UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
[X] Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934 for the quarterly period ended June 30, 1996 or
[ ] Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the transition period from to
Commission file number 0-19628
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The Price REIT, Inc.
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(Exact name of Registrant as specified in its Charter)
Maryland 52-1746059
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(State or other jurisdiction (IRS Employer Identification No.)
of incorporation)
7979 Ivanhoe Avenue, La Jolla, California 92037
- ----------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
(619)551-2320
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(Registrant's telephone number, including area code)
N/A
(Former name, former address and former fiscal year if changed since last
report)
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. YES X NO
--- ---
Number of shares of the Registrant's common stock outstanding at June 30, 1996:
8,361,873.
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The Price REIT, Inc.
Form 10-Q
Index
PART I - FINANCIAL INFORMATION PAGE
Item 1: Financial Statements
Condensed Consolidated Balance Sheets of The Price REIT,
Inc. as of June 30, 1996 and December 31, 1995 4
Condensed Consolidated Statements of Income of The Price
REIT, Inc. for the three months and six months ended
June 30, 1996 and June 30, 1995 5
Condensed Consolidated Statements of Cash Flows of
The Price REIT, Inc. for the six months ended June 30,
1996 and June 30, 1995 6
Notes to Condensed Consolidated Financial Statements 7-12
Item 2: Management's Discussion and Analysis of
Financial Condition and Results of Operations 13-20
PART II - OTHER INFORMATION
Item 2: Changes in Securities 21
Item 4: Submission of Matters to a Vote of Security Holders 21
Item 6: Exhibits and Reports on Form 8-K 22
Signatures 24
Independent Accountants' Review Report 25
PART I - FINANCIAL INFORMATION
Item 1 - Financial Statements
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The Price REIT, Inc.
Condensed Consolidated Balance Sheets
(Unaudited)
June 30, December 31,
1996 1995
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(In Thousands)
ASSETS
Rental property, net $348,081 $351,585
Investment in joint venture-Centrepoint Associates 17,449 17,568
Investment in joint venture-Hayden Plaza 1,724 -
Cash and cash equivalents 194 1,241
Deferred rent receivable 7,397 6,219
Rent receivable and other assets 5,782 5,431
Investment in Development Company 434 434
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Total assets $381,061 $382,478
========= =========
LIABILITIES & STOCKHOLDERS' EQUITY
LIABILITIES
Accounts payable and accrued liabilities 767 1,459
Security deposits 548 548
Accrued interest payable 1,279 1,401
Senior Notes payable 99,158 99,082
Unsecured line of credit 57,000 56,000
Secured note payable 2,750 2,750
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Total liabilities 161,502 161,240
STOCKHOLDERS' EQUITY
Preferred stock, $.01 par value; 2,000,000 shares
authorized, no shares issued or outstanding - -
Common stock, $.01 par value, 25,000,000 shares
authorized:
Series A Common Stock, $.01 par value per share:
44,986 shares designated,
0 and 44,546 shares issued and outstanding,
convertible 1 for 1 to Common Stock - 1
Common Stock, $.01 par value per share:
10,000,000 shares designated,
8,361,873 and 8,256,302 shares issued and
outstanding 84 82
Additional paid-in capital 238,173 236,365
Accumulated deficit (18,698) (15,210)
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Total stockholders' equity 219,559 221,238
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Total liabilities and stockholders' equity $381,061 $382,478
========= =========
See accompanying notes.
The Price REIT, Inc.
Condensed Consolidated Statements of Income
(Unaudited)
Three months ended Six months ended
June 30, June 30,
1996 1995 1996 1995
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(In Thousands, except per share amounts)
REVENUE
Rental income $12,217 $9,525 $24,867 $19,406
Management fees 263 269 539 519
Equity in earnings of joint venture-
Centrepoint Associates 297 487 694 811
Equity in earnings of joint venture-
Hayden Plaza 45 - 45 -
Interest and other income 61 124 170 183
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Total revenue 12,883 10,405 26,315 20,919
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EXPENSES
Rental operations, maintenance and
management 925 569 2,353 1,416
Real estate taxes 1,122 961 2,355 1,921
General and administrative 823 770 1,661 1,554
Depreciation 2,897 2,384 5,792 4,724
Interest 2,981 1,630 5,961 3,205
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Total expenses 8,748 6,314 18,122 12,820
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NET INCOME $4,135 $4,091 $8,193 $8,099
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PER SHARE DATA
Net income per share $0.50 $0.50 $0.98 $0.98
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Dividends paid per share $0.70 $0.66 $1.40 $1.32
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Weighted average number of shares
outstanding 8,353 8,244 8,334 8,231
----- ----- ----- -----
See accompanying notes.
The Price REIT, Inc.
Condensed Consolidated Statements of Cash Flows
For the Six Months Ended June 30, 1996 and 1995
(Unaudited)
1996 1995
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(In Thousands)
OPERATING ACTIVITIES
Net income $8,193 $8,099
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation 5,792 4,724
Amortization of deferred loan fees 263 97
Amortization of debt discount 76 -
Equity in earnings of joint venture-Centrepoint Assoc. (694) (811)
Equity in earnings of joint venture-Hayden Plaza (45) -
Deferred rent (1,178) (918)
Changes in operating assets and liabilities:
Increase in rent receivable and other assets (689) (344)
(Decrease) increase in accounts payable and
accrued liabilities (692) 280
Increase in security deposits - 3
Decrease in interest payable (122) (37)
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Net cash provided by operating activities 10,904 11,093
INVESTING ACTIVITIES
Additions to rental property (2,179) (8,159)
Investment in joint venture-Centrepoint Associates (206) (1,041)
Distributions from joint venture-Centrepoint Assoc. 985 850
Investment in joint venture-Hayden Plaza (1,729) -
Distributions from joint venture-Hayden Plaza 50 -
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Net cash used in investing activities (3,079) (8,350)
FINANCING ACTIVITIES
Proceeds from unsecured line of credit 3,000 9,000
Repayment of unsecured line of credit (2,000) (3,000)
Proceeds from issuance of Common Stock 1,363 801
Dividends paid, net of dividends reinvested (11,235) (10,019)
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Net cash used in financing activities (8,872) (3,218)
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Decrease in cash and cash equivalents (1,047) (475)
Cash and cash equivalents at beginning of the period 1,241 2,093
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Cash and cash equivalents at end of period $194 $1,618
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SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for interest $5,850 $3,132
======== ========
SUPPLEMENTAL DISCLOSURE OF NONCASH FINANCING
ACTIVITIES:
Additional Common Stock issued in accordance with
the dividend reinvestment plan $445 $834
======== ========
See accompanying notes.
The Price REIT, Inc.
Notes to Condensed Consolidated Financial Statements
June 30, 1996
(Unaudited)
NOTE 1 - BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements of The
Price REIT, Inc. (the "Company") for the six months ended June 30, 1996 and the
unaudited condensed consolidated financial statements for the six months ended
June 30, 1995 have been prepared in accordance with generally accepted
accounting principles for interim financial information and with the
instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, they do
not include all of the information and footnotes required by generally accepted
accounting principles for complete financial statements. In the opinion of
management, all adjustments considered necessary for a fair presentation have
been included and all such adjustments are of a normal recurring nature. For
further information, refer to the consolidated financial statements and
accompanying footnotes included in the Company's annual report on Form 10-K for
the year ended December 31, 1995.
The preparation of the Company's financial statements requires management to
make estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the financial
statement date and the reported amounts of revenue and expenses during the
reporting period. Due to uncertainties inherent in the estimation process, it is
reasonably possible that actual results could differ from these estimates.
NOTE 2 - PROPERTY ACQUISITIONS
PURCHASE OF SHOPPING CENTERS
On November 17, 1995, the Company acquired a 426,097 square foot shopping center
located in Webster, Texas (Houston area) for $25.7 million. As of June 30, 1996,
the 40 acre shopping center (the "Center") was 100% leased. The Center's anchor
tenants, which occupy approximately 345,000 square feet of space, include Bed,
Bath & Beyond, Best Buy, Builder's Square, Oshman's, Sears Homelife, Stein Mart
and Sony Theatres. The Company financed this acquisition with borrowings of $18
million under its unsecured line of credit ("Line of Credit") and $7.7 million
of operating cash.
The Company also entered into an agreement to purchase from another party, at a
cost of $1.25 million, a 9.7 acre parcel of undeveloped land that is adjacent to
the Center. The Company intends to use such land for expansion of the Center and
development for new tenants. The acquisition of this undeveloped land parcel was
completed on January 29, 1996. The Company financed this acquisition with
operating cash.
On December 27, 1995, the Company acquired a 278,825 square foot shopping center
located in La Mirada, California for $25.8 million. As of June 30, 1996, the 31-
acre shopping center was 94.6% leased and was anchored by the U.S. Post Office,
Toys "R" Us, L.A. Fitness, Krikorian Theatres, Sav-on Drugs, Petco and Chuck E.
Cheese which, in aggregate, occupy approximately 164,400 square feet of space.
The shopping center also includes a Lucky Supermarket and a La Mirada Theatre
Center (a local performing arts theater) which are separately owned. The Company
financed this acquisition entirely with borrowings under its Line of Credit.
On December 29, 1995, the Company acquired a 171,850 square foot shopping center
located in Oxnard, California for $10.3 million. As of June 30, 1996, the 14-
acre shopping center was 100% leased and was anchored and solely occupied by
Target, Ralph's (Food-4-Less) and Family Fitness. The Company financed this
acquisition with borrowings of $7 million under its Line of Credit and $3.3
million of operating cash.
HAYDEN PLAZA NORTH JOINT VENTURE ACQUISITION
On April 23, 1996, the Company entered into an agreement to form a partnership
(the "Partnership") with Kimco Realty Corporation ("Kimco"), a major New York-
based retail real estate investment trust, to purchase a shopping center in
Phoenix, Arizona at a cost of $3,490,000. The acquisition was completed by the
Partnership on May 3, 1996. The 13-acre shopping center has approximately
190,575 square feet of leasable area. As of June 30, 1996, the shopping center
was 93% leased and is anchored by Home Depot. The Company holds a 50% interest
in the Partnership and Kimco holds the remaining 50% interest. The Partnership
intends to renovate the shopping center and continue leasing the vacant space.
The Company's 50% share of the acquisition cost was funded by borrowings of $1
million under the Line of Credit and $750,000 of operating cash. The operations
of the partnership are accounted for under the equity method of accounting.
CENTREPOINT ASSOCIATES JOINT VENTURE ACQUISITIONS
On December 28, 1995, Centrepoint Associates (the "Joint Venture"), a
partnership in which the Company owns a 50% interest, acquired from Suncor
Development ("Suncor") an 85,000 square foot existing shopping center in
Glendale (Talavi), Arizona and a parcel of vacant land for future development in
Goodyear, Arizona. Suncor, which also owns a 50% interest in the Joint Venture,
was previously the sole owner of both the properties sold to the Joint Venture.
The existing 12 acre shopping center containing 85,000 square feet in Glendale,
Arizona (the "Center") was purchased for $6.7 million. As of June 30, 1996, the
Center was 100% leased. The Center's anchor tenants, which occupy approximately
58,000 square feet of space, include Sears Homelife and Michael's. The Center
is also anchored by Wal-Mart and Sports and Recreation which own their own
respective parcels. The Center has two future development pads, of which one
was recently leased to Tutor Time Child Care Systems, Inc. A build-to-suit 9,000
square foot building will be constructed and operational by early 1997. The
remaining vacant pad which can accommodate up to 10,000 square feet of leasable
space is currently being marketed to prospective tenants. The vacant land
parcel, consisting of approximately 40 acres, is located in Goodyear, Arizona,
and was acquired for approximately $4.2 million. The Joint Venture plans to
develop the parcel into a 370,000 square foot retail power center within the
next two years.
The Joint Venture's combined cost of these two acquisitions totaling
approximately $11 million was financed by the proceeds of a $10.5 million
secured credit line obtained from Wells Fargo Bank ("Wells Fargo Line") and
capital contributions of approximately $210,000 from the Company and $210,000
from Suncor. The Wells Fargo Line is secured by the first phase of the Tempe,
Arizona power center which contains 236,000 square feet and is owned by the
Joint Venture. The interest on the Wells Fargo Line is payable monthly and is
based on the London Interbank Offered Rate ("LIBOR") plus 150 basis points ("the
Margin"). The Joint Venture may elect to fix the interest rate for periods of
one month or multiples of one month up to a maximum of one year at the
corresponding LIBOR rate plus the Margin. The Wells Fargo Line matures on
December 27, 1997. The Joint Venture anticipates that construction and
development costs to complete the Goodyear and Glendale properties will be
financed by a secured line of credit similar to the Wells Fargo Line or an
expansion of the existing loan which will be secured by the second phase of the
Tempe, Arizona power center. The operations of the Joint Venture are accounted
for under the equity method of accounting.
KING KULLEN JOINT VENTURE
K & F Development Company (the "Development Company"), an affiliate company of
which the Company owns 100% of the outstanding preferred stock, has formed a
joint venture with King Kullen Grocery Co., Inc. ("King Kullen"), a major Long
Island, New York grocery chain, to develop a power center in the Commack area of
Long Island, New York. It is anticipated that the power center will contain an
aggregate of 270,000 leasable square feet of space and will include a 60,000
square foot King Kullen supermarket and several other retail anchor tenants. The
Development Company will hold an ownership interest of approximately 80% in the
joint venture and King Kullen will hold the remaining interest of approximately
20%. The property is subject to an 49 year ground lease with four ten year
options. The development was rezoned in February 1996 and is subject to site
plan approval contingencies. The Company will purchase the Development Company's
approximate 80% interest in the joint venture. The Company anticipates that
construction on this property will commence in the summer of 1996 and that its
approximate 80% share of construction and development costs will be funded by
borrowings under the Company's Line of Credit, operating funds to the extent
such funds are available, and joint venture financing.
PURCHASE OF PRICE CLUB LEASE
The Company entered into an agreement with Price/Costco, Inc. ("Price/Costco")
and Home Depot to buy out the remaining term of the Price Club warehouse lease
in Copiague, New York, and then re-lease the facility to Home Depot at a higher
monthly rate. Price/Costco vacated the premises in December 1994 and Home Depot
completed construction of the tenant improvements in April 1995. The Company has
paid Price/Costco the sum of $1,220,231 pursuant to the agreement.
NOTE 3 - NOTES PAYABLE
SECURED NOTE PAYABLE
The secured note payable bears interest at 6.25% per annum and is secured by the
shopping center in North Phoenix, Arizona. The note provides for monthly
payments of interest only with all principal due in December 1996.
SENIOR NOTES PAYABLE
On August 15, 1995, the Company filed a shelf registration statement with the
Securities and Exchange Commission for up to $175 million of debt securities,
preferred stock, common stock and warrants.
On November 1, 1995, the Company completed an underwritten public offering (the
"Offering") of $100 million aggregate principal amount of the Company's Senior
Notes due November 1, 2000 at an interest rate of 7.25%. The 7.25% Senior Notes
were priced at an aggregate of $99,050,000. The Company used $91,000,000 of the
net proceeds from the Offering to repay indebtedness then outstanding under the
Company's Line of Credit and the remaining net proceeds were used for general
corporate purposes. The Senior Notes provide for semi-annual payment of interest
only due on May 1 and November 1 of each year until the maturity date of
November 1, 2000 at which time the aggregate principal is due.
UNSECURED LINE OF CREDIT
On November 1, 1995, the Company modified its $100 million Line of Credit,
substituting one of the three banks in the original lending group with Morgan
Guaranty Trust Company of New York as lead agent. Concurrently with completion
of the Offering and the repayment of the Line of Credit, certain other
modifications were made to the Line of Credit including, among other things, (i)
incorporation of certain additional financial covenants and conditions into the
loan agreement and documentation, (ii) a reduction of the initial borrowing
capacity to $75 million, (iii) a modification of the interest rate payable on
borrowings outstanding to LIBOR plus 1.4% and (iv) an extension of the initial
maturity to October 1997, with an option to extend for an additional year upon
satisfaction of certain conditions.
The effective rates of interest at June 30, 1996 of the various borrowings under
the Line of Credit ranged from 6.9000% to 6.9625%. Interest on the outstanding
balances of the Line of Credit is payable periodically, but at least quarterly.
The agreement requires the Company to maintain certain minimum net operating
income and net worth levels, as defined, and provides that the Company will not
pay dividends in excess of 95% of its annual net income plus depreciation. The
Company is required to pay a commitment fee of .25% per annum of the unused
portion of the Line of Credit.
The Company typically funds short-term financing for its acquisition and
development activities through its $75 million Line of Credit. On April 29,
1996, the Company borrowed $1 million to fund its 50% share of the Hayden Plaza
North Associates acquisition of the Phoenix, Arizona property. On May 13, 1996,
the Company used its excess funds to pay down $2 million of indebtedness under
the Line of Credit. On June 27, 1996, the Company borrowed an additional $2
million to replenish operating funds. At June 30, 1996, the outstanding balance
of the borrowing under the Line of Credit was $57 million.
NOTE 4 - NET INCOME PER SHARE
Net income per share was calculated by dividing net income by the weighted
average number of shares outstanding. The assumed exercise of outstanding stock
options, using the treasury stock method, is not materially dilutive to the
earnings per share computation.
NOTE 5 - SUBSEQUENT EVENTS
In early July 1996, the Company acquired a 15 acre shopping center in Mesquite,
Texas (Dallas area) at a combined cost of approximately $12.7 million. The
shopping center was 100% leased and is anchored by Best Buy, Sears Homelife,
PetsMart, and General Cinema. The shopping center was comprised of two parcels
which were separately owned. One parcel which contained 156,697 square feet of
leasable area was acquired from Town East Centre Joint Venture on July 3, 1996
at a cost of $8.9 million. The other parcel which contained 52,882 square feet
of leasable area was acquired from MGC Joint Venture on July 10, 1996 at a cost
of $3.8 million. The Company financed this acquisition entirely with borrowings
under its Line of Credit.
On July 15, 1996, the Company through its affiliate Development Company
commenced the construction of the shopping center in Long Island, New York
pursuant to the joint venture of Development Company and King Kullen Grocery
Company as discussed above. The shopping center will be anchored by King Kullen
and national tenants such as The Sports Authority, Borders bookstore, HomePlace
and Babies `R Us. In addition, Target plans to open a 125,000 square foot store
on a contiguous parcel of land. The shopping center is scheduled to open by
summer 1997.
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
OVERVIEW
The following discussion, which is based on the condensed consolidated financial
statements of the Company, should be read in conjunction with the consolidated
financial statements appearing elsewhere in this report. When used in the
following discussion, the words "believes," "anticipates," "expects" and similar
expressions are intended to identify forward-looking statements. Such statements
are subject to certain risks and uncertainties which could cause actual results
to differ materially from those projected, including, but not limited to, the
actual timing of the Company's planned acquisitions and developments and the
strength of the local economies in the sub-markets in which the Company
operates. Readers are cautioned not to place undue reliance on theses forward-
looking statements, which speak only as of the date hereof. The Company
undertakes no obligations to publicly release any revisions to these forward-
looking statements which may be made to reflects events or circumstances after
the date hereof or to reflect the occurrence of unanticipated events.
RESULTS OF OPERATIONS
On November 17, 1995, the Company acquired a 426,097 square foot shopping center
located in Webster, Texas (Houston area) for $25.7 million. The Company financed
this acquisition with borrowings of $18 million under its Line of Credit and
$7.7 million of operating cash.
On December 27, 1995, the Company acquired a 278,825 square foot shopping center
located in La Mirada, California for $25.8 million. The Company financed this
acquisition entirely with borrowings under its Line of Credit.
On December 28, 1995, Centrepoint Associates (the "Joint Venture"), a
partnership in which the Company owns a 50% interest, acquired from Suncor
Development ("Suncor") an 85,000 square foot shopping center in Glendale
(Talavi), Arizona and a parcel of vacant land for future development in
Goodyear, Arizona.
The Joint Venture's combined cost of these two acquisitions totaling
approximately $11 million was financed by the proceeds of a $10.5 million
secured credit line obtained from Wells Fargo Bank and capital contributions of
approximately $210,000 from the Company and $210,000 from Suncor.
On December 29, 1995, the Company acquired a 171,850 square foot shopping
center located in Oxnard, California for $10.3 million. The Company financed
this acquisition with borrowings of $7 million under its Line of Credit and $3.3
million of operating cash.
On May 3, 1996, the Hayden Plaza North Associates Partnership, in which the
Company owns a 50% interest, acquired a shopping center in Phoenix, Arizona at a
cost of $3,490,000. The Company's 50% share of the acquisition cost was funded
by borrowings of $1 million under the Line of Credit and $750,000 of operating
cash.
The results of operations of the Company for the three months and six months
ended June 30, 1996, as compared to the same periods for 1995, are significantly
different due to the acquisitions discussed above.
COMPARISON OF THE QUARTER ENDED JUNE 30, 1996 TO THE QUARTER ENDED JUNE 30, 1995
Rental income increased from $9,525,000 for the quarter ended June 30, 1995 to
$12,217,000 for the same period in 1996. An increase of $2,204,000 was
attributable to new rental revenue from properties acquired in the last quarter
of 1995. The remaining $488,000 increase was due to additional rents generated
from retenanting and expansion of existing properties, higher occupancy rates,
base rent increases, and tenant common area maintenance and property tax
reimbursements for the thirteen properties which were owned by the Company
during all of 1995 and the first six months of 1996.
Management fee income from third party contracts decreased from $269,000 for the
quarter ended June 30, 1995 to $263,000 for the same period in 1996. Management
fee income reflects fees generated from the Company's management of several
shopping centers owned by Price Enterprises, Inc. and certain other properties
owned by third parties. The decrease in management fee income for the quarter
ended June 30, 1996 was primarily the result of the sale of a third party owned
property in February 1996, and the elimination of four smaller properties from
Price Enterprises' portfolio in February 1996.
On September 1, 1996, the Company will cease management services for four Price
Enterprises, Inc. shopping centers located in California and Arizona. On January
1, 1997, the Company will cease management services for the six remaining Price
Enterprises, Inc. shopping centers located in the northeast United States. The
impact of the foregoing will be a significant reduction in the Company's future
third party management fee income. This, however, should be partially offset by
a reduction in related operating expenses. Total third party management fee
income accounted for approximately 2% of the Company's total gross revenues for
the three month period ended June 30, 1996. The Company does not believe that
this reduction in future third party management fee income will have a material
effect on its future earnings and Funds from Operations. Management believes
that the reduction of third party management services will allow the Company to
more effectively and efficiently manage its own portfolio as well as any
additional future acquisitions.
Equity in earnings of joint ventures for the quarter ended June 30, 1996
reflects the Company's share of earnings from the Centrepoint Associates and
Hayden Plaza joint ventures in which it holds a 50% general partnership
interest. The equity in earnings of joint venture amount decreased from $487,000
for the quarter ended June 30, 1995 to $342,000 for the same period in 1996 due
to a one time adjustment to accrued property tax receivable in the quarter ended
June 30, 1995. Additionally, the current quarter includes an additional charge
for depreciation and amortization expense relative to the Tempe, Arizona
property.
Rental operating expenses consisting of common area maintenance and real estate
taxes have increased from $1,530,000 for the quarter ended June 30, 1995 to
$2,047,000 for the same period in 1996. Approximately $508,000 of this increase
was attributable to properties acquired in the fourth quarter of 1995. The
remainder of the increase was attributable to slightly higher operating
expenses.
Depreciation expense increased from $2,384,000 for the quarter ended June 30,
1995 to $2,897,000 for the same period in 1996. Approximately $399,000 of the
increase was attributable to the properties acquired in the fourth quarter of
1995. The remainder of the increase was the result of additional depreciation on
new construction on existing properties that was completed in 1995.
Interest expense increased from $1,630,000 for the quarter ended June 30, 1995
to $2,981,000 for the same period in 1996. This increase was mainly attributable
to the Company's outstanding indebtedness during the quarter ended June 30, 1996
which ranged from approximately $66 to $70 million greater than the amount of
outstanding indebtedness during the same period in 1995. During 1995, the
Company increased its outstanding indebtedness in order to finance the majority
of the Company's 1995 acquisitions and certain ongoing construction and
development projects. The remainder of the increased interest expense was
attributable to the amortization of the note discount and other costs of the
issuance in November 1995 of the Company's Senior Notes which are reflected as
interest expense.
COMPARISON OF THE SIX MONTHS ENDED JUNE 30, 1996 TO THE SIX MONTHS ENDED JUNE
30, 1995
Rental income increased from $19,406,000 for the six months ended June 30, 1995
to $24,867,000 for the same period in 1996. An increase of $4,467,000 was
attributable to new rental revenue from properties acquired in the last quarter
of 1995. The remaining $994,000 increase was due to additional rents generated
from retenanting and expansion of existing properties, higher occupancy rates,
base rent increases, and tenant common area maintenance and property tax
reimbursements for the thirteen properties which were owned by the Company
during all of 1995 and the six months in 1996.
Management fee income from third party contracts increased from $519,000 for the
six months ended June 30, 1995 to $539,000 for the same period in 1996.
Management fee income reflects fees generated from the Company's management of
Price Enterprises, Inc.'s existing shopping centers and certain other properties
owned by third parties. The increase in management fee income for the six months
ended June 30, 1996 was primarily the result of the addition of tenants to
properties managed by the Company, which generated additional management fee
income for the Company.
On September 1, 1996, the Company will cease management services for four Price
Enterprises, Inc. shopping centers located in California and Arizona. On January
1, 1997, the Company will cease management services for the six remaining Price
Enterprises, Inc. shopping centers located in the northeast United States. The
impact of the foregoing will be a significant reduction in the Company's future
third party management fee income. This, however, should be partially offset by
a reduction in related operating expenses. Total third party management fee
income accounted for approximately 2% of the Company's total gross revenues for
the six month period ended June 30, 1996. The Company does not believe that this
reduction in future third party management fee income will have a material
effect on its future earnings and Funds from Operations. Management believes
that the reduction of third party management services will allow the Company to
more effectively and efficiently manage its own portfolio as well as any
additional future acquisitions.
Equity in earnings of joint venture for the six months ended June 30, 1996
reflects the Company's share of earnings from the Centrepoint Associates and
Hayden Plaza joint ventures in which it holds a 50% general partnership
interest. The equity in earnings of joint venture amount decreased from $811,000
for the six months ended June 30, 1995 to $739,000 for the same period in 1996
due to a one time adjustment to accrued property tax receivable in the quarter
ended June 30, 1995. Additionally, the current quarter includes an additional
charge for depreciation and amortization expense relative to the Tempe, Arizona
property.
Rental operating expenses consisting of common area maintenance and real estate
taxes have increased from $3,337,000 for the six months ended June 30, 1995 to
$4,708,000 for the same period in 1996. Approximately $993,000 of this increase
was attributable to properties acquired in the fourth quarter of 1995. The
remainder of the increase was mostly attributable to higher snow removal costs
arising from the weather conditions for the east coast properties, and slightly
higher operating costs.
Depreciation expense increased from $4,724,000 for the six months ended June 30,
1995 to $5,792,000 for the same period in 1996. Approximately $796,000 of the
increase was attributable to the properties acquired in the fourth quarter of
1995. The remainder of the increase was the result of additional depreciation on
new construction on existing properties that was completed in 1995.
Interest expense increased from $3,205,000 for the six months ended June 30,
1995 to $5,961,000 for the same period in 1996. This increase was mainly
attributable to the Company's outstanding indebtedness during the six months
ended June 30, 1996 which ranged from approximately $66 to $71 million greater
than the amount of outstanding indebtedness during the same period in 1995.
During 1995, the Company increased its outstanding indebtedness in order to
finance the majority of the Company's 1995 acquisitions and certain ongoing
construction and development projects. The remainder of the increased interest
expense was attributable to the amortization of the note discount and other
costs of the issuance in November 1995 of the Company's Senior Notes which are
reflected as interest expense.
CAPITAL RESOURCES AND LIQUIDITY
The Company's principal source of funding for the acquisition, development,
expansion and renovation of properties are an unsecured line of credit, a
secured note, public equity financing, public unsecured debt financing and cash
flow from operations.
The Company elects to be taxed as a REIT under Sections 856 through 860 of the
Internal Revenue Code of 1986, as amended, commencing with its taxable year
ended December 31, 1991. REITs are subject to a number of organizational and
operational requirements, including a requirement that they currently distribute
at least 95 percent of their ordinary taxable income.
The Company believes that its cash flow from operations after interest for 1996
will be sufficient to pay regular quarterly dividends to the shareholders of the
Company based on the total number of outstanding shares of its Common Stock. The
Company declared dividends in the aggregate amount of $11,680,000 during the six
months ended June 30, 1996, of which $445,000 was reinvested into Common Stock
by stockholders.
In December 1994, as part of the North Phoenix acquisition, the Company obtained
a note payable secured by the shopping center in the amount of $2,750,000. The
note bears interest at 6.25% per annum with monthly payments of interest only
and all principal due in December 1996.
On August 15, 1995, the Company filed a shelf registration statement with the
Securities and Exchange Commission for up to $175 million of debt securities,
preferred stock, common stock and warrants.
On November 1, 1995, the Company completed an underwritten public offering (the
"Offering") of $100 million aggregate principal amount of the Company's Senior
Notes due November 1, 2000 at an interest rate of 7.25%. The 7.25% Senior Notes
were priced at an aggregate of $99,050,000. The Company used $91,000,000 of the
net proceeds from the Offering to repay indebtedness then outstanding under the
Company's Line of Credit and the remaining net proceeds were used for general
corporate purposes.
On November 1, 1995, the Company modified it's $100 million Line of Credit,
substituting one of the three banks in the original lending group with Morgan
Guaranty Trust Company of New York as lead agent. Concurrently with completion
of the Offering and the repayment of the Line of Credit, certain other
modifications were made to the Line of Credit including, among other things, (i)
incorporation of certain additional financial covenants and conditions into the
loan agreement and documentation, (ii) a reduction of the initial borrowing
capacity to $75 million, (iii) a modification of the interest rate payable on
borrowings outstanding to LIBOR plus 1.4% and (iv) an extension of the initial
maturity to October 1997, with an option to extend for an additional year upon
satisfaction of certain conditions.
The Line of Credit agreement requires the Company to maintain certain minimum
net operating income and net worth levels, as defined in the agreement, and
provides that the Company will not pay dividends in excess of 95% of its annual
net income plus depreciation. The Company is required to pay a commitment fee
of .25% per annum of the unused portion of the Line of Credit.
The Company typically funds short-term financing for its acquisition and
development activities through the Line of Credit. On April 29, 1996, the
Company borrowed $1 million to fund its 50% share of the Hayden Plaza North
Associates acquisition of the Phoenix, Arizona property. On May 13, 1996, the
Company used its excess funds to pay down $2 million of indebtedness under the
Line of Credit. On June 27, 1996, the Company borrowed an additional $2 million
to replenish operating funds. At June 30, 1996, the outstanding balance of the
borrowing under the Line of Credit was $57 million.
Interest on borrowings under the Line of Credit is at a rate of LIBOR plus 1.4%.
Interest on the outstanding balance is payable periodically, but at least
quarterly. The interest rates of the various borrowings under the Line of Credit
have decreased from 7.3625% at June 30, 1995 to a range of 6.9000% to 6.9625% at
June 30, 1996 as a result of decreases to the base rate indicator (LIBOR).
Capitalized interest costs for the six months ended June 30, 1996 was $106,000.
In order to continue to expand and develop its portfolio of properties, the
Company may seek to obtain funds through additional equity offerings or debt
financings. The Company anticipates that its liquidity and capital resources
will be adequate to fund its operating and administrative expenses, continuing
debt service obligations and the payment of distributions in accordance with
Company requirements.
The information in the immediately preceding paragraph is forward-looking and
involves risks and uncertainties that could significantly impact the Company's
expected liquidity requirements in the short and long term. While it is
impossible to itemize the many factors and specific events that could affect the
Company's outlook for its liquidity requirements, such factors would include the
actual timing of the Company's planned development of new, and expansion of
existing centers; the actual costs associated with such developments; and the
strength of the local economies in the sub-markets in which the Company
operates. Higher than expected costs, delays in development of centers, a
downturn in the local economies and/or the lack of growth of such economies
could reduce the Company's revenues and increase its expenses, resulting in a
greater burden on the Company's liquidity than that which the Company has
described above.
FUNDS FROM OPERATION
Most industry analysts and equity REITs, including the Company, consider Funds
from Operation ("FFO") an appropriate supplemental measure of operating
performance of an equity REIT. In general, FFO adjusts the net income for non-
cash charges such as depreciation, certain amortization expenses and most non-
recurring gains or losses. However, FFO does not represent cash generated from
operating activities in accordance with generally accepted accounting principles
and should not be considered an alternative to net income as an indication of
the results of the Company's performance or to cash flows as a measure of
liquidity.
In 1995, the National Association of Real Estate Investment Trusts ("NAREIT")
established new guidelines clarifying its definition of Funds from Operations
and requested that REITs adopt this new definition beginning in 1996.
The Company is including its FFO computation in this report as defined by and in
accordance with the recommendation of the NAREIT.
The following table sets forth the Company's calculation of FFO for the three
months and six months ended June 30, 1996 based on the new NAREIT definition.
The table also sets forth the calculation of FFO for the same periods of 1995,
which has been modified to conform to the new NAREIT definition.
Three months ended Six months ended
June 30, June 30,
(Unaudited)
1996 1995 1996 1995
------- ------- ------- -------
(In Thousands)
Net income $ 4,135 $ 4,091 $ 8,193 $ 8,099
Depreciation 2,897 2,384 5,792 4,724
Joint ventures FFO adjustment 206 101 318 201
------- ------- ------- -------
Funds from Operations $ 7,238 $ 6,576 $14,303 $13,024
======= ======= ======= =======
Weighted average numbers of shares
outstanding 8,353 8,244 8,334 8,231
Prior to the Company's adoption of the new NAREIT definition of FFO, the Company
calculated FFO by adjusting for deferred rent. If such an adjustment had been
made to the calculation of FFO in the above table, FFO would have been reduced
by $637,000 and $490,000 including the deferred rent adjustments to the Joint
Ventures for the three month periods ended June 30, 1996 and 1995, respectively
and $1,216,000 and $980,000, for the six month periods ended June 30, 1996 and
1995, respectively.
PART II - OTHER INFORMATION
Item 2 - Changes in Securities
- ------------------------------
At the Company's Annual Meeting held on May 23, 1996, stockholders approved
an amendment to the Company's charter to (i) provide that all outstanding shares
of Series A Common Stock shall be changed into shares of Common Stock; (ii)
eliminate the provision which entitles holders of Common Stock to receive an
annualized quarterly per share dividend equal to 105% of the annualized
quarterly per share dividend on the Series A Common Stock; (iii) change the name
of its "Series A Common Stock" to Common Stock; and (iv) change the name of what
was formerly referred to as "Common Shares" to "Common Stock". There were
approximately 38,266 outstanding shares of Series A Common Stock, which were
converted on a one-for-one basis into shares of Common Stock. The Company
believes that this mandatory change will reduce market confusion and eliminate
administrative expenses associated with maintaining two separate series of
Common Stock. The Company remains authorized to issue 27,000,000 shares,
including 2,000,000 shares of Preferred Stock, $.01 par value per share;
however, as a result of these changes, only one class of common stock,
designated as "Common Stock" and consisting of 25,000,000 shares, is currently
authorized for issuance.
Item 4 - Submission of Matters to a Vote of Security Holders
- ------------------------------------------------------------
At the Company's annual stockholders meeting, held on May 23, 1996, the
following proposals were submitted to a vote of the stockholders:
1. The following individuals were nominated to serve as directors:
Joseph K. Kornwasser Raymond E. Peet
George M. Jezek Walter Weisman
Roy P. Drachman Keene Wolcott
William D. Jones
2. To consider and vote upon The Price REIT, Inc. 1996 Director's Stock
Option Plan.
3. To consider and vote upon amendments to the Company's Charter to (i)
provide that all outstanding shares of Series A Common Stock shall be changed
into shares of Common Stock; (ii) eliminate the provision which entitles holders
of Common Stock to receive an annualized quarterly per share dividend equal to
105% of the annualized quarterly per share dividend on the Series A Common
Stock; and (iii) change the name of its "Series A Common Stock" to "Common
Stock."
Tabulation of Votes
Proposal 1 VOTES IN FAVOR VOTES WITHHELD
- ---------- -------------- --------------
Raymond E. Peet 7,623,350 42,485
Joseph K. Kornwasser 7,622,622 43,213
George M. Jezek 7,622,850 42,985
Roy P. Drachman 7,621,880 43,955
William D. Jones 7,623,007 42,828
Walter Weisman 7,621,708 44,127
Keene Wolcott 7,622,450 43,385
Proposal 2 VOTES
- ---------- --------------
For 6,588,299
Against 951,894
Abstain 125,642
Proposal 3 VOTES
- ---------- --------------
For 6,549,546
Against 82,538
Abstain 90,810
Broker Non-votes 942,941
Item 6 - Exhibits and Reports on Form 8-K
- -----------------------------------------
Exhibits
--------
3.3 Articles of Amendment
10.41 Purchase and Sale Agreement dated March 22, 1996 by and
between The Price REIT, Inc. and Town East Centre Joint
Venture (Mesquite, Texas property)
10.42 Purchase and Sale Agreement dated April 16, 1996 by and
between The Price REIT, Inc. and MGC Joint Venture
(Mesquite, Texas property)
12.1 Statement Re: Computation of Ratio of Earnings to Fixed
Charges
15.1 Letter Re: Unaudited Interim Financial Information
27.1 Article 5 Financial Data Schedule
Reports on Form 8-K
-------------------
No current Reports on Form 8-K were filed during the quarter
ended June 30, 1996.
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 thereunto duly authorized.
The Price REIT, Inc.
Date: August 14, 1996 /Joseph K. Kornwasser/
Joseph K. Kornwasser
Chief Executive Officer,
President and Director
Date: August 14, 1996 /George M. Jezek/
George M. Jezek
Chief Financial Officer,
Secretary, Director (Principal
Financial and Chief Accounting Officer)
INDEPENDENT ACCOUNTANTS' REVIEW REPORT
--------------------------------------
The Board of Directors
The Price REIT, Inc.
We have reviewed the accompanying condensed consolidated balance sheet of The
Price REIT, Inc. as of June 30, 1996, and the related condensed consolidated
statements of income for the three-month and six-month periods ended June 30,
1996 and 1995, and the condensed consolidated statements of cash flows for the
six-month periods ended June 30, 1996 and 1995. These financial statements are
the responsibility of the Company's management.
We conducted our reviews in accordance with standards established by the
American Institute of Certified Public Accountants. A review of interim
financial information consists principally of applying analytical procedures to
financial data, and making inquiries of persons responsible for financial and
accounting matters. It is substantially less in scope than an audit conducted in
accordance with generally accepted auditing standards, which will be performed
for the full year with the objective of expressing an opinion regarding the
financial statements taken as a whole. Accordingly, we do not express such an
opinion.
Based on our reviews, we are not aware of any material modifications that should
be made to the accompanying condensed consolidated financial statements referred
to above for them to be in conformity with generally accepted accounting
principles.
We have previously audited, in accordance with generally accepted auditing
standards, the consolidated balance sheet of The Price REIT, Inc. as of December
31, 1995, and the related consolidated statements of income, stockholders'
equity, and cash flows for the year then ended (not presented herein) and in our
report dated January 31, 1996, we expressed an unqualified opinion on those
consolidated financial statements. In our opinion, the information set forth in
the accompanying condensed consolidated balance sheet as of December 31, 1995,
is fairly stated, in all material respects, in relation to the consolidated
balance sheet from which it has been derived.
Ernst & Young LLP
San Diego, California
August 9, 1996
THE PRICE REIT, INC.
--------------------
ARTICLES OF AMENDMENT
THIS IS TO CERTIFY THAT:
FIRST: The Charter of The Price REIT, Inc., a Maryland corporation (the
"Corporation"), is hereby amended as follows:
1. Paragraph (c) of Article IV of the charter is amended to read in its entirety
as follows:
"(c) All shares of `Common Stock' (which were initially designated as `Series
B Common Stock' and which have been redesignated as `Common Stock' outstanding
shall become shares of `Common Stock.' The holders of the Common Stock shall be
entitled to participate in distributions when and as authorized and declared by
the Board of Directors and shall be entitled to one vote per share of Common
Stock on all matters submitted to a vote of the stockholders of the Corporation.
The holders of the Common Stock shall not be entitled to cumulative voting
except as expressly provided in the Bylaws of the Corporation."
2. Each reference to "Common Shares" in paragraphs (a) and (b) of Article IV, in
the third paragraph of Section 1 of Article IX and in paragraph (D) of Section 4
of Article IX is changed to "Common Stock."
SECOND: The amendments to the charter of the Corporation as set forth above have
been duly advised by the Board of Directors and approved by the stockholders of
the Corporation as required by law.
THIRD: The undersigned President acknowledges these Articles of Amendment to be
the corporate act of the Corporation and as to all matters or facts required to
be verified under oath, the undersigned President acknowledges that to the best
of his knowledge, information and belief, these matters and facts are true in
all material respects and that this statement is made under the penalties for
perjury.
IN WITNESS WHEREOF, the Corporation has caused these Articles to be signed in
its name and on its behalf by its President and attested to by its Secretary on
this 11 day of June, 1996.
ATTEST: THE PRICE REIT, INC.
GEORGE M. JEZEK JOSEPH K. KORNWASSER
- --------------- --------------------
George M. Jezek Joseph K. Kornwasser
Secretary, Chief Financial President and
Officer, Treasurer and Chief Executive Officer
Executive Vice President
PURCHASE AND SALE AGREEMENT
AND JOINT ESCROW INSTRUCTIONS
dated
APRIL 16, 1996
by and between
THE PRICE REIT, INC.,
as Buyer,
and
MGC JOINT VENTURE,
as Seller
PURCHASE AND SALE AGREEMENT
AND JOINT ESCROW INSTRUCTIONS
-----------------------------
THIS PURCHASE AND SALE AGREEMENT AND JOINT ESCROW INSTRUCTIONS ("AGREEMENT") is
made and entered into as of April 16, 1996 (the "EXECUTION DATE"), by and
between THE PRICE REIT, INC., a Maryland corporation ("BUYER"), and MGC JOINT
VENTURE, a Texas joint venture ("SELLER"), for the purpose of setting forth the
agreement of the parties and of instructing Chicago Title Insurance Company
("ESCROW AGENT"), with respect to the transactions contemplated by this
Agreement.
RECITALS
A. Seller is the owner of a fee simple interest in that certain real property
located in the City of Mesquite, County of Dallas, State of Texas, as more
particularly described on EXHIBIT "A" attached hereto (the "LAND"). The Land,
together with the Improvements, the balance of the Real Property, the Personal
Property and the Intangible Property (each as hereinafter defined) shall be
collectively referred to herein as the "PROPERTY."
B. Seller desires to sell and Buyer desires to purchase the Property upon and
subject to the terms and conditions set forth in this Agreement.
AGREEMENT
NOW, THEREFORE, in consideration of the mutual covenants contained in this
Agreement and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, Buyer and Seller hereby agree, and
instruct Escrow Agent, as follows:
1. AGREEMENT TO PURCHASE AND SELL.
Subject to all of the terms and conditions of this Agreement, Seller agrees to
sell, transfer and convey to Buyer, and Buyer agrees to acquire and purchase
from Seller, the Property, upon the terms and conditions set forth herein.
2. PURCHASE PRICE.
The purchase price for the Property (the "PURCHASE PRICE") shall be the sum of
THREE MILLION EIGHT HUNDRED EIGHTY THOUSAND DOLLARS ($3,880,000.00), payable as
follows:
2.1 INITIAL DEPOSIT. Upon the Opening of Escrow (as hereinafter defined), Buyer
shall deposit into Escrow (as hereinafter defined) the sum of FIFTY THOUSAND
DOLLARS ($50,000.00) (which amount, together with any and all interest and
dividends earned thereon, shall hereinafter be referred to as the "INITIAL
DEPOSIT") by wire transfer or by certified or bank check payable to the order of
Escrow Agent. In the event that Buyer fails to deposit the Initial Deposit in
accordance with the terms hereof, then this Agreement shall become voidable at
Seller's option exercised at anytime prior to the time that Buyer deposits the
Initial Deposit into Escrow.
2.2 ADDITIONAL DEPOSIT. Upon the Due Diligence Termination Date (as hereinafter
defined), Buyer shall deposit into Escrow the sum of FIFTY THOUSAND DOLLARS
($50,000.00) (which amount, together with any and all interest and dividends
earned thereon, shall hereinafter be referred to as the "ADDITIONAL DEPOSIT");
by wire transfer or by certified or bank check payable to the order of Escrow
Agent. The Initial Deposit together with the Additional Deposit, or such portion
thereof that is then in Escrow, shall hereinafter be referred to as the
"DEPOSIT").
The Escrow Agent shall invest the Deposit in insured money market accounts,
certificates of deposit, United States Treasury Bills or such other insured
instruments as Buyer may instruct from time to time. At the Closing (as
hereinafter defined), the Deposit shall be paid to Seller and credited against
the Purchase Price. In the event the sale of the Property is not consummated for
any reason, the Deposit shall be returned to Buyer or delivered to Seller in
accordance with the terms of this Agreement.
2.3 BALANCE. At the Closing, Buyer shall pay to Seller the balance of the
Purchase Price over and above the Deposit paid by Buyer under Sections 2.1 and
2.2 above, by wire transfer of federal funds, net of all prorations and ad
justments as provided herein.
3. OPENING OF ESCROW.
On or before the second (2nd) Business Day (as hereinafter defined) after the
Execution Date, Buyer and Seller shall cause a purchase and sale escrow
("ESCROW") to be opened with Escrow Agent by delivery to Escrow Agent of two (2)
fully executed copies of this Agreement together with the Deposit (the "OPENING
OF ESCROW"). This Agreement shall constitute escrow instructions to the Escrow
Agent as well as the agreement of the parties. Escrow Agent is hereby appointed
and designated to act as the Escrow Agent and instructed to deliver, pursuant to
the terms of this Agreement, the documents and funds to be deposited into Escrow
as herein provided. The parties hereto shall execute such additional escrow
instructions, not inconsistent with this Agreement as determined by counsel for
Buyer and Seller, as Escrow Agent shall deem reasonably necessary for its
protection, including Escrow Agent's general provisions, if any (as may be
modified by Buyer, Seller and Escrow Agent). In the event of any inconsistency
between this Agreement and such additional escrow instructions, the provisions
of this Agreement shall govern.
4. ACTIONS PENDING CLOSING.
4.1 DUE DILIGENCE PERIOD.
4.1.1 DUE DILIGENCE.
4.1.1.1 PROPERTY DOCUMENTS. On or before the fifth (5th) day after the Execution
Date, Seller shall deliver to Buyer, at Seller's sole cost and expense, at its
address set forth in Section 15.3 hereof, true, correct and complete copies of
all of the following to the extent the same are in Seller's possession, in the
control or possession of its agents, auditors or independent contractors or
otherwise reasonably available to Seller (collectively, the "PROPERTY
DOCUMENTS"): contracts, documents, books, records and other materials relating
to the Property, including, without limitation, as-built plans and
specifications, income and expense records, Leases (as hereinafter defined),
rent rolls, engineering tests and studies, soil tests, hazardous materials
reports, termite reports, phase one environmental reports, service contracts,
structural and mechanical reports, maps (including, without limitation,
topographical maps), plans, agreements, governmental permits and approvals,
licenses, appraisals, title policies, surveys, construction warranties, land
studies, a description of existing and proposed local improvements affecting the
Property (including, without limitation, assessment levels), a certificate from
the appropriate governmental authorities confirming the zoning, building and
platting status of the Property, all correspondence with all governmental
entities regarding the Property, and all property tax statements and assessed
value notices for the three years preceding the Execution Date. Seller is
providing the Property Documents to Buyer in order to assist Buyer in its
inspection of the Property. Except as set forth in Section 8 hereof, Seller does
not warrant or represent the accuracy of any information set forth in the
Property Documents relating to the physical condition or characteristics of the
Property.
4.1.1.2 DILIGENCE TESTS. At all reasonable times for a period of forty-five (45)
days following the Opening of Escrow (the "DUE DILIGENCE PERIOD"), Buyer, its
agents and representatives shall be entitled at Buyer's sole cost and expense to
(i) enter onto the Property during normal business hours and upon reasonable
advance notice to Seller, subject to the rights of Tenants (as hereinafter
defined) under the Leases, to perform any inspections, investigations, studies
and tests of the Property, including, without limitation, physical, structural,
mechanical, architectural, engineering, soils, geotechnical and environmental
tests that Buyer deems reasonable; (ii) cause an environmental assessment of the
Property to be performed, upon reasonable notice to Seller; and (iii) review all
Property Documents and examine and copy any and all books and records maintained
by Seller or its agents relating to the Property (including, without limitation,
all documents relating to utilities, zoning, and the access, subdivision and
appraisal of the Property). Buyer shall indemnify, defend and hold harmless
Seller from all claims, causes of action, costs, losses, damages and reasonable
attorneys' fees incurred by Seller in connection with or arising out of any
inspections carried on, by or on behalf of Buyer pursuant to this Section
4.1.1.2; provided, however, that Buyer shall not indemnify Seller for any claim,
loss or cause of action caused by Seller's gross negligence or willful
misconduct or any physical condition existing on the Property prior to Buyer's
entry thereon. The provisions of this Section 4.1.1.2 shall survive the Closing
or earlier termination of this Agreement and further, notwithstanding the
limitations on Seller's remedies set forth in Section 12 of this Agreement,
Seller shall have all remedies available at law or in equity in the enforcement
of Buyer's indemnification obligations.
On or before the third (3rd) Business Day prior to performing any inspection or
study of the Property that would involve the intrusive or destructive sampling
or analysis of any portion of the Property or its improvements, including,
without limitation, any soil, water or groundwater on or under the Property (the
"Phase II Investigation"), Buyer shall provide to Seller a detailed description
of the work to be performed during the Phase II Investigation. On or before the
third (3rd) Business Day after Seller's receipt of Buyer's description, Seller
shall have the right to object to any portion of the proposed Phase II
Investigation that Seller reasonably determines may represent an unreasonable
risk of injury or damage to persons or property on or near the Property, in
which case Buyer shall refrain from performing any such portion of the proposed
Phase II Investigation. Seller or its representative shall have the right, but
not the obligation, to observe any and all activities of Buyer or its
representative during the performance of any Phase II Investigation.
4.1.2 TERMINATION RIGHT. Buyer shall have the right at any time on or before the
last day of the Due Diligence Period (the "DUE DILIGENCE TERMINATION DATE") to
terminate this Agreement if Buyer determines in its sole and absolute discretion
that the Property is not acceptable to Buyer. In the event that Buyer fails to
deliver a written notice to Seller and Escrow Agent waiving its termination
right hereunder on or before the Due Diligence Termination Date, then (i) Buyer
shall deliver to Seller copies of all inspections, reports and analyses of the
Property (other than those subject to attorney-client privilege) which were
prepared by Buyer or Buyer's agents and shall return to Seller all materials
delivered by Seller to Buyer pursuant to this Agreement, (ii) Escrow Agent shall
return the Deposit to Buyer, (iii) the parties shall equally share the
cancellation charges of Escrow Agent and Title Company (as hereinafter deemed),
and (iv) this Agreement shall automatically terminate and be of no further force
or effect and neither party shall have any further rights or obligations
hereunder, other than pursuant to any provision hereof which expressly survives
the termination of this Agreement.
4.1.3 INDEPENDENT CONTRACT CONSIDERATION. Buyer agrees that if Buyer exercises
its right to terminate this Agreement pursuant to Section 4 hereof, Seller shall
be entitled to retain, and Escrow Agent is hereby authorized and directed to
disburse to Seller from the Deposit, the sum of One Hundred Dollars ($100),
which amount Seller and Buyer hereby acknowledge and agree has been bargained
for and agreed to as full and adequate consideration for Seller's execution,
delivery and performance of this Agreement and Buyer's right to inspect the
Property pursuant to this Agreement. The consideration provided for in this
Section 4.1.3 is in addition to and independent of any other consideration or
payment provided for herein and, to the extent payable, is non-refundable in all
events.
4.2 TITLE.
4.2.1 DELIVERIES BY SELLER. Seller shall deliver or cause to be delivered to
Buyer the following: (a) on or before the fifth (5th) day after the Opening of
Escrow, a Texas form of commitment for an owner's policy of title insurance (the
"PTR") issued by Chicago Title Insurance Company (in such capacity, the "TITLE
COMPANY"), together with legible copies of all documents referenced as
exceptions therein (the "UNDERLYING DOCUMENTS"); (b) on or before the twentieth
(20th) day after the Opening of Escrow, a current Texas Land Surveyors Category
1A Condition II as-built survey of the Property (the "SURVEY"), in form
reasonably satisfactory to Buyer and Title Company, prepared and certified to
Buyer, Title Company, and such other persons or entities as Buyer may, in its
discretion, request, by a surveyor licensed in the State of Texas, showing any
and all matters which Buyer may reasonably require, including, without
limitation, all Improvements, all easements, all roads, all utilities, the
number of parking spaces, access to and from the Land, and drainage ditches,
set-back lines, protrusions, encroachments, and encumbrances affecting the same,
and showing that the Real Property is contiguous to that certain real property
located in Mesquite, Texas, which Buyer is acquiring pursuant to the Town East
Centre Contract (as hereinafter defined); and (c) on or before the fifth (5th)
day after the Opening of Escrow, a UCC Search with regard to the Personal
Property (the "UCC SEARCH"). The PTR, the Underlying Documents, the Survey and
the UCC Search shall be collectively referred to herein as the "TITLE
DOCUMENTS."
4.2.2 BUYER'S REVIEW OF TITLE. Buyer shall have ten (10) Business Days after its
receipt of all of the Title Documents to notify Seller and Escrow Agent in
writing ("BUYER'S OBJECTION LETTER") of any objection which Buyer may have to
any matters reported or shown in the Title Documents or any updates thereof
(provided, however, that if any such updates are received by Buyer, Buyer shall
have an additional five (5) Business Days, regardless of the Due Diligence
Termination Date, following Buyer's receipt of such update and legible copies of
all documents referenced therein to notify Seller and Escrow Agent of objections
to items shown on any such update to the extent that such items are not
specifically set forth in the initial Title Documents). Matters reported in or
shown by the Title Documents (or any updates thereof and not objected to by
Buyer as provided above or which Buyer objects to, but which objections are
subsequently waived pursuant to this Section 4.2.2 shall be deemed to be
"PERMITTED EXCEPTIONS." Seller shall have no obligation to cure or correct any
matter objected to by Buyer, other than any Liens (as hereinafter defined).
However, on or before the fifth (5th) Business Day following Seller's receipt of
Buyer's Objection Letter, Seller may elect, by delivering written notice of such
election to Buyer and Escrow Agent ("SELLER'S RESPONSE"), to either remove or,
to Buyer's reasonable satisfaction, insure over any matters objected to in
Buyer's Objection Letter. If Seller fails to remove or satisfactorily insure
over any exceptions or matters objected to by Buyer, then Buyer shall elect, by
delivering written notice of such election to Seller and Escrow Agent ("BUYER'S
RESPONSE") on or prior to the tenth (10th) Business Day following Buyer's
receipt of Seller's Response, to: (a) terminate this Agreement (in which case
Escrow Agent shall return the Deposit to Buyer, the parties shall equally share
the cancellation charges of Escrow Agent and Title Company and neither party
shall thereafter have any rights or obligations to the other hereunder, other
than pursuant to any provision hereof which expressly survives the termination
of this Agreement); (b) extend the Closing Date (as hereinafter defined) for a
period not to exceed five (5) Business Days to allow Seller a reasonable period
of time to remove such objected to exceptions or matters (but only in the event
that Seller has elected to remove such exceptions or matters pursuant to the
terms hereof); or (c) proceed to a timely Closing whereupon such objected to
exceptions or matters shall be waived and deemed to be Permitted Exceptions. In
the event that Buyer fails to deliver timely Buyer's Response in accordance with
the terms hereof, then (i) Escrow Agent shall return the Deposit to Buyer, (ii)
the parties shall equally share the cancellation charges of Escrow Agent and
Title Company and (iii) this Agreement shall automatically terminate and be of
no further force or effect and neither party shall have any further rights or
obligations hereunder, other than pursuant to any provision hereof which
expressly survives the termination of this Agreement. Notwithstanding anything
to the contrary contained herein, Seller shall be required to discharge and
remove any and all liens (the "LIENS") affecting the Property which secure an
obligation to pay an amount equal to or less than $15,000 (other than
installments of real estate taxes not delinquent as of the Closing) and, even
though Buyer does not expressly disapprove such Liens, such Liens shall not be
Permitted Exceptions. In the event that Seller fails to discharge and remove any
Liens, then Buyer may elect to either (i) discharge any Liens which can be
discharged by the payment of money and deduct from the Purchase Price the amount
necessary to do so or (ii) pursue any other remedy identified in Subsections (a)
or (b) of this Section
4.2.2.
4.2.3 CONDITION OF TITLE AT CLOSING. Upon the Closing, Seller shall sell,
transfer and convey to Buyer indefeasible fee simple title to the Real Property
by a duly executed and acknowledged special warranty deed in the form of EXHIBIT
"B" attached hereto (the "DEED"), subject only to (i) the Permitted Exceptions
and (ii) any non-delinquent real estate taxes for the year in which the Closing
occurs, provided, however, that this Section 4.2.3 shall not affect Seller's
obligation to pay its share of real property taxes pursuant to Section 7.5
hereof. Prior to Closing, Seller shall not take any action or commit any acts
which would give rise to a variance from the current legal description of the
Real Property, or cause the creation of any exception or encumbrance against or
respecting the Real Property without the prior written consent of Buyer, which
consent may be withheld in Buyer's sole and absolute discretion. Nothing in this
Section 4.2.3 shall preclude Buyer from disapproving title matters in accordance
with the provisions of Section 4.2.2 above.
5. DESCRIPTION OF PROPERTY.
5.1 THE IMPROVEMENTS. As used herein, the term "IMPROVEMENTS" shall mean, all
buildings, improvements, structures and fixtures now or hereafter located on or
in the Land, including, without limitation, those certain buildings and
structures containing approximately 52,882 square feet of retail and commercial
space, being used for the operation of a shopping center (the "SHOPPING CENTER")
commonly known as "Town East Plaza. "
5.2 THE REAL PROPERTY. As used herein, the term "REAL PROPERTY" shall include
(i) the Land, (ii) the Improvements, (iii) all apparatus, equipment and
appliances owned by Seller and used in connection with the operation or
occupancy of the Land and the Improvements (such as heating, air conditioning or
mechanical systems and facilities used to provide any utility services, refriger
ation, ventilation, waste disposal or other services) and now or hereafter
located on or in the Land or the Improvements, and (iv) all of the rights,
privileges and easements appurtenant to or used in connection with the Land and
the Improvements, including, without limitation, all minerals, oil, gas and
other hydrocarbon substances, all development rights, air rights, water, water
rights, waste water capacity and water stock relating to the Land, all strips
and gores, all of Seller's right, title and interest in and to any streets,
alleys, easements, rights-of-way, public ways, or other rights appurtenant,
adjacent or connected to the Land.
5.3 THE PERSONAL PROPERTY. As used herein, the term "PERSONAL PROPERTY" shall
mean all of that certain tangible personal property, equipment and supplies
owned by Seller and either situated at the Real Property or used by Seller in
connection with the use, operation, maintenance or repair of the Real Property,
including, without limitation, all Personal Property described on EXHIBIT "C"
attached hereto.
5.4 THE INTANGIBLE PROPERTY. As used herein, the term "INTANGIBLE PROPERTY"
shall mean all of that certain intangible property owned by Seller and used by
Seller in connection with the Real Property and/or the Personal Property,
including, without limitation, (i) the Leases, all contract rights, easement
agreements, books, records, reports, test results, environmental assessments
as-built plans, specifications and other similar documents and materials
relating to the use, operation, maintenance, repair, construction or fabrication
of the Real Property or the Personal Property; (ii) all trademarks and trade
names, including, without limitation, all rights in and to the name "Town East
Plaza;" (iii) all transferable business licenses, architectural, site,
landscaping or other permits, applications, approvals, authorizations and other
entitlements affecting the Real Property; and (iv) all transferable guarantees,
warranties and utility contracts relating to the Real Property.
6. CONDITIONS PRECEDENT TO CLOSING.
6.1 BUYER'S CONDITIONS. The obligation of Buyer to purchase the Property in
accordance with this Agreement is subject to the following conditions precedent
(and conditions concurrent, with respect to deliveries to be made by the parties
at Closing) (the "CLOSING CONDITIONS"), which conditions may be waived, or the
time for satisfaction thereof extended for a period not to exceed five (5)
Business Days, by Buyer only in a writing executed by Buyer (provided, however,
that any such waiver shall not affect Buyer's ability to pursue any remedy it
may have with respect to any breach hereunder by Seller):
6.1.1 TITLE. Title Company shall be prepared and irrevocably committed to issue
to Buyer a Texas form of owner's policy of title insurance in favor of Buyer in
an amount equal to the Purchase Price showing indefeasible fee simple title to
the Property vested in Buyer, with those endorsements reasonably requested by
Buyer to the extent available in Texas, subject only to the Permitted Exceptions
and the standard printed exceptions set forth in any standard Texas form of
owner's policy of title insurance (collectively, the "OWNER'S TITLE POLICY").
6.1.2 SELLER'S DUE PERFORMANCE. All of the representations and warranties of
Seller set forth in Section 8 below shall be true and correct as of the Closing
Date, and Seller, on or prior to the Closing Date, shall have complied with
and/or performed all of the obligations, covenants and agreements required on
the part of Seller to be complied with or performed pursuant to the terms of
this Agreement. On the Closing Date, Seller shall deliver a certificate, in the
form of EXHIBIT "D" attached hereto (the "SELLER'S CERTIFICATE"), to Buyer
certifying that other than as disclosed on such certificate, all of the
representations, covenants and warranties of Seller made in or pursuant to this
Agreement, including, without limitation, those set forth in Sections 8 and 10
below, are true, accurate, correct and complete in all material respects, as of
the Closing.
6.1.3 PHYSICAL CONDITION OF PROPERTY. Subject to the provisions of Section 11
below, the physical condition of the Property shall be substantially the same on
the Closing Date as on the Execution Date, except for ordinary wear and tear and
any damages due to any act of Buyer or Buyer's representatives.
6.1.4 BANKRUPTCY. No action or proceeding shall have been commenced by or
against Seller under the federal bankruptcy code or any state law for the relief
of debtors or for the enforcement of the rights of creditors and no attachment,
execution, lien or levy shall have attached to or been issued with respect to
the Property or any portion thereof.
6.1.5 LEASES. At the Closing, Seller shall assign all of Seller's rights and
remedies under the Leases, including, without limitation, the right to any
security deposits and prepaid rent, to Buyer pursuant to an assignment and
assumption of leases and security deposits (the "ASSIGNMENT OF LEASES") in the
form of EXHIBIT "E" attached hereto.
6.1.6 BILL OF SALE. At the Closing, Seller shall deliver to Buyer a bill of sale
and assignment (the "BILL OF SALE AND ASSIGNMENT"), by which Seller shall
transfer to Buyer all the Personal Property and the Intangible Property,
including, without limitation, the Property Documents, but excluding the Leases,
in each case free of all liens and encumbrances, in the form of EXHIBIT "F"
attached hereto.
6.1.7 ESTOPPEL CERTIFICATES. Seller shall use commercially reasonable efforts to
deliver to Buyer, on or before the tenth (10th) day prior to the Closing,
certificates, each substantially in the form of EXHIBIT "G" attached hereto,
executed by each Tenant (collectively, the "ESTOPPEL CERTIFICATES").
In the event that Seller is unable to deliver one hundred percent (100%) of the
Estoppel Certificates to Buyer, then Seller shall execute and deliver to Buyer
an estoppel certificate in the form of EXHIBIT "H" attached hereto (the
"SELLER'S ESTOPPEL CERTIFICATE") with respect to any Lease for which Buyer did
not receive an Estoppel Certificate. Buyer shall review and approve or
disapprove the Estoppel Certificates and the Seller's Estoppel Certificates in
Buyer's sole and absolute discretion; provided, however, that Buyer shall not
disapprove of any Estoppel Certificate or Seller's Estoppel Certificate on the
basis of any matter set forth in any Lease. In the event that Buyer disapproves
any of the Estoppel Certificates or Seller's Estoppel Certificates in accordance
with the terms hereof, Buyer may elect to terminate this Agreement (in which
case Escrow Agent shall return the Deposit to Buyer, the parties shall equally
share the cancellation charges of Escrow Agent and Title Company and neither
party shall thereafter have any rights or obligations to the other hereunder,
other than pursuant to any provision hereof which expressly survives the
termination of this Agreement). Notwithstanding anything to the contrary
contained herein, in the event that Seller fails to deliver one hundred percent
(100%) of the Estoppel Certificates to Buyer as required hereunder, Buyer shall
have the right to extend the Closing for up to five (5) Business Days, in order
to allow Seller a reasonable amount of time to obtain such certificates.
6.1.8 NON-FOREIGN AFFIDAVIT. On or before the Closing, Seller shall deliver to
Buyer the Non-Foreign Affidavit (the "NON-FOREIGN AFFIDAVIT") in the form of
EXHIBIT "I" attached hereto, executed by Seller.
6.1.9 NO MORATORIA. No moratorium, statute, regulation, ordinance, or federal,
state, county or local legislation, or order, judgment, ruling or decree of any
governmental agency or of any court directed specifically at the Property shall
have been enacted, adopted, issued, entered or pending which would prohibit the
current use of the Property as a shopping center.
6.2 FAILURE OF CLOSING CONDITIONS. Subject to Buyer's rights hereunder, if any
of the Closing Conditions have not been fulfilled within the applicable time
periods, Buyer may:
(a) waive the Closing Condition and close Escrow in accordance with this
Agreement, without adjustment or abatement of the Purchase Price, except as
otherwise provided herein; or
(b) cure or discharge any Liens in accordance with the terms of Section 4.2.2
hereof (which Buyer understands shall be discharged through Escrow from the
proceeds of the Purchase Price); or (c) terminate this Agreement by written
notice to Seller and to Escrow Agent, in which event Escrow Agent shall return
the Deposit to Buyer, Seller shall pay for all of the cancellation charges of
Title Company and Escrow Agent, and Buyer shall be entitled to pursue its rights
and remedies pursuant to Section 12.2 hereof.
6.3 ADDITIONAL CLOSING CONDITION. On or before the Closing Date, Buyer shall
have acquired from Town East Centre Joint Venture, a Texas joint venture ("TOWN
EAST CENTRE"), indefeasible fee simple title to that certain real property
located in Mesquite, Texas, pursuant to that certain Purchase and Sale Agreement
and Joint Escrow Instructions, dated as of March 22, 1996, between Buyer and
Town East Centre (the "TOWN EAST CENTRE CONTRACT"). In the event that the
condition set forth in this Section 6.3 is not satisfied on or before the
Closing Date, then (i) Escrow Agent shall return the Deposit to Buyer, (ii) the
parties shall equally share the cancellation charges of Escrow Agent and Title
Company, and (iii) this Agreement shall automatically terminate and be of no
further force or effect and neither party shall have any further rights or
obligations hereunder, other than pursuant to any provision hereof which
expressly survives the termination of this agreement.
7. CLOSING.
7.1 CLOSING DATE. Subject to the provisions of this Agreement, the "Closing" (as
defined below) shall take place on the thirtieth (30th) day following the Due
Diligence Termination Date, or on such other date as the parties hereto may
agree. As used herein, the following terms shall have the following meanings:
(i) the "CLOSING" shall mean the recordation of the Deed in the Official Public
Records of Real Property of Dallas County, Texas (the "OFFICIAL RECORDS"); and
(ii) the "CLOSING DATE" shall mean the date upon which the Closing actually
occurs.
7.2 DELIVERIES BY SELLER. Not less than two (2) Business Days prior to the
Closing Date, Seller, at its sole cost and expense, shall deliver or cause to be
delivered into Escrow the following documents and instruments, each dated as of
the Closing Date, in addition to the other items and payments required by this
Agreement to be delivered by Seller:
7.2.1 DEED. The original executed and acknowledged Deed conveying the Property
to Buyer or its nominee;
7.2.2 NON-FOREIGN AFFIDAVIT. The original Non-Foreign Affidavit executed by
Seller;
7.2.3 ASSIGNMENT OF LEASES. Four (4) original executed counterparts of the
Assignment of Leases;
7.2.4 BILL OF SALE AND ASSIGNMENT. Four (4) original executed counterparts of
the Bill of Sale and Assignment;
7.2.5 SELLER'S CERTIFICATE. Four (4) original Seller's Certificates, executed by
Seller;
7.2.6 PROOF OF AUTHORITY. Such proof of Seller's authority and authorization to
enter into this Agreement and the transaction contemplated hereby, and such
proof of the power and authority of the individual(s) executing or delivering
any instruments, documents or certificates on behalf of Seller to act for and
bind Seller as may be reasonably required by Title Company or Buyer; and
7.2.7 OTHER. Such other documents and instruments, signed and properly
acknowledged by Seller, if appropriate, as may be reasonably required by Buyer,
Escrow Agent, or otherwise in order to effectuate the provisions of this
Agreement and the Closing of the transactions contemplated herein.
7.3 DELIVERIES BY BUYER. On or before the Closing, Buyer shall deliver or cause
to be delivered into Escrow the following: (i) the balance of the Purchase Price
pursuant to Section 2 hereof and Buyer's share of prorations and Closing Costs,
as provided in Sections 7.5 and 7.6, respectively; (ii) four (4) original
executed counterparts of the Assignment of Leases; and (iii) such other
documents and instruments, signed and properly acknowledged by Buyer, if
appropriate, as may reasonably be required by Escrow Agent or otherwise in order
to effectuate the provisions of this Agreement and the closing of the
transactions contemplated herein.
7.4 ACTIONS BY ESCROW AGENT. Provided that Escrow Agent shall not have received
written notice from Buyer or Seller of the failure of any condition to the
Closing or of the termination of the Escrow and this Agreement, when Buyer and
Seller have deposited into Escrow the documents and funds required by this
Agreement, and Title Company is irrevocably and unconditionally committed to
issue the Owner's Title Policy concurrently with the Closing, Escrow Agent
shall, in the order and manner herein below indicated, take the following
actions:
7.4.1 RECORDING. Following Title Company's ACKNOWLEDGEMENT that it is prepared
and irrevocably committed to issue the Owner's Title Policy to Buyer, cause the
Deed and any other documents which the parties hereto may mutually direct to be
recorded in the Official Records and obtain conformed copies thereof for
distribution to Buyer and Seller.
7.4.2 FUNDS. Upon receipt of confirmation of the recordation of the Deed and
such other documents as were recorded pursuant to Section 7.4.1 above, disburse
all funds deposited with it by Buyer as follows:
(a) pursuant to the Closing Statement (as hereinafter defined), retain for
Escrow Agent's own account all escrow fees and costs, disburse to Title Company
the fees and expenses incurred in connection with the issuance of the Owner's
Title Policy, and disburse to any other persons or entities entitled thereto the
amount of any other Closing Costs;
(b) disburse to Seller an amount equal to the Purchase Price, less or plus the
net debit or credit to Seller by reason of the prorations and allocation of
Closing Costs provided for in this Section 7. Seller's portion (as provided in
Section 7.6 below) of the escrow fees, title fees and other Closing Costs shall
be paid pursuant to clause (a) above; and
(c) disburse to Buyer any remaining funds in the possession of Escrow Agent
after payments pursuant to (a) and (b) above have been completed.
7.4.3 DELIVERY OF DOCUMENTS. Deliver to Buyer and Seller each two (2) originals
of all documents, other than the Deed and the Non-Foreign Affidavit, deposited
into Escrow.
7.4.4 TITLE POLICY. Cause Title Company to issue the Owner's Title Policy (with
an effective date of the Closing) to Buyer after the Closing.
7.5 PRORATIONS. Rentals, revenues, and other income, if any, from the Property,
taxes, assessments, improvement bonds, service or other contract fees, utility
costs, and other expenses affecting the Property shall be prorated between Buyer
and Seller as of the Closing Date based on a 365-day year. For purposes of
calculating prorations, Buyer shall be deemed to be title holder of the
Property, and therefore entitled to the income and responsible for the expenses,
after 12:01 a.m. on the Closing Date. Notwithstanding the foregoing, with
respect to percentage rent under the Leases, prorations shall be made following
the end of the calendar year in which the Closing occurs so that all percentage
rents received by Buyer with respect to such calendar year shall be prorated
between Buyer and Seller as of the Closing Date. Delinquent rentals as of the
Closing Date shall not be prorated, but when paid to Buyer shall be delivered by
Buyer to Seller, less the costs and expenses incurred by Buyer in collecting the
same (provided that all current rent has then been paid with respect to such
Leases). After the Closing, Buyer shall use commercially reasonable efforts to
collect delinquent rents on behalf of Seller. After the Closing, Seller shall
have no right to proceed in any manner or make any claim against Tenants for
rents that were delinquent as of the Closing Date. On the Closing Date, Buyer
shall receive as a credit to the Purchase Price an amount equal to the sum of:
(i) security deposits which were paid by Tenants to Seller, (ii) expenses and
other sums owed by Seller to Tenants for work or other matters which occurred
prior to the Closing Date (provided that Seller does not in good faith dispute
such expenses or other sums), and (iii) rentals already received by Seller
attributable to periods after the Closing Date. All non-delinquent real estate
taxes or assessments on the Property shall be prorated based on the actual
current tax bill, but if such tax bill has not yet been received by Seller by
the Closing Date or if supplemental taxes are assessed after the Closing for the
period prior to the Closing, the parties shall make any necessary adjustment
after the Closing by cash payment to the party entitled thereto so that Seller
shall have borne all real property taxes, including all supplemental taxes,
allocable to the period prior to the Closing and Buyer shall bear all real
property taxes, including all supplemental taxes, allocable to the period from
and after the Closing. If any expenses or revenues attributable to the Property
and allocable to the period prior to the Closing are discovered or billed on or
before the first (1st) year anniversary of the Closing, the parties shall make
any necessary adjustment after the Closing by cash payment to the party entitled
thereto so that Seller shall have borne all expenses and received all revenues
allocable to the period prior to the Closing and Buyer shall bear all expenses
and receive all revenues allocable to the period from and after the Closing. The
provisions of this Section 7.5 shall survive the Closing.
Ten (10) days prior to the Closing, Escrow Agent shall deliver to each of the
parties for their review and approval a preliminary closing statement (the
"PRELIMINARY CLOSING STATEMENT") based on an income expense statement prepared
by Seller, approved by Buyer, and delivered to Escrow Agent prior to said date,
setting forth (i) the proration amounts allocable to each of the parties
pursuant to this Section 7.5 and (ii) the Closing Costs allocable to each of the
parties pursuant to Section 7.6 hereof. Based on each of the party's comments,
if any, regarding the Preliminary Closing Statement, Escrow Agent shall revise
the Preliminary Closing Statement and deliver a final, signed version of a
closing statement to each of the parties at the Closing (the "CLOSING
STATEMENT").
7.6 CLOSING COSTS. Each party shall pay its own costs and expenses arising in
connection with the Closing (including, without limitation, its own attorney and
advisor fees), except the following costs (the "CLOSING COSTS"), which shall be
allocated between the parties as follows:
(i) Seller shall pay all documentary transfer and stamp taxes, if any, related
to the transfer of the Property, one-half (1/2) of Escrow Agent's escrow fees
and costs, the cost of the Survey (if not already paid), the cost of the
standard portion of the Owner's Title Policy and all recording fees.
(ii) Buyer shall pay one-half (1/2) of Escrow Agent's escrow fees and costs, the
cost of the modification of the "survey exception" to the Owner's Title Policy
and the cost of all endorsements to the Owner's Title Policy.
7.7 DELIVERIES OUTSIDE OF ESCROW. Seller shall deliver possession of the
Property, subject to the Leases and the rights of parties claiming under the
Permitted Exceptions, to Buyer upon the Closing. Further, the parties hereby
covenant and agree to deliver, on or prior to the Closing, the following items:
7.7.1 APPROVALS. Seller shall deliver to Buyer, originals of all certifications,
approvals, consents, authorizations, waivers, licenses, variances, permits,
easements and rights of way, including proofs of dedication, which are required
by any governmental authority in connection with the current ownership,
development, management, use and maintenance of the Property, to the extent that
such items are in Seller's possession;
7.7.2 INTANGIBLE PROPERTY. Seller shall deliver to Buyer, the Intangible
Property, including, without limitation, the original Property Documents and the
original Leases; and
7.7.3 PERSONAL PROPERTY. Seller shall deliver to Buyer, the Personal Property,
including, without limitation, all keys, pass cards, remote controls, security
codes, computer software and other devices relating to access to the
Improvements.
7.7.4 NOTICES.
7.7.4.1 NOTICE TO TENANTS. Seller shall execute and deliver to Buyer, and then
Buyer shall execute and deliver to each Tenant, a letter for each Tenant in the
form attached hereto as EXHIBIT "J." dated as of the Closing Date and addressed
to the Tenants, informing such Tenants of the transfer of the Property and the
assignment of the Leases to Buyer together with an instruction to pay all
amounts due under the Leases following the Closing Date to Buyer.
7.7.4.2 NOTICE TO VENDORS. Seller shall execute and deliver to Buyer, and then
Buyer shall execute and deliver to each vendor, a letter for each of the vendors
of the Service Contracts (as hereinafter defined) in the form attached hereto as
EXHIBIT "K," dated as of the Closing Date and addressed to each Service Contract
vendor, informing said vendors of the assignment of the Service Contracts to
Buyer.
8. SELLER'S REPRESENTATIONS AND WARRANTIES.
Seller represents and warrants to and agrees with Buyer, as of the Execution
Date and, subject to matters disclosed in the Seller's Certificate, as of the
Closing, as follows:
8.1 TITLE. To Seller's actual knowledge, Seller is the legal and equitable owner
of the Property and Seller has the full right to convey the Property.
8.2 LEASES.
8.2.1 LEASE SCHEDULE. The schedule attached hereto as EXHIBIT "L" (the "LEASE
SCHEDULE") is true, correct and complete with respect to: (i) the leases,
licenses, tenancies, concession agreements, subleases, and other occupancy
agreements to which Seller is a party, including, without limitation, all
amendments, modifications and guarantees thereof and options to renew or extend
the term thereof, whether oral or written, now in effect at the Property
(collectively, the "LEASES"), (ii) the dates of the Leases and of all
amendments, modifications, supplements and restatements thereof, (iii) the
identities of the tenants under the Leases (the "TENANTS"), (iv) the space
occupied by the Tenants and the rentable area thereof, (v) the commencement and
expiration dates of the Leases, (vi) the annual rents payable thereunder, (vii)
the security and other deposits maintained, if any, with respect to the Leases,
(viii) the base year for any CPI or other escalation thereunder, (ix) the
currently escalated rents, (x) the percentage rent factor and break point, (xi)
all contributions to common area maintenance, operating expenses and insurance
under the Leases, (xii) any options to extend, renew or cancel the Leases (as
well as any notification from any of the Tenants regarding their election to
extend, renew or cancel any of the Leases), (xiii) any rights of first refusal
or first offer with respect to any portion of the Property, and (xiv) to
Seller's actual knowledge, any and all advances, concessions, allowances,
credits, rebates, offsets or other cases for relief or adjustment (to the extent
not expressly set forth in the Leases), including, without limitation, any
unpaid reimbursements for Tenant improvements and any "free" or "reduced" rent
still outstanding.
8.2.2 TENANT ARREARAGES. The schedule attached hereto as EXHIBIT "M" the
("TENANT ARREARAGE STATEMENT") is a true, correct and complete statement of
Tenant arrearages and accrued but unpaid minimum and additional rents,
percentage rents, expense escalations, tax and other adjustments and charges
attributable to the period prior to 12:01 a.m. on the Closing Date. Except as
set forth on the Tenant Arrearage Statement, there are no arrearages in rent or
additional rent under any of the Leases.
8.2.3 DELIVERY AND STATUS OF LEASES. Except as shown on the Lease Schedule, to
Seller's actual knowledge, the Leases are in full force and effect and are free
from default by Seller or any other party. To Seller's actual knowledge, except
as disclosed to Buyer herein, no event has occurred which with notice, lapse of
time or both would constitute an event of default under any of the Leases.
Seller has no actual knowledge, as of the date hereof, that any Tenant intends
to discontinue its operations at the Property or intends to commit a material
breach of its Lease. True, correct and complete copies of all Leases shall be
delivered to Buyer in accordance with Section 4.1.1 hereof; provided, however,
that for purposes of this Agreement, Buyer may rely on the data set forth in the
Lease Schedule. At any time prior to the Closing, Seller shall promptly deliver
to Buyer a written explanation of any inconsistencies or differences between the
Lease Schedule and the copies of the Leases delivered to Buyer to the extent
that any such inconsistencies or differences are identified to Seller by Buyer.
8.2.4 SECURITY DEPOSITS. Except as set forth on the Lease Schedule, there are no
security deposits held by the landlord under any of the Leases.
8.2.5 NO PRE-PAID RENT. No Tenant has paid any rent for more than one (1) month
in advance except as may otherwise be set forth in the Lease Schedule.
8.2.6 NO BROKER'S COMMISSIONS. To Seller's knowledge, Seller is not subject to
any arrangements (whether written or oral) for the payment of any brokerage or
other leasing commissions payable in connection with any of the Tenants under
presently existing Leases or new leases or amendments thereto (including,
without limitation, any extension or expansion options that may exist under the
Leases).
8.2.7 NO NEW LEASES. Seller shall not enter into any new lease, or extend, renew
or amend any Lease, without Buyer's prior written consent (which consent may not
be unreasonably withheld on or prior to the Due Diligence Termination Date, but
which consent may be granted or withheld in Buyer's sole and absolute discretion
after the Due Diligence Termination Date).
8.3 CONDITION OF PROPERTY. Except as otherwise set forth in the Property
Documents, Seller has not actually received any written notice of any defects in
the Property from any Tenants or any other third parties, including, without
limitation, any governmental agencies.
8.4 SPECIAL ASSESSMENTS OR CONDEMNATION. Seller has not received any notice of
any pending (i) special assessments or (ii) condemnation actions against the
Property or any part, and Seller has no actual knowledge of any threatened,
contemplated or pending special assessments or eminent domain proceedings that
would affect the Property or any part thereof in any way whatsoever.
8.5 SERVICE CONTRACTS. There are no service, maintenance, repair, management,
leasing, or supply contracts or other contracts (including, without limitation,
janitorial, elevator, equipment, brokerage, and landscaping agreements) (the
"SERVICE CONTRACTS") affecting the Property, oral or written, except as set
forth on the schedule attached hereto as EXHIBIT "N" (the "CONTRACT SCHEDULE").
True, correct and complete copies of all Service Contracts shall be delivered to
Buyer in accordance with Section 4.1.1 hereof; provided, however, that for the
purposes of this Agreement, Buyer may rely on the data set forth in the Contract
Schedule. Except as shown on the Contract Schedule, the Service Contracts are
unmodified and, to Seller's actual knowledge, are in full force and effect, free
from any default by Seller or any other party thereto. To Seller's actual
knowledge, no event has occurred which with notice or lapse of time or both
would constitute an event of default under any of the Service Contracts. Except
as set forth in the Contract Schedule, none of the Service Contracts have been
assigned or encumbered.
8.6 EMPLOYEES. There are no employees of Seller employed in connection with the
use, management, maintenance or operation of the Property whose employment will
continue after the Closing Date. There is no bargaining unit or union contract
relating to any employees of Seller.
8.7 CONSENTS AND RELEASES. Seller has obtained, or will obtain prior to Closing,
all required consents, releases, and permissions to convey good and indefeasible
title to Buyer.
8.8 AUTHORITY. This Agreement and all other documents delivered prior to or at
the Closing (i) have been duly authorized, executed, and delivered by Seller;
(ii) are binding obligations of Seller; (iii) are collectively sufficient to
transfer all of Seller's rights to the Property; and (iv) do not violate the
formation documents of Seller. Seller further represents that it is a joint
venture duly organized and existing in good standing under the laws of the State
of Texas with its principal place of business in the State of Texas.
8.9 BANKRUPTCY. No filing or petition under the United States Bankruptcy Law or
any insolvency laws, or any laws for composition of indebtedness or for the
reorganization of debtors has been filed with regard to Seller.
8.10 FOREIGN INVESTMENT IN REAL PROPERTY TAX ACT. Seller is not a foreign person
within the meaning of 42 USCS 1445(f)(3).
8.11 INSURANCE. Seller has not actually received any written notice from any
insurance company requesting the performance of any work or alteration with
respect to the Property.
8.12 TAXES. Attached hereto as EXHIBIT "O" are true, correct and complete copies
of the bills for the real estate tax assessments against the Property for the
last three (3) years. To Seller's actual knowledge, except as disclosed herein,
there are no special assessments currently pending against the Property. Seller
is currently, at its sole cost and expense, contesting the real property taxes
affecting the Property. Seller acknowledges that any and all refunds, benefits
or credits it may obtain as a result of such contest, relating to the period
from and after the Closing, shall promptly be paid to or accrued to the benefit
of Buyer; provided, however, that Seller may recover the Related Costs (as
hereinafter defined) of such contest before remitting any refunds, benefits or
credits to Buyer. As used herein, the term "RELATED COSTS" shall mean a
percentage of the total out-of-pocket costs incurred by Seller in connection
with such contest, the numerator of which shall equal the amount of the refunds,
benefits and credits obtained as a result of such contest, relating to the
period from and after the Closing, and the denominator of which shall equal the
total amount of all refunds, benefits and credits obtained as a result of such
contest, relating to any period of time, whether before or after the Closing.
8.13 LITIGATION. Except as set forth on the schedule attached hereto as EXHIBIT
"P", there are no actions, suits or proceedings before any judicial or quasi-
judicial body, by any governmental authority or other third party, pending, or
to Seller's knowledge, threatened, against or affecting all or any portion of
the Property. There are no actions, suits or proceedings pending, contemplated
or threatened by Seller in connection with all or any portion of the Property or
Seller's ownership, rights, use, development or maintenance thereof, except for
tax reduction proceedings. No attachments, execution proceedings, assignments
for the benefit of creditors, insolvency, bankruptcy, reorganization or other
proceedings are pending, or, to Seller's knowledge, threatened, against Seller.
To Seller's actual knowledge, there are no outstanding or unpaid judgements
affecting the Property.
8.14 COMPLIANCE WITH LAWS. Except as otherwise disclosed to Buyer in the
Property Documents, Seller has not actually received any written notice that the
Property is in violation of any existing laws, rules, regulations, ordinances
and orders of all applicable federal, state, city and other governmental
authorities in effect as of the date of this Agreement (collectively, "Laws"),
including, without limitation, (i) the Americans with Disabilities Act, 42
U.S.C. 12102, et seq. (ii) the Texas Architectural Barriers Act, together with
all rules, regulations and official interpretations promulgated pursuant
thereto, and (iii) any Laws with respect to building, fire and health codes,
environmental protection and sanitation and pollution control.
8.15 ZONING. Except for a proposal for an overlay zoning scheme, Seller has not
received any notice of any change or proposed change of the current zoning
designation of the Property.
8.16 TOXIC OR HAZARDOUS MATERIALS.
8.16.1 DEFINITIONS.
(a) "ENVIRONMENTAL LAWS" means all federal, state, local and foreign laws and
regulations relating to pollution or protection of human health or the
environment, including, without limitation, laws and regulations relating to
emissions, discharges, releases or threatened releases of Materials of
Environmental Concern (as hereinafter defined), or otherwise relating to the
manufacture, processing, distribution, use, treatment, storage, disposal,
transport or handling of Materials of Environmental Concern.
(b) "MATERIALS OF ENVIRONMENTAL CONCERN" means chemicals, pollutants,
contaminants, wastes, toxic substances, petroleum and petroleum products.
8.16.2 REPRESENTATIONS AND WARRANTIES. To the actual knowledge of Joseph
Peacock, Seller has not actually received any written notice whether from a
governmental authority or third party (other than as set forth in the Property
Documents), alleging that Seller is not in material compliance with all
applicable Environmental Laws relating to the Property, which compliance
includes, but is not limited to, the possession by Seller of all permits and
other governmental authorizations required under applicable Environmental Laws,
and compliance with the terms and conditions thereof.
8.17 NO CONFLICTS. The execution and delivery of this Agreement by Seller, the
consummation of the transactions herein contemplated by Seller, and compliance
with the terms of this Agreement by Seller will not conflict with, or, with or
without notice or the passage of time or both, result in a breach of any of the
terms or provisions of, or constitute a default under, any indenture, deed of
trust, mortgage, loan agreement, or other document, or instrument or agreement,
oral or written, to which Seller is a party or by which Seller or the Property
is bound, or any applicable regulation of any governmental agency, or any
judgment, order or decree of any court having jurisdiction over Seller or all or
any portion of the Property.
8.18 PROPERTY'S FINANCIAL STATUS. Seller has delivered to Buyer true, correct
and complete (in all material respects) financial statements prepared by Seller
showing all income, expenditures and other receipts from or with respect to the
use, operation, maintenance or management of the Property for the three (3) year
period preceding the Execution Date, copies of which are attached hereto as
EXHIBIT "Q."
8.19 OWNERSHIP OF INTANGIBLE AND PERSONAL PROPERTY. As of the Closing, Seller
shall own all of the Personal Property and the Intangible Property free and
clear of all options, liens, claims, encumbrances, covenants, conditions,
restrictions, and any other matters affecting title, other than the Permitted
Exceptions. Seller has the full right to convey the Personal Property and the
Intangible Property.
8.20 SURVIVAL. All of the representations, warranties and agreements of Seller
set forth in this Agreement shall be true upon the Execution Date, shall be
deemed to be repeated at and as of the Closing Date (subject to the matters
disclosed in the Seller's Certificate) without the necessity of a separate
certificate with respect thereto and shall survive the delivery of the Deed and
other closing instruments and documents for a period of one (1) year. On or
before the first (1st) year anniversary of the Closing Date, Buyer shall be
obligated to deliver to Seller written notice of any breach by Seller of any of
the representations set forth in this Agreement, which notice shall set forth
with specificity the representation that was allegedly breached and the reasons
why Buyer believes the same to have been breached. Failure to provide such
notice within said one (1) year period shall constitute a waiver by Buyer of any
and all rights or claims associated with or arising out of any alleged breach of
any representation of Seller set forth in this Agreement.
8.21 AS-IS PROPERTY CONDITION. BUYER ACKNOWLEDGES AND AGREES THAT BUYER IS
EXPERIENCED IN THE OWNERSHIP AND OPERATION OF PROPERTIES SIMILAR TO THE PROPERTY
AND THAT BUYER PRIOR TO THE CLOSING DATE WILL HAVE INSPECTED THE PROPERTY TO ITS
SATISFACTION AND IS QUALIFIED TO MAKE SUCH INSPECTION. BUYER ACKNOWLEDGES THAT
IT IS FULLY RELYING ON BUYER'S (OR BUYER'S REPRESENTATIVES') INSPECTIONS OF THE
PROPERTY AND NOT UPON ANY STATEMENTS(ORAL OR WRITTEN), OTHER THAN THOSE
EXPRESSLY CONTAINED HEREIN OR IN THE DOCUMENTS DELIVERED TO BUYER AT THE
CLOSING, WHICH MAY HAVE BEEN MADE OR MAY BE MADE (OR PURPORTEDLY MADE) BY SELLER
OR ANY OF ITS REPRESENTATIVES. BUYER ACKNOWLEDGES THAT BUYER HAS (OR BUYER'S
REPRESENTATIVES HAVE), OR PRIOR TO THE CLOSING DATE WILL HAVE, THOROUGHLY
INSPECTED AND EXAMINED THE PROPERTY TO THE EXTENT DEEMED NECESSARY BY BUYER IN
ORDER TO ENABLE BUYER TO EVALUATE THE CONDITION OF THE PROPERTY AND ALL OTHER
ASPECTS OF THE PROPERTY (INCLUDING, BUT NOT LIMITED TO, THE ENVIRONMENTAL
CONDITION OF THE PROPERTY), AND BUYER ACKNOWLEDGES THAT BUYER IS RELYING SOLELY
UPON ITS OWN (OR ITS REPRESENTATIVES') INSPECTION, EXAMINATION AND EVALUATION OF
THE PROPERTY. AS A MATERIAL PART OF THE CONSIDERATION FOR THIS AGREEMENT AND THE
PURCHASE, BUYER HEREBY AGREES TO ACCEPT THE PROPERTY ON THE CLOSING DATE IN ITS
"AS-IS, WHERE IS" CONDITION, WITH ALL FAULTS, AND WITHOUT REPRESENTATIONS AND
WARRANTIES OF ANY KIND, EXPRESS OR IMPLIED, OR ARISING BY OPERATION OF LAW,
EXCEPT FOR THOSE REPRESENTATIONS AND WARRANTIES EXPRESSLY SET FORTH HEREIN OR IN
THE DOCUMENTS DELIVERED TO BUYER AT THE CLOSING. WITHOUT IN ANY WAY LIMITING THE
GENERALITY OF THE FOREGOING, IN CONNECTION WITH THE SALE OF THE PROPERTY TO
BUYER, THE SALE OF THE PROPERTY IS WITHOUT ANY WARRANTY (OTHER THAN THOSE
EXPRESSLY CONTAINED HEREIN OR IN THE DOCUMENTS DELIVERED TO BUYER AT THE
CLOSING), AND SELLER AND SELLER'S OFFICERS, AGENTS, DIRECTORS, EMPLOYEES,
ATTORNEYS, CONTRACTORS AND AFFILIATES (COLLECTIVELY, "SELLER'S RELATED PARTIES")
HAVE MADE NO, AND EXPRESSLY AND SPECIFICALLY DISCLAIM, AND BUYER ACCEPTS THAT
SELLER AND SELLER'S RELATED PARTIES HAVE DISCLAIMED, ANY AND ALL
REPRESENTATIONS, GUARANTIES OR
WARRANTIES, EXPRESS OR IMPLIED, OR ARISING BY OPERATION OF LAW (EXCEPT AS
EXPRESSLY CONTAINED HEREIN OR IN THE DOCUMENTS DELIVERED TO BUYER AT THE
CLOSING), OF OR RELATING TO THE PROPERTY, INCLUDING, WITHOUT LIMITATION, OF OR
RELATING TO: (I) THE USE, INCOME POTENTIAL, EXPENSES, OPERATION, CHARACTERISTICS
OR CONDITION OF THE PROPERTY OR ANY PORTION THEREOF, INCLUDING, WITHOUT
LIMITATION, WARRANTIES OF SUITABILITY, HABITABILITY, MERCHANTABILITY, DESIGN OR
FITNESS FOR ANY SPECIFIC PURPOSE OR A PARTICULAR PURPOSE, OR GOOD AND
WORKMANLIKE CONSTRUCTION; (II) THE NATURE, MANNER, OR CONDITION OF THE PROPERTY,
ON THE SURFACE OR SUBSURFACE THEREOF, WHETHER OR NOT OBVIOUS, VISIBLE OR
APPARENT; (III) THE ENVIRONMENTAL CONDITION OF THE PROPERTY AND THE PRESENCE OR
ABSENCE OF OR CONTAMINATION BY HAZARDOUS MATERIALS, OR THE COMPLIANCE OF THE
PROPERTY WITH ALL REGULATIONS OR LAWS PERTAINING TO HEALTH OR THE ENVIRONMENT,
INCLUDING, BUT NOT LIMITED TO, THE COMPREHENSIVE ENVIRONMENTAL RESPONSE,
COMPENSATION AND LIABILITY ACT, THE RESOURCE CONSERVATION AND RECOVERY ACT, THE
CLEAN WATER ACT, THE TEXAS HEALTH AND SAFETY CODE AND THE TEXAS WATER CODE, EACH
AS MAY BE AMENDED FROM TIME TO TIME, AND INCLUDING ANY AND ALL REGULATIONS,
RULES OR POLICIES PROMULGATED THEREUNDER (COLLECTIVELY, THE "ENVIRONMENTAL
RULES"); AND (IV) THE SOIL CONDITIONS, DRAINAGE, FLOODING CHARACTERISTICS,
UTILITIES OR OTHER CONDITIONS EXISTING IN, ON OR UNDER THE PROPERTY. SUBJECT TO
SELLER'S LIABILITY FOR ANY BREACH OF THE REPRESENTATIONS SET FORTH IN SECTION
8.16 HEREOF, BUYER HEREBY
EXPRESSLY ASSUMES ALL RISKS, LIABILITIES, CLAIMS, DAMAGES AND COSTS, INCLUDING
ANY LIABILITY WITH RESPECT TO THE ENVIRONMENTAL RULES (AND AGREES THAT SELLER
SHALL NOT BE LIABLE FOR ANY SPECIAL, DIRECT, INDIRECT, CONSEQUENTIAL OR OTHER
DAMAGES) RESULTING OR ARISING FROM OR RELATED TO THE CONDITION, MAINTENANCE OR
REPAIR OF THE PROPERTY. IN CONSUMMATING THE PURCHASE OF THE PROPERTY, BUYER IS
NOT RELYING ON ANY REPRESENTATIONS OR STATEMENTS (ORAL OR WRITTEN), OTHER THAN
THOSE EXPRESSLY CONTAINED HEREIN OR IN THE DOCUMENTS DELIVERED TO BUYER AT THE
CLOSING, WHICH MAY HAVE BEEN MADE OR MAY BE MADE BY SELLER OR SELLER'S RELATED
PARTIES, AND IS RELYING SOLELY UPON BUYER'S OR ITS REPRESENTATIVES' OWN PHYSICAL
INSPECTION OF THE PROPERTY. EXCEPT AS EXPRESSLY SET FORTH HEREIN OR IN THE
DOCUMENTS DELIVERED TO BUYER AT THE CLOSING, BUYER ACKNOWLEDGES THAT ANY
CONDITION OF THE PROPERTY WHICH BUYER DISCOVERS OR DESIRES TO CORRECT OR IMPROVE
PRIOR TO OR AFTER THE CLOSING DATE SHALL BE AT BUYER'S SOLE EXPENSE. NOTHING
CONTAINED IN THIS SECTION 8.21 SHALL IN ANY WAY LIMIT THE REPRESENTATIONS AND
WARRANTIES OF SELLER CONTAINED IN THIS AGREEMENT OR IN THE DOCUMENTS DELIVERED
TO BUYER AT THE CLOSING. THE PROVISIONS OF THIS SECTION 8.21 SHALL SURVIVE THE
CLOSING.
9. BUYER'S REPRESENTATIONS AND WARRANTIES.
Buyer represents and warrants to and agrees with Seller as of the Execution Date
and as of the Closing, as follows:
9.1 NO CONFLICTS. The execution and delivery of this Agreement, the consummation
of the transactions herein contemplated, and compliance with the terms of this
Agreement will not conflict with, or, with or without notice or the passage of
time or both, result in a breach of any of the terms or provisions of, or
constitute a default under, any indenture, deed of trust, mortgage, loan
agreement, or other document or instrument to which Buyer is a party or by which
Buyer is bound, or any applicable regulation of any governmental agency, or any
judgment, order or decree of any court having jurisdiction over Buyer or all or
any portion of the Property.
9.2 DUE ORGANIZATION; CONSENTS. Buyer is a corporation duly organized and
existing in good standing under the laws of the State of Maryland with its
principal place of business in the State of California. All requisite corporate
action has been taken by Buyer in connection with entering into this Agreement,
and will be taken prior to the Closing in connection with the execution and
delivery of the instruments referenced herein and the consummation of the
transactions contemplated hereby. No consent of any partner, shareholder,
beneficiary, creditor, investor, judicial or administrative body, governmental
authority or other party is required in connection herewith which has not been
obtained.
9.3 BUYER'S AUTHORITY; VALIDITY OF AGREEMENTS. Buyer has full right, power and
authority to purchase the Property from Seller as provided in this Agreement and
to carry out its obligations hereunder. The individual(s) executing this
Agreement and the instruments referenced herein on behalf of Buyer have the
legal power, right and actual authority to bind Buyer to the terms hereof and
thereof. This Agreement is and all other documents and instruments to be
executed and delivered by Buyer in connection with this Agreement shall be duly
authorized, executed and delivered by Buyer and shall be valid, binding and
enforceable obligations of Buyer.
10. ADDITIONAL COVENANTS OF SELLER.
In addition to the covenants and agreements of Seller set forth elsewhere in
this Agreement, Seller covenants and agrees that between the Execution Date and
the Closing Date:
10.1 TITLE. Seller shall not directly or indirectly sell, assign or create any
right, title or interest whatsoever in or to the Property, or create or permit
to exist thereon any lien, charge or encumbrance other than the Permitted
Exceptions, or enter into any agreement to do any of the foregoing, without the
prior written consent of Buyer (which consent may be granted or withheld in
Buyer's sole and absolute discretion).
10.2 LEASES. Seller shall not directly or indirectly enter into any new leases
(or renewals, modifications or extensions of any Leases), without the prior
written consent of Buyer (which consent may not be unreasonably withheld on or
prior to the Due Diligence Termination Date, but which consent may be granted or
withheld in Buyer's sole and absolute discretion after the Due Diligence
Termination Date). On or before the tenth (10th) Business Day following Buyer's
receipt of a written request for such consent from Seller, Buyer shall deliver
to Seller written notice of Buyer's consent or refusal to consent.
10.3 SERVICE, MANAGEMENT, EMPLOYMENT AND OPERATING AGREEMENTS. Seller shall not
directly or indirectly (i) enter into any new service contracts (or renewals,
modifications or extensions of any Service Contracts) or (ii) enter into,
extend, renew or replace any existing property management, employment or
operating agreements in respect of the Property, without the prior written
consent of Buyer (which consent may not be unreasonably withheld on or prior to
the Due Diligence Termination Date, but which consent may be granted or withheld
in Buyer's sole and absolute discretion after the Due Diligence Termination
Date), unless the same shall be cancellable without penalty or premium, upon not
more than thirty (30) days' notice from the owner of the Property.
10.4 ACTIVITIES. Seller hereby agrees to reasonably cooperate with Buyer in
Buyer's efforts to obtain any permits, approvals or other development
entitlements from any governmental or other regulatory entities or any
agreements relating thereto, as Buyer deems necessary to permit Buyer to operate
the Property as a shopping center.
10.5 NO PRE-PAID RENT. Seller shall not accept any rent from any Tenant (or any
new tenant under any new lease to which Buyer has consented) for more than one
(1) month in advance of the payment date.
10.6 NOTICE OF CHANGE IN CIRCUMSTANCES. Seller shall promptly notify Buyer of
any change in any condition with respect to the Property or any portion thereof
or of any event or circumstance of which Seller becomes aware subsequent to the
Execution Date which (a) makes any representation or warranty of Seller to Buyer
under this Agreement materially untrue or materially misleading, or (b) makes
any covenant or agreement of Seller under this Agreement incapable or materially
less likely of being performed, it being expressly understood that Seller's
obligation to provide information to Buyer under this paragraph shall in no way
relieve Seller of any liability for a breach by Seller of any of its
representations, warranties, covenants or agreements under this Agreement.
10.7 MAINTENANCE OF PROPERTY. Seller shall operate and maintain the Property in
accordance with Seller's past practice and all applicable Laws, rules and
regulations affecting the Property or any portion thereof.
10.8 ZONING. Except as expressly approved by Buyer in writing, Seller shall not
seek any change in the zoning of the Real Property.
11. RISK OF LOSS.
11.1 CONDEMNATION. If, prior to the Closing, all or any material portion of the
Property is taken by condemnation or eminent domain (or is the subject of a
pending or contemplated taking which has not been consummated), Seller shall
immediately notify Buyer of such fact. In such event, Buyer shall have the
option to terminate this Agreement upon written notice to Seller given not later
than thirty (30) days after receipt of such notice from Seller. Upon such
termination, Escrow Agent shall return the Deposit to Buyer, the parties shall
equally share the cancellation charges of Escrow Agent and Title Company, and
neither party shall have any further rights or obligations hereunder, other than
pursuant to any provision hereof which expressly survives the termination of
this Agreement. Buyer shall have no right to terminate this Agreement as a
result of any nonmaterial taking of the Property. If Buyer does not elect or has
no right to terminate this Agreement, at the Closing, Seller shall assign and
turn over to Buyer, and Buyer shall be entitled to receive and keep, all awards
for the taking by condemnation and Buyer shall be deemed to have accepted the
Property subject to the taking without reduction in the Purchase Price.
11.2 CASUALTY. Prior to the Closing and notwithstanding the pendency of this
Agreement, the entire risk of loss or damage by earthquake, flood, landslide,
fire or other casualty shall be borne and assumed by Seller. If, prior to the
Closing any material part of the Property is damaged or destroyed by earthquake,
flood, landslide, fire, hurricane, tornado or other casualty, Seller shall
immediately notify Buyer of such fact. In such event, Buyer shall have the
option to terminate this Agreement in the same manner as provided in Section
11.1 hereof upon written notice to Seller given not later than thirty (30) days
after receipt of any such notice from Seller. Buyer shall have no right to termi
nate this Agreement as a result of any nonmaterial damage or destruction of the
Property. If Buyer does not elect or has no right to terminate this Agreement,
at the Closing, Seller shall assign and turn over, and Buyer shall be entitled
to receive and keep, all insurance proceeds payable with respect to such damage
or destruction (which shall then be repaired or not at Buyer's option and cost)
and Buyer shall receive as a credit against the Purchase Price an amount equal
to the deductible amount with respect to the insurance and the parties shall
proceed to Closing pursuant to the terms hereof without modification of the
terms of this Agreement. If Buyer does not elect or has no right to terminate
this Agreement by reason of any casualty, Buyer shall have the right to
participate in any adjustment of the insurance claim.
12. LIQUIDATED DAMAGES; SPECIFIC PERFORMANCE.
12.1 LIQUIDATED DAMAGES. IN THE EVENT THAT THE ESCROW AND THIS TRANSACTION FAIL
TO CLOSE SOLELY AS A RESULT OF THE DEFAULT OF BUYER IN THE PERFORMANCE OF ITS
OBLIGATIONS UNDER THIS AGREEMENT, BUYER AND SELLER AGREE THAT SELLER'S ACTUAL
DAMAGES WOULD BE IMPRACTICABLE OR EXTREMELY DIFFICULT TO FIX. THE PARTIES
THEREFORE AGREE THAT IN THE EVENT THAT ESCROW AND THIS TRANSACTION FAIL TO CLOSE
SOLELY AS A RESULT OF THE DEFAULT OF BUYER IN THE PERFORMANCE OF ITS OBLIGATIONS
HEREUNDER, SELLER, AS SELLER'S SOLE AND EXCLUSIVE REMEDY, IS ENTITLED TO LIQUI
DATED DAMAGES IN THE AMOUNT OF THE DEPOSIT THEN HELD BY ESCROW AGENT. IN THE
EVENT ESCROW FAILS TO CLOSE SOLELY AS A RESULT OF BUYER'S DEFAULT, THEN (l) THIS
AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF BUYER AND SELLER HEREUNDER AND THE
ESCROW CREATED HEREBY SHALL TERMINATE, (2) ESCROW AGENT SHALL, AND IS HEREBY
AUTHORIZED AND INSTRUCTED TO, RETURN PROMPTLY TO BUYER AND SELLER ALL DOCUMENTS
AND INSTRUMENTS TO THE PARTIES WHO DEPOSITED THE SAME, (3) ESCROW AGENT SHALL
DELIVER THE DEPOSIT THEN HELD BY ESCROW AGENT TO SELLER PURSUANT TO SELLER'S
INSTRUCTIONS, AND THE SAME SHALL BE THE FULL, AGREED AND LIQUIDATED DAMAGES, AND
(4) ALL TITLE AND ESCROW CANCELLATION CHARGES SHALL BE CHARGED TO BUYER.
SELLER AND BUYER ACKNOWLEDGE THAT THEY HAVE READ AND UNDERSTAND THE PROVISIONS
OF THIS SECTION 12.1, AND BY THEIR INITIALS IMMEDIATELY BELOW AGREE TO BE BOUND
BY ITS TERMS.
JP JK
Seller's Initials Buyer's Initials
12.2 DEFAULT BY SELLER. In the event that the Closing of the transaction
contemplated in this Agreement does not occur by reason of any default by
Seller, then (i) Escrow Agent shall return the Deposit to Buyer and (ii) Buyer
shall be entitled to pursue any remedy available to it hereunder, at law or in
equity, including, without limitation, the specific performance of this Agree
ment; provided, however, that any amount of damages received by Buyer shall be
limited to Buyer's actual out-of-pocket costs and expenses up to $15,000.00.
13. BROKERS.
Buyer and Seller each hereby represent, warrant to and agree with each other
that it has not had, and shall not have, any dealings with any third party to
whom the payment of any broker's fee, finder's fee, commission or other similar
compensation ("COMMISSION") shall or may become due or payable in connection
with the transaction contemplated hereby, other than with (i) Cushman &
Wakefield of Texas, Inc., in its capacity as Buyer's representative, and (ii) Fo
cus Realty Advisors, Inc., in its capacity as Seller's representative
(collectively, the "BROKERS"). Seller hereby agrees to pay each of the Brokers
through Escrow a Commission equal to the amount of one percent (1%) of the
Purchase Price, in connection with the transaction contemplated hereby. Seller
shall indemnify, defend and hold Buyer harmless from and against any and all
claims, losses, damages, costs and expenses (including reasonable attorneys'
fees, charges and disbursements) incurred by Buyer by reason of any breach or
inaccuracy of the representation, warranty and agreement of Seller contained in
this Section 13. Buyer shall indemnify, protect, defend and hold Seller harmless
from and against any and all claims, losses, damages, costs and expenses
(including reasonable attorneys' fees, charges and disbursements) incurred by
Seller by reason of any breach or inaccuracy of the representation, warranty and
agreement of Buyer contained in this Section 13. Notwithstanding the fact that
Seller has agreed to pay each of the Brokers a Commission pursuant to this
Section 13, the Brokers are not Seller's agents and are not acting, in any
manner, on Seller's behalf. No oral or written statement, act or omission by the
Brokers shall bind or be attributed to Seller. The provisions of this Section 13
shall survive the Closing or earlier termination of this Agreement.
14. INDEMNIFICATION.
Buyer hereby agrees to indemnify, defend and hold Seller harmless from and
against any claims, demands, obligations, losses, costs, damages, liabilities,
judgments or expenses (including reasonable attorneys' fees, charges and
disbursements) arising out of or in connection with the ownership, operation or
maintenance of the Property after the Closing. Seller hereby agrees to
indemnify, defend and hold Buyer harmless from and against any claims, demands,
obligations, losses, costs, damages, liabilities, judgments or expenses
(including reasonable attorneys' fees, charges and disbursements) arising out of
or in connection with the ownership, operation or maintenance of the Property
prior to the Closing. Each party shall do, execute and deliver, or shall cause
to be done, executed and delivered, all such further acts and instruments which
the other party may reasonably request in order to more fully effectuate the
indemnifications provided for in this Agreement. The provisions of this Section
14 shall survive the Closing.
15. MISCELLANEOUS PROVISIONS.
15.1 GOVERNING LAW. This Agreement and the legal relations between the parties
hereto shall be governed by and construed and enforced in accordance with the
laws of the State of Texas, without regard to its principles of conflicts of
law.
15.2 ENTIRE AGREEMENT; MODIFICATIONS; WAIVER.
15.2.1 ENTIRE AGREEMENT. This Agreement, including the exhibits and schedules
attached hereto, constitutes the entire agreement between Buyer and Seller
pertaining to the subject matter hereof and supersedes all prior agreements,
understandings, letters of intent, negotiations and discussions, whether oral or
written, of the parties, and there are no warranties, representations or
other agreements, express or implied, made to either party by the other party in
connection with the subject matter hereof except as specifically set forth
herein or in the documents delivered pursuant hereto or in connection herewith.
Without limiting the foregoing, upon the execution of this Agreement, that
certain letter, dated as of January 25, 1996, by and between Buyer and Seller,
shall terminate and be of no further force or effect.
15.2.2 MODIFICATION. No supplement, modification, waiver or termination of this
Agreement shall be binding unless executed in writing by the party to be bound
thereby. No waiver of any provision of this Agreement shall be deemed or shall
constitute a waiver of any other provision hereof (whether or not similar), nor
shall such waiver constitute a continuing waiver unless otherwise expressly
provided.
15.3 NOTICES. All notices, consents, requests, reports, demands or other
communications hereunder (collectively, "Notices") shall be in writing and may
be given personally, by registered or certified mail, or by Federal Express (or
other reputable overnight delivery service).
To Buyer: The Price REIT, Inc.
145 S. Fairfax Avenue, 4th Floor
Los Angeles, California 90036
Attention: Mr. Joseph K. Kornwasser
Telephone: (213) 937-8200
Facsimile: (213) 937-8175
With A Copy To: Skadden, Arps, Slate, Meagher & Flom
300 South Grand Avenue, Suite 3400
Los Angeles, California 90071
Attention: Allan G. Mutchnik, Esq.
Telephone: (213) 687-5391
Facsimile: (213) 687-5600
To Seller: MGC Joint Venture
c/o Uniteg Investment Company, Inc.
6800 Texas Commerce Tower, 68th Floor
Houston, Texas 77002-3054
Attention: Mr. Joseph W. Peacock
Telephone: (713) 222-6900
Facsimile: (713) 222-1614
With A Copy To: Liddell, Sapp, Zivley, Hill & Lagoon, L.L.P.
600 Travis, 32nd Floor
Houston, Texas 77002
Attention: Stephen Jacobs, Esq.
Telephone: (713) 226-1382
Facsimile: (713) 223-3717
To Escrow Chicago Title Insurance Company
Agent: 350 N. St. Paul, Suite 250
Dallas, Texas 75201
Attention: Ms. Marjorie Cox
Telephone: (214) 965-1668
Facsimile: (214) 720-1047
or to such other address or such other person as the addressee party shall have
last designated by notice to the other party. All Notices shall be deemed to
have been given when received.
15.4 EXPENSES. Subject to the allocation of Closing Costs provided in Section
7.6 hereof, whether or not the transactions contemplated by this Agreement shall
be consummated, all fees and expenses incurred by any party hereto in connection
with this Agreement shall be borne by such party.
15.5 ASSIGNMENT.
15.5.1 SELLER'S RIGHT TO ASSIGN. Seller shall not have the right, power, or
authority to assign or pledge this Agreement or any portion of this Agreement,
or to delegate any duties or obligations arising under this Agreement,
voluntarily, involuntarily, or by operation of law, without Buyer's prior
written consent.
15.5.2 BUYER'S RIGHT TO ASSIGN. Except as otherwise provided in this Agreement,
Buyer shall have the right, power and authority to assign this Agreement or any
portion of this Agreement or to delegate any duties or obligations arising under
this Agreement, voluntarily, involuntarily or by operation of law, without
Seller's consent; provided, however, that (i) Buyer shall provide written notice
to Seller of any such assignment, (ii) no such assignment or delegation shall
relieve Buyer of its obligations or liabilities under this Agreement, and (iii)
the assignee must assume, in writing, for the express benefit of Seller, all of
the obligations of Buyer arising hereunder, whether arising prior to or
following the date of such assignment. Notwithstanding the foregoing, Buyer may
not assign this Agreement or any portion of this Agreement or delegate any
duties or obligations arising under this Agreement, voluntarily, involuntarily
or by operation of law, at a time that Buyer is in default under this Agreement.
15.6 SEVERABILITY. Any provision or part of this Agreement which is invalid or
unenforceable in any situation in any jurisdiction shall, as to such situation
and such jurisdiction, be ineffective only to the extent of such invalidity and
shall not affect the enforceability of the remaining provisions hereof or the
validity or enforceability of any such provision in any other situation or in
any other jurisdiction.
15.7 SUCCESSORS AND ASSIGNS: THIRD PARTIES. Subject to and without waiver of the
provisions of Section 15.5 hereof, all of the rights, duties, benefits,
liabilities and obligations of the parties shall inure to the benefit of, and be
binding upon, their respective successors and assigns. Except as specifically
set forth or referred to herein, nothing herein expressed or implied is intended
or shall be construed to confer upon or give to any person or entity, other than
the parties hereto and their successors or permitted assigns, any rights or
remedies under or by reason of this Agreement.
15.8 COUNTERPARTS. This Agreement may be executed in as many counterparts as may
be deemed necessary and convenient, and by the different parties hereto on
separate counterparts, each of which, when so executed, shall be deemed an
original, but all such counterparts shall constitute one and the same in
strument.
15.9 HEADINGS. The Section headings of this Agreement are for convenience of
reference only and shall not be deemed to modify, explain, restrict, alter or
affect the meaning or interpretation of any provision hereof.
15.10 TIME OF ESSENCE. Time shall be of the essence with respect to all matters
contemplated by this Agreement.
15.11 FURTHER ASSURANCES. In addition to the actions recited herein and
contemplated to be performed, executed and/or delivered by Seller and Buyer,
Seller and Buyer agree to perform, execute and/or deliver or cause to be
performed, executed and/or delivered at Closing or after Closing any and all
such further acts, instruments, deeds and assurances as may be reasonably
required to consummate the transactions contemplated hereby.
15.12 NUMBER AND GENDER. Whenever the singular number is used, and when required
by the context, the same includes the plural, and the masculine gender includes
the feminine and neuter genders.
15.13 CONSTRUCTION. This Agreement shall not be construed more strictly against
one party hereto than against any other party hereto merely by virtue of the
fact that it may have been prepared by counsel for one of the parties.
15.14 POST-CLOSING ACCESS TO RECORDS. Upon receipt by Seller of Buyer's
reasonable written request at anytime and from time to time within a period of
one (1) year after the Closing, Seller shall, at Seller's principal place of
business, during Seller's normal business hours, make all of Seller's records
relating to the Property available to Buyer for inspection and copying (at
Buyer's sole cost and expense).
15.15 EXHIBITS. All exhibits attached hereto are hereby incorporated by
reference as though set out in full herein.
15.16 ATTORNEYS' FEES. In the event that either party hereto brings an action or
proceeding against the other party to enforce or interpret any of the covenants,
conditions, agreements or provisions of this Agreement, the prevailing party in
such action or proceeding shall be entitled to recover all costs and expenses of
such action or proceeding, including, without limitation, attorneys' fees,
charges, disbursements and the fees and costs of expert witnesses.
15.17 BUSINESS DAYS. As used herein, the term "BUSINESS DAY" shall mean a day
that is not a Saturday, Sunday or legal holiday. In the event that the date for
the performance of any covenant or obligation under this Agreement shall fall on
a Saturday, Sunday or legal holiday, the date for performance thereof shall be
extended to the next Business Day.
15.18 DPTA WAIVER. Buyer hereby waives all rights that it may have under the
Texas Deceptive Trade Practices and Consumer Protection Act (Section 17.41 et
seq. of the Texas Business and Commerce Code), except Section 17.555 thereof.
Buyer warrants and represents to Seller that Buyer is not in a significantly
disparate bargaining position, that it is a business consumer with assets of
$5,000,000.00 or more according to its most recent financial statement prepared
in accordance with generally accepted accounting principles and that Buyer has
knowledge and experience in financial and business matters that enable it to
evaluate the merits and risks of a transaction.
15.19 TEXAS REAL ESTATE LICENSE ACT. The Texas Real Estate License Act requires
written notice to Buyer that it should have an attorney examine an abstract of
title to the property being purchased or obtain a title insurance policy. Notice
to that effect is, therefore, hereby given to Buyer.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
day and year first above written.
BUYER:
THE PRICE REIT, INC.
a Maryland corporation,
By: JOSEPH KORNWASSER
-----------------
Name: Joseph Kornwasser
Its: President/CEO
SELLER:
MGC JOINT VENTURE,
a Texas joint venture,
By: Uniteg Investment Company, Inc.,
a Texas corporation,
Its: Managing Venturer
By: JOSEPH W. PEACOCK
-----------------
Name: Joseph W. Peacock
Its: President
ESCROW AGENT
The undersigned Escrow Agent accepts the foregoing Agreement of Purchase and
Sale and Joint Escrow Instructions and agrees to act as Escrow Agent under this
Agreement in strict accordance with its terms and acknowledges receipt of two
(2) fully executed copies of this Agreement together with the Deposit.
CHICAGO TITLE INSURANCE COMPANY,
a Missouri corporation,
By: MARJORIE COX
------------------
Name: Marjorie Cox
Its: Assistant Vice President
Commercial Escrow Officer
ATTORNEY JOINDER
The undersigned have executed this Agreement in order to satisfy the waiver
requirements set forth in Section 17.42(a)(3) of the Texas Business and Commerce
Code.
COUNSEL FOR SELLER:
LIDDELL, SAPP, ZIVLEY, HILL & LABOON, L.L.P.
By: STEPHEN C. JACOBS
-----------------
Name: Stephen C. Jacobs
Title: Partner
COUNSEL FOR BUYER:
SKADDEN, ARPS, SLATE, MEAGHER & FLOM
By: ALLAN MUTEHNIK
--------------
Name: Allan Mutehnik
Title: Partner
LIST OF EXHIBITS
EXHIBIT "A" LEGAL DESCRIPTION
EXHIBIT "B" DEED
EXHIBIT "C" SCHEDULE OF PERSONAL PROPERTY
EXHIBIT "D" SELLER'S CERTIFICATE
EXHIBIT "E" ASSIGNMENT OF LEASES
EXHIBIT "F" BILL OF SALE AND ASSIGNMENT
EXHIBIT "G" ESTOPPEL CERTIFICATE
EXHIBIT "H" SELLER'S ESTOPPEL CERTIFICATE
EXHIBIT "I" NON-FOREIGN AFFIDAVIT
EXHIBIT "I" NOTICE TO TENANTS
EXHIBIT "K" NOTICE TO VENDORS
EXHIBIT "L" LEASE SCHEDULE
EXHIBIT "M" TENANT ARREARAGE STATEMENT
EXHIBIT "N" CONTRACT SCHEDULE
EXHIBIT "O" TAXES
EXHIBIT "P" LITIGATION
EXHIBIT "Q" PROPERTY'S FINANCIAL STATUS
PURCHASE AND SALE AGREEMENT
AND JOINT ESCROW INSTRUCTIONS
dated
MARCH 22, 1996
by and between
THE PRICE REIT, INC.,
as Buyer,
and
TOWN EAST CENTRE JOINT VENTURE,
as Seller
PURCHASE AND SALE AGREEMENT
AND JOINT ESCROW INSTRUCTIONS
-----------------------------
THIS PURCHASE AND SALE AGREEMENT AND JOINT ESCROW INSTRUCTIONS ("AGREEMENT") is
made and entered into as of March 22, 1996 (the "EXECUTION DATE"), by and
between THE PRICE REIT, INC., a Maryland corporation ("BUYER"), and TOWN EAST
CENTRE JOINT VENTURE, a Texas joint venture ("SELLER"), for the purpose of
setting forth the agreement of the parties and of instructing Chicago Title
Insurance Company ("ESCROW AGENT"), with respect to the transactions
contemplated by this Agreement.
RECITALS
A. Seller is the owner of a fee simple interest in that certain real property
located in the City of Mesquite, County of Dallas, State of Texas, as more
particularly described on EXHIBIT "A" attached hereto (the "LAND"). The Land,
together with the Improvements, the balance of the Real Property, the Personal
Property and the Intangible Property (each as hereinafter defined) shall be
collectively referred to herein as the "PROPERTY."
B. Seller desires to sell and Buyer desires to purchase the Property upon and
subject to the terms and conditions set forth in this Agreement.
AGREEMENT
NOW, THEREFORE, in consideration of the mutual covenants contained in this
Agreement and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, Buyer and Seller hereby agree, and
instruct Escrow Agent, as follows:
1. AGREEMENT TO PURCHASE AND SELL.
Seller agrees to sell, transfer and convey to Buyer, and Buyer agrees to acquire
and purchase from Seller, the Property, upon the terms and conditions set forth
herein.
2. PURCHASE PRICE.
The purchase price for the Property (the "PURCHASE PRICE") shall be the sum of
EIGHT MILLION EIGHT HUNDRED TWENTY THOUSAND DOLLARS ($8,820,000.00), payable as
follows:
2.1 INITIAL DEPOSIT. On or before the tenth (10th) Business Day following the
date on which Seller delivers the Property Documents (as hereinafter defined) to
Buyer, and provided that Buyer has not terminated this Agreement, Buyer shall
deposit into Escrow (as hereinafter defined) the sum of FIFTY THOUSAND DOLLARS
($50,000.00) (which amount, together with any and all interest and dividends
earned thereon, shall hereinafter be referred to as the "INITIAL DEPOSIT") by
wire transfer or by certified or bank check payable to the order of Escrow
Agent. The Initial Deposit shall not be refundable to Buyer unless: (i) this
Agreement is terminated pursuant to the terms of Sections 4.1.1.2 (b), 4.2.2 ,
6.1.8 (but only if terminated after the Due Diligence Termination Date, as
hereinafter defined) or 12.2 hereof; or (ii) any of the representations or
warranties of Seller set forth in Section 8 hereof are materially false or
misleading.
2.2 ADDITIONAL DEPOSIT. Upon the Due Diligence Termination Date, Buyer shall
deposit into Escrow the sum of ONE HUNDRED THOUSAND DOLLARS ($100,000.00) (which
amount, together with any and all interest and dividends earned thereon, shall
hereinafter be referred to as the "ADDITIONAL DEPOSIT") by wire transfer or by
certified or bank check payable to the order of Escrow Agent. The Initial
Deposit together with the Additional Deposit shall hereinafter be referred to as
the "DEPOSIT").
The Escrow Agent shall invest the Deposit in insured money market accounts,
certificates of deposit, United States Treasury Bills or such other instruments
as Buyer may instruct from time to time; provided, however, that the maturity
date of each such instrument shall be on or prior to the Closing Date (as
hereinafter defined). At the Closing (as hereinafter defined), the Deposit shall
be paid to Seller and credited against the Purchase Price. In the event the sale
of the Property is not consummated for any reason, other than a default under
this Agreement solely on the part of Buyer, the Deposit shall be returned to
Buyer.
2.3 BALANCE. At the Closing, Buyer shall pay to Seller the balance of the
Purchase Price over and above the Deposit paid by Buyer under Sections 2.1 and
2.2 above, by wire transfer of federal funds, net of all prorations and ad
justments as provided herein.
3. OPENING OF ESCROW.
On or before the second (2nd) Business Day (as hereinafter defined) after the
Execution Date, Buyer and Seller shall cause a purchase and sale escrow
("ESCROW") to be opened with Escrow Agent by delivery to Escrow Agent of two (2)
fully executed copies of this Agreement (the "OPENING OF ESCROW") and, provided
that this Agreement is not earlier terminated, such Escrow shall be funded by
Buyer's delivery of the Initial Deposit to Escrow Agent pursuant to the terms of
Section 2.1 hereof. This Agreement shall constitute escrow instructions to the
Escrow Agent as well as the agreement of the parties. Escrow Agent is hereby
appointed and designated to act as the Escrow Agent and instructed to deliver,
pursuant to the terms of this Agreement, the documents and funds to be deposited
into Escrow as herein provided. The parties hereto shall execute such additional
escrow instructions, not inconsistent with this Agreement as determined by
counsel for Buyer and Seller, as Escrow Agent shall deem reasonably necessary
for its protection, including Escrow Agent's general provisions, if any (as may
be modified by Buyer, Seller and Escrow Agent). In the event of any
inconsistency between this Agreement and such additional escrow instructions,
the provisions of this Agreement shall govern.
4. ACTIONS PENDING CLOSING.
4.1 DUE DILIGENCE PERIOD.
4.1.1 DUE DILIGENCE.
4.1.1.1 PROPERTY DOCUMENTS. On or before the fifth (5th) day after the Execution
Date, Seller shall deliver to Buyer, at Seller's sole cost and expense, at its
address set forth in Section 15.3 hereof, true, correct and complete copies of
all of the following to the extent the same are in Seller's possession or
reasonable control (collectively, the "PROPERTY DOCUMENTS"): contracts,
documents, books, records, files, reports, correspondence and other materials
relating to the Property, including, without limitation, as-built plans and
specifications, income and expense records, Leases (as hereinafter defined),
rent rolls, engineering tests and studies, soil tests, hazardous materials
reports, termite reports, phase one environmental reports, service contracts,
structural and mechanical reports, maps (including, without limitation,
topographical maps), plans,
agreements, governmental permits and approvals, licenses, appraisals, title poli
cies, surveys, construction warranties, land studies, a description of existing
and proposed local improvements affecting the Property (including, without
limitation, assessment levels), any existing certificates previously issued by
any governmental authorities confirming the zoning (to the extent in Seller's
possession only), building and platting status of the Property, all
correspondence with all governmental entities regarding the Property, all
property tax statements and assessed value notices for the three years preceding
the Execution Date, all insurance policies, and financial statements prepared by
Seller showing all income, expenditures and other receipts from or with respect
to the use, operation, maintenance or management of the Property for the three
year period preceding the Execution Date.
4.1.1.2 DILIGENCE TESTS.
(a) At all reasonable times for a period of thirty (30) days following the
Opening of Escrow (the "DUE DILIGENCE PERIOD"), Buyer, its agents and
representatives shall be entitled at Buyer's sole cost and expense to (i) enter
onto the Property during normal business hours and upon reasonable advance
notice to Seller (subject to the Leases and any recorded restrictive covenants),
to perform any inspections, investigations, studies and tests of the Property,
including, without limitation, physical, structural, mechanical, architectural,
engineering, soils, geotechnical and environmental tests that Buyer deems
reasonable; (ii) cause an environmental assessment of the Property to be per
formed, upon reasonable notice to Seller; and (iii) review all Property
Documents and examine and copy any and all books and records maintained by
Seller or its agents relating to the Property (including, without limitation,
all documents relating to utilities, zoning, and the access, subdivision and
appraisal of the Property). Buyer shall indemnify, defend and hold harmless
Seller from all claims, causes of action, costs, losses, damages and reasonable
attorneys' fees incurred by Seller in connection with or arising out of any
inspections carried on, by or on behalf of Buyer pursuant to this Section
4.1.1.2; provided, however, that Buyer shall not indemnify Seller for any claim,
loss or cause of action caused by Seller's gross negligence or willful
misconduct or any physical condition existing on the Property prior to Buyer's
entry thereon. In addition, if this Agreement is terminated, Buyer shall repair
any damage to the Property caused by its entry thereon and restore the same to
the condition in which it existed prior to such entry; provided, however, that
Buyer shall have no obligation to repair any damage caused by Seller's gross
negligence or willful misconduct or to remediate, contain, abate or control any
"Material of Environmental Concern" (as hereinafter defined) or any hazardous
defect that existed at the Property prior to Buyer's entry thereon. The
provisions of this Section 4.1.1.2 shall survive the Closing or earlier
termination of this Agreement.
(b) Notwithstanding anything to the contrary, Buyer shall cause an environmental
assessment of the Real Property to be performed and an environmental report to
be delivered to Buyer on or before the fifteenth (15th) Business Day following
the Execution Date (the "ENVIRONMENTAL REPORT DATE"). If the environmental
report is unfavorable in the reasonable discretion of Buyer, then on or before
the third (3rd) Business Day following Buyer's receipt of the environmental
report (but in no event later than the third (3rd) Business Day following the
Environmental Report Date, regardless of whether a full environmental report is
received) (the "FINAL ENVIRONMENTAL TERMINATION DATE"), Buyer may elect to
terminate this Agreement by (i) delivering written notice of such election to
Seller and Escrow Agent, including a detailed explanation of the reason for
Buyer's termination, and (ii) delivering a copy of the environmental report to
Seller (provided that Seller acknowledges that Buyer makes no representation or
warranty as to the truth, accuracy, or completeness of such report). After the
Final Environmental Termination Date, Buyer shall have no right to terminate
this Agreement or to obtain a refund of the Initial Deposit based upon any
dissatisfaction with environmental matters related to the Property.
4.1.2 TERMINATION RIGHT. Buyer shall have the right at any time on or before the
last day of the Due Diligence Period (the "DUE DILIGENCE TERMINATION DATE") to
terminate this Agreement if Buyer determines in its sole and absolute discretion
that the Property is not acceptable to Buyer. In the event that Buyer fails to
deliver a written notice to Seller and Escrow Agent waiving its termination
right hereunder on or before the Due Diligence Termination Date, then (i) Escrow
Agent shall deliver the Deposit to Seller (provided, however, that in the event
that (a) this Agreement is terminated pursuant to the terms of Sections 4.1.1.2
(b), 4.2.2, 6.1.8 (if terminated after the Due Diligence Termination Date) or
12.2 hereof, or (b) any of the representations or warranties of Seller set forth
in Section 8 hereof are materially false or misleading, then Escrow Agent shall
return the Deposit to Buyer), (ii) the parties shall equally share the
cancellation charges of Escrow Agent and Title Company (as hereinafter defined)
and (iii) this Agreement shall automatically terminate and be of no further
force or effect and neither party shall have any further rights or obligations
hereunder, other than pursuant to any provision hereof which expressly survives
the termination of this Agreement. In the event that this Agreement is
terminated by Buyer, Buyer shall return the Property Documents to Seller within
ten (10) days after the date on which this Agreement is terminated. Buyer's
obligation to return the Property Documents pursuant to this Section 4.1.2 shall
survive the termination of this Agreement.
4.1.3 INDEPENDENT CONTRACT CONSIDERATION. Contemporaneously with the execution
of this Agreement by Buyer, Buyer shall pay directly to Seller the sum of One
Hundred Dollars ($100), which amount Seller and Buyer hereby acknowledge and
agree has been bargained for and agreed to as full and adequate consideration
for Seller's execution, delivery and performance of this Agreement and Buyer's
right to inspect the Property pursuant to this Agreement. The consideration
provided for in this Section 4.1.3 is in addition to and independent of any
other consideration or payment provided for herein and, to the extent payable,
is non-refundable in all events.
4.2 TITLE.
4.2.1 DELIVERIES BY SELLER. On or before the fifth (5th) day after the Opening
of Escrow, Seller shall deliver or cause to be delivered to Buyer the following:
(a) a Texas form of commitment for an owner's policy of title insurance (the
"PTR") issued by Chicago Title Insurance Company (in such capacity, the "TITLE
COMPANY"), together with legible copies of all documents referenced as
exceptions therein (the "UNDERLYING DOCUMENTS"); and (b) a copy of that certain
Texas Land Surveyors Category 1A Condition II as-built survey of the Property,
dated as of November 27, 1995 (the "SURVEY"), by Brockette Davis Drake, showing
all Improvements, all easements, all roads, all utilities, the number of parking
spaces, access to and from the Land, and drainage ditches, set-back lines,
protrusions, encroachments, and encumbrances affecting the same. The PTR, the
Underlying Documents and the Survey shall be collectively referred to herein as
the "TITLE DOCUMENTS."
4.2.2 BUYER'S REVIEW OF TITLE. Buyer shall have five (5) Business Days after its
receipt of all of the Title Documents to notify Seller and Escrow Agent in
writing ("BUYER'S OBJECTION LETTER") of any objection which Buyer may have to
any matters reported or shown in the Title Documents or any updates thereof
(provided, however, that if any updates of the Survey received by Buyer reflect
additional matters not previously disclosed by the Title Documents, Buyer shall
have an additional three (3) Business Days following Buyer's receipt of such
update to notify Seller and Escrow Agent of objections to such additional
items). Matters reported in or shown by the Title Documents (or any updates
thereof) and not objected to by Buyer as provided above shall be deemed to be
"PERMITTED EXCEPTIONS." Seller shall have no obligation to cure or correct any
matter objected to by Buyer, other than any Liens (as hereinafter defined).
However, on or before the third (3rd) Business Day following Seller's receipt of
Buyer's Objection Letter, (i) Seller may elect, by delivering written notice of
such election to Buyer and Escrow Agent ("SELLER'S RESPONSE"), to either remove
or, to Buyer's reasonable satisfaction, insure over any matters objected to in
Buyer's Objection Letter and (ii) Seller shall order an update of the Survey,
certified to Buyer, Title Company and such other persons or entities as Buyer
may, in its reasonable discretion, request. If Seller fails to remove or
satisfactorily insure over any exceptions or matters objected to by Buyer, then
Buyer must elect, by delivering written notice of such election to Seller and
Escrow Agent ("BUYER'S RESPONSE") on or prior to the third (3rd) Business Day
following Buyer's receipt of Seller's Response, to: (a) terminate this Agreement
(in which case Escrow Agent shall return the Initial Deposit to Buyer, the
parties shall equally share the cancellation charges of Escrow Agent and Title
Company and neither party shall thereafter have any rights or obligations to the
other hereunder, other than pursuant to any provision hereof which expressly
survives the termination of this Agreement); or (b) proceed to a timely Closing
whereupon such objected to exceptions or matters shall be waived and deemed to
be Permitted Exceptions. In the event that Buyer fails to deliver Buyer's
Response in accordance with the terms hereof, then Buyer shall be deemed to have
elected to waive such objected to exceptions or matters and such exceptions or
matters shall be deemed to be Permitted Exceptions. Notwithstanding anything to
the contrary contained herein, Seller shall be required to discharge and remove
any and all liens (the "LIENS") affecting the Property which secure an
obligation to pay money at Closing (other than installments of real estate taxes
not delinquent as of the Closing) and, even though Buyer does not expressly
disapprove such Liens, such Liens shall not be Permitted Exceptions. Seller may
use proceeds from the Closing to discharge and remove any Liens. In the event
that Seller fails to remove any Liens at the Closing either by obtaining a bond
(reasonably acceptable to Buyer) or by discharging such Liens, then Buyer may
elect to either (i) discharge any Liens which can be discharged by the payment
of money and deduct from the Purchase Price the amount necessary to do so or
(ii) pursue any other remedy identified in clause (a) of this Section 4.2.2
(except the Initial Deposit shall be non-refundable), or clause (b) of this
Section 4.2.2.
4.2.3 CONDITION OF TITLE AT CLOSING. Upon the Closing, Seller shall sell,
transfer and convey to Buyer fee simple title to the Real Property by a duly
executed and acknowledged special warranty deed in the form of EXHIBIT "B"
attached hereto (the "DEED"), subject only to the Permitted Exceptions. Prior to
Closing, Seller shall not take any action or commit or suffer any acts which
would give rise to a variance from the current legal description of the Real
Property, or cause the creation of any exception or encumbrance against or
respecting the Real Property without the prior written consent of Buyer (which
consent may not be unreasonably withheld on or prior to the Due Diligence
Termination Date, but which consent may be granted or withheld in Buyer's sole
and absolute discretion after the Due Diligence Termination Date). Nothing in
this Section 4.2.3 shall preclude Buyer from disapproving title matters in accor
dance with the provisions of Section 4.2.2 above.
4.3 BUYER'S BOARD APPROVAL CONTINGENCY. Buyer shall have until the Due Diligence
Termination Date to obtain the approval of Buyer's Board of Directors with
respect to the transactions contemplated herein and, in the event that Buyer
does not obtain such approval, Buyer shall have the right to terminate this
Agreement. In the event that Buyer fails to deliver a written notice to Seller
and Escrow Agent waiving its termination right hereunder on or before the Due
Diligence Termination Date, then (i) Escrow Agent shall return the Deposit to
Seller, (ii) the parties shall equally share the cancellation charges of Escrow
Agent and Title Company and (iii) this Agreement shall automatically terminate
and be of no further force or effect and neither party shall have any further
rights or obligations hereunder, other than pursuant to any provision hereof
which expressly survives the termination of this Agreement.
5. DESCRIPTION OF PROPERTY.
5.1 THE IMPROVEMENTS. As used herein, the term "IMPROVEMENTS" shall mean, all
buildings, improvements, structures and fixtures now or hereafter located on or
in the Land, including, without limitation, those certain buildings being used
for the operation of a shopping center (the "SHOPPING CENTER") commonly known as
"Town East Centre."
5.2 THE REAL PROPERTY. As used herein, the term "REAL PROPERTY" shall include
(i) the Land, (ii) the Improvements, (iii) all of Seller's right, title and
interest in and to all apparatus, equipment and appliances used in connection
with the operation or occupancy of the Land and the Improvements (such as
heating, air conditioning or mechanical systems and facilities used to provide
any utility services, refrigeration, ventilation, waste disposal or other
services) and now or hereafter located on or in the Land or the Improvements,
and (iv) all of Seller's right, title and interest in and to the rights,
privileges and easements appurtenant to or used in connection with the Land and
the Improvements, including, without limitation, all minerals, oil, gas and
other hydrocarbon substances, all development rights, air rights, water, water
rights, waste water capacity and water stock relating to the Land, all strips
and gores, streets, alleys, easements, rights-of-way, public ways, or other
rights appurtenant, adjacent or connected to the Land.
5.3 THE PERSONAL PROPERTY. As used herein, the term "PERSONAL PROPERTY" shall
mean all of that certain tangible personal property, equipment and supplies
owned by Seller and either situated at the Real Property or used by Seller in
connection with the use, operation, maintenance or repair of the Real Property,
including, without limitation, all Personal Property described on a list to be
delivered by Seller to Buyer as a Property Document on or before the fifth (5th)
day after the Execution Date; provided, however, that the Personal Property
shall not include any computer equipment that is used by Seller in generating or
maintaining books and records for the Property.
5.4 THE INTANGIBLE PROPERTY. As used herein, the term "INTANGIBLE PROPERTY"
shall mean all of that certain intangible property owned by Seller and used by
Seller in connection with the Real Property and/or the Personal Property,
including, without limitation, (i) the Leases, all contract rights, books,
records, reports, test results, environmental assessments, as-built plans,
specifications and other similar documents and materials relating to the use,
operation, maintenance, repair, construction or fabrication of the Real Property
or the Personal Property; (ii) all of Seller's right, title and interest in and
to any trademarks and trade names, including, without limitation, all rights in
and to the name "Town East Centre;" (iii) all transferable business licenses,
architectural, site, landscaping or other permits, applications, approvals,
authorizations and other entitlements affecting the Real Property; and (iv) all
transferable guarantees, warranties and utility contracts relating to the Real
Property. Notwithstanding the foregoing, Buyer hereby acknowledges that Seller
has not registered any trademark or trade name in connection with the Real
Property or the Personal Property and has not made any representations to Buyer
that Seller has any rights in or to any trademark or trade name.
6. CONDITIONS PRECEDENT TO CLOSING.
6.1 BUYER'S CONDITIONS. The obligation of Buyer to purchase the Property in
accordance with this Agreement is subject to the following conditions precedent
(and conditions concurrent, with respect to deliveries to be made by the parties
at Closing) (the "CLOSING CONDITIONS"), which conditions may be waived by Buyer,
or the time for satisfaction thereof extended by Buyer and Seller only in a
writing executed by Buyer and Seller:
6.1.1 TITLE. Title Company shall be prepared and irrevocably committed to issue
to Buyer a Texas form of owner's policy of title insurance in favor of Buyer in
an amount equal to the Purchase Price showing indefeasible fee simple title to
the Property vested in Buyer, with those endorsements reasonably requested by
Buyer to the extent available in Texas, subject only to the Permitted Exceptions
(collectively, the "OWNER'S TITLE POLICY").
6.1.2 SELLER'S DUE PERFORMANCE. All of the representations and warranties of
Seller set forth in Section 8 below shall be materially true and correct as of
the Closing Date, and Seller, on or prior to the Closing Date, shall have
complied with and/or performed all of the obligations, covenants and agreements
required on the part of Seller to be complied with or performed pursuant to the
terms of this Agreement. On the Closing Date, Seller shall deliver a
certificate, in the form of EXHIBIT "C" attached hereto (the "SELLER'S
CERTIFICATE"), to Buyer certifying that (i) all of the representations,
covenants and warranties of Seller made in or pursuant to this Agreement,
including, without limitation, those set forth in Sections 8 and 10 below, are
materially true, accurate, correct and complete as of the Closing, (ii) all
conditions to the Closing that Seller was to satisfy or perform have been
satisfied, performed or waived, and (iii) to Seller's knowledge, all conditions
to the Closing that Buyer was to satisfy or perform have been satisfied and
performed.
6.1.3 PHYSICAL CONDITION OF PROPERTY. Subject to the provisions of Section 11
below, the physical condition of the Property shall be substantially the same on
the Closing Date as on the Execution Date, except for any damages due to any act
of Buyer or Buyer's representatives.
6.1.4 BANKRUPTCY. No action or proceeding shall have been commenced by or
against Seller under the federal bankruptcy code or any state law for the relief
of debtors or for the enforcement of the rights of creditors and no attachment,
execution, lien or levy shall have attached to or been issued with respect to
the Property or any portion thereof.
6.1.5 LEASES. At the Closing, Seller shall assign all of Seller's rights and
remedies under the Leases, including, without limitation, the right to any
security deposits and prepaid rent, to Buyer pursuant to an assignment and
assumption of leases and security deposits (the "ASSIGNMENT OF LEASES") in the
form of EXHIBIT "D" attached hereto.
6.1.6 ASSIGNMENT OF REA. At the Closing, Seller shall assign all of Seller's
right, title and interest in, to and under that certain Reciprocal Easement
Agreement, dated as of January 24, 1991, by and between Seller and Home Depot
U.S.A., Inc. (the "REA"), pursuant to an assignment of reciprocal easement
agreement (the "ASSIGNMENT OF REA") in the form of EXHIBIT "E" attached hereto.
6.1.7 BILL OF SALE. At the Closing, Seller shall deliver to Buyer a bill of sale
and assignment (the "BILL OF SALE AND ASSIGNMENT"), by which Seller shall
transfer to Buyer all the Personal Property and the Intangible Property,
including, without limitation, the Property Documents, but excluding the Leases,
in each case free of all liens and encumbrances other than the Permitted
Exceptions, in the form of EXHIBIT "F" attached hereto.
6.1.8 ESTOPPEL CERTIFICATES. Seller shall use commercially reasonable efforts to
deliver the following to Buyer, on or before the tenth (10th) day prior to the
Closing (collectively, the "ESTOPPEL CERTIFICATES"):
6.1.8.1 a certificate, in the form of EXHIBIT "G" attached hereto, executed by
Sears (the "SEARS ESTOPPEL CERTIFICATE").
6.1.8.2 certificates, each substantially in the form of EXHIBIT "H" attached
hereto, executed by each Tenant (as hereinafter defined) other than Sears
(collectively, and together with the Sears Estoppel Certificate, the "TENANT
ESTOPPEL CERTIFICATES").
6.1.8.3 a certificate, substantially in the form of EXHIBIT "I" attached hereto,
executed by each of the parties to the REA.
In the event that Seller is unable to deliver one hundred percent (100%) of the
Estoppel Certificates to Buyer, but is able to deliver at least seventy-five
percent (75 %) of the Tenant Estoppel Certificates to Buyer, then Seller shall
execute and deliver to Buyer an estoppel certificate in the form of EXHIBIT "H"
attached hereto (the "SELLER'S ESTOPPEL CERTIFICATE") with respect to any Lease
or REA for which Buyer did not receive an Estoppel Certificate. Buyer shall
review and approve or disapprove any substantive variation in the form of the
Estoppel Certificates and the Seller's Estoppel Certificates in Buyer's
reasonable discretion. In the event that Seller fails to deliver at least
seventy-five percent (75%) of the Tenant Estoppel Certificates to Buyer as
required hereunder, or Buyer disapproves any of the Estoppel Certificates or
Seller's Estoppel Certificates in accordance with the terms hereof, Buyer may
elect to terminate this Agreement (in which case the parties shall equally share
the cancellation charges of Escrow Agent and Title Company, neither party shall
thereafter have any rights or obligations to the other hereunder, other than
pursuant to any provision hereof which expressly survives the termination of
this Agreement, and if the termination occurs on or before the Due Diligence
Termination Date, Escrow Agent shall return the Deposit to Seller, but if the
termination occurs after the Due Diligence Termination Date, Escrow Agent shall
return the Deposit to Buyer). Notwithstanding anything to the contrary contained
herein, in the event that Seller fails to deliver one hundred percent (100%) of
the Estoppel Certificates to Buyer as required hereunder, each party shall have
the right to unilaterally extend the Closing for up to thirty (30) days, in
order to allow Seller a reasonable amount of additional time to obtain such
certificates.
6.1.9 NON-FOREIGN SELLER'S AFFIDAVIT. On or before the Closing, Seller shall
deliver to Buyer the Non-Foreign Seller's Affidavit (the "NON-FOREIGN SELLER'S
AFFIDAVIT") in the form of EXHIBIT "I" attached hereto, executed by Seller.
6.1.10 NO MORATORIA. No moratorium, statute, regulation, ordinance, or federal,
state, county or local legislation, or order, judgment, ruling or decree of any
governmental agency or of any court shall have been enacted, adopted, issued,
entered or pending which would adversely affect the current use of the Property
as a shopping center.
6.2 FAILURE OF CLOSING CONDITIONS. Subject to Buyer's rights hereunder, if any
of the Closing Conditions have not been fulfilled within the applicable time
periods, Buyer may:
(a) waive the Closing Condition and close Escrow in accordance with this
Agreement, without adjustment or abatement of the Purchase Price, except as
otherwise provided herein; or
(b) cure (by payment or obtaining a bond) or discharge any Liens in accordance
with the terms of Section 4.2.2 hereof; or
(c) terminate this Agreement by written notice to Seller and to Escrow Agent, in
which event Escrow Agent shall return the Deposit to Buyer, Seller shall pay for
all of the cancellation charges of Title Company and Escrow Agent and Buyer
shall be entitled to pursue its rights and remedies pursuant to Section 12.2
hereof.
7. CLOSING.
7.1 CLOSING DATE. Subject to the provisions of this Agreement, the "Closing" (as
defined below) shall take place on the thirtieth (30th) day following the Due
Diligence Termination Date, or on such other date as the parties hereto may
agree. As used herein, the following terms shall have the following meanings:
(i) the "CLOSING" shall mean the recordation of the Deed in the Official Public
Records of Real Property of Dallas County, Texas (the "OFFICIAL RECORDS"); and
(ii) the "CLOSING DATE" shall mean the date upon which the Closing actually
occurs.
7.2 DELIVERIES BY SELLER. Not less than one (1) Business Day prior to the
Closing Date, Seller, at its sole cost and expense, shall deliver or cause to be
delivered into Escrow the following documents and instruments, each dated as of
the Closing Date, in addition to the other items and payments required by this
Agreement to be delivered by Seller:
7.2.1 DEED. The original executed and acknowledged Deed conveying the Property
to Buyer or its nominee;
7.2.2 NON-FOREIGN SELLER'S AFFIDAVIT. The original Non-Foreign Seller's
Affidavit executed by Seller;
7.2.3 ASSIGNMENT OF LEASES. Four (4) original executed counterparts of the
Assignment of Leases;
7.2.4 ASSIGNMENT OF REA. Four (4) original executed and acknowledged
counterparts of the Assignment of REA;
7.2.5 BILL OF SALE AND ASSIGNMENT. Four (4) original executed counterparts of
the Bill of Sale and Assignment;
7.2.6 SELLER'S CERTIFICATE. Four (4) original Seller's Certificates, executed by
Seller;
7.2.7 PROOF OF AUTHORITY. Such proof of Seller's authority and authorization to
enter into this Agreement and the transaction contemplated hereby, and such
proof of the power and authority of the individual(s) executing or delivering
any instruments, documents or certificates on behalf of Seller to act for and
bind Seller as may be reasonably required by Title Company or Buyer; and
7.2.8 OTHER. Such other documents and instruments, signed and properly
acknowledged by Seller, if appropriate, as may be reasonably required by Buyer,
Escrow Agent, or otherwise in order to effectuate the provisions of this
Agreement and the Closing of the transactions contemplated herein.
7.3 DELIVERIES BY BUYER. On or before the Closing, Buyer shall deliver or cause
to be delivered into Escrow the following:
7.3.1 BALANCE OF PURCHASE PRICE. The balance of the Purchase Price pursuant to
Section 2 hereof and Buyer's share of prorations and Closing Costs, as provided
in Sections 7.5 and 7.6, respectively;
7.3.2 ASSIGNMENT OF LEASES. Four (4) original executed counterparts of the
Assignment of Leases;
7.3.3 ASSIGNMENT OF REA. Four (4) original executed and acknowledged
counterparts of the Assignment of REA;
7.3.4 BUYER'S CERTIFICATE. A certificate, in the form of EXHIBIT "K" attached
hereto, certifying that (i) all of the representations, covenants and warranties
of Buyer made in or pursuant to this Agreement are materially true, accurate,
correct and complete as of the Closing, (ii) all conditions to the Closing that
Buyer was to satisfy or perform have been satisfied, performed or waived, and
(iii) to Buyer's knowledge, all conditions to the Closing that Seller was to
satisfy or perform have been satisfied or performed; and
7.3.5 OTHER. Such other documents and instruments, signed and properly
acknowledged by Buyer, if appropriate, as may reasonably be required by Escrow
Agent or otherwise in order to effectuate the provisions of this Agreement and
the closing of the transactions contemplated herein.
7.4 ACTIONS BY ESCROW AGENT. Provided that Escrow Agent shall not have received
written notice from Buyer or Seller of the failure of any condition to the
Closing or of the termination of the Escrow and this Agreement, when Buyer and
Seller have deposited into Escrow the documents and funds required by this
Agreement, and Title Company is committed to issue the Owner's Title Policy with
an effective date of the Closing Date, Escrow Agent shall, in the order and
manner herein below indicated, take the following actions:
7.4.1 RECORDING. Following Title Company's acknowledgement that it is prepared
and irrevocably committed to issue the Owner's Title Policy to Buyer, cause the
Deed and any other documents which the parties hereto may mutually direct to be
recorded in the Official Records and obtain conformed copies thereof for
distribution to Buyer and Seller.
7.4.2 FUNDS. Upon receipt of confirmation of the recordation of the Deed and
such other documents as were recorded pursuant to Section 7.4.1 above, disburse
all funds deposited with it by Buyer as follows:
(a) pursuant to the Closing Statement (as hereinafter defined), retain for
Escrow Agent's own account all escrow fees and costs, disburse to Title Company
the fees and expenses incurred in connection with the issuance of the Owner's
Title Policy, and disburse to any other persons or entities entitled thereto the
amount of any other Closing Costs;
(b) disburse to Seller an amount equal to the Purchase Price, less or plus the
net debit or credit to Seller by reason of the prorations and allocation of
Closing Costs provided for in this Section 7. Seller's portion (as provided in
Section 7.6 below) of the escrow fees, title fees and other Closing Costs shall
be paid pursuant to clause (a) above; and
(c) disburse to Buyer any remaining funds in the possession of Escrow Agent
after payments pursuant to (a) and (b) above have been completed.
7.4.3 DELIVERY OF DOCUMENTS. Deliver to Buyer and Seller each two (2) originals
of all documents, other than the Deed and the Non-Foreign Seller's Affidavit,
deposited into Escrow.
7.4.4 TITLE POLICY. Cause Title Company to issue the Owner's Title Policy to
Buyer.
7.5 PRORATIONS. Rentals, revenues, and other income, if any, from the Property,
service or other contract fees, utility costs, and other expenses affecting the
Property shall be prorated between Buyer and Seller as of the Closing Date based
on a 365-day year. For purposes of calculating prorations, Buyer shall be deemed
to be title holder of the Property, and therefore entitled to the income and
responsible for the expenses, after 12:01 a.m. on the Closing Date.
Notwithstanding the foregoing, with respect to percentage rent under the Leases,
prorations shall be made following the end of the calendar year in which the
Closing occurs so that all percentage rents received by Buyer with respect to
such calendar year shall be prorated between Buyer and Seller as of the Closing
Date. Delinquent rentals as of the Closing Date (including, without limitation,
any rent or additional rent (and any adjustments thereto for common area mainte
nance or insurance payments) that has not been paid as of the Closing Date),
shall not be prorated, but when paid to Buyer shall be delivered by Buyer to
Seller, provided that all current rent has then been paid with respect to such
Leases. After the Closing, Buyer shall use commercially reasonable efforts to
collect delinquent rents on behalf of Seller, provided that with respect to such
efforts Seller shall reimburse Buyer for its reasonable costs and expenses.
After the Closing, Seller shall have no right to proceed in any manner or make
any claim against Tenants for rents that were delinquent as of the Closing Date.
On the Closing Date, Buyer shall receive as a credit to the Purchase Price an
amount equal to the sum of: (i) security deposits which were paid by Tenants to
Seller, (ii) expenses and other sums owed by Seller to Tenants for work or
disputes which occurred prior to the Closing Date, and (iii) rentals already
received by Seller attributable to periods after the Closing Date. Buyer shall
receive a credit against the Purchase Price in an amount equal to the sum of all
amounts actually received by Seller from Tenants prior to the Closing Date for
non-delinquent real estate taxes, assessments and improvement bonds on the
Property for the year 1996. If any other expenses attributable to the Property
and allocable to the period prior to the Closing are discovered or billed after
the Closing, the parties shall make any necessary adjustment after the Closing
by cash payment to the party entitled thereto so that Seller shall have borne
all expenses allocable to the period prior to the Closing and Buyer shall bear
all expenses allocable to the period from and after the Closing. The provisions
of this Section 7.5 shall survive the Closing.
Ten (10) days prior to the Closing, Escrow Agent shall deliver to each of the
parties for their review and approval a preliminary closing statement (the
"PRELIMINARY CLOSING STATEMENT") based on an income expense statement prepared
by Seller, approved by Buyer, and delivered to Escrow Agent prior to said date,
setting forth (i) the proration amounts allocable to each of the parties
pursuant to this Section 7.5 and (ii) the Closing Costs allocable to each of the
parties pursuant to Section 7.6 hereof. Based on each of the party's comments,
if any, regarding the Preliminary Closing Statement, Escrow Agent shall revise
the Preliminary Closing Statement and deliver a final, signed version of a
closing statement to each of the parties at the Closing (the "CLOSING
STATEMENT").
7.6 Closing Costs. Each party shall pay its own costs and expenses arising in
connection with the Closing (including, without limitation, its own attorney and
advisor fees), except the following costs (the "CLOSING COSTS"), which shall be
allocated between the parties as follows:
(i) Seller shall pay any and all documentary transfer, stamp, sales and other
taxes related to the transfer of the Property, one-half (1/2) of Escrow Agent's
escrow fees and costs, the cost of the Survey (if not already paid), the cost of
the standard portion of the Owner's Title Policy and all recording fees.
(ii) Buyer shall pay one-half (1/2) of Escrow Agent's escrow fees and costs, the
cost of the modification of the "survey exception" to the Owner's Title Policy,
the cost of all endorsements to the Owner's Title Policy, and the sum of all
deposits currently being held by utility companies pursuant to those certain
utility contracts which are being assigned to Buyer under the Bill of Sale.
7.7 DELIVERIES OUTSIDE OF ESCROW. Seller shall deliver possession of the
Property, subject to the Leases, to Buyer upon the Closing. Further, Seller
hereby covenants and agrees to deliver to Buyer, on or prior to the Closing, the
following items:
7.7.1 APPROVALS. Originals of the Approvals (as hereinafter defined);
7.7.2 INTANGIBLE PROPERTY. The Intangible Property, including, without
limitation, the original Property Documents and the original Leases; and
7.7.3 PERSONAL PROPERTY. The Personal Property, including, without limitation,
all keys, pass cards, remote controls, security codes, computer software and
other devices relating to access to the Improvements.
7.7.4 NOTICES.
7.7.4.1 NOTICE TO TENANTS. A letter for each Tenant in the form attached hereto
as EXHIBIT "L," duly executed by Seller, dated as of the Closing Date and
addressed to the Tenants, informing such Tenants of the transfer of the Property
and the assignment of the Leases to Buyer together with an instruction to pay
all amounts due under the Leases following the Closing Date to Buyer.
7.7.4.2 NOTICE TO VENDORS. A letter for each of the vendors of the Service
Contracts (as hereinafter defined) in the form attached hereto as EXHIBIT "M."
duly executed by Seller, dated as of the Closing Date and addressed to each
Service Contract vendor, informing said vendors of the assignment of the Service
Contracts to Buyer.
8. SELLER'S REPRESENTATIONS AND WARRANTIES.
Seller represents and warrants to and agrees with Buyer, as of the Execution
Date and as of the Closing, as follows:
8.1 TITLE. Seller is the legal and equitable owner of the Property and has the
full right to convey the Property.
8.2 LEASES.
8.2.1 LEASE SCHEDULE. The schedule attached hereto as EXHIBIT "N" (the "LEASE
SCHEDULE") is true, correct and complete with respect to: (i) the leases,
licenses, tenancies, concession agreements, subleases, and other occupancy
agreements to which Seller is a party, including, without limitation, all
amendments, modifications, assignments and guarantees thereof and options to
renew or extend the term thereof, whether oral or written, now in effect at the
Property (collectively, the "LEASES"), (ii) to Seller's knowledge, the
identities of the tenants under the Leases (the "TENANTS"), (iii) to Seller's
knowledge, the commencement and expiration dates of the Leases, (iv) to Seller's
knowledge, the security and other deposits maintained, if any, with respect to
the Leases, (v) to Seller's knowledge, the current rents, (vi) to Seller's
knowledge, all contributions to common area maintenance, operating expenses and
insurance under the Leases, (vii) to Seller's knowledge, any notification from
any of the Tenants regarding their election to extend, renew or cancel any of
the Leases, and (viii) to Seller's knowledge, any and all advances, concessions,
allowances, credits, rebates, offsets or other cases for relief or adjustment
(to the extent not expressly set forth in the Leases), including, without
limitation, any unpaid reimbursements for Tenant improvements and any "free" or
"reduced" rent.
8.2.2 TENANT ARREARAGES. The schedule attached hereto as EXHIBIT "O" the
("TENANT ARREARAGE STATEMENT") is a true, correct and complete statement of
Tenant arrearages and accrued but unpaid minimum and additional rents,
percentage rents, expense escalations, tax and other adjustments and charges
attributable to the period prior to 12:01 a.m. on the Closing Date. Except as
set forth on the Tenant Arrearage Statement, there are no arrearages in rent or
additional rent under any of the Leases.
8.2.3 DELIVERY AND STATUS OF LEASES. Except as shown on the Lease Schedule, the
Leases are in full force and effect and, to Seller's knowledge, are free from
default by Seller or any other party. To Seller's knowledge, except as disclosed
to Buyer herein, no event has occurred which with notice, lapse of time or both
would constitute an event of default under any of the Leases. Seller has no
knowledge, as of the date hereof, that any Tenant intends to discontinue its
operations at the Property or intends to commit a material breach of its Lease.
True, correct and complete copies of all Leases shall be delivered to Buyer in
accordance with Section 4.1.1 hereof. At any time prior to the Closing, Seller
shall promptly deliver to Buyer a written explanation of any inconsistencies or
differences between the Lease Schedule and the copies of the Leases delivered to
Buyer to the extent that any such inconsistencies or differences are identified
to Seller by Buyer.
8.2.4 SECURITY DEPOSITS. Except as set forth on the Lease Schedule, there are no
security deposits held by the landlord under any of the Leases.
8.2.5 SERVICES TO TENANTS. To Seller's knowledge, all of the services required
to be supplied to each Tenant are presently being supplied and will continue to
be supplied through the Closing Date, and Seller has received no notices of any
failure of Seller to supply any of said services to any Tenant. Seller has had
no notice from any Tenant of any items of work to be completed pursuant to any
of the Leases for the benefit of any Tenant and Seller has no knowledge of any
such work to be done except as may otherwise be set forth in the Leases. To
Seller's knowledge, no Tenant is entitled to any additional work during the term
of its Lease' including the painting of the leased premises, except as may
otherwise be set forth in the Leases.
8.2.6 NO TENANT DISPUTES. Seller has not received any notice whatsoever from any
Tenant, including, without limitation, notices to cancel, renew or extend any
Leases or supply any additional services to such Tenant except as may otherwise
be set forth in the Property Documents. Except as otherwise set forth in the
Property Documents, Seller has not received any notification from any Tenant
that it disputes the computation of the rents payable pursuant to its Lease or
the base year for escalation rents payable by such Tenant.
8.2.7 NO VIOLATIONS. Seller has received no written notice that the occupancy of
any Tenant, under its Lease, violates any Law (as hereinafter defined).
8.2.8 NO PRE-PAID RENT. No Tenant has paid any rent for more than one (1) month
in advance except as may otherwise be set forth in the Lease Schedule.
8.2.9 NO BROKER'S COMMISSIONS. There will be no brokerage or other leasing
commissions payable in connection with any of the Tenants under presently
existing Leases or new leases or amendments thereto (including, without
limitation, any extension or expansion options that may exist under the Leases).
8.2.10 NO NEW LEASES. Seller shall not enter into any new lease, or extend,
renew or amend any Lease, without Buyer's prior written consent (which consent
may not be unreasonably withheld on or prior to the Due Diligence Termination
Date, but which consent may be granted or withheld in Buyer's sole and absolute
discretion after the Due Diligence Termination Date).
8.2.11 ASSIGNMENT. All of the Leases are assignable to Buyer in connection with
its purchase of the Property without the necessity for any approval, consent or
additional payment.
8.3 REA. To Seller's knowledge: (i) the REA is in full force and effect and has
not been assigned, modified, supplemented or amended, except as otherwise
provided in recorded documents; and (ii) no party to the REA is in default of
its obligations thereunder.
8.4 CONDITION OF PROPERTY. Except as otherwise provided in the Property
Documents, Seller has not received any notice of any defects in the Property
from any Tenants or any other third parties, including, without limitation, any
governmental agencies.
8.5 SHOPPING CENTER. Seller has not received any notice of any contemplated
changes in any applicable legal requirements which would adversely affect the
use, operation, maintenance or management of the Shopping Center. Seller will
continue to operate and manage the Shopping Center in the same manner as
presently conducted.
8.6 SPECIAL ASSESSMENTS OR CONDEMNATION. There are not presently pending (i) any
special assessments or (ii) condemnation actions against the Property or any
part, and Seller has no knowledge of any threatened, contemplated or pending
special assessments or eminent domain proceedings that would affect the Property
or any part thereof in any way whatsoever.
8.7 UTILITIES. To Seller's knowledge, all water, sewer, electric, gas,
telephone, and drainage facilities, and all other utilities required for the
current operation of the Property are installed to the property lines of the
Property and have been connected to the Improvements pursuant to valid permits.
Seller has no knowledge of any basis on which the same will not remain available
after the Closing.
8.8 SERVICE CONTRACTS. There are no service, maintenance, repair, management,
leasing, or supply contracts or other contracts (including, without limitation,
janitorial, elevator, equipment, brokerage, and landscaping agreements) (the
"SERVICE CONTRACTS") affecting the Property, oral or written, except as set
forth on a list to be delivered by Seller to Buyer as a Property Document on or
before the fifth (5th) day after the Execution Date (the "CONTRACT SCHEDULE")
and, except as set forth on the Contract Schedule, all Service Contracts are
cancelable without cost at the option of Seller or the then owner of the
Property upon not more than thirty (30) days' prior written notice. All of the
Service Contracts are assignable to Buyer in connection with its purchase of the
Property without the necessity for any approval, consent or additional payment.
True, correct and complete copies of all Service Contracts shall be delivered to
Buyer in accordance with Section 4.1.1 hereof. At any time prior to the Closing,
Seller shall promptly deliver to Buyer a written explanation of any
inconsistencies or differences between the Contract Schedule and the copies of
the Service Contracts delivered to Buyer to the extent that any such
inconsistencies or differences are identified to Seller by Buyer. Except as
provided in the Service Contracts, the Service Contracts are unmodified and in
full force and effect, and, to Seller's knowledge, are free from any default by
Seller or any other party thereto. To Seller's knowledge, no event has occurred
which with notice or lapse of time or both would constitute an event of default
under any of the Service Contracts. Except as set forth in the Contract
Schedule, none of the Service Contracts have been assigned or encumbered.
8.9 EMPLOYEES. There are no employees of Seller employed in connection with the
use, management, maintenance or operation of the Property whose employment with
respect to the Property will continue after the Closing Date. There is no
bargaining unit or union contract relating to any employees of Seller.
8.10 CONSENTS AND RELEASES. Seller has obtained all required consents, releases,
and permissions to consummate the conveyance contemplated herein.
8.11 AUTHORITY. This Agreement and all other documents delivered by Seller prior
to or at the Closing (i) have been duly authorized, executed, and delivered by
Seller; (ii) are binding obligations of Seller; and (iii) do not violate the
formation documents of Seller. Seller further represents that it is a joint
venture duly organized and existing in good standing under the laws of the State
of Texas.
8.12 BANKRUPTCY. No filing or petition under the United States Bankruptcy Law or
any insolvency laws, or any laws for composition of indebtedness or for the
reorganization of debtors has been filed with regard to Seller.
8.13 CERTIFICATES OF OCCUPANCY. To Seller's knowledge, all necessary, valid,
final and unconditional certificates of occupancy, or the equivalent permitting
required by the applicable licensing agency, for the current use and occupancy
of the Property have been issued.
8.14 FOREIGN INVESTMENT IN REAL PROPERTY TAX ACT. Seller is not a foreign person
within the meaning of 42 USCS 1445(f)(3).
8.15 EXISTING APPROVALS. To Seller's knowledge, all existing governmental
approvals with respect to the Property (collectively, the "APPROVALS") are in
full force and effect. To Seller's knowledge, (i) none of the Approvals has been
assigned or encumbered, (ii) all of the Approvals are transferable to Buyer
without the necessity of any approval or consent or additional payment and (iii)
no such transfer will affect the validity thereof. Seller has no knowledge of
any governmental action to suspend or revoke any of the Approvals.
8.16 INSURANCE. As of the Execution Date, there will be in effect such insurance
policies as are customarily maintained with respect to similar properties. All
premiums due on such insurance policies will be paid by Seller and Seller will
maintain such insurance policies from the Execution Date through the Closing
Date or earlier termination of this Agreement. Seller has not received and has
no knowledge of any notice or request from any insurance company requesting the
performance of any work or alteration with respect to the Property. Seller has
received no notice from any insurance company concerning any defects or
inadequacies in the Property which, if not corrected, would result in the
termination of insurance coverage or increase its cost.
8.17 TAXES. Seller is not prosecuting any appeals of any taxes or assessments
affecting the Property. To Seller's knowledge, except as disclosed herein, there
are no special assessments currently pending against the Property.
8.18 LITIGATION. Except as set forth on the schedule attached hereto as EXHIBIT
"P", there are no actions, suits or proceedings before any judicial or quasi-
judicial body, by any governmental authority or other third party, pending, or
to Seller's knowledge, threatened, against or affecting all or any portion of
the Property. There are no actions, suits or proceedings pending, contemplated
or threatened by Seller in connection with all or any portion of the Property or
Seller's ownership, rights, use, development or maintenance thereof, including,
without limitation, tax reduction proceedings. No attachments, execution
proceedings, assignments for the benefit of creditors, insolvency, bankruptcy,
reorganization or other proceedings are pending, or, to Seller's knowledge,
threatened, against Seller. To Seller's knowledge, there are no outstanding or
unpaid judgements affecting the Property.
8.19 COMPLIANCE WITH LAWS. Except as otherwise disclosed to Buyer in the
Property Documents, Seller has not received any written notice that the Property
is in violation of any existing laws, rules, regulations, ordinances and orders
of any applicable federal, state, city and other governmental authorities in
effect as of the date of this Agreement (collectively, "Laws"), including,
without limitation, (i) the Americans with Disabilities Act, 42 U.S.C. 12102,
et seq. (ii) the Texas Architectural Barriers Act, together with all rules,
regulations and official interpretations promulgated pursuant thereto, and (iii)
any Laws with respect to building, fire and health codes, environmental
protection and sanitation and pollution control.
8.20 ZONING. Seller has not received any notice of any change or proposed change
of the current zoning designation of the Property.
8.21 TOXIC OR HAZARDOUS MATERIALS.
8.21.1 DEFINITIONS.
(a) "ENVIRONMENTAL CLAIM" means any claim, action, cause of action,
investigation or notice (written or oral) by any person or entity alleging
potential liability (including, without limitation, potential liability for
investigatory costs, cleanup costs, governmental response costs, natural
resources damages, property damages, personal injuries, or penalties) arising
out of, based on or resulting from (i) the manufacture, treatment, processing,
distribution, use, transport, handling, deposit, storage, disposal, leaking or
other presence, or release into the environment of any Material of Environmental
Concern in, at, on, under or about any location, whether or not owned or
operated by Seller or (ii) circumstances forming the basis of any violation, or
alleged violation, of any Environmental Law (as defined below).
(b) "ENVIRONMENTAL LAWS" means all federal, state, local and foreign laws and
regulations relating to pollution or protection of human health or the
environment, including, without limitation, laws and regulations relating to
emissions, discharges, releases or threatened releases of Materials of
Environmental Concern, or otherwise relating to the manufacture, processing,
distribution, use, treatment, storage, disposal, transport or handling of
Materials of Environmental Concern.
(c) "MATERIAL OF ENVIRONMENTAL CONCERN" means chemicals, pollutants,
contaminants, wastes, toxic substances, petroleum and petroleum products.
8.21.2 REPRESENTATIONS AND WARRANTIES. To Seller's knowledge: (i) Seller has not
received any communication (written or oral), whether from a governmental
authority or third party, alleging that Seller is not in material compliance
with any applicable Environmental Law; (ii) there is no Environmental Claim
pending or threatened with regard to the Property; and (iii) without in any way
limiting the generality of the foregoing:
(a) Seller has not stored, disposed or arranged for the disposal of Materials
of Environmental Concern on the Property;
(b) there are no underground storage tanks located on the Property;
(c) there is no asbestos contained in or forming part of any Improvement,
including, without limitation, any building, building component, structure or
office space on the Property; and
(d) no polychlorinated biphenyls (PCBs) are used or stored at the Property.
8.22 NO RESTRICTION ON ACCESS. Seller has no knowledge of any fact or condition
which would prohibit or adversely affect any existing right of access to or from
the Property from or to the existing highways and roads (all of such existing
highways and roads being duly opened and dedicated to the municipality having
jurisdiction thereof) and Seller has no knowledge of any pending or threatened
restriction or denial, governmental or otherwise, upon such ingress and egress.
8.23 STORM DRAINAGE. To Seller's knowledge, all storm water flowing from the
Property drains either into a public system or onto a permitted location and
through easements for the benefit of the Property.
8.24 SOILS. Seller has no knowledge of any soil conditions adversely affecting
the Property or any part thereof.
8.25 NO CONFLICTS. The execution and delivery of this Agreement, the
consummation of the transactions herein contemplated, and compliance with the
terms of this Agreement will not conflict with, or, with or without notice or
the passage of time or both, result in a breach of any of the terms or
provisions of, or constitute a default under, any indenture, deed of trust,
mortgage, loan agreement, or other document, or instrument or agreement, oral or
written, to which Seller is a party or by which Seller or the Property is bound,
or, to Seller's knowledge, any applicable regulation of any governmental agency,
or any judgment, order or decree of any court having jurisdiction over Seller or
all or any portion of the Property.
8.26 INTANGIBLE AND PERSONAL PROPERTY. As of the Closing, Seller shall own the
Personal Property and the Intangible Property free and clear of all options,
liens, claims, encumbrances, covenants, conditions, restrictions, and any other
matters affecting title by, through or under Seller, and subject to the
Permitted Exceptions. Seller has the full right to convey its right, title and
interest in and to the Personal Property and the Intangible Property.
8.27 SURVIVAL. All of the representations, warranties and agreements of Seller
set forth in this Agreement shall be true upon the Execution Date, shall be
deemed to be repeated at and as of the Closing Date without the necessity of a
separate certificate with respect thereto and shall survive the delivery of the
Deed and other closing instruments and documents for a period of one (1) year.
8.28 SELLER'S KNOWLEDGE. As used herein, the phrase "to Seller's knowledge" or
any similar phrase shall mean the actual knowledge of Stephen Kauffman and
Sheila Eason. The persons named in the preceding sentence are those persons
employed by Seller or its affiliates in an executive or overseeing management
capacity who are most familiar with the condition and operation of the Property
and who have been employed in such capacity for a period of at least three (3)
years preceding the Execution Date.
8.29 AS-IS CONVEYANCE. BUYER EXPRESSLY ACKNOWLEDGES AND AGREES THAT BUYER HAS OR
WILL HAVE, PRIOR TO THE END OF THE DUE DILIGENCE PERIOD, INSPECTED THE PROPERTY
TO THE EXTENT DEEMED NECESSARY BY BUYER TO ENABLE BUYER TO EVALUATE THE
PROPERTY. BUYER FURTHER ACKNOWLEDGES AND AGREES THAT BUYER IS RELYING SOLELY
UPON THE INSPECTION, EXAMINATION AND EVALUATION OF THE PROPERTY BY BUYER, AND
THAT BUYER IS PURCHASING THE PROPERTY ON AN "AS IS", "WHERE IS" AND "WITH ALL
FAULTS" BASIS, WITHOUT ANY REPRESENTATION OR WARRANTY BY SELLER (WHETHER
EXPRESS, IMPLIED, STATUTORY OR OTHERWISE) EXCEPT AS EXPRESSLY SET FORTH HEREIN.
SELLER HAS NOT MADE AND DOES NOT HEREBY MAKE, EXCEPT AS EXPRESSLY SET FORTH
HEREIN, ANY REPRESENTATIONS OR WARRANTIES OF ANY KIND OR CHARACTER WHATSOEVER
(WHETHER EXPRESS, IMPLIED, STATUTORY OTHERWISE) WITH RESPECT TO THE PROPERTY,
ITS CONDITION (INCLUDING WITHOUT LIMITATION ANY REPRESENTATION OR WARRANTY
REGARDING QUALITY OF CONSTRUCTION, WORKMANSHIP, MERCHANTABILITY OR FITNESS FOR
ANY PARTICULAR PURPOSE), ITS COMPLIANCE WITH APPLICABLE ENVIRONMENTAL LAWS OR
OTHER APPLICABLE LAWS, INCOME TO BE DERIVED THEREFROM OR EXPENSES TO BE INCURRED
WITH RESPECT THERETO, THE OBLIGATIONS, RESPONSIBILITIES OR LIABILITIES OF THE
OWNER THEREOF, OR ANY OTHER MATTER OR THING RELATING TO OR AFFECTING THE
PROPERTY, AND BUYER ACKNOWLEDGES THAT IT IS THE INTENTION OF SELLER AND BUYER
THAT BUYER SHALL PURCHASE THE PROPERTY WITHOUT ANY REPRESENTATIONS OR WARRANTIES
(WHETHER EXPRESS, IMPLIED, STATUTORY OR OTHERWISE) FROM SELLER OR ANY OTHER
PERSON, INCLUDING WITHOUT LIMITATION, SELLER'S BROKERS, CONSULTANTS, COUNSEL,
EMPLOYEES, OFFICERS, DIRECTORS, PARTNERS, TRUSTEES OR BENEFICIARIES, OTHER THAN
THOSE EXPRESSLY SET FORTH IN THIS AGREEMENT OR ANY DOCUMENT EXECUTED BY SELLER
PURSUANT TO THIS AGREEMENT AT CLOSING.
9. BUYER'S REPRESENTATIONS AND WARRANTIES.
Buyer represents and warrants to and agrees with Seller as of the Execution Date
and as of the Closing, as follows:
9.1 NO CONFLICTS. The execution and delivery of this Agreement, the consummation
of the transactions herein contemplated, and compliance with the terms of this
Agreement will not conflict with, or, with or without notice or the passage of
time or both, result in a breach of any of the terms or provisions of, or
constitute a default under, any indenture, deed of trust, mortgage, loan
agreement, or other document or instrument to which Buyer is a party or by which
Buyer is bound, or any applicable regulation of any governmental agency, or any
judgment, order or decree of any court having jurisdiction over Buyer or all or
any portion of the Property.
9.2 DUE ORGANIZATION; CONSENTS. Buyer is a corporation duly organized and
existing in good standing under the laws of the State of Maryland with its
principal place of business in the State of California. Subject to terms of
Section 4.3 hereof, (i) all requisite corporate action has been taken by Buyer
in connection with entering into this Agreement, and will be taken prior to the
Closing in connection with the execution and delivery of the instruments refer
enced herein and the consummation of the transactions contemplated hereby; and
(ii) no consent of any partner, shareholder, beneficiary, creditor, investor,
judicial or administrative body, governmental authority or other party is
required in connection herewith which has not been obtained.
9.3 BUYER'S AUTHORITY; VALIDITY OF AGREEMENTS. Subject to terms of Section 4.3
hereof, (i) Buyer has full right, power and authority to purchase the Property
from Seller as provided in this Agreement and to carry out its obligations
hereunder; (ii) the individual(s) executing this Agreement and the instruments
referenced herein on behalf of Buyer have the legal power, right and actual
authority to bind Buyer to the terms hereof and thereof; and (iii) this
Agreement is and all other documents and instruments to be executed and deliv
ered by Buyer in connection with this Agreement shall be duly authorized,
executed and delivered by Buyer and shall be valid, binding and enforceable
obligations of Buyer.
10. ADDITIONAL COVENANTS OF SELLER.
In addition to the covenants and agreements of Seller set forth elsewhere in
this Agreement, Seller covenants and agrees that between the Execution Date and
the Closing Date:
10.1 TITLE. Seller shall not directly or indirectly sell, assign or create any
right, title or interest whatsoever in or to the Property, or create or permit
to exist thereon any lien, charge or encumbrance other than the Permitted
Exceptions, or enter into any agreement to do any of the foregoing, without the
prior written consent of Buyer (which consent may not be unreasonably withheld
on or prior to the Due Diligence Termination Date, but which consent may be
granted or withheld in Buyer's sole and absolute discretion after the Due Dili
gence Termination Date).
10.2 LEASES. Seller shall not directly or indirectly enter into any new leases
(or renewals, modifications or extensions of any Leases), without the prior
written consent of Buyer (which consent may not be unreasonably withheld on or
prior to the Due Diligence Termination Date, but which consent may be granted or
withheld in Buyer's sole and absolute discretion after the Due Diligence
Termination Date).
10.3 OPERATING AGREEMENTS. Seller shall not directly or indirectly enter into
(i) any operating agreements or reciprocal easement agreements or (ii) any
renewal, modifications or extensions of the REA, without Buyer's prior written
consent (which consent may not be unreasonably withheld on or prior to
the Due Diligence Termination Date, but which consent may be granted or withheld
in Buyer's sole and absolute discretion after the Due Diligence Termination
Date).
10.4 SERVICE, MANAGEMENT AND EMPLOYMENT CONTRACTS. Seller shall not directly or
indirectly (i) enter into any new service contracts (or renewals, modifications
or extensions of any Service Contracts) or (ii) enter into, extend, renew or
replace any existing property management or employment contracts in respect of
the Property, without the prior written consent of Buyer (which consent may not
be unreasonably withheld on or prior to the Due Diligence Termination Date, but
which consent may be granted or withheld in Buyer's sole and absolute discretion
after the Due Diligence Termination Date), unless the same shall be cancellable
without penalty or premium, upon not more than thirty (30) days' notice from the
owner of the Property.
10.5 DEVELOPMENT ACTIVITIES. Seller shall not take any actions with respect to
the development of the Property, including, without limitation, applying for,
pursuing, accepting or obtaining any permits, approvals or other development
entitlements from any governmental or other regulatory entities or finalizing or
entering into any agreements relating thereto without the prior written consent
of Buyer (which consent may not be unreasonably withheld on or prior to the Due
Diligence Termination Date, but which consent may be granted or withheld in
Buyer's sole and absolute discretion after the Due Diligence Termination Date).
Subject to the Leases, the REA and other recorded restrictive covenants, Seller
hereby agrees to reasonably cooperate with Buyer in Buyer's efforts to obtain
such governmental approvals as Buyer deems necessary to permit Buyer to operate
the Property as Buyer wishes.
10.6 NO PRE-PAID RENT. Seller shall not accept any rent from any Tenant (or any
new tenant under any new lease to which Buyer has consented) for more than one
(1) month in advance of the payment date.
10.7 NOTICE OF CHANGE IN CIRCUMSTANCES. Seller shall promptly notify Buyer of
any change in any condition with respect to the Property or any portion thereof
or of any event or circumstance of which Seller becomes aware subsequent to the
Execution Date which (a) makes any representation or warranty of Seller to Buyer
under this Agreement materially untrue or materially misleading or (b) makes any
covenant or agreement of Seller under this Agreement incapable or less likely of
being performed, it being expressly understood that Seller's obligation to
provide information to Buyer under this paragraph shall in no way relieve Seller
of any liability for a breach by Seller of any of its representations,
warranties, covenants or agreements under this Agreement.
10.8 NO DEFAULTS; MAINTENANCE OF PROPERTY. Seller shall not default with respect
to the performance of any obligation relating to the Property, including,
without limitation, the payment of all amounts due and the performance of all
obligations with respect to the Leases, the REA, the Service Contracts, and any
existing indebtedness relating to the Property. Seller shall operate and
maintain the Property in accordance with Seller's past practice and the Leases,
the REA and all other recorded covenants, conditions and restrictions.
10.9 LITIGATION. From and after the date hereof, Seller shall not commence or
allow to be commenced on its behalf any action, suit or proceeding with respect
to all or any portion of the Property without the prior written consent of
Buyer; provided, however, that in the event that Seller is named as a defendant
in any action with respect to all or any portion of the Property, Seller may
name any Tenant in such suit if necessary in order to protect Seller's rights to
indemnification or contribution with respect to such Tenant. In the event that
any proceeding of the character described in Section 8.18 hereof is initiated
prior to the Closing, Seller shall promptly advise Buyer in writing. Seller
hereby agrees to forever indemnify, defend and hold harmless Buyer from and
against any and all loss, cost, damage and expense (including, without
limitation, reasonable attorneys' fees, charges and disbursements) accruing from
any presently pending litigation with respect to the Property.
10.10 ZONING. Except as required by any Lease or as expressly approved by Buyer
in writing, Seller shall not seek any change in the zoning of the Real Property
and shall take all actions necessary to maintain the present zoning of the Real
Property.
11. RISK OF LOSS.
11.1 CONDEMNATION. If, prior to the Closing, all or any material portion of the
Property is taken by condemnation or eminent domain (or is the subject of a
pending or contemplated taking which has not been consummated), Seller shall
immediately notify Buyer of such fact. In such event, Buyer shall have the
option to terminate this Agreement upon written notice to Seller given not later
than thirty (30) days after receipt of such notice from Seller. Upon such
termination, Escrow Agent shall return the Deposit to Buyer, the parties shall
equally share the cancellation charges of Escrow Agent and Title Company and
neither party shall have any further rights or obligations hereunder, other than
pursuant to any provision hereof which expressly survives the termination of
this Agreement. Buyer shall have no right to terminate this Agreement as a
result of any nonmaterial taking of the Property. If Buyer does not elect or has
no right to terminate this Agreement, Seller shall assign and turn over to
Buyer, and Buyer shall be entitled to receive and keep, all awards for the
taking by condemnation and Buyer shall be deemed to have accepted the Property
subject to the taking without reduction in the Purchase Price.
11.2 CASUALTY. Prior to the Closing and notwithstanding the pendency of this
Agreement, the entire risk of loss or damage by earthquake, flood, landslide,
fire or other casualty shall be borne and assumed by Seller. If, prior to the
Closing any material part of the Property is damaged or destroyed by earthquake,
flood, landslide, fire, hurricane, tornado or other casualty, Seller shall
immediately notify Buyer of such fact. In such event, Buyer shall have the
option to terminate this Agreement in the same manner as provided in Section
11.1 hereof upon written notice to Seller given not later than thirty (30) days
after receipt of any such notice from Seller. Buyer shall have no right to termi
nate this Agreement as a result of any nonmaterial damage or destruction of the
Property. If Buyer does not elect or has no right to terminate this Agreement,
(i) at the Closing, Seller shall assign and turn over, and Buyer shall be
entitled to receive and keep, all insurance proceeds payable with respect to
such damage or destruction (which shall then be repaired or not at Buyer's
option and cost), (ii) Buyer shall assume Seller's obligations for such damage
and destruction under the Leases and the REA, (iii) Buyer shall receive as a
credit against the Purchase Price an amount equal to the sum of the amount of
any uninsured loss and the amount of any deductible with respect to the
insurance (to the extent that such amount is not reimbursed to Buyer by any
Tenant or any party to the REA), and (iv) the parties shall proceed to Closing
pursuant to the terms hereof without modification of the terms of this
Agreement. If Buyer does not elect or has no right to terminate this Agreement
by reason of any casualty, Buyer shall have the right to participate in any
adjustment of the insurance claim.
12. LIQUIDATED DAMAGES; SPECIFIC PERFORMANCE.
12.1 LIQUIDATED DAMAGES. IN THE EVENT THAT THE ESCROW AND THIS TRANSACTION FAIL
TO CLOSE SOLELY AS A RESULT OF THE DEFAULT OF BUYER IN THE PERFORMANCE OF ITS
OBLIGATIONS UNDER THIS AGREEMENT, BUYER AND SELLER AGREE THAT SELLER'S ACTUAL
DAMAGES WOULD BE IMPRACTICABLE OR EXTREMELY DIFFICULT TO FIX. THE PARTIES
THEREFORE AGREE THAT IN THE EVENT THAT ESCROW AND THIS TRANSACTION FAIL TO CLOSE
SOLELY AS A RESULT OF THE DEFAULT OF BUYER IN THE PERFORMANCE OF ITS OBLIGATIONS
HEREUNDER, SELLER, AS SELLER'S SOLE AND EXCLUSIVE REMEDY, IS ENTITLED TO LIQUI
DATED DAMAGES IN THE AMOUNT OF THE DEPOSIT THEN HELD BY ESCROW AGENT. IN THE
EVENT ESCROW FAILS TO CLOSE SOLELY AS A RESULT OF BUYER'S DEFAULT, THEN (1) THIS
AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF BUYER AND SELLER HEREUNDER AND THE
ESCROW CREATED HEREBY SHALL TERMINATE, (2) ESCROW AGENT SHALL, AND IS HEREBY
AUTHORIZED AND INSTRUCTED TO, RETURN PROMPTLY TO BUYER AND SELLER ALL DOCUMENTS
AND INSTRUMENTS TO THE PARTIES WHO DEPOSITED THE SAME, (3) ESCROW AGENT SHALL
DELIVER THE DEPOSIT THEN HELD BY ESCROW AGENT TO SELLER PURSUANT TO SELLER'S IN
STRUCTIONS, AND THE SAME SHALL BE THE FULL, AGREED AND LIQUIDATED DAMAGES, AND
(4) ALL TITLE AND ESCROW CANCELLATION CHARGES SHALL BE CHARGED TO BUYER.
SELLER AND BUYER ACKNOWLEDGE THAT THEY HAVE READ AND UNDERSTAND THE PROVISIONS
OF THIS SECTION 12.1, AND BY THEIR INITIALS IMMEDIATELY BELOW AGREE TO BE BOUND
BY ITS TERMS.
FL JK
Seller's Initials Buyer's Initials
12.2 DEFAULT BY SELLER. In the event that the Closing of the transaction
contemplated in this Agreement does not occur by reason of any default by
Seller, then (i) Escrow Agent shall return the Deposit to Buyer and (ii) Buyer
shall be entitled to pursue any remedy available to it hereunder, at law or in
equity, including, without limitation, the specific performance of this Agree
ment, provided that any amount of damages received by Buyer shall not exceed
Seventy Five Thousand Dollars ($75,000.00). Upon Buyer's discovery of any
alleged default hereunder by Seller, Buyer shall promptly notify Seller in
writing. In the event that Seller refuses to cure the alleged default and Buyer
elects to pursue an action for specific performance, Buyer must bring suit on
such action on or before the thirtieth (30th) day following Seller's refusal to
cure such alleged default. In the event that Buyer fails to bring suit on such
action in accordance with the terms hereof, then Buyer will be deemed to have
waived its right to sue for specific performance.
13. BROKERS.
Buyer and Seller each hereby represent, warrant to and agree with each other
that it has not had, and shall not have, any dealings with any third party to
whom the payment of any broker's fee, finder's fee, commission or other similar
compensation ("COMMISSION") shall or may become due or payable in connection
with the transaction contemplated hereby, other than with (i) Cushman &
Wakefield of Texas, Inc., in its capacity as Buyer's representative, and (ii) Fo
cus Realty Advisors, Inc., in its capacity as Seller's representative
(collectively, the "BROKERS"). Seller hereby agrees to pay each of the Brokers
through Escrow a Commission equal to the amount of one percent (1%) of the
Purchase Price, in connection with the transaction contemplated hereby. Seller
shall indemnify, defend and hold Buyer harmless from and against any and all
claims, losses, damages, costs and expenses (including reasonable attorneys'
fees, charges and disbursements) incurred by Buyer by reason of any breach or
inaccuracy of the representation, warranty and agreement of Seller contained in
this Section 13. Buyer shall indemnify, protect, defend and hold Seller harmless
from and against any and all claims, losses, damages, costs and expenses
(including reasonable attorneys' fees, charges and disbursements) incurred by
Seller by reason of any breach or inaccuracy of the representation, warranty and
agreement of Buyer contained in this Section 13. The provisions of this Section
13 shall survive the Closing or earlier termination of this Agreement.
14. INDEMNIFICATION.
Buyer hereby agrees to indemnify, defend and hold Seller harmless from and
against any claims, demands, obligations, losses, costs, damages, liabilities,
judgments or expenses (including reasonable attorneys' fees, charges and
disbursements) arising out of or in connection with the ownership, operation or
maintenance of the Property after the Closing. Seller hereby agrees to
indemnify, defend and hold Buyer harmless from and against any claims, demands,
obligations, losses, costs, damages, liabilities, judgments or expenses
(including reasonable attorneys' fees, charges and disbursements) arising out of
or in connection with the ownership, operation or maintenance of the Property
prior to the Closing. Each party shall do, execute and deliver, or shall cause
to be done, executed and delivered, all such further acts and instruments which
the other party may reasonably request in order to more fully effectuate the
indemnifications provided for in this Agreement. The provisions of this Section
14 shall survive the Closing.
15. MISCELLANEOUS PROVISIONS.
15.1 GOVERNING LAW. This Agreement and the legal relations between the parties
hereto shall be governed by and construed and enforced in accordance with the
laws of the State of Texas, without regard to its principles of conflicts of
law.
15.2 ENTIRE AGREEMENT; MODIFICATIONS; WAIVER.
15.2.1 ENTIRE AGREEMENT. This Agreement, including the exhibits and schedules
attached hereto, constitutes the entire agreement between Buyer and Seller
pertaining to the subject matter hereof and supersedes all prior agreements,
understandings, letters of intent, negotiations and discussions, whether oral or
written, of the parties, and there are no warranties, representations or other
agreements, express or implied, made to either party by the other party in
connection with the subject matter hereof except as specifically set forth
herein or in the documents delivered pursuant hereto or in connection herewith.
Without limiting the foregoing, upon the execution of this Agreement, that
certain letter, dated as of January 25, 1996, by and between Buyer and Seller,
shall terminate and be of no further force or effect.
15.2.2 MODIFICATION. No supplement, modification, waiver or termination of this
Agreement shall be binding unless executed in writing by the party to be bound
thereby. No waiver of any provision of this Agreement shall be deemed or shall
constitute a waiver of any other provision hereof (whether or not similar), nor
shall such waiver constitute a continuing waiver unless otherwise expressly
provided.
15.3 NOTICES. All notices, consents, requests, reports, demands or other
communications hereunder (collectively, "NOTICES") shall be in writing and may
be given personally, by registered or certified mail (return receipt requested),
by Federal Express (or other reputable overnight delivery service) or by
facsimile transmission.
To Buyer: The Price REIT, Inc.
145 S. Fairfax Avenue, 4th Floor
Los Angeles, California 90036
Attention: Mr. Joseph K. Kornwasser
Telephone: (213) 937-8200
Facsimile: (213) 937-8175
With A Copy To: Skadden, Arps, Slate, Meagher & Flom
300 South Grand Avenue, Suite 3400
Los Angeles, California 90071
Attention: Allan G. Mutchnik, Esq.
Telephone: (213) 687-5391
Facsimile: (213) 687-5600
To Seller: Town East Centre Joint Venture
25 Imperial Street, Suite 500
Toronto, Ontario, Canada M5P 1C1
Attention: Mr. Frank Laurie
Telephone: (416) 483-8018
Facsimile: (416) 483-9763
With A Copy To: Ginsberg and Brusilow
750 Signature Place
14785 Preston Road
Dallas, Texas 75240
Attention: Michael H. Saks, Esq.
Telephone: (214) 788-1600
Facsimile: (214) 702-0662
To Escrow Chicago Title Insurance Company
Agent: 350 N. St. Paul, Suite 250
Dallas, Texas 75201
Attention: Ms. Marjorie Cox
Telephone: (214) 965-1668
Facsimile: (214) 720-1047
or to such other address or such other person as the addressee party shall have
last designated by notice to the other party. All Notices shall be deemed to
have been given when received and Notices given by facsimile transmission shall
be deemed to be received when confirmed.
15.4 EXPENSES. Subject to the allocation of Closing Costs provided in Section
7.6 hereof, whether or not the transactions contemplated by this Agreement shall
be consummated, all fees and expenses incurred by any party hereto in connection
with this Agreement shall be borne by such party.
15.5 ASSIGNMENT.
15.5.1 SELLER'S RIGHT TO ASSIGN. Seller shall not have the right, power, or
authority to assign or pledge this Agreement or any portion of this Agreement,
or to delegate any duties or obligations arising under this Agreement,
voluntarily, involuntarily, or by operation of law, without Buyer's prior
written consent.
15.5.2 BUYER'S RIGHT TO ASSIGN. Except as otherwise provided in this Agreement,
Buyer shall not have the right, power or authority to assign this Agreement or
any portion of this Agreement or to delegate any duties or obligations arising
under this Agreement, voluntarily, involuntarily or by operation of law, without
Seller's prior written consent, which consent shall not be unreasonably withheld
or delayed; provided, however, that Buyer shall have the right, power and
authority to assign this Agreement or any portion of this Agreement or to
delegate any duties or obligations arising under this Agreement, voluntarily,
involuntarily or by operation of law, to an affiliate of Buyer, without Seller's
consent. Notwithstanding the foregoing, no assignment or delegation shall
relieve Buyer of its obligations or liabilities under this Agreement.
15.6 SEVERABILITY. Any provision or part of this Agreement which is invalid or
unenforceable in any situation in any jurisdiction shall, as to such situation
and such jurisdiction, be ineffective only to the extent of such invalidity and
shall not affect the enforceability of the remaining provisions hereof or the
validity or enforceability of any such provision in any other situation or in
any other jurisdiction.
15.7 SUCCESSORS AND ASSIGNS; THIRD PARTIES. Subject to and without waiver of the
provisions of Section 15.5 hereof, all of the rights, duties, benefits,
liabilities and obligations of the parties shall inure to the benefit of, and be
binding upon, their respective successors and assigns. Except as specifically
set forth or referred to herein, nothing herein expressed or implied is intended
or shall be construed to confer upon or give to any person or entity, other than
the parties hereto and their successors or permitted assigns, any rights or
remedies under or by reason of this Agreement.
15.8 COUNTERPARTS. This Agreement may be executed in as many counterparts as may
be deemed necessary and convenient, and by the different parties hereto on
separate counterparts, each of which, when so executed, shall be deemed an
original, but all such counterparts shall constitute one and the same in
strument.
15.9 HEADINGS. The Section headings of this Agreement are for convenience of
reference only and shall not be deemed to modify, explain, restrict, alter or
affect the meaning or interpretation of any provision hereof.
15.10 TIME OF ESSENCE. Time shall be of the essence with respect to all matters
contemplated by this Agreement.
15.11 FURTHER ASSURANCES. In addition to the actions recited herein and
contemplated to be performed, executed and/or delivered by Seller and Buyer,
Seller and Buyer agree to perform, execute and/or deliver or cause to be per
formed, executed and/or delivered at Closing or after Closing any and all such
further acts, instruments, deeds and assurances as may be reasonably required to
consummate the transactions contemplated hereby.
15.12 NUMBER AND GENDER. Whenever the singular number is used, and when required
by the context, the same includes the plural, and the masculine gender includes
the feminine and neuter genders.
15.13 CONSTRUCTION. This Agreement shall not be construed more strictly against
one party hereto than against any other party hereto merely by virtue of the
fact that it may have been prepared by counsel for one of the parties.
15.14 POST-CLOSING ACCESS TO RECORDS. Upon receipt by Seller of Buyer's
reasonable written request at anytime and from time to time within a period of
one (1) year after the Closing, Seller shall, at Seller's principal place of
business, during Seller's normal business hours, make all of Seller's records
relating to the Property (which have not already been delivered to Buyer)
available to Buyer for inspection and copying (at Buyer's sole cost and
expense).
15.15 EXHIBITS. All exhibits attached hereto are hereby incorporated by
reference as though set out in full herein.
15.16 ATTORNEYS' FEES. In the event that either party hereto brings an action or
proceeding against the other party to enforce or interpret any of the covenants,
conditions, agreements or provisions of this Agreement, the prevailing party in
such action or proceeding shall be entitled to recover all costs and expenses of
such action or proceeding, including, without limitation, attorneys' fees,
charges, disbursements and the fees and costs of expert witnesses.
15.17 BUSINESS DAYS. As used herein, the term "BUSINESS DAY" shall mean a day
that is not a Saturday, Sunday or legal holiday. In the event that the date for
the performance of any covenant or obligation under this Agreement shall fall on
a Saturday, Sunday or legal holiday, the date for performance thereof shall be
extended to the next Business Day.
15.18 NO SURVIVAL. Except for the terms and provisions of this Agreement which
expressly survive the Closing as set forth herein, each of the terms and
provisions of this Agreement shall not survive the Closing and each of the
covenants and conditions set forth herein shall be deemed to have been performed
or waived.
15.19 DPTA WAIVER. IT IS THE INTENT OF SELLER AND BUYER THAT THE RIGHTS AND
REMEDIES WITH RESPECT TO THE TRANSACTION CONTEMPLATED BY THIS AGREEMENT SHALL BE
GOVERNED BY LEGAL PRINCIPLES OTHER THAN THE TEXAS DECEPTIVE TRADE
PRACTICES-CONSUMER PROTECTION ACT. ACCORDINGLY, TO THE MAXIMUM EXTENT APPLICABLE
AND PERMITTED BY LAW (AND WITHOUT ADMITTING SUCH APPLICABILITY), BUYER HEREBY
WAIVES THE PROVISIONS OF THE TEXAS DECEPTIVE TRADE PRACTICES-CONSUMER PROTECTION
ACT, CHAPTER 17, SUBCHAPTER 3, (OTHER THAN SECTION 17.555, WHICH IS NOT WAIVED),
TEXAS BUSINESS AND COMMERCE CODE. FOR PURPOSES OF THE WAIVERS SET FORTH IN THIS
AGREEMENT, BUYER HEREBY WARRANTS AND REPRESENTS UNTO SELLER THAT (i) BUYER HAS
KNOWLEDGE AND EXPERIENCE IN FINANCIAL AND BUSINESS MATTERS THAT ENABLE IT TO
EVALUATE THE MERITS AND RISKS OF THE TRANSACTION CONTEMPLATED UNDER THIS
AGREEMENT, (ii) BUYER IS NOT IN A SIGNIFICANTLY DISPARATE BARGAINING POSITION
WITH SELLER REGARDING THE TRANSACTIONS CONTEMPLATED UNDER THIS AGREEMENT, (iii)
BUYER IS REPRESENTED BY LEGAL COUNSEL THAT IS SEPARATE AND INDEPENDENT OF SELLER
AND SELLER'S LEGAL COUNSEL AND (iv) BUYER HAS CONSULTED WITH BUYER'S LEGAL
COUNSEL REGARDING THIS AGREEMENT PRIOR TO BUYER'S EXECUTION OF THIS AGREEMENT.
In compliance with Section 17.42 of the Texas Deceptive Trade Practices-Consumer
Protection Act (the "ACT"), within five (5) days after the Execution Date, Buyer
shall obtain the signature of Buyer's legal counsel on the signature page
hereof, provided such signature will be for the limited purpose of compliance
with Section 17.42(a)(3) of the Act.
15.20 TEXAS REAL ESTATE LICENSE ACT. The Texas Real Estate License Act requires
written notice to Buyer that it should have an attorney examine an abstract of
title to the property being purchased or obtain a title insurance policy. Notice
to that effect is, therefore, hereby given to Buyer.
15.21 REPORTING PERSON. The Title Company is hereby designated as the "Reporting
Person" under Section 6045 of the Internal Revenue Code of 1986, as amended, and
the regulations promulgated thereunder.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
day and year first above written.
BUYER:
THE PRICE REIT, INC.,
a Maryland corporation,
By: JOSEPH KORNWASSER
-----------------
Name: Joseph Kornwasser
Its: President/CEO
SELLER:
TOWN EAST CENTRE JOINT VENTURE,
a Texas joint venture,
By: Vector Mesquite Joint Venture,
as managing ventured
By: 727272, Inc., a Texas corporation
By: FRANK LAURIE
------------
Name: Frank Laurie
Its: Managing partner
ESCROW AGENT
The undersigned Escrow Agent accepts the foregoing Agreement of Purchase and
Sale and Joint Escrow Instructions and agrees to act as Escrow Agent under this
Agreement in strict accordance with its terms and acknowledges receipt of two
(2) fully executed copies of this Agreement together with the Deposit.
CHICAGO TITLE INSURANCE COMPANY,
a Missouri corporation,
By: MARJORIE COX
------------
Name: Majorie Cox
Its: Assistant Vice President
Commercial Escrow Officer
ATTORNEY JOINDER
The undersigned have executed this Agreement in order to satisfy the waiver
requirements set forth in Section 17.42(a)(3) of the Texas Business and Commerce
Code.
COUNSEL FOR SELLER:
GINSBERG & BRUSILOW
By: MICHAEL H. SAKS
---------------
Name: Michael H. Saks
Title: Shareholder
COUNSEL FOR BUYER:
SKADDEN, ARPS, SLATE, MEAGHER & FLOM
By: ALLAN G. MUTCHNIK
-----------------
Name: Allan G. Mutchnik
Title: Associate
LIST OF EXHIBITS
EXHIBIT "A" LEGAL DESCRIPTION
EXHIBIT "B" DEED
EXHIBIT "C" SELLER'S CERTIFICATE
EXHIBIT "D" ASSIGNMENT OF LEASES
EXHIBIT "E" ASSIGNMENT OF REA
EXHIBIT "F" BILL OF SALE AND ASSIGNMENT
EXHIBIT "G" SEARS ESTOPPEL CERTIFICATE
EXHIBIT "H" TENANT ESTOPPEL CERTIFICATE
EXHIBIT "I" REA ESTOPPEL CERTIFICATE
EXHIBIT "I" NON-FOREIGN SELLER'S AFFIDAVIT
EXHIBIT "K" BUYER'S CERTIFICATE
EXHIBIT "L" NOTICE TO TENANTS
EXHIBIT "M" NOTICE TO VENDORS
EXHIBIT "N" LEASE SCHEDULE
EXHIBIT "O" TENANT ARREARAGE STATEMENT
EXHIBIT "P" LITIGATION
June 26, 1996
Uniteg Investment Company, Inc.
6800 Texas Commerce Tower, 68th Floor
Houston, Texas 77002-3054
Attention: Mr. Joseph W. Peacock
Re: Purchase and Sale Agreement and Joint Escrow Instructions, dated as of April
16, 1996 (as amended, the "PURCHASE AGREEMENT"), by and between The Price REIT,
Inc., a Maryland corporation (the "BUYER"), and MGC Joint Venture, a Texas joint
venture (the "SELLER")
- -----------------------------------------------------------------------------
Dear Mr. Peacock:
The purpose of this letter amendment ("AMENDMENT") is to reflect the agreement
between the Buyer and the Seller with respect to the amendment of the Purchase
Agreement. All capitalized terms used but not otherwise defined herein shall
have the meanings set forth for the same in the Purchase Agreement.
The Purchase Agreement is hereby amended as follows:
1. The Purchase Price shall be the sum of Three Million Eight Hundred
Thirty Thousand Dollars ($3,830,000.00).
2. The Due Diligence Termination Date shall be June 28, 1996.
3. Section 6.1.7 of the Purchase Agreement is hereby deleted in its
entirety and the following paragraph is inserted in lieu thereof:
6.1.7 ESTOPPEL CERTIFICATES. Seller shall use commercially reasonable
efforts to deliver to Buyer, on or before the second (2nd) Business Day prior to
the Closing, certificates, each substantially in the form of EXHIBIT "G"
attached hereto, executed by each Tenant (collectively, the "ESTOPPEL
CERTIFICATES"). In the event that Seller is unable to deliver an Estoppel
Certificate executed by Team Excel Management Company Inc. ("TEAM"), then Seller
shall execute and deliver to Buyer an estoppel certificate in the form of
EXHIBIT "H" attached hereto (the "SELLER'S ESTOPPEL CERTIFICATE") with respect
to the Team Lease. Buyer shall review and approve or disapprove the Estoppel
Certificates and the Seller's Estoppel Certificate, if any, in Buyer's sole and
absolute discretion; provided, however, that Buyer shall not disapprove of any
Estoppel Certificate or Seller's Estoppel Certificate on the basis of any matter
set forth in any Lease. In the event that (i) Seller is unable to deliver to
Buyer Estoppel Certificates executed by General Cinema Corp. of Texas and Dupey
Management Corporation (collectively, the "MAJOR ESTOPPELS") or (ii) Buyer
disapproves any of the Estoppel Certificates or Seller's Estoppel Certificate in
accordance with the terms hereof, Buyer may elect to terminate this Agreement
(in which case Escrow Agent shall return the Deposit to Buyer, the parties shall
equally share the cancellation charges of Escrow Agent and Title Company and
neither party shall thereafter have any rights or obligations to the other
hereunder, other than pursuant to any provision hereof which expressly survives
the termination of this Agreement). Notwithstanding anything to the contrary
contained herein, in the event that Seller fails to deliver either of the Major
Estoppels to Buyer as required hereunder, Buyer shall have the one-time right
but not the obligation to extend the Closing (by delivering written notice to
Seller on or before June 3, 1996) for up to twenty (20) Business Days, in order
to allow Seller a reasonable amount of time to obtain (and Buyer two (2)
Business Days to review) such certificates.
4. The Closing shall take place on the later to occur of (i) July 3,
1996 or (ii) if extended in accordance with the terms of Section 6.1.7 of the
Purchase Agreement (as hereby amended), the second (2nd) Business Day following
Buyer's receipt of the Major Estoppels and either an Estoppel Certificate
executed by Team or the Seller's Estoppel Certificate.
Except as otherwise expressly provided herein, the Purchase Agreement shall
remain unmodified and in full force and effect, and all of the terms and
provisions of the Purchase Agreement, as herein modified, are hereby ratified
and reaffirmed by both the Buyer and the Seller. This Amendment may be executed
in as many counterparts as may be deemed necessary and convenient, and by the
different parties hereto on separate counterparts, each of which, when so
executed, shall be deemed an original, but all such counterparts shall consti
tute one and the same instrument.
Assuming that this Amendment accurately reflects the agreement of the Buyer and
the Seller, please execute a copy of this Amendment where indicated below and
return a facsimile copy of it (with the original to follow by mail) to the Buyer
as soon as possible.
Very truly yours,
THE PRICE REIT, INC.,
a Maryland corporation,
By: JOSEPH KORNWASSER
----------------------
Name: Joseph Kornwasser
Its: President/CEO
ACCEPTED AND AGREED TO AS OF
THE DATE FIRST WRITTEN ABOVE:
MGC JOINT VENTURE,
a Texas joint venture,
By: Uniteg Investment Company, Inc.,
a Texas corporation,
Its: Managing Venturer
By: JOSEPH W. PEACOCK
--------------------
Name: Joseph W. Peacock
Its: President
EXHIBIT 12.1-STATEMENT RE: COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
For the period
from July 31, 1991
(inception) through Year Ended December 31,
December 31, 1991 1992 1993
------------------- ---------- ----------
Pretax income from
continuing operations $438 $ 4,118 $ 9,128
Interest - 3,203 4,287
Less interest capitalized
during the period - - (30)
Amortization of deferred
loan fees and discount - 17 99
------------------- ---------- ----------
Earnings $438 $ 7,338 $13,484
=================== ========== ==========
Interest - 3,203 4,287
Amortization of deferred
loan fees and discount - 17 99
------------------- ---------- ----------
Fixed Charges $ - $ 3,220 $ 4,386
=================== ========== ==========
Ratio of Earnings to
Fixed Charges $ - 2.28 x 3.07 x
=================== ========== ==========
For the six
Year ended December 31, months ended
1994 1995 June 30, 1996
---------- ---------- ---------------
Pretax income from
continuing operations $16,904 $16,386 $ 8,193
Interest 4,319 7,070 5,728
Less interest capitalized
during the period (234) (415) (106)
Amortization of deferred
loan fees and discount 152 284 339
---------- ---------- ---------------
Earnings $21,141 $23,325 $14,154
========== ========== ===============
Interest 4,319 7,070 5,728
Amortization of deferred
loan fees and discount 152 284 339
---------- ---------- ---------------
Fixed Charges $4,471 $7,354 $ 6,067
========== ========== ===============
Ratio of Earnings to
Fixed Charges 4.73 x 3.17 x 2.33 x
========== ========== ===============
EXHIBIT 15.1 Letter Re: Unaudited Interim Financial Information
August 14, 1996
The Board of Directors
The Price REIT, Inc.
We are aware of the incorporation by reference in the Registration Statements
(Form S-3 No. 33-75548; Form S-8 No. 33-87812; and Amendment No. 1 to Form S-3
No. 33-95832 and related Prospectus) of The Price REIT, Inc. for the
registration of 500,000 shares of its common stock; 600,000 shares of its common
stock; and an aggregate maximum total of $175,000,000 of debt securities,
preferred stock, common stock, and warrants for the purchase of its preferred
stock or common stock, respectively, of our report dated July 26, 1996 relating
to the unaudited condensed consolidated interim financial statements of The
Price REIT, Inc. that is included in its Form 10-Q for the quarter ended June
30, 1996.
Pursuant to Rule 436(c) of the Securities Act of 1933 our report is not a part
of the registration statement prepared or certified by accountants within the
meaning of Section 7 or 11 of the Securities Act of 1933.
Ernst & Young LLP
San Diego, California
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<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> JUN-30-1996
<CASH> 194
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<RECEIVABLES> 1305
<ALLOWANCES> 311
<INVENTORY> 0
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<PP&E> 383801
<DEPRECIATION> 35720
<TOTAL-ASSETS> 381061
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<BONDS> 158908
0
0
<COMMON> 84
<OTHER-SE> 219475
<TOTAL-LIABILITY-AND-EQUITY> 381061
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<TOTAL-REVENUES> 26315
<CGS> 0
<TOTAL-COSTS> 18122
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