified sale to provide any and
all information to one another necessary to market and
conclude such sale in an efficient fashion.
(b) If, at any time within 24 months following
the Closing Date, Brea Tech desires to sell the Pads,
Arden or any affiliate (but no successor-in-ownership
to Arden) shall have a right of first offer (subject to
a prompt response period) to purchase the Pads at a
price proposed by Brea Tech. The precise terms of the
right of first offer shall be set forth in the
definitive agreement. Both this right of first offer
and the foregoing drag-along right shall terminate if
Brea Tech sells to any unaffiliated third party
successor following Arden's declination of the right of
first offer.
[Balance of Page Intentionally Blank]
* * * * *
If you agree that the foregoing represents an accurate
expression of our agreement, please execute a copy of this letter
agreement in the space provided below and return a signed copy to
the undersigned.
Very truly yours,
AEW/LBA Acquisition Co., LLC
AEW/LBA Acquisition Co. II, LLC
AEW/LBA Acquisition Co. IV, LLC
Cal Portfolio VI, L.L.C.
Spectrum Huntington Center, LLC
Spectrum Chicago Avenue , LLC
Spectrum Waples Street, LLC
Spectrum Lambert Plaza, LLC
By:/s/ Phil Belling
Phil Belling
By:/s/ Paul E. Slye
Paul E. Slye
Authorized Sellers's Signatories
AGREED TO BY BUYER:
Arden Realty, Inc. Arden Realty Limited
Partnership, a Maryland limited partnership
By:
Name: Victor Coleman By: Arden Realty, Inc.
Its: President
By:/s/ Victor J. Coleman
Name: Victor Coleman
Its: President
AGREED TO SOLELY FOR THE PURPOSES
OF SECTION 18:
BREA TECH ASSOCIATES, LLC
By: /s/ Paul E. Slye
Paul E. Slye
Its: Authorized Signatory
WARRANT AGREEMENT
by and between
ARDEN REALTY, INC.
and
AEW/LBA ACQUISITION CO. II, LLC
Dated as of March 2, 1998
ARDEN REALTY INC.
THIS WARRANT AGREEMENT (the "Agreement"), dated as of March
2, 1998, is entered into by and among Arden Realty Inc., a
Maryland corporation (the "Company") and AEW/LBA Acquisition Co.
II, LLC, a California limited liability company ("Purchaser").
R E C I T A L S:
A. Pursuant to the terms and conditions of that
certain Agreement for Purchase and Sale of AEW/LBA Portfolio
dated as of December 15, 1997, by and among the Company, as
"Buyer," and the Purchaser and certain additional named parties,
as "Sellers," (the "Purchase Agreement"), the Company desires to
sell to the Purchaser warrants (each, a "Warrant", and
collectively, the "Warrants") to purchase up to an aggregate of
2,500,000 shares of common stock, $.01 par value per share
("Common Shares") (subject to adjustment) of the Company. The
Common Shares issuable upon exercise of the Warrants shall be
referred to as the "Warrant Shares."
B. Pursuant to the terms and conditions of the
Purchase Agreement, the Purchasers desire to purchase the
Warrants.
NOW, THEREFORE, in consideration of the premises and of the
mutual agreements herein contained, the parties hereto agree as
follows:
ARTICLE I
WARRANT CERTIFICATES
Section 1.1 Warrant Certificates. The warrant
certificates representing the Warrants purchased by the Purchaser
(the "Warrant Certificates") shall be issued in registered form
only and, together with the form of the election to purchase (the
"Election to Purchase") and assignment to be attached thereto,
shall be substantially in the form of Exhibit A attached hereto
and, in addition, may have such letters, numbers or other marks
of identification or designation and such legends, summaries, or
endorsements stamped, printed, lithographed or engraved thereon
as the Company may deem appropriate and as are not inconsistent
with the provisions of this Agreement, or as, in any particular
case, may be required in the opinion of counsel for the Company,
to comply with any law or with any rule or regulation of any
regulatory authority or agency, or to conform to customary usage.
Subject to the rights of exchange set forth in Section 1.4, the
Company shall issue an initial Warrant Certificate to Purchaser
representing the Warrants to purchase the full measure of
2,500,000 Common Shares.
Section 1.2 Execution of Warrant Certificates. The
Warrant Certificates shall be executed on behalf of the Company
by its Chairman or President and attested to by another
authorized officer of the Company, either manually or by
facsimile signature printed thereon. In the event that any
authorized officer of the Company who shall have signed any of
the Warrant Certificates shall cease to be an officer of the
Company either before or after delivery thereof by the Company to
any Purchaser, the signature of such person on such Warrant
Certificates shall be valid nevertheless and such Warrant
Certificates may be issued and delivered to those persons
entitled to receive the Warrants represented thereby with the
same force and effect as though the person who signed such
Warrant Certificates had not ceased to be an officer of the
Company.
Section 1.3 Registration of Warrant Certificates. The
Company shall number and register the Warrant Certificates in a
warrant register maintained by the Company as they are needed.
The Company may deem and treat the registered holder(s) of the
Warrant Certificates (the "Holders") as the absolute owner(s)
thereof for all purposes.
Section 1.4 Exchange and Transfer of Warrant
Certificates. (a) The Warrants (and any Warrant Shares issued
upon exercise of the Warrants) shall bear such restrictive legend
or legends as may be required by this Agreement and as may be
required by law and shall be transferable only in accordance with
the terms of this Agreement. Subject to the foregoing, the
Warrants shall be fully and freely transferable in whole or in
part.
(b) The Company shall from time to time register the
transfer of any outstanding Warrant Certificates in the warrant
register upon surrender thereof accompanied by a written
instrument or instruments of transfer in form reasonably
satisfactory to the Company duly executed by the Holder or
Holders thereof or by the duly appointed legal representative
thereof or by a duly authorized attorney. Upon any such
registration of transfer, the Company shall issue as promptly as
practicable and in any event within seven (7) days after receipt
of such notice of transfer a new Warrant Certificate to the
transferee(s).
(c) At any time and from time to time based upon the
transfer or exercise of fewer than all the Warrants represented
by any Warrant Certificate or otherwise, Warrant Certificates may
be exchanged at the option of the Holder(s) thereof when
surrendered to the Company at the address set forth in Section
4.5 hereof for another Warrant Certificate or Warrant
Certificates of like tenor and representing the right to purchase
in the aggregate a like number of Warrant Shares; provided that
the Company shall not be required to issue any Warrant
Certificate representing any fractional Warrant Shares.
(d) The Company shall pay all expenses, taxes and
other charges payable in connection with the preparation,
issuance and delivery of new Warrant Certificates, including,
without limitation, any transfer or stamp taxes.
(e) The Warrants may not be sold or transferred in
violation of the stock ownership restrictions set forth in the
Company Charter (the "Charter") and any such attempted sale or
transfer shall be subject to the remedies set forth in the
Charter subject to the Holder's rights pursuant to Section 2.4
hereof.
Section 1.5 Lost, Stolen, Mutilated or Destroyed
Warrant Certificates. If any Warrant Certificate shall be
mutilated, lost, stolen or destroyed, the Company shall issue,
execute and deliver, in exchange and substitution for and upon
cancellation of such mutilated Warrant Certificate, or in lieu of
or in substitution for such lost, stolen or destroyed Warrant
Certificate, a new Warrant Certificate representing an equivalent
number of Warrants or Warrant Shares. If required by the
Company, the Holder of the mutilated, lost, stolen or destroyed
Warrant Certificate must provide indemnity reasonably sufficient
to protect the Company from any loss which it may suffer if the
Warrant Certificate is replaced. Any new Warrant Certificate
shall constitute an original contractual obligation of the
Company, whether or not the allegedly lost, stolen, mutilated or
destroyed Warrant Certificate shall be at any time enforceable by
anyone.
Section 1.6 Cancellation of Warrant Certificates. Any
Warrant Certificate surrendered upon the exercise of Warrants or
for exchange or transfer, or purchased or otherwise acquired by
the Company, shall be canceled and shall not be reissued by the
Company; and, except as provided in Section 2.6 with respect to
the exercise of fewer than all of the Warrants evidenced by a
Warrant Certificate or in Section 1.4 with respect to an exchange
or transfer, no Warrant Certificate shall be issued hereunder in
lieu of such canceled Warrant Certificate. Any Warrant
Certificate so canceled shall be destroyed by the Company.
ARTICLE II
WARRANT EXERCISE PRICE AND EXERCISE OF WARRANTS
Section 2.1 Exercise Price. Each Warrant Certificate
shall, when duly issued by the Company, entitle the Holder
thereof to purchase from the Company, subject to the terms and
conditions of this Agreement, the number of fully paid and
nonassessable Warrant Shares evidenced thereby at a purchase
price equal to the Exercise Price (as defined below) or such
adjusted number of Warrant Shares at such adjusted purchase price
as may be established from time to time pursuant to the
provisions of Article III hereof, payable in full in accordance
with Section 2.4, at the time of exercise of the Warrant. For
the foregoing purposes, the following meanings shall apply:
(a) "Exercise Price shall refer to $29.56875 per
share of Common Shares. Notwithstanding the foregoing, the
Exercise Price per Common Share shall be increased by an
amount equal to the amount, if any, by which the Market
Value (as defined below) per Common Share as of the Date of
Exercise exceeds the Exercise Price (determined without
reference to such increase) by more than $6.00 per Common
Share. The $6.00 figure shall be referred to as the "Cap
Amount." The Exercise Price determined pursuant to the
initial sentence of this subsection (a) and without
reference to any increase based upon Market Value and the
Cap Amount shall be referred to as the "Basic Exercise
Price."
(b) "Date of Exercise" with respect to any
Warrant means the date on which such Warrant is exercised as
provided in this Agreement.
(c) "Closing Price" for any date shall mean the
last sale price reported in The Wall Street Journal regular
way or, in case no such reported sale takes place on such
date, the average of the last reported bid and asked prices
regular way, in either case on the New York Stock Exchange.
(d) "Trading Days" with respect to the Common
Shares means days on which the New York Stock Exchange is
open for business.
(e) "Market Value" on a per share basis, means
the average of the daily Closing Prices of the Common Shares
for the ten (10) consecutive Trading Days ending on the
Trading Day immediately preceding a Date of Exercise.
Section 2.2 Legend. The Purchaser hereby acknowledges
that the Warrants and Warrant Shares are being and will be issued
and sold in a transaction not involving any public offering
within the meaning of the Securities Act of 1933, as amended (the
"Securities Act"), and that the Warrants and Warrant Shares have
not and shall not have been registered under the Securities Act.
Except for any distribution of Warrants to the Distributee (as
defined in Section 2.3) and without prejudice to the Purchaser's
right at all times to sell or otherwise dispose of all or any
part of the Warrants and Warrant Shares pursuant to an effective
registration statement under the Securities Act or under an
exemption from registration available under the Securities Act,
the Purchaser hereby agrees not to offer, sell, transfer or
otherwise dispose of any of the Warrants or Warrant Shares it is
issued pursuant to the Purchase Agreement in the absence of the
registration unless the Purchaser delivers to the Company an
opinion of a lawyer experienced in securities matters and
reasonably satisfactory to the Company in form and substance
reasonably satisfactory to the Company, to the effect that the
proposed sale, transfer or other disposition may be effected
without registration under the Securities Act and under
applicable state securities or "blue sky" laws. The Purchaser
hereby further acknowledges that each certificate representing
the Warrants and Warrant Shares shall bear a legend in
substantially the following form:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED (THE "ACT"), OR THE SECURITIES LAWS OF ANY
STATE AND MAY NOT BE TRANSFERRED, SOLD, ASSIGNED,
PLEDGED, HYPOTHECATED OR OTHERWISE DISPOSED OF IN THE
ABSENCE OF SUCH REGISTRATION UNLESS THE COMPANY HAS
BEEN FURNISHED WITH AN OPINION OF COUNSEL REASONABLY
SATISFACTORY TO THE COMPANY, IN FORM AND SUBSTANCE
REASONABLY SATISFACTORY TO THE COMPANY, TO THE EFFECT
THAT THE PROPOSED SALE, TRANSFER OR OTHER DISPOSITION
MAY BE EFFECTED WITHOUT REGISTRATION UNDER THE
SECURITIES ACT AND UNDER APPLICABLE STATE SECURITIES OR
"BLUE SKY" LAWS."
Section 2.3 Accredited Investor; Investment Intent.
The following shall be true (i) with respect to the Purchaser and
each Distributee (as defined below) at the time of original
issuance of the Warrants and (ii) with respect to the Holder of
any Warrant upon the exercise of such Warrant with respect to the
issuance of Warrant Shares:
(a) Such person is an "accredited investor" as defined in
Regulation D promulgated under the Securities Act.
(b) The Warrants and/or Warrant Shares acquired or to be
acquired by such person are being sold or will be acquired for
such person's own account for investment only and not with a view
to, or with any present intention of, a distribution or resale
thereof in violation of the Securities Act or state or "blue sky"
laws, without prejudice to such person's right at all times to
sell or otherwise dispose of all or any pat of the Warrants or
Warrant Shares pursuant to an effective registration statement
under the Securities Act or under an exemption from registration
available under the Securities Act.
"Distributee" shall mean any person who receives Warrants or
Warrant Shares pursuant to a distribution by the Purchaser or a
member of the Purchaser to their respective constituent
shareholders, partners or members.
Section 2.4 Exercise of Warrants. The Warrants may be
exercised prior to the Expiration Date (as hereinafter defined)
at the Exercise Price at any time and from time to time subject
to the limits on ownership of the Company stock set forth in the
Company Charter and the provisions of this Section 2.4. The
Warrants shall expire at 5:00 p.m., New York City time, on March
2, 2001 (the "Expiration Date"). The Warrants may be exercised
by surrendering the Warrant Certificates representing such
Warrants to the Company at its address set forth in Section 4.5,
together with the Election to Purchase duly completed and
executed, accompanied by payment in full, as set forth below, to
the Company of the Exercise Price for each Warrant Share with
respect to which such Warrants are being exercised. Such
Exercise Price shall be paid in full by (i) cash or a certified
check or a wire transfer in same day funds in an amount equal to
the Exercise Price multiplied by the number of Warrant Shares
then being purchased or (ii) delivery to the Company of that
number of Common Shares having a Market Value equal to the
Exercise Price multiplied by the number of Warrant Shares then
being purchased. In the alternative, the Holder of a Warrant
Certificate may exercise its right to purchase some or all of the
Warrant Shares subject to such Warrant Certificate, on a net
basis, such that, without the exchange of any funds, such Holder
receives that number of Warrant Shares subscribed to pursuant to
such Election to Purchase less that number of Common Shares
having an aggregate Market Value on the Exercise Date equal to
the aggregate Exercise Price that would otherwise have been paid
by such Holder for the number of Warrant Shares subscribed to
pursuant to such Election to Purchase (a "Net Cashless
Exercise"). Notwithstanding any other provision of this
Agreement, no Warrant Shares shall be issued in respect of any
exercise of a Warrant by any Holder to the extent that the
ownership or right to acquire Warrant Shares pursuant to such
exercise by such Holder would:
(a) for so long as the Company is in compliance with the
REIT Requirements (as defined below), cause the Company to
violate the REIT Requirements and such Holder shall have no right
under this Agreement or the Warrants to acquire Warrant Shares to
the extent that such acquisition could cause such Holder to
beneficially own (as such term is defined under the Internal
Revenue Code of 1986, as amended (the "Code") for purposes of the
REIT Requirements) Warrant Shares in excess of the Ownership
Limit (as defined below);
(b) otherwise be prohibited under the Company's Amended and
Restates Articles of Incorporation (as amended from time to
time); or
(c) otherwise cause the Company to be in violation of the
REIT Requirements.
To the extent that any attempted exercise of Warrants would be in
violation of this Section 2.4, it shall be null and void ab
initio and, except as otherwise provided in this Section 2.4,
such Holder shall not acquire any interest in any Warrant Shares
otherwise issuable upon such exercise; provided, however, that
(i) at such Holder's request the Company shall be required to pay
in cash to such Holder the value of the Warrant Shares otherwise
issuable upon such exercise based on the higher of (x) the Market
Value with respect to the exercise giving rise to the violation
or (y) the average of the daily Closing Prices of the Common
Shares for the ten (10 ) consecutive Trading Days ending on the
Trading Day immediately preceding the date of payment of such
cash amount, and (ii) if the Holder exercised the right described
in the foregoing clause (i), such Holder's Warrants shall be
deemed to have been canceled to the extent of the right to
acquire the Warrant Shares for which such Holder shall have been
compensated in cash. "Ownership Limited" shall mean 9.8% (in
value or in number of shares, whichever is more restrictive) of
the outstanding Common Shares. "REIT Requirements" shall mean
the requirements for the Company to (i) continue to qualify as a
real estate investment trust under the Code and the rules and
regulations promulgated thereunder and (ii) avoid any federal
income or excise tax liability.
Section 2.5 Issuance of Common Shares. As promptly as
practicable after the Date of Exercise of any Warrants and in any
event within seven (7) days after receipt of the Election to
Purchase, the Company shall issue, or cause its transfer agent to
issue, a certificate or certificates for the number of non-
fractional Warrant Shares (the "Common Share Certificate"),
registered in accordance with the instructions set forth in the
Election to Purchase, together with cash for fractional Warrant
Shares as provided in Section 3.9. All Warrant Shares issued
upon the exercise of any Warrants shall be validly authorized and
issued, fully paid, non-assessable, free of preemptive rights and
free from all taxes, liens, charges and security interests in
respect of the issuance thereof. Each person in whose name any
such Common Share Certificate is issued shall be deemed for all
purposes to have become the holder of record of the Common Shares
represented thereby on the Date of Exercise of the Warrants
resulting in the issuance of such shares, irrespective of the
date of issuance or delivery of such Common Share Certificate.
The Company shall pay all expenses, taxes and other charges
payable in connection with the preparation, issuance and delivery
of new Common Share Certificates, including, without limitation,
any transfer or stamp taxes.
Section 2.6 Certificates for Unexercised Warrants. In
the event that, prior to the Expiration Date, a Warrant
Certificate is exercised with respect to fewer than all of the
Warrant Shares issuable on such exercise a new Warrant
Certificate representing the remaining Warrant Shares shall be
issued and delivered pursuant to the provisions hereof; provided
that the Company shall not be required to issue any Warrant
Certificate representing any fractional Warrant Shares.
Section 2.7 Reservation of Common Shares; Listing.
The Company shall at all times reserve and keep available, free
from preemptive rights, for issuance upon the exercise of
Warrants, the maximum number of its authorized but unissued
shares of Common Shares which may then be issuable upon the
exercise in full of all outstanding Warrants. If the Common
Shares are listed on any U.S. national securities exchange at the
time of any issuance of Warrant Shares, then such maximum number
of Common Shares shall be duly listed thereon.
Section 2.8 No Impairment. The Company shall not by
any action, including, without limitation, amending its articles
of incorporation or through any reorganization, transfer of
assets, consolidation, merger, dissolution, issue or sale of
securities or any other voluntary action, avoid or seek to avoid
the observance or performance of any of the terms of the Warrants
or this Agreement, but will at all times in good faith assist in
the carrying out of all such terms and in the taking of all such
actions as may be necessary or appropriate to protect the rights
of the Holders against impairment. Without limiting the
generality of the foregoing, the Company shall obtain all such
authorizations, exemptions or consents from any public regulatory
body having jurisdiction thereof as may be necessary to enable
the Company to perform its obligations under the Warrants.
Section 2.9 Restrictions on Transfer of Warrant
Shares. Any Holder or Holders of Warrant Shares shall be
prohibited from the transfer of the Warrant Shares pursuant to
the registration rights set forth in this Agreement during the
limited period commencing on the date of this Agreement and
ending on the earlier to occur of (a) the date thirty-six days
following the Company's completion of financings (i.e., public
offering or a private placement of the Company's equity
securities, debt transactions, joint venture or any combination
of the foregoing) in which the proceeds received by the Company
are adequate to consummate the transactions contemplated by the
Purchase Agreement or (b) the date six months following the date
of this Agreement.
ARTICLE III
ADJUSTMENT PROVISIONS
Section 3.1 Adjustment of Exercise Price. Subject to
the provisions of this Article III, the Exercise Price in effect
from time to time shall be subject to adjustment, as follows:
(a) In the event that the Company shall (i) declare a
dividend or make a distribution on the outstanding Common Shares
in additional Common Shares, (ii) subdivide or reclassify the
outstanding Common Shares into a greater number of shares, or
(iii) combine or reclassify the outstanding Common Shares into a
fewer number of shares, the Exercise Price shall be adjusted and
determined after the record date for such dividend or
distribution or the effective date of such subdivision,
combination or reclassification, as the case may be, as follows:
each of the Basic Exercise Price and the Cap Amount in effect
immediately prior thereto shall be multiplied by a fraction, of
which the numerator shall be the number of Common Shares
outstanding immediately before such dividend, distribution,
subdivision, combination or reclassification, and of which the
denominator shall be the number of Common Shares outstanding
immediately after such dividend, distribution, subdivision,
combination or reclassification. Any Common Shares issuable in
payment of a dividend shall be deemed to have been issued
immediately prior to the record date for such dividend for the
purpose of calculating the number of outstanding Common Shares
under this Section. Such adjustments shall be made successively
whenever any event specified above shall occur.
(b) Upon each adjustment of the Exercise Price
pursuant to subsection (a), each Warrant shall thereupon evidence
the right to purchase that number of Warrant Shares (calculated
to the nearest hundredth of a share) obtained by multiplying the
number of Warrant Shares purchasable immediately prior to such
adjustment upon exercise of the Warrant by a fraction, of which
the numerator shall be the number of Common Shares outstanding
immediately after the dividend, distribution, subdivision,
combination or reclassification, and of which the denominator
shall be the number of Common Shares outstanding immediately
prior such dividend, distribution, subdivision, combination or
reclassification.
(c) In the event of any capital reorganization, other
than in the cases referred to in subsection (a), or the
consolidation or merger of the Company with or into another
corporation (other than a merger or consolidation in which the
Company is the continuing corporation and which does not result
in any reclassification of the outstanding Common Shares or the
conversion of such outstanding Common Shares into shares of other
stock or other securities or property), or the sale or conveyance
of the property of the Company as an entirety or substantially as
an entirety (collectively such actions being hereinafter referred
to as "Reorganizations"), there shall thereafter be deliverable
upon exercise of any Warrant (in lieu of the number of Warrant
Shares theretofore deliverable) the number of shares of stock or
other securities or property to which a holder of the number of
Warrant Shares which would otherwise have been deliverable upon
the exercise of such Warrant would have been entitled upon such
Reorganization if such Warrant had been exercised in full
immediately prior to such Reorganization. In the event of any
Reorganization, appropriate adjustment, as determined in good
faith by the Company's Board of Directors, shall be made in the
application of the provisions herein set forth with respect to
the rights and interests of Holders so that the provisions set
forth herein shall thereafter be applicable, as nearly as
possible, in relation to any shares or other property thereafter
deliverable upon exercise of Warrants. Any such adjustment shall
be made by and set forth in a supplemental agreement prepared by
the Company or any successor thereto, between the Company and any
successor thereto, and shall for all purposes hereof conclusively
be deemed to be an appropriate adjustment. The Company shall not
effect any such Reorganization, unless upon or prior to the
consummation thereof the successor corporation, or if the Company
shall be the surviving corporation in any such Reorganization and
is not the issuer of the shares of stock or other securities or
property to be delivered to holders of Common Shares outstanding
at the effective time thereof, then such issuer, shall assume by
written instrument the obligation to deliver to the Holder of any
Warrant Certificate such shares of stock, securities, cash or
other property as such holder shall be entitled to purchase in
accordance with the foregoing provisions.
Section 3.2 Notice of Certain Actions. In the event
the Company shall (a) declare any dividend payable in stock to
the holders of its Common Shares or make any other distribution
in property other than cash to the holders of its Common Shares,
(b) offer to the holders of its Common Shares rights to subscribe
for or purchase any shares of any class of stock or any other
rights or options, or (c) effect any reclassification of its
Common Shares (other than a reclassification involving merely the
subdivision or combination of outstanding Common Shares) or any
capital reorganization or any consolidation or merger (other than
a merger in which no distribution of securities or other property
is made to holders of Common Shares) or any sale, transfer or
other disposition of its property, assets and business
substantially as an entirety, or the liquidation, dissolution or
winding up of the Company; then, in each such case, the Company
shall exercise good faith efforts to cause notice of such
proposed action to be mailed to each Holder
Section 3.3 Certificate of Adjustments. The Company
shall perform any computations and determine any adjustments
required to be made under this Agreement (including any
computations and adjustments pursuant to Section 2.3(b) and this
Article III) (the "Adjustments") and may cause an independent
public accounting firm selected by the Company to verify each
Adjustment. As promptly as practicable after determining any
Adjustment, the Company shall prepare a certificate executed by
the Chief Financial Officer of the Company setting forth such
Adjustment and mail such certificate to each Holder (an
"Adjustment Notice"). The Adjustment Notice shall include in
reasonable detail (a) the events precipitating the Adjustment,
(b) the computations relating to such Adjustment and (c) the
Exercise Price, Cap Amount and the number of shares or the
securities or other property purchasable upon exercise of each
Warrant after giving effect to such Adjustment. In the event
that the Holders of Warrants entitling such Holders to purchase a
majority of the Warrant Shares subject to purchase upon exercise
of Warrants at the time outstanding (the "Required Interest")
shall disagree with any Adjustment, the Required Interest shall
give notice thereof (the "Dispute Notice") to the Company within
15 days after the Adjustment Notice. Upon receipt of the Dispute
Notice, the Company shall promptly engage a third party
independent public accounting firm acceptable to the Required
Interest to make an independent determination of such disputed
Adjustment (the "Independent Adjustment"). The Independent
Adjustment shall be final and binding on the Company and all
Holders. If the disputed Adjustment and the Independent
Adjustment differ by an amount of 5% or less of the disputed
Adjustment, then the costs of conducting the independent
determination shall be borne equally by the Company and the
Required Interest; if the disputed Adjustment is greater than the
Independent Adjustment by more than 5% of the disputed
Adjustment, then the costs of conducting the independent
determination shall be borne entirely by the Required Interest
(pro rata, in accordance with the number of Warrants held by
each, with each subject Holder severally liable); and if the
Independent Adjustment is greater than the disputed Adjustment by
more than 5% of the disputed Adjustment, then the costs of
conducting the independent determination shall be borne entirely
by the Company; provided that in each case costs separately
incurred by the Company and any Holders shall be separately borne
by them.
Section 3.4 Warrant Certificate Amendments.
Irrespective of any adjustments pursuant to this Article III,
Warrant Certificates theretofore or thereafter issued need not be
amended or replaced, but certificates thereafter issued shall
bear an appropriate legend or other notice of any adjustments;
provided the Company may, at its option, issue new Warrant
Certificates evidencing Warrants in such form as may be approved
by its Board of Directors to reflect any adjustment in the
Exercise Price and number of Warrant Shares purchasable under the
Warrants.
Section 3.5 Fractional Shares. The Company shall not
be required upon the exercise of any Warrant to issue fractional
Warrant Shares which may result from adjustments in accordance
with this Article III to the Exercise Price or number of Warrant
Shares purchasable under each Warrant. If more than one Warrant
is exercised at one time by the same Holder, the number of full
Warrant Shares which shall be issuable upon the exercise thereof
shall be computed based on the aggregate number of Warrant Shares
purchasable upon exercise of such Warrants. With respect to any
final fraction of a share called for upon the exercise of any
Warrant or Warrants, the Company shall pay an amount in cash to
the Holder of the Warrants in respect of such final fraction in
an amount equal to the Market Value of a Common Share as of the
Date of Exercise of such Warrants, multiplied by such fraction.
All calculations under this Section 3.5 shall be made to the
nearest hundredth of a share.
ARTICLE IV
MISCELLANEOUS
Section 4.1 Payment of Taxes and Charges. The Company
will pay all taxes (other than income taxes) and other government
charges in connection with the issuance or delivery or transfer
of the Warrants and the initial issuance or delivery of Warrant
Shares upon the exercise of any Warrants and payment of the
Exercise Price.
Section 4.2 Changes to Agreement. The Company, when
authorized by its Board of Directors, with the written consent of
Holders of 75% of the outstanding Warrants may amend or
supplement this Agreement, except that no amendment which
increases the Exercise Price or reduces the number of Warrant
Shares or otherwise economically impairs the value of the
Warrants shall be enforceable against a Holder who has not
consented in writing to such amendment.
Section 4.3 Assignment. All the covenants and
provisions of this Agreement by or for the benefit of the Company
or the Holders shall bind and inure to the benefit of their
respective successors and assigns.
Section 4.4 Successor to Company. In the event that
the Company merges or consolidates with or into any other
corporation or sells or otherwise transfers its property, assets
and business substantially as an entirety to a successor
corporation or other entity, the Company shall use its best
efforts to have such successor corporation or other entity assume
in writing each and every covenant and condition of this
Agreement to be performed and observed by the Company, and such
successor corporation or other entity shall be deemed, upon the
closing of such merger, consolidation, transfer or sale, to have
so assumed such liabilities whether or not such assumption is
made in writing.
Section 4.5 Notices. Any notice or demand required by
this Agreement to be given or made by any Holder to or on the
Company shall be sufficiently given or made if sent by
first-class or registered mail, postage prepaid, addressed as
follows:
Arden Realty, Inc.
9100 Wilshire Boulevard
East Tower, Suite 700
Beverly Hills, CA 90212
Attn: Victor Coleman
with a copy to: Pircher, Nichols & Meeks
1999 Avenue of the Stars
Suite 2600
Los Angeles, CA 90067
Attn: Gary Laughlin
Any notice or demand required by this Agreement to be given or
made by the Company to or on Purchaser shall be sufficiently
given or made if sent by first-class or registered mail, postage
prepaid, addressed to Purchaser and sent to the address set forth
below (or, if a subsequent Holder, the address of such Holder on
the Company's warrant register):
Spectrum Investments II, L.P.
c/o Layton-Belling & Associates
4440 Von Karman Boulevard
Newport Beach, CA 92660
Attn: Phil Belling
and
Eastrich 175, LLC
c/o AEW Capital Management, L.P.
225 Franklin Street
Boston, Massachusetts 02110
Attn: James Finnegan
with a copy to: Heller, Ehrman, White & McAuliffe
333 Bush Street
San Francisco, CA 94104
Attn: Brian Smith
and a copy to: Orrick, Herrington & Suttcliffe
777 So. Figueroa Street
Los Angeles, CA 90017
Attn: Richard Mendelson
Any notice or demand required by this Agreement to be given or
made by the Company to or on any Holder shall be sufficiently
given or made, whether or not such Holder receives the notice,
five (5) days after mailing, if sent by first-class or registered
mail, postage prepaid, addressed to such Holder at its last
address as shown on the books of the Company. Otherwise, such
notice or demand shall be deemed given when received by the party
entitled thereto.
Section 4.6 Defects in Notice. Failure to file any
certificate or notice or to mail any notice, or any defect in any
certificate or notice pursuant to this Agreement shall not affect
in any way the rights of any Holder or the legality or validity
of any adjustment made pursuant to Section 3.1 or 3.2 hereof.
Section 4.7 Governing Law. This Agreement and each
Warrant Certificate issued hereunder shall be governed by the
laws of the State of California without regard to principles of
conflicts of laws thereof.
Section 4.8 Standing. Nothing in this Agreement
expressed and nothing that may be implied from any of the
provisions hereof is intended, or shall be construed, to confer
upon, or give to, any person or corporation other than the
Company and the Holders any right, remedy or claim under or by
reason of this Agreement or of any covenant, condition,
stipulation, promise or agreement contained herein; and all
covenants, conditions, stipulations, promises and agreements
contained in this Agreement shall be for the sole and exclusive
benefit of the Company and its successors and the Holders.
Section 4.9 Headings. The descriptive headings of the
articles and sections of this Agreement are inserted for
convenience only and shall not control or affect the meaning or
construction of any of the provisions hereof.
Section 4.10 Counterparts. This Agreement may be
executed in any number of counterparts, each of which so executed
shall be deemed to be an original, and all of which together
shall constitute one and the same instrument.
Section 4.11 Availability of the Agreement. The
Company shall keep copies of this Agreement available for
inspection by Holders during normal business hours. Copies of
this Agreement may be obtained upon written request addressed to
the Company at the address set forth in Section 4.5.
Section 4.12 Entire Agreement. This Agreement,
including the Exhibits referred to herein and the other
agreements and writings specifically identified herein or
contemplated hereby, is complete, reflects the entire agreement
of the parties with respect to its subject matter, and supersedes
all previous written or oral negotiations, commitments and
writings.
IN WITNESS WHEREOF, the Company and the Purchaser have
executed and delivered this Warrant Agreement as of the date
first written above.
THE COMPANY:
ARDEN REALTY, INC.
By: /s/ Victor J. Coleman
Name: Victor J. Coleman
Title: President
By: /s/ Andrew J. Sobel
Name: Andrew J. Sobel
Title: Vice President
EXHIBIT A
FORM OF WARRANT CERTIFICATE
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, NOR
PURSUANT TO THE SECURITIES OR "BLUE SKY" LAWS OF ANY STATE. SUCH
SECURITIES MAY NOT BE OFFERED, SOLD, TRANSFERRED, PLEDGED,
HYPOTHECATED OR OTHERWISE ASSIGNED, EXCEPT PURSUANT TO (i) A
REGISTRATION STATEMENT WITH RESPECT TO SUCH SECURITIES WHICH IS
EFFECTIVE UNDER SUCH ACT, (ii) RULE 144 OR RULE 144A UNDER SUCH
ACT, (iii) ANY OTHER EXEMPTION FROM REGISTRATION UNDER SUCH ACT
RELATING TO SUCH ACT, OR (iv) IN COMPLIANCE WITH ANY APPLICABLE
STATE OR PROVINCIAL SECURITIES LAWS.
IN ADDITION, ANY SALE, ASSIGNMENT, TRANSFER, PLEDGE OR OTHER
DISPOSITION OF THIS SECURITY IS RESTRICTED BY, AND THE RIGHTS OF
THE HOLDER OF SUCH SECURITY ARE SUBJECT TO THE TERMS AND
CONDITIONS CONTAINED IN, A WARRANT AGREEMENT DATED AS OF MARCH 2,
1998, A COMPLETE AND CORRECT COPY OF THE FORM OF WHICH WILL BE
FURNISHED BY THE ISSUER TO THE HOLDER HEREOF UPON WRITTEN REQUEST
AND WITHOUT CHARGE.
FURTHER, ANY SALE, ASSIGNMENT, TRANSFER, PLEDGE OR OTHER
DISPOSITION OF THIS SECURITY IS LIMITED BY THE CHARTER OF THE
ISSUER WHICH CONTAINS LIMITATIONS ON STOCK OWNERSHIP.
No. ___________
Certificate for ________ Warrants
NOT EXERCISABLE AFTER 5:00 P.M.,
NEW YORK CITY TIME, ON MARCH 2, 2001
ARDEN REALTY INC.
WARRANT CERTIFICATE
THIS CERTIFIES that _______________________________, a
__________________________, or its registered assigns is the
registered holder (the "Registered Holder") of the number of
Warrants set forth above, each of which represents the right to
purchase one fully paid and non-assessable common share (the
"Common Shares"), of Arden Realty Inc., a Maryland (the
"Company"), at the Exercise Price (as defined in and determined
from time to time in accordance with the Warrant Agreement), by
surrendering this Warrant Certificate, with the form of Election
to Purchase attached hereto duly executed and by paying in full
the Exercise Price (the Common Shares issuable upon exercise of
the Warrants being referred to herein as the "Warrant Shares"),
subject to the limits on ownership of the Company Stock set forth
in the Charter Charter subject to the Holder's rights pursuant to
Section 2.4 of the Warrant Agreement. Payment of the Exercise
Price shall be made as set forth in the Warrant Agreement (as
hereinafter defined). No Warrant may be exercised after 5:00
P.M., New York City time, on March 2, 2001 (the "Expiration
Date"). All Warrants evidenced hereby shall thereafter become
void, subject to the terms of the Warrant Agreement hereinafter
referred to.
Prior to the Expiration Date, subject to any applicable
laws, rules or regulations restricting transferability and to any
restriction on transferability that may appear on this Warrant
Certificate or in the Company Charter and in accordance with the
terms of the Warrant Agreement hereinafter referred to, the
Registered Holder shall be entitled to transfer this Warrant
Certificate, in whole or in part, upon surrender of this Warrant
Certificate at the principal office of the Company with the form
of assignment set forth hereon duly executed. Upon any such
transfer, a new Warrant Certificate or Warrant Certificates
representing the same aggregate number of Warrant Shares will be
issued in accordance with instructions in the form of assignment.
Upon the exercise of fewer than all of the Warrants to
purchase the Common Shares evidenced by this Warrant Certificate,
there shall be issued to the Registered Holder a new Warrant
Certificate in respect of the Warrants not exercised.
Prior to the Expiration Date, the Registered Holder shall be
entitled to exchange this Warrant Certificate, with or without
other Warrant Certificates, for another Warrant Certificate or
Warrant Certificates for the same aggregate number of Warrant
Shares, upon surrender of this Warrant Certificate at the
principal office of the Company.
Upon certain events provided for in the Warrant Agreement,
the Exercise Price and the number of Warrant Shares are required
to be adjusted.
No fractional shares will be issued upon the exercise of
Warrants. As to any final fraction of a Common Share which the
Registered Holder of one or more Warrant Certificates, the rights
under which are exercised in the same transaction, would
otherwise be entitled to purchase upon such exercise, the Company
shall pay the cash value thereof determined as provided in the
Warrant Agreement. No Warrant Certificate representing any
fractional Warrant Shares will be issued.
This Warrant Certificate is issued under and in accordance
with the Warrant Agreement dated as of March 2, 1998 (the
"Warrant Agreement") by and among the Company and the Purchaser
(as defined in the Warrant Agreement) and is subject to the term
and provisions contained in the Warrant Agreement. All
capitalized terms not defined herein shall have the meanings
given such terms as set forth in the Warrant Agreement.
This Warrant Certificate shall not entitle the Registered
Holder to any of the rights of a stockholder of the Company,
including, without limitation, the right to vote, to receive
dividends and other distributions, or to attend or receive any
notice of meetings of stockholders or any other proceedings of
the Company.
IN WITNESS WHEREOF, the Company has caused this Warrant
Certificate to be duly executed under its facsimile corporate
seal.
ARDEN REALTY, INC.
By:
Name: Victor J. Coleman
Title: President
[Seal] Attest:
By:______________________________
Name: Andrew J. Sobel
Title: Vice President
[Form of Assignment]
FOR VALUE RECEIVED, the undersigned hereby irrevocably
sells, assigns and transfers unto the Assignee named below all of
the rights of the undersigned represented by the within Warrant
Certificate, with respect to the number of Warrants to purchase
the Common Shares set forth below:
Name of Assignee Address No. of Warrants
and does hereby irrevocably constitute and appoint
_____________________ true and lawful Attorney, to make such
transfer on the books of Arden Realty Inc., maintained for that
purpose, with full power of substitution in the premises.
Dated: __________ ___, _____
Signature
(Signature must conform in all
respects to name of holder as
specified on the face of the
Warrant Certificate.)
[Form of Election To Purchase]
The undersigned hereby irrevocably elects to exercise
____________ of the Warrants represented by this Warrant
Certificate and to purchase the Common Shares issuable upon the
exercise of said Warrants, and requests that certificates for
such shares be issued and delivered as follows:
ISSUE TO:
(NAME)
(ADDRESS, INCLUDING ZIP CODE)
(SOCIAL SECURITY OR OTHER IDENTIFICATION NUMBER)
DELIVER TO:
(NAME)
at
(ADDRESS, INCLUDING ZIP CODE)
In full payment of the purchase price with respect to the
exercise of Warrants to purchase Common Shares, the undersigned:
hereby tenders payment of [U.S.$________] by cash,
certified check, cashier's check or money order payable in
United States currency to the order of the Company; or
hereby delivers to the Company that number of
Common Shares having a Market Value (as defined in the
Warrant Agreement) equal to the Exercise Price multiplied
by the number of Warrant Shares being purchased; or
hereby makes a Net Cashless Exercise (as defined
in the Warrant Agreement).
If the number of Warrants to purchase the Common Shares
hereby exercised is fewer than all the Warrants represented by
this Warrant Certificate, the undersigned requests that a new
Warrant Certificate representing the number of such full Warrants
not exercised be issued and delivered as follows:
ISSUE TO:
(NAME)
(ADDRESS, INCLUDING ZIP CODE)
(SOCIAL SECURITY OR OTHER IDENTIFICATION NUMBER)
DELIVER TO:
(NAME)
at
(ADDRESS, INCLUDING ZIP CODE)
Date: __________ ___, ______
______________________________________
Signature
(Signature must conform in all
respects to name of holder as
specified on the face of the
Warrant Certificate.)
PLEASE INSERT SOCIAL SECURITY OR
TAX I.D. NUMBER OF HOLDER
Consent of Independent Auditors
We consent to the incorporation by reference in the Registration
Statements and in the related Prospectuses (Form S-3 No. 333-44141,
Form S-3 No. 333-40451 and Form S-8 dated October 9, 1997) of Arden Realty,
Inc. of our report dated September 10, 1997 with
respect to the combined statement of revenues and certain
expenses of 1996 LBA Owned Portfolio for the year ended December
31, 1996, and the incorporation by reference therein of our
report dated August 25, 1997 with respect to the combined
statement of revenue and certain expenses of 1996 Cigna Acquired
Properties for the year ended December 31, 1996, and the
incorporation by reference therein of our report dated August 25,
1997 with respect to the combined statement of revenue and
certain expenses of 1997 MetLife Acquired Properties for the year
ended December 31, 1996, and the incorporation by reference
therein of our report dated August 25, 1997 with respect to the
combined statement of revenue and certain expenses of Ontario
Airport Commerce Center and Hunter Business Park for the year
ended December 31, 1996, and the incorporation by reference
therein of our report dated August 25, 1997 with respect to the
statement of revenue and certain expenses of Sorrento Valley
Science Park for the year ended December 31, 1996, and the
incorporation by reference therein of our report dated August 25,
1997 with respect to the statement of revenue and certain
expenses of HDS Plaza for the year ended December 31, 1996, and
the incorporation by reference therein of our report dated August
25, 1997 with respect to the statement of revenue and certain
expenses of Fountain Valley Plaza for the year ended December 31,
1996, and the incorporation by reference therein of our report
dated August 25, 1997 with respect to the statement of revenue
and certain expenses of Havengate Center for the year ended
December 31, 1996, and the incorporation by reference therein of
our report dated August 25, 1997 with respect to the statement of
revenue and certain expenses of Von Karman Corporate Center for
the year ended December 31, 1996, and the incorporation by
reference therein of our report dated August 25, 1997 with
respect to the statement of revenue and certain expenses of
Centrelake Plaza for the year ended December 31, 1996, and the
incorporation by reference therein of our report dated August 25,
1997 with respect to the statement of revenue and certain
expenses of 150 East Colorado for the year ended December 31,
1996, and the incorporation by reference therein of our report
dated November 23, 1997 with respect to the combined statement of
revenue and certain expenses of SDK Properties for the year ended
December 31, 1996, and the incorporation by reference therein of
our report dated January 21, 1998 with respect to the statement
of revenue and certain expenses of 9201 Sunset for the year ended
December 31, 1996, and the incorporation by reference therein of
our report dated October 27, 1997 with respect to the statement
of revenue and certain expenses of Activity Business Center for
the year ended December 31, 1996, and the incorporation by
reference therein of our report dated January 21, 1998 with
respect to the statement of revenue and certain expenses of 9100
Wilshire for the year ended December 31, 1996, and the
incorporation by reference therein of our report dated May 30,
1997 with respect to the combined statement of revenue and
certain expenses of 1100 Glendon for the year ended December 31,
1996, all of which were incorporated by reference in the Form 8-K
of Arden Realty, Inc. dated March 16, 1998.
/s/ Ernst & Young LLP
Los Angeles, California
March 13, 1998
