<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
Current Report Pursuant to Section 13 or 15(d) of
the Securities Act of 1934
Date of Report (Date of Earliest Event Reported)
MAY 3, 1999
General Growth Properties, Inc.
(Exact name of registrant as specified in its charter)
Delaware 1-11656 42-1283895
(State or other (Commission File (I.R.S. Employer
jurisdiction of Number) Number)
Identification
incorporation)
110 N. Wacker Drive, Chicago, Illinois 60606
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (312) 960-5000
N/A
(Former name or former address, if changed since last report.)
<PAGE> 2
Item 5. Other Events.
Ala Moana Center
As of May 3, 1999, the Company entered into a definitive purchase agreement to
acquire Ala Moana Center in Honolulu, Hawaii from D/E Hawaii Joint Venture, a
general partnership consisting of Hawaii Central Development, Inc. and Daiei
Hawaii Investments, Inc. In addition to the Ala Moana Center, the Company also
agreed to acquire three adjoining office buildings and a retail/office complex.
The properties comprise approximately 2.25 million square feet of total gross
leasable area. Ala Moana Center, the largest open-air shopping center in the
world, contains approximately 1.8 million square feet of the total gross
leasable area and includes Neiman Marcus, Liberty House, Sears and JCPenney as
anchor tenants. The Company has managed the Ala Moana Center for more than ten
years.
The total acquisition price will be $810 million, and closing is
expected on or before July 30, 1999. At closing, the Company will receive an
adjustment equal to the remaining cost to complete expansion and other work that
is currently in progress.
The Company currently expects to obtain a new first mortgage loan in
the amount of approximately $500 million to fund a majority of the purchase
price and to use a portion of the net proceeds from a public offering of
10,000,000 shares of common stock to fund the balance. The Company is discussing
with an institutional investor a new joint venture to own the property and may
discuss a joint venture of this kind with additional institutional investors.
The terms of any joint venture, and the Company's interest in any joint venture,
have not been determined, and the Company may not be successful in forming the
joint venture.
Extension of the Maturity of Certain Indebtedness
On July 1, 1999, Lehman Brothers Holdings Inc. and certain of its
affiliates extended from July 1, 1999 to October 1, 1999 the maturity date of
approximately $833 million of indebtedness of certain affiliates of the Company.
The Company's affiliates expect to enter into one or more transactions pursuant
to which this debt will be refinanced in whole or in part through the issuance
of commercial mortgage-backed securities or other debt or equity securities. In
connection with the extension, the Operating Partnership guaranteed the
repayment of $200 million of the debt. The Company also agreed to issue up to
5,000,000 shares of common stock to affiliates of Lehman as additional
collateral if the indebtedness is not paid in full by October 1, 1999 and upon
other events of default.
Item 7. FINANCIAL STATEMENTS AND EXHIBITS.
-2-
<PAGE> 3
Listed below are the financial statements, pro forma financial information
and exhibits filed as a part of this report:
(a) Financial Statements of Businesses acquired and to be acquired.
The financial statements of The Crossroads Mall and the Ala Moana
Properties as listed in the accompanying Index to Financial Statements and Pro
Forma Financial Information are filed as part of this Current Report on Form
8-K.
(b) Pro Forma Financial Information.
The pro forma financial information of General Growth Properties, Inc.
listed in the accompanying Index to Financial Statements and Pro Forma Financial
Information is filed as part of this Current Report on Form 8-K.
(c) Exhibits.
See Exhibit Index attached hereto and incorporated herein by reference.
-3-
<PAGE> 4
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
as amended, the registrant has duly caused this report to be signed on its
behalf by the undersigned hereunto duly authorized.
GENERAL GROWTH PROPERTIES, INC.
By: /s/ Bernard Freibaum
---------------------------------
Bernard Freibaum
Executive Vice President and
Chief Financial Officer
Date: July 12, 1999
<PAGE> 5
EXHIBIT INDEX
Exhibit Page
Number Name Number
2.1 Purchase and Sale Agreement, dated as of May 3, 1999, among D/E
Hawaii Joint Venture, GGP Limited Partnership and General Growth
Properties, Inc.*
3.1 Amendment to Second Amended and Restated Certificate of
Incorporation of General Growth Properties, Inc. filed on
May 17, 1999.
3.2 Amendment to Certificate of Designations, Preferences and Rights
of 7.25% Preferred Income Equity Redeemable Stock, Series A of
General Growth Properties, Inc. filed on May 17, 1999.
23.1 Consent of Deloitte and Touche LLP
* In accordance with Rule 601(b)(2) of Regulation S-K, the exhibits to this
agreement and the related disclosure schedules have not been filed. The Company
agrees to furnish supplementally a copy of any such omitted exhibit or
disclosure schedule to the Securities and Exchange Commission upon request.
<PAGE> 6
INDEX TO FINANCIAL STATEMENTS AND
PRO FORMA FINANCIAL INFORMATION
The following financial information is presented in accordance with Rule
3-14 of Regulation S-X of the SEC. Accordingly, the historical information has
been presented, and audited as applicable, only for the respective properties'
most recent fiscal year since (a) the transactions in which the properties were
acquired or are to be acquired were not and are not with related parties and (b)
the Company, after reasonable inquiry, is not aware of any material factors
related to the properties not otherwise disclosed that would cause the reported
financial information to not be necessarily indicative of future operating
results. In addition, as the properties are or will be directly or indirectly
owned by entities that elect to be treated as REITs for Federal income tax
purposes, a presentation of estimated taxable operating results is not
applicable.
THE CROSSROADS MALL
<TABLE>
<S> <C>
Statement of Revenues and Certain Expenses for the Year
Ended December 31, 1998 (Unaudited)....................... F-2
</TABLE>
ALA MOANA PROPERTIES
<TABLE>
<S> <C>
Independent Auditors' Report................................ F-3
Combined Statements of Revenues and Certain Expenses for the
Year Ended December 31, 1998 and for the Three Months
Ended March 31, 1999 (Unaudited).......................... F-4
Notes to Combined Statements of Revenues and Certain
Expenses.................................................. F-5
</TABLE>
GENERAL GROWTH PROPERTIES, INC.
<TABLE>
<S> <C>
Pro Forma Condensed Consolidated Statement of Operations for
the Year Ended December 31, 1998 (Unaudited).............. F-7
Notes to Pro Forma Condensed Consolidated Statement of
Operations for the Year Ended December 31, 1998
(Unaudited)............................................... F-8
Pro Forma Condensed Consolidated Statement of Operations for
the Three Months Ended March 31, 1999 (Unaudited)......... F-11
Notes to Pro Forma Condensed Consolidated Statement of
Operations for the Three Months Ended March 31, 1999
(Unaudited)............................................... F-12
Pro Forma Condensed Consolidated Balance Sheet as of March
31, 1999 (Unaudited)...................................... F-14
Notes to Pro Forma Condensed Consolidated Balance Sheet as
of March 31, 1999 (Unaudited)............................. F-15
</TABLE>
F-1
<PAGE> 7
THE CROSSROADS MALL
STATEMENT OF REVENUES AND CERTAIN EXPENSES
(DOLLARS IN THOUSANDS -- UNAUDITED)
The Statement of Revenues and Certain Expenses, as shown below, presents
the summarized results of operations of The Crossroads Mall for the year ended
December 31, 1998. On January 11, 1999, the Company acquired 100% of The
Crossroads Mall, a one-level enclosed mall shopping center located in Kalamazoo,
Michigan with approximately 765,500 square feet of gross leasable area. The
Crossroads Mall, which opened in 1980 and underwent extensive remodeling between
1992 and 1998, is anchored by Hudson's, Mervyn's, JCPenney and Sears.
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31, 1998
-----------------
<S> <C>
Revenues:
Rental income............................................. $5,233
Percentage rent........................................... 710
Tenant recoveries and other charges....................... 3,029
------
8,972
Expenses:
Real estate taxes......................................... 572
Property operating expenses............................... 2,036
------
2,608
------
Revenues in excess of certain expenses.................... $6,364
======
</TABLE>
F-2
<PAGE> 8
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Stockholders of
General Growth Properties, Inc.:
We have audited the accompanying combined statement of revenues and certain
expenses of the Ala Moana Properties (the "Properties") for the year ended
December 31, 1998. This financial statement is the responsibility of the
Properties' management. Our responsibility is to express an opinion on this
financial statement based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the combined statement of revenues and
certain expenses is free of material misstatement. An audit includes examining,
on a test basis, evidence supporting the amounts and disclosures in the combined
statement of revenues and certain expenses. An audit also includes assessing the
accounting principles used and significant estimates made by management, as well
as evaluating the overall presentation of the combined statement of revenues and
certain expenses. We believe that our audit provides a reasonable basis for our
opinion.
The combined statement of revenues and certain expenses was prepared for
purposes of complying with certain rules and regulations of the Securities and
Exchange Commission, as described in Note 2 to the combined statements of
revenues and certain expenses, and is not intended to be a complete presentation
of the combined revenues and expenses of the Properties.
In our opinion, the combined statement of revenues and certain expenses
presents fairly, in all material respects, the combined revenues and certain
expenses of the Properties for the year ended December 31, 1998 in conformity
with generally accepted accounting principles.
DELOITTE & TOUCHE LLP
Honolulu, Hawaii
June 25, 1999
F-3
<PAGE> 9
ALA MOANA PROPERTIES
COMBINED STATEMENTS OF REVENUES AND CERTAIN EXPENSES
YEAR ENDED DECEMBER 31, 1998 AND
THREE MONTHS ENDED MARCH 31, 1999 (UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS
ENDED
YEAR ENDED 3/31/99
12/31/98 (UNAUDITED)
----------- ------------
<S> <C> <C>
REVENUES:
Minimum rent................................................ $57,582,560 $13,990,914
Percentage rent............................................. 11,354,437 3,221,491
Common area recoveries...................................... 15,788,809 4,025,872
Other income................................................ 5,550,435 1,858,616
----------- -----------
90,276,241 23,096,893
=========== ===========
CERTAIN EXPENSES:
Cost of commercial property operations.................... 19,766,643 4,671,804
Property taxes............................................ 6,407,716 1,713,941
----------- -----------
Total certain expenses............................ 26,174,359 6,385,745
----------- -----------
REVENUES IN EXCESS OF CERTAIN EXPENSES...................... $64,101,882 $16,711,148
=========== ===========
</TABLE>
See notes to combined statements of revenues and certain expenses.
F-4
<PAGE> 10
ALA MOANA PROPERTIES
NOTES TO COMBINED STATEMENTS OF REVENUES AND CERTAIN EXPENSES
YEAR ENDED DECEMBER 31, 1998 AND
THREE MONTHS ENDED MARCH 31, 1999 (UNAUDITED)
1. BUSINESS:
The combined statements of revenues and certain expenses include the
operations of Ala Moana Properties ("the Properties"), which includes Ala Moana
Center (a shopping center) and Ala Moana Building, Ala Moana Pacific Center and
Ala Moana Plaza (all office buildings) and Kapiolani Properties (retail/office
complex). The Properties are all located in Honolulu, Hawaii and are owned by
D/E Hawaii Joint Venture, a Hawaii general partnership.
On May 3, 1999, D/E Hawaii Joint Venture entered into a Purchase and Sale
Agreement with GGP Limited Partnership, a Delaware limited partnership, and
General Growth Properties, Inc. a Delaware corporation. Under the Agreement, GGP
Limited Partnership, as the purchaser, and General Growth Properties, Inc., as
the general partner, agreed to purchase the Properties for a cash amount stated
in the Agreement.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Basis of Presentation -- The accounts of each property are combined in the
statements of revenues and certain expenses. The combined statements of revenues
and certain expenses are not representative of the actual operations for the
periods presented as certain amounts that may not be comparable to the income
and expenses expected to be incurred in the future operations of the Properties
have been excluded in accordance with Rule 3-14 of Regulation S-X of the
Securities and Exchange Commission. Amounts excluded consist of loss on
replacement of assets, interest expense, depreciation, amortization, corporate
expenses and other costs not directly related to the future operations of the
properties.
Revenue Recognition -- Minimum rent revenues are recognized on a
straight-line basis over the terms of the related leases. Percentage rent
revenues are recognized on an accrual basis. Recoveries from tenants for
shopping center and office building operating expenses are recognized in the
period the applicable costs are incurred.
Cost of Commercial Property Operations -- Cost of commercial property
operations consist primarily of utilities, insurance, repairs and maintenance,
security and safety, cleaning, and other administrative expenses.
Use of estimates -- The preparation of the combined statements of revenues
and certain expenses in conformity with generally accepted accounting principles
requires management to make estimates and assumptions that affect the reported
amounts of revenues and expenses during the reporting periods. Actual results
could differ from those estimates.
Unaudited Information -- The combined financial statement for the
three-month period ended March 31, 1999 is unaudited. In the opinion of
management, all significant adjustments of a normal recurring nature considered
necessary for a fair presentation have been included.
3. LEASE COMMITMENTS:
The Properties have, as lessor, non-cancelable operating leases with
tenants for retail and commercial office space and, as lessee, a ground lease
for a portion of the parcel underlying one of the office buildings and a lease
for equipment.
F-5
<PAGE> 11
ALA MOANA PROPERTIES
NOTES TO COMBINED STATEMENTS OF REVENUES
AND CERTAIN EXPENSES -- (CONTINUED)
At December 31, 1998, aggregate minimum rental income and expense under
noncancelable operating leases having an initial term of more than one year were
as follows:
<TABLE>
<CAPTION>
RENTAL RENTAL
YEAR ENDING DECEMBER 31 INCOME EXPENSE
- ----------------------- ------------ ----------
<S> <C> <C>
1999...................................................... $ 45,685,000 $ 387,000
2000...................................................... 39,595,000 245,000
2001...................................................... 36,853,000 245,000
2002...................................................... 33,913,000 245,000
2003...................................................... 30,408,000 245,000
Thereafter................................................ 69,952,000 3,833,000
------------ ----------
Total........................................... $256,406,000 $5,200,000
============ ==========
</TABLE>
F-6
<PAGE> 12
GENERAL GROWTH PROPERTIES, INC.
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1998
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA -- UNAUDITED)
<TABLE>
<CAPTION>
HISTORICAL 1998 OTHER
FISCAL 1998 PRO FORMA FISCAL ALA MOANA 1999
1998(1) ACQUISITIONS ADJUSTMENTS 1998 CENTER ACQUISITIONS
---------- ------------ ----------- -------- --------- ------------
<S> <C> <C> <C> <C> <C> <C>
Total revenues................. $426,576 $87,525 $ 0 $514,101 $90,276 $ 8,972
Expenses:
Property operating............ 147,496 31,704 0 179,200 26,174 2,608
Management fees............... 4,288 502 237 (a) 5,027 0 0
Depreciation and
amortization................ 75,227 0 17,180 (b) 92,407 0 0
-------- ------- --------- -------- ------- -------
Total Expenses................. 227,011 32,206 17,417 276,634 26,174 2,608
-------- ------- --------- -------- ------- -------
Operating Income............... 199,565 55,319 (17,417) 237,467 64,102 6,364
Interest expense, net......... (109,840) 0 (38,766)(c) (148,606) 0 0
Equity in net income/(loss)
unconsolidated affiliates:
GGP/Homart, Inc............... 17,865 0 0 17,865 0 5,512
Property Joint Ventures....... 9,837 (69) 0 9,768 0 0
General Growth Management,
Inc......................... (16,635) 1,697(e) 0 (14,938) 0 0
-------- ------- --------- -------- ------- -------
Income before minority
interest...................... 100,792 56,947 (56,183) 101,556 64,102 11,876
Minority interest in Operating
Partnership................... (29,794) 0 164 (d) (29,630) 0 0
-------- ------- --------- -------- ------- -------
Net income..................... 70,998 56,947 (56,019) 71,926 64,102 11,876
-------- ------- --------- -------- ------- -------
Convertible preferred stock
dividends (2)................. (13,433) 0 (11,036) (24,469) 0 0
-------- ------- --------- -------- ------- -------
Net income available to common
stockholders.................. $ 57,565 $56,947 $ (67,055) $ 47,457 $64,102 $11,876
======== ======= ========= ======== ======= =======
Weighted average shares
outstanding -- basic........
Weighted average shares
outstanding -- diluted......
Earnings per share -- basic...
Earnings per
share -- diluted............
<CAPTION>
TOTAL
PRO FORMA PRO FORMA
ADJUSTMENTS COMBINED
----------- -----------
<S> <C> <C>
Total revenues................. $ 0 $ 613,349
Expenses:
Property operating............ 0 207,982
Management fees............... 200 (a) 5,227
Depreciation and
amortization................ 19,755 (b) 112,162
---------- -----------
Total Expenses................. 19,955 325,371
---------- -----------
Operating Income............... (19,955) 287,978
Interest expense, net......... (34,918)(c) (183,524)
Equity in net income/(loss)
unconsolidated affiliates:
GGP/Homart, Inc............... 0 23,377
Property Joint Ventures....... 0 9,768
General Growth Management,
Inc......................... 0 (14,938)
---------- -----------
Income before minority
interest...................... (54,873) 122,661
Minority interest in Operating
Partnership................... (1,913)(d) (31,543)
---------- -----------
Net income..................... (56,786) 91,118
---------- -----------
Convertible preferred stock
dividends (2)................. 0 (24,469)
---------- -----------
Net income available to common
stockholders.................. $ (56,786) $ 66,649
========== ===========
Weighted average shares
outstanding -- basic........ 47,741,476(f)
Weighted average shares
outstanding -- diluted...... 47,933,023(f)
Earnings per share -- basic... $ 1.40
Earnings per
share -- diluted............ $ 1.39
</TABLE>
- ---------------
(1) Amounts are from the statements and footnotes included in the Company's Form
10-K for the year ended December 31, 1998 except that the non-recurring
gain on sale and the extraordinary items are excluded.
(2) Pro forma earnings have been reduced by the pro forma dividends on the 7.25%
Convertible Preferred Stock.
The accompanying notes are an integral part of the Pro Forma Condensed
Consolidated Statement of Operations.
For alphabetical references, please refer to Note 3-Pro Forma Adjustments.
F-7
<PAGE> 13
GENERAL GROWTH PROPERTIES, INC.
NOTES TO PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1998
(DOLLARS IN THOUSANDS -- UNAUDITED)
NOTE 1 PRO FORMA BASIS OF PRESENTATION
This unaudited pro forma condensed consolidated statement of operations is
presented as if (i) the acquisitions made in 1998 (Southwest Plaza, Northbrook
Court, Coastland Mall, the MEPC Portfolio, the USPPI Portfolio, Altamonte Mall,
Spring Hill Mall, Pierre Bossier Mall and Mall St. Vincent), (ii) the
acquisitions made and to be made in 1999 (Ala Moana Properties and the "Other
1999 Acquisitions", which are The Crossroads Mall and the additional interest in
GGP/Homart due to the exchange of interests for common stock) and (iii) the
Company's use of the net proceeds of the offering of Depositary Shares in 1998
and a majority of the approximately $332,225 of net proceeds from a public
offering of 10,000,000 shares of common stock to fund the acquisitions and for
other working capital purposes, had all occurred on January 1, 1998. In
management's opinion, all adjustments necessary to reflect these transactions
have been included. Such pro forma statement of operations is based upon the
historical information of General Growth Properties, Inc. excluding the
non-recurring gains on sale and extraordinary items and the historical
information of each of the above-mentioned assets for the year ended December
31, 1998. This unaudited pro forma statement of operations is not necessarily
indicative of what actual results of General Growth Properties, Inc. would have
been assuming such transactions had been completed as of January 1, 1998 nor
does it purport to represent the results of operations for future periods.
NOTE 2 ACQUISITIONS AND OTHER PRO FORMA TRANSACTIONS
On April 2, 1998, the Company acquired Southwest Plaza located in Denver,
Colorado. On May 8, 1998, the Company completed the acquisition of Northbrook
Court Shopping Center located in Northbrook (Chicago), Illinois. The aggregate
purchase price for Southwest Plaza and Northbrook Court was approximately
$261,000, including approximately $149,000 of assumed debt.
On June 2, 1998, the Company acquired the U.S. retail property portfolio
(the "MEPC Portfolio") of MEPC plc, a United Kingdom based real estate company
("MEPC"), through the purchase of the stock of the three U.S. subsidiaries of
MEPC ("MEPC U.S. Subsidiaries") that directly or indirectly owned the MEPC
Portfolio. The Company acquired the MEPC Portfolio for approximately $871,000
(less certain adjustments for tenant allowances, construction costs, MEPC U.S.
Subsidiary liabilities and other items). The Company borrowed approximately
$830,000 to finance the purchase price for the stock, which was paid in cash at
closing. The MEPC Portfolio consists of eight enclosed mall shopping centers:
Apache Mall in Rochester, Minnesota; The Boulevard Mall in Las Vegas, Nevada;
Cumberland Mall in Atlanta, Georgia; McCreless Mall in San Antonio, Texas;
Northridge Fashion Center in Northridge (Los Angeles), California; Regency
Square Mall in Jacksonville, Florida; Riverlands Shopping Center in LaPlace,
Louisiana and Valley Plaza Mall in Bakersfield, California.
On July 21, 1998, the Company acquired Altamonte Mall in Altamonte Springs
(Orlando), Florida. The aggregate consideration paid for the Altamonte Mall was
$169,000 (subject to prorations and certain adjustments), part of which was paid
by the payoff of approximately $24,000 of indebtedness assumed at acquisition
from cash funded from the Company's line of credit facility and the balance of
which was paid by the issuance of 3,683,143 redeemable units of limited
partnership interest ("Units") in the Operating Partnership.
On July 23, 1998, effective as of June 30, 1998, GGP Ivanhoe III acquired
the U.S. Prime Property, Inc. ("USPPI") portfolio through a merger of a
wholly-owned subsidiary of GGP Ivanhoe III into USPPI. The common stock of GGP
Ivanhoe III, which will elect to be taxed as a REIT, is owned 51% by the Company
and 49% by a joint venture partner. The aggregate consideration paid pursuant to
the merger agreement was approximately $625,000 (less certain adjustments,
including a credit of approximately $64,000 for outstanding mortgage
indebtedness and accrued interest thereon as well as
F-8
<PAGE> 14
GENERAL GROWTH PROPERTIES, INC.
NOTES TO PRO FORMA CONDENSED CONSOLIDATED
STATEMENT OF OPERATIONS -- (CONTINUED)
(DOLLARS IN THOUSANDS -- UNAUDITED)
credits for tenant allowances, construction costs, commissions, due diligence
items and certain miscellaneous items). The acquisition was financed with a
$392,000 interim loan, which became due July 1, 1999 (subsequently extended to
October 1, 1999), and capital contributions from the Company and the joint
venture partner in proportion to their respective stock ownership. Pursuant to
the GGP Ivanhoe III stockholders' agreement, the Company has contributed
approximately $91,290 to GGP Ivanhoe III (less certain interest and other
credits). The Company's capital contributions were funded primarily from
proceeds from the Company's line of credit facility. The properties acquired
include: Landmark Mall in Alexandria, Virginia; Mayfair Mall and adjacent office
buildings in Wauwatosa (Milwaukee), Wisconsin; Meadows Mall in Las Vegas,
Nevada; Northgate Mall in Chattanooga, Tennessee; Oglethorpe Mall in Savannah,
Georgia; and Park City Center in Lancaster, Pennsylvania.
On September 3, 1998, the Company acquired Pierre Bossier Mall in Bossier
City (Shreveport), Louisiana. The aggregate consideration paid for the Pierre
Bossier Mall was approximately $52,700 (subject to prorations and certain
adjustments) which was paid in the form of approximately $10,000 in cash (funded
from the Company's line of credit facility), a new mortgage loan (obtained from
an independent third party) of approximately $42,000 and the assumption of
approximately $700 of existing debt. The Company had previously loaned the
sellers approximately $50,000 in early 1998 and received an option to buy the
property. In conjunction with the closing of the sale, the loan was fully
repaid.
On September 15, 1998, the Company acquired Spring Hill Mall in West Dundee
(Chicago), Illinois. The aggregate consideration paid by the Company was
approximately $124,000 (subject to prorations and certain adjustments) which was
paid in the form of approximately $32,000 in cash (through the Company's line of
credit facility) and a new ten year fixed rate $92,000 mortgage.
On September 18, 1998, the Company acquired Coastland Center in Naples,
Florida, for approximately $114,500 in cash (subject to prorations and certain
adjustments). The aggregate consideration paid was borrowed under the Company's
line of credit facility.
On October 21, 1998, the Company acquired Mall St. Vincent in Shreveport,
Louisiana. The aggregate consideration paid for Mall St. Vincent was $26,400
(subject to prorations and certain adjustments) which was paid by issuing
200,052 redeemable Units in the Operating Partnership (of which 88,871 were
immediately redeemed for cash (funded by the Company's line of credit facility)
upon demand of the holders of such Units) and by assuming approximately $19,200
of debt.
On January 11, 1999, the Company acquired a 100% ownership interest in the
Crossroads Mall in Kalamazoo, Michigan. The aggregate purchase price was
approximately $68,000 (subject to prorations and certain adjustments), which was
funded primarily from a new $45,000 mortgage loan.
On May 3, 1999, the Company entered into a definitive purchase agreement to
acquire Ala Moana Center in Honolulu, Hawaii. The closing of the transaction,
which is subject to the completion of certain closing conditions, is expected to
occur on or before July 30, 1999. The total acquisition price is $810,000 (less
certain closing adjustments, including a credit for the cost to complete an
ongoing expansion project), and is expected to be funded from a new first
mortgage loan of approximately $500,000 and the majority of the proceeds from
the Company's sale of 10,000,000 shares of common stock. Any excess proceeds
from the sale of such stock will be applied to reduce outstanding loans.
During 1999, the Company received notices from three of the institutional
investors in GGP/Homart (holding an approximate 11.08% total interest in
GGP/Homart) that they desired to exercise the exchange rights available to them
under the GGP/Homart stockholders' agreement. The Company satisfied the exercise
of such exchange rights by issuing 2,603,291 shares of Common Stock, thereby
increasing its ownership interest in GGP/Homart from approximately 38.2% in 1998
to 50% in 1999.
F-9
<PAGE> 15
GENERAL GROWTH PROPERTIES, INC.
NOTES TO PRO FORMA CONDENSED CONSOLIDATED
STATEMENT OF OPERATIONS -- (CONTINUED)
(DOLLARS IN THOUSANDS -- UNAUDITED)
NOTE 3 PRO FORMA ADJUSTMENTS
(A) MANAGEMENT FEES
The management fee adjustment represents the difference in management costs
charged and/or allocated to the properties by the previous owners and the new
rates charged by General Growth Management, Inc.
(B) DEPRECIATION AND AMORTIZATION
Depreciation and amortization is adjusted to include additional amounts
related to the periods from January 1, 1998 to the dates of acquisition for the
1998 acquisitions and for the entire year of 1998 for the acquisitions made or
to be made in 1999.
(C) INTEREST EXPENSE
Interest expense increased due to a combination of debt assumption and
increased borrowings. In connection with the 1998 acquisitions described above,
the Company assumed $69,000 of mortgage debt bearing interest at the weighted
average rate of 8.64%. The Company also issued approximately $1,137,400 of
secured and unsecured borrowings to fund the cash portion of the acquisitions.
The pro forma interest expense on new borrowings was calculated using a weighted
average interest rate of 6.64%. In connection with the 1999 acquisitions and
common stock issuance, the Company issued approximately $522,000 of net
secured and unsecured borrowings to fund the cash portion of the acquisitions.
The pro forma interest expense on new borrowing was calculated using a weighted
average interest rate of 6.59%.
(D) MINORITY INTEREST
The pro forma income statement has been adjusted to reflect the allocation
of earnings to the minority interest.
(E) EQUITY IN GENERAL GROWTH MANAGEMENT, INC.
Reflects the increase in General Growth Management, Inc. net income for
management fees as the USPPI Portfolio was acquired with a joint venture
partner.
(F) WEIGHTED AVERAGE SHARES
The pro forma weighted average shares outstanding has been adjusted to
reflect the additional shares of stock outstanding due to the conversion of the
interest of the investors in GGP/Homart and the 10,000,000 shares of stock to be
issued in the offering made by this prospectus supplement (assuming no exercise
of the underwriter's over-allotment option).
F-10
<PAGE> 16
GENERAL GROWTH PROPERTIES, INC.
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 1999
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA -- UNAUDITED)
<TABLE>
<CAPTION>
HISTORICAL
GENERAL GROWTH OTHER TOTAL
PROPERTIES, ALA MOANA 1999 PRO FORMA PRO FORMA
INC.(1) CENTER ACQUISITIONS ADJUSTMENTS COMBINED
-------------- --------- ------------ ----------- ----------
<S> <C> <C> <C> <C> <C>
Total revenues................. $ 134,260 $23,097 $267 $ 0 $ 157,624
Expenses:
Property operating........ 45,523 6,386 83 0 51,992
Management fees........... 1,300 0 0 25(a) 1,325
Depreciation and
amortization............ 25,015 0 0 4,540(b) 29,555
---------- ------- ---- ---------- ----------
Total Expenses....... 71,838 6,386 83 4,565 82,872
---------- ------- ---- ---------- ----------
Operating Income............... 62,422 16,711 184 (4,565) 74,752
Interest expense, net..... (39,087) 0 0 (9,519)(c) (48,606)
Equity in unconsolidated
affiliates:
GGP/Homart, Inc........... 3,492 0 694 0 4,186
Joint Venture
Properties.............. 3,574 0 0 0 3,574
General Growth Management,
Inc..................... (2,856) 0 0 0 (2,856)
---------- ------- ---- ---------- ----------
Income before minority
interest..................... 27,545 16,711 878 (14,084) 31,050
Minority interest in Operating
Partnership.................. (4,216) 0 0 (2,703)(d) (6,919)
---------- ------- ---- ---------- ----------
Net income..................... 23,329 16,711 878 (16,787) 24,131
Convertible preferred stock
dividends.................... (6,117) 0 0 0 (6,117)
---------- ------- ---- ---------- ----------
Net income available to common
stockholders................. $ 17,212 $16,711 $878 $ (16,787) $ 18,014
========== ======= ==== ========== ==========
Weighted average shares
outstanding -- basic......... 40,054,780 11,551,109(e) 51,605,884
Weighted average shares
outstanding -- diluted....... 40,252,453 11,551,109(e) 51,803,562
Earnings per share -- basic.... $ 0.35
Earnings per
share -- diluted............. $ 0.35
</TABLE>
- ---------------
(1) Amounts are from the statements included in the Company's Form 10-Q for the
three months ended March 31, 1999 except that extraordinary items are
excluded.
The accompanying notes are an integral part of the Pro Forma Condensed
Consolidated Statement of Operations.
For alphabetical references, please refer to Note 3-Pro Forma Adjustments.
F-11
<PAGE> 17
GENERAL GROWTH PROPERTIES, INC.
NOTES TO PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 1999
(DOLLARS IN THOUSANDS -- UNAUDITED)
NOTE 1 PRO FORMA BASIS OF PRESENTATION
This unaudited pro forma condensed consolidated statement of operations is
presented as if (i) the acquisitions made and to be made in 1999 (Ala Moana
Properties and the "Other 1999 Acquisitions," which are The Crossroads Mall and
the additional interest in GGP/Homart due to the exchange of interests for
common stock) and (ii) the Company's use of a majority of the approximately
$322,225 of net proceeds from a public offering of 10,000,000 shares of common
stock to fund the acquisitions and for other working capital purposes, had all
occurred on January 1, 1999. In management's opinion, all adjustments necessary
to reflect these transactions have been included. Such pro forma statement of
operations is based upon the historical information of General Growth
Properties, Inc. excluding extraordinary items and the historical information of
each of the above-mentioned entities for the three months ended March 31, 1999.
This unaudited pro forma statement of operations is not necessarily indicative
of what actual results of General Growth Properties, Inc. would have been
assuming such transactions had been completed as of January 1, 1999 nor does it
purport to represent the results of operations for future periods.
NOTE 2 ACQUISITIONS AND OTHER PRO FORMA TRANSACTIONS
On January 11, 1999, the Company acquired a 100% ownership interest in the
Crossroads Mall in Kalamazoo, Michigan. The aggregate purchase price was
approximately $68,000 (subject to prorations and certain adjustments), which was
funded primarily from a new $45,000 mortgage loan.
On May 3, 1999, the Company entered into a definitive purchase agreement to
acquire Ala Moana Center in Honolulu, Hawaii. The closing of the transaction,
which is subject to the completion of certain closing conditions, is expected to
occur on or before July 30, 1999. The total acquisition price is $810,000 (less
certain closing adjustments, including a credit for the cost to complete an
ongoing expansion project), and is expected to be funded from a new first
mortgage loan of approximately $500,000 and a majority of the proceeds from the
Company's sale of 10,000,000 shares of common stock. Any excess proceeds from
the sale of such stock will be applied to reduce outstanding loans.
During 1999, the Company received notices from two of the institutional
investors in GGP/Homart (holding an approximate 7.1% total interest in
GGP/Homart) that they desired to exercise the exchange rights available to them
under the GGP/Homart stockholders' agreement. The Company satisfied the exercise
of such exchange rights by issuing 1,551,109 shares of Common Stock, thereby
increasing its ownership interest in GGP/Homart from approximately 43% in 1998
to 50% in 1999.
NOTE 3 PRO FORMA ADJUSTMENTS
(A) MANAGEMENT FEES
The management fee adjustment represents the difference in management costs
charged and/or allocated to the properties by the previous owners and the new
rates charged by General Growth Management, Inc.
(B) DEPRECIATION AND AMORTIZATION
Depreciation and amortization is adjusted to include additional amounts
related to the periods from January 1, 1999 to the dates of acquisition for the
acquisitions made or to be made in 1999.
F-12
<PAGE> 18
GENERAL GROWTH PROPERTIES, INC.
NOTES TO PRO FORMA CONDENSED CONSOLIDATED
STATEMENT OF OPERATIONS -- (CONTINUED)
(DOLLARS IN THOUSANDS -- UNAUDITED)
(C) INTEREST EXPENSE
Interest expense increased due to a combination of debt assumption and
increased borrowings. In connection with the 1999 acquisitions and common stock
issuance, the Company issued approximately $522,000 of net secured and unsecured
borrowings to fund the cash portion of the acquisitions. The pro forma interest
expense on new borrowing was calculated using a weighted average interest rate
of 6.59%.
(D) MINORITY INTEREST
The pro forma income statement has been adjusted to reflect the allocation
of earnings to the minority interest.
(E) WEIGHTED AVERAGE SHARES
The pro forma weighted average shares outstanding has been adjusted to
reflect the additional shares of stock outstanding due to the conversion of the
interest of the investors in GGP/Homart and the 10,000,000 shares of stock to be
issued in the offering made by this prospectus supplement (assuming no exercise
of the underwriter's over-allotment option).
F-13
<PAGE> 19
GENERAL GROWTH PROPERTIES, INC.
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
MARCH 31, 1999
(DOLLARS IN THOUSANDS -- UNAUDITED)
<TABLE>
<CAPTION>
HISTORICAL
GENERAL GROWTH TOTAL
PROPERTIES, PRO FORMA PRO FORMA
INC.(1) ADJUSTMENTS COMBINED
-------------- ----------- ----------
<S> <C> <C> <C>
ASSETS
Investment in real estate
Land............................................... $ 372,434 $ 81,000(a) $ 453,434
Buildings and equipment............................ 3,317,050 729,000(a) 4,046,050
Less accumulated depreciation...................... (326,242) -- (326,242)
Developments in progress........................... 101,709 -- 101,709
---------- -------- ----------
Net property and equipment...................... 3,464,951 810,000 4,274,951
Investment in Unconsol R. E. Ventures.............. 409,980 57,595 467,575
---------- -------- ----------
Net investment in real estate................... 3,874,931 867,595 4,742,526
Cash and cash equivalents............................ 14,540 -- 14,540
Tenant accounts receivable, net...................... 74,012 -- 74,012
Deferred expenses, net............................... 71,880 -- 71,880
Investment in and note receivable from GGMI.......... 90,887 -- 90,887
Prepaid expenses and other assets.................... 13,072 -- 13,072
---------- -------- ----------
$4,139,322 $867,595 $5,006,917
========== ======== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Mortgage notes and other debt payable................ $2,753,373 $477,775(b) $3,231,148
Distributions payable................................ 34,965 -- 34,965
Accounts payable and accrued expenses................ 110,136 -- 110,136
---------- -------- ----------
Total Liabilities.......................... 2,898,474 477,775 3,376,249
---------- -------- ----------
Minority interest in Operating Partnership........... 299,832 58,764(c) 358,596
---------- -------- ----------
Commitments and contingencies
Convertible preferred stock......................... 337,500 -- 337,500
Stockholders' equity
Common stock....................................... 4,010 1,155 5,165
Additional paid-in capital......................... 871,553 329,207 1,200,760
Retained earnings (deficit)........................ (268,883) 694 (268,189)
Notes Receivable-Common Stock Purchase............. (3,164) -- (3,164)
---------- -------- ----------
Total stockholders' equity................. 603,516 331,056(d) 934,572
---------- -------- ----------
Total Liabilities and Equity............... $4,139,322 $867,595 $5,006,917
========== ======== ==========
</TABLE>
- ---------------
(1) Amounts are from the statements included in the Company's Form 10-Q for the
quarter ended March 31, 1999.
The accompanying notes are an integral part of the Pro Forma Condensed
Consolidated Balance Sheet.
For alphabetical references please refer to Note 2-Pro Forma Adjustments.
F-14
<PAGE> 20
GENERAL GROWTH PROPERTIES, INC.
NOTES TO PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
MARCH 31, 1999
(DOLLARS IN THOUSANDS -- UNAUDITED)
NOTE 1 PRO FORMA BASIS OF PRESENTATION
This unaudited pro forma condensed consolidated balance sheet is presented
as if (i) the acquisitions made and to be made in 1999 (Ala Moana Properties and
the additional interest in GGP/Homart due to the exchange of interests for
common stock) and (ii) the Company's use of the net proceeds of the offering of
common stock made by this prospectus supplement to fund the acquisitions and to
repay indebtedness, had all occurred on March 31, 1999. In management's opinion,
all adjustments necessary to reflect these transactions have been included.
NOTE 2 PRO FORMA ADJUSTMENTS
(A) INVESTMENT IN REAL ESTATE
Asset additions for Ala Moana Center are as follows:
<TABLE>
<S> <C>
Land........................................................ $ 81,000
Buildings and equipment..................................... 729,000
--------
$810,000
========
</TABLE>
(B) MORTGAGE NOTES PAYABLE
Debt incurred is assumed to be as follows:
<TABLE>
<S> <C>
Ala Moana Center............................................ $500,000
Debt paydown due to common stock offering................... (22,225)
--------
$477,775
========
</TABLE>
(C) MINORITY INTEREST
<TABLE>
<S> <C>
Adjustment to minority interest as determined by the
relationship of the units to common shares at March 31,
1999...................................................... $58,764
</TABLE>
(D) STOCKHOLDERS' EQUITY
<TABLE>
<S> <C>
Adjustment to stockholders' equity as determined by the
relationship of the units to common shares at March 31,
1999...................................................... $(58,764)
Common stock issued by the Company to fund the Ala Moana
acquisition, net of offering costs........................ 332,225
Common stock issued to increase investment in GGP/Homart.... 56,901
Increase in equity in GGP/Homart earnings................... 694
--------
$331,056
========
</TABLE>
F-15
<PAGE> 1
EXHIBIT 2.1
PURCHASE AND SALE AGREEMENT
dated as of May 3, 1999
among
D/E HAWAII JOINT VENTURE,
GGP LIMITED PARTNERSHIP
and
GENERAL GROWTH PROPERTIES, INC.
<PAGE> 2
TABLE OF CONTENTS
Page
ARTICLE I PURCHASE AND SALE OF PROPERTY
1.1 General................................................................ 1
1.2 No Representations..................................................... 3
1.3 Release................................................................ 5
ARTICLE II PURCHASE PRICE; DEPOSIT
2.1 Purchase Price......................................................... 5
2.2 Deposit................................................................ 6
ARTICLE III TITLE MATTERS
3.1 Title to Real Property................................................. 6
3.2 Title Defects.......................................................... 7
ARTICLE IV APPORTIONMENTS AND OTHER ADJUSTMENTS
4.1 General................................................................ 9
4.2 Post-Closing Adjustments............................................... 14
4.3 Tax and Operating Expense Reimbursements............................... 14
4.4 Collection of Rents.................................................... 15
4.5 Additional Credits..................................................... 16
4.6 Inspection of Books and Records........................................ 16
4.7 Survival............................................................... 16
ARTICLE V CLOSING
5.1 Closing................................................................ 16
5.2 Closing Deliveries by Seller........................................... 17
5.3 Closing Deliveries by Purchaser........................................ 21
ARTICLE VI CONDITIONS PRECEDENT TO CLOSING
6.1 Conditions Precedent to Obligation of Purchaser and General Partner.... 22
6.2 Conditions Precedent to Obligations of Seller.......................... 25
ARTICLE VII REPRESENTATIONS AND WARRANTIES
<PAGE> 3
Page
7.1 Representations and Warranties by Purchaser........................ 26
7.2 Representations and Warranties of Seller........................... 28
7.3 General Provisions................................................. 31
7.4 Survival........................................................... 32
ARTICLE VIII INDEMNIFICATION
8.1 Obligation of Purchaser to Indemnify............................... 32
8.2 Obligation of Seller to Indemnify.................................. 32
8.3 Limitations on Recovery............................................ 33
8.4 Claim Procedures and Escrow........................................ 34
8.5 Sole Remedy; Survival.............................................. 35
ARTICLE IX CASUALTY AND CONDEMNATION
9.1 Condemnation....................................................... 35
9.2 Destruction or Damage.............................................. 36
9.3 Insurance.......................................................... 37
9.4 Effect of Termination.............................................. 37
9.5 Waiver............................................................. 37
ARTICLE X PRE-CLOSING OPERATIONS
10.1 Pre-Closing Operations............................................. 37
10.2 Purchaser Consents................................................. 39
10.3 Estoppel Certificates.............................................. 40
10.4 Completion of Modified Phase V A Work.............................. 40
10.5 Liberty House Settlement........................................... 41
10.6 Survival........................................................... 42
ARTICLE XI MISCELLANEOUS
11.1 Broker............................................................. 42
11.2 Survival/Merger.................................................... 42
11.3 Termination upon Default........................................... 42
11.4 Further Assurances................................................. 44
11.5 Payment of Expenses................................................ 44
11.6 Notices............................................................ 44
11.7 Assignment......................................................... 46
11.8 Waiver............................................................. 46
11.9 Pre-Closing Matters................................................ 46
11.10 Incorporation of Recitals and Schedules............................ 48
11.11 Confidentiality.................................................... 48
<PAGE> 4
Page
11.12 Merger............................................................. 49
11.13 GOVERNING LAW...................................................... 49
11.14 Jurisdiction....................................................... 49
11.15 Captions........................................................... 49
11.16 Counterparts....................................................... 50
11.17 Severability....................................................... 50
11.18 Prior Negotiations; Construction................................... 50
11.19 Litigation Expenses................................................ 50
11.20 No Recordation..................................................... 50
11.21 WAIVER OF TRIAL BY JURY............................................ 50
ARTICLE XII DEFINITIONS
12.1 Definitions........................................................ 51
<PAGE> 5
EXHIBITS
EXHIBIT A OWNED LAND
EXHIBIT B GROUND LEASE
EXHIBIT C ESCROW AGREEMENT
EXHIBIT D DEED OF TRANSFER
EXHIBIT E BILL OF SALE
EXHIBIT F ASSIGNMENT OF LEASES
EXHIBIT G BLANKET ASSIGNMENT OF CONTRACTS
EXHIBIT H ASSIGNMENT OF GROUND LEASE
EXHIBIT I-1 FIRPTA AFFIDAVIT
EXHIBIT I-2 STATE OF HAWAII FORM N-289
EXHIBIT J SELLER'S CERTIFICATE
EXHIBIT K STATE OF HAWAII FORM G-8A
EXHIBIT L STATE OF HAWAII FORM P-64A
EXHIBIT M STATE OF HAWAII FORM D-37
EXHIBIT N INTENTIONALLY OMITTED
EXHIBIT O INTENTIONALLY OMITTED
EXHIBIT P-1 TENANT ESTOPPEL CERTIFICATE
EXHIBIT P-2 ANCHOR ESTOPPEL CERTIFICATE
EXHIBIT P-3 GROUND LESSOR ESTOPPEL CERTIFICATE
EXHIBIT Q REPRESENTATION LETTER
EXHIBIT R LIBERTY HOUSE CERTIFICATE OF ACKNOWLEDGMENT
EXHIBIT S MODIFIED PHASE V A PLANS
EXHIBIT T MODIFIED PHASE V A BUDGET
<PAGE> 6
SCHEDULES
SCHEDULE 1.1(vi) LEASES
SCHEDULE 1.1(viii) SERVICE CONTRACTS
SCHEDULE 1.1(ix) EQUIPMENT LEASES
SCHEDULE 1.1(x) INTELLECTUAL PROPERTY
SCHEDULE 1.1(xiii) EXCEPTED UTILITY DEPOSITS
SCHEDULE 1.1(xiv) UNRECORDED AGREEMENTS
SCHEDULE 1.1(xv) CONSTRUCTION CONTRACTS
SCHEDULE 2.1 ALLOCATION OF PURCHASE PRICE
SCHEDULE 3.1(a)(I) SELLER'S TITLE REPORT
SCHEDULE 3.1(a)(II) INITIAL TITLE REPORT OBJECTIONS
SCHEDULE 3.1(b) PRELIMINARY SURVEYS
SCHEDULE 4.1(d)(ii) DELINQUENCIES AND PREPAYMENTS
SCHEDULE 4.1(i) CERTAIN PROSPECTIVE LEASES
SCHEDULE 4.5 ADDITIONAL CREDITS
SCHEDULE 7.2(b)(ii) VIOLATIONS OF LAW
SCHEDULE 7.2(b)(iv) ENVIRONMENTAL MATTERS
SCHEDULE 7.2(b)(v) CONDEMNATION
SCHEDULE 7.2(c) EQUIPMENT ENCUMBRANCES
SCHEDULE 7.2(h) LITIGATION
SCHEDULE 7.2(i) CONSENTS
SCHEDULE 8.4(d)(iii) ELIGIBLE INVESTMENTS
<PAGE> 7
Index of Defined Terms
Definition Section Reference
Additional Rent 4.1(d)
Adjustment Point 4.1
Affiliates 12.1
Agreement Preamble
Ala Moana Building 12.1
Ala Moana Center 12.1
Ala Moana Pacific Center 12.1
Ala Moana Plaza 12.1
Anchor Estoppels 10.3
Anchor Tenants 10.3
Applicable Closing Fiscal Period 12.1
Approved Change Order 12.1
Assignment Instruments 8.3(b)
Assignment of Ground Lease 5.2(e)
Assignment of Leases 5.2(c)
Bill of Sale 5.2(b)
Blanket Assignment of Contract & Other Similar Rights 5.2(d)
Books and Records 1.1(xiv)
Broker 11.1
Brokers 4.1(i)
Business Day 12.1
Cash Collateral 8.4(a)
Casualty 12.1
Casualty Realization Costs 9.2
CEC Properties 12.1
Change Order 12.1
Closing 5.1
Closing Date 5.1
Closing Supplement 6.1(b)
Confidentiality Agreement 11.11(b)
Consents 7.2(i)
Construction Contracts 1.1(xv)
Deductible Amount 8.3
Deed 5.2(a)
Demand Notice 8.4(b)
Deposit 2.2
Designated Employee 7.3(b)
Election Notice 9.2
Encumbrances 3.2(a)
Environmental Law 7.2(b)(iv)
Equipment 1.1(v)
Equipment Leases 1.1(ix)
Escrow Agent 2.2
Escrow Agreement 2.2
Estoppel Certificates 10.3
Expiration Date 8.4(e)(ii)
Fair Value 6.1(b)
Fixed Rents 4.1(d)
<PAGE> 8
Definition Section Reference
Fixtures 1.1(iv)
GAAS 12.1
GGMI Preamble
General Partner Preamble
Governmental Entity 6.1(e)
Ground Lease 1.1(ii)
Ground Leased Land 1.1(ii)
Hazardous Materials 12.1
HSR Act 6.1(j)
Impairment 6.1(b)
Improvements 1.1(iii)
Indemnity Escrow 8.4(a)
Indemnity Escrow Agent 8.4(a)
Initial Scheduled Closing Date 5.1
Intellectual Property 1.1(x)
Initial Title Report Objections 3.1(a)
Internal Revenue Code 5.2(h)
Kapiolani Properties 12.1
Land 12.1
Leases 1.1(vi)
Liability Cap 8.3(b)
Liberty House Settlement Agreement 6.2(i)
Management Agreement 12.1
Mandatory Removal Objection 3.2(a)
Manager Preamble
Managing Venturer Preamble
Material Uninsured Casualty 12.1
Modified Phase V A Budget 12.1
Modified Phase V A Costs 12.1
Modified Phase V A Plans 12.1
Modified Phase V A Work 12.1
Notice of Claim 8.3
Other Exceptions 3.2(a)
Owned Land 1.1(i)
Partnership Agreement 12.1
Permits 1.1(xi)
Permitted Exceptions 3.1
Percentage Rents 4.1(d)
Person 12.1
Preliminary Surveys 3.1(b)
Premises 1.1(iii)
Property 1.1
Property Representations 6.1(b)
Purchase Price 2.1
Purchaser Preamble
Purchaser's Representatives 7.3(c)
Qualifying Tenants 3.1(l)
Releasing Party 1.3
<PAGE> 9
Definition Section Reference
Remove 3.2(b)
Rents 4.1(d)
Security Deposits 1.1(vii)
Seller Preamble
Seller Parties 1.3
Seller's Knowledge 7.3(b)
Seller's Title Report 3.1(a)
Service Contracts 1.1(viii)
Subsequent Scheduled Closing Date 5.1
Subsequent Title Objections 3.2(a)
Substantial Casualty 12.1
Substantial Taking 12.1
Taking 12.1
Taking Realization Costs 9.1(b)
Tax and Operating Expense Reimbursements 4.1(d)
Tenant Charge Reimbursements 4.1(d)
Tenant Costs 10.1(d)
Tenant Estoppels 10.3
Tenant Work 10.1(c)
Tenant(s) 1.1(vii)
Title Company 3.1(a)
Title Objection 3.2(b)
Title Policy 12.1
Underwritten Leases 4.1(i)
Unrecorded Agreements 1.1(xiv)
Updated Survey 12.1
Utility Deposits 1.1(xiii)
Warranties 1.1(xii)
<PAGE> 10
PURCHASE AND SALE AGREEMENT
THIS PURCHASE AND SALE AGREEMENT (this "Agreement") is made as
of the 3rd day of May, 1999, by and among D/E HAWAII JOINT VENTURE ("Seller"), a
Hawaii general partnership consisting of Hawaii Central Development, Inc., a
Hawaii corporation (the "Managing Venturer") and Daiei Hawaii Investments, Inc.,
a Hawaii corporation, as general partners, and having an office at 1585
Kapiolani Boulevard, Honolulu, Suite 901, Hawaii 96814, GGP LIMITED PARTNERSHIP,
a Delaware limited partnership ("Purchaser"), and GENERAL GROWTH PROPERTIES,
INC. a Delaware corporation ("General Partner"), Purchaser and General Partner
having an office at 110 North Wacker Drive, Chicago, Illinois 60606.
W I T N E S S E T H:
WHEREAS, Seller owns, or prior to Closing will own, certain
land and improvements located in Honolulu, Hawaii and commonly known as the "Ala
Moana Center", "Ala Moana Building", "Ala Moana Plaza", "Kapiolani Properties"
and "CEC Properties" and owns a portion, and ground leases a portion, of certain
land and improvements located in Honolulu, Hawaii and commonly known as the "Ala
Moana Pacific Center" (each such property more particularly described herein);
WHEREAS, all of the aforesaid real properties are managed by
General Growth Management of Hawaii, Inc., a Hawaii corporation ("Manager"),
which is a wholly-owned subsidiary of General Growth Management, Inc., a
Delaware corporation ("GGMI"). Purchaser owns substantially all of the economic
interests in GGMI and General Partner is the general partner of Purchaser; and
WHEREAS, Seller desires to sell to Purchaser, and Purchaser
desires to purchase from Seller, the Property (as hereinafter defined) upon the
terms and subject to the conditions set forth herein.
NOW, THEREFORE, in consideration of the premises and the
representations, warranties, covenants, conditions and agreements contained
herein and other good and valuable consideration, the sufficiency of which is
hereby acknowledged, the parties hereby agree as follows:
ARTICLE I
PURCHASE AND SALE OF PROPERTY
1.1 General. Subject to and on the terms and conditions, and
in reliance upon the representations, warranties, covenants and agreements,
hereinafter set forth, on the date and at the time and place provided for in
Section 5.1, Seller agrees to sell, transfer, assign and deliver to Purchaser,
and Purchaser agrees to purchase, acquire and accept from Seller, upon the terms
and conditions hereinafter set forth, the following free and clear of
Encumbrances other than Permitted Exceptions (collectively, as so qualified, the
"Property"):
(i) Real Property. Fee simple title to those certain
plots, pieces and parcels of land located in the City
of Honolulu, State of Hawaii, and more particularly
described on Exhibits A-1 through A-6 attached hereto
(the "Owned Land"), together with all easements,
rights of way, privileges and other rights, if any,
attached or appurtenant to the Owned Land, or used in
connection therewith;
(ii) Ground Lease. All rights, title and interest as
tenant pursuant to that certain Indenture of Lease,
dated April 1, 1981, by and between E.W. Jacobsen,
E.G. Lagreid, (individually and as Trustee), C.L.
Jacobsen, C.W. White (both as Trustees), as
landlords, and Dillingham Corporation, as tenant, as
amended
1
<PAGE> 11
through the date hereof and as more specifically
identified on Exhibit B attached hereto (the "Ground
Lease", and the land leased thereby as more
particularly described on Exhibit B attached hereto,
the "Ground Leased Land");
(iii) Improvements. The buildings, parking structures and
other improvements located on the Owned Land and/or
the Ground Leased Land (collectively, the
"Improvements"; the Owned Land, the Ground Leased
Land and Improvements being referred to herein
collectively as the "Premises");
(iv) Fixtures. The fixtures built on or attached to the
Premises (the "Fixtures");
(v) Equipment. The equipment, furniture, machinery,
furnishings, tools, spare parts, supplies and other
articles of personal property located on or in the
Premises and owned by and in the possession and
control of Seller or Manager on Seller's behalf on
the Closing Date (as hereinafter defined)
(collectively, the "Equipment");
(vi) Leases. The leases and other similar agreements for
the present or future use or occupancy of any space
in the Premises as listed on Schedule 1.1(vi)
(collectively, together with such additional leases
as are executed hereinafter by Seller in accordance
with this Agreement, the "Leases") that are in effect
on the Closing Date;
(vii) Security Deposits. The money, negotiable instruments
and other security deposited by any tenant in or
having a contractual right to commence occupancy of
any portion of the Premises as of the Closing Date
(each, a "Tenant", and collectively, "Tenants") under
a Lease in effect on the Closing Date to secure
performance of the Tenant's obligations thereunder
and not previously applied by Seller in accordance
with the terms of the applicable Lease to satisfy any
obligations of the Tenant pursuant to that Lease,
together with the accrued interest thereon (but only
to the extent that the applicable Lease requires such
interest to accrue for the benefit of the Tenant)
(collectively, the "Security Deposits");
(viii) Service Contracts. The contracts pursuant to which
Seller is entitled to receive services at and
relating to the Premises, to the extent in effect on
the Closing Date, as identified on Schedule 1.1(viii)
attached hereto, but expressly excluding the
contracts identified as "excluded contracts" on
Schedule 1.1(viii) (the contracts to be assigned,
collectively, together with such additional service
contracts executed by Seller hereafter in accordance
with this Agreement, the "Service Contracts");
(ix) Equipment Leases. The equipment leases by which
Seller holds the right to possess and use any of the
Equipment, as identified in Schedule 1.1(ix) attached
hereto (collectively, together with such equipment
leases as are executed by Seller hereafter in
accordance with this Agreement, the "Equipment
Leases");
(x) Intellectual Property. The trademarks, tradenames,
logos and other similar
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intellectual property rights being used by or on
behalf of Seller at and relating to the Premises (the
"Intellectual Property"), as identified in Schedule
1.1(x) attached hereto, to the extent in effect on
the Closing Date and assignable pursuant to
applicable laws and regulations;
(xi) Licenses and Permits. The licenses and permits being
used by or on behalf of Seller at and relating to the
Premises, the Fixtures and the Equipment (the
"Permits"), to the extent in effect on the Closing
Date and assignable by the terms thereof and pursuant
to applicable laws and regulations;
(xii) Guaranties and Warranties. The warranties, guaranties
and other similar rights, if any, relating to the
Fixtures and the Equipment (the "Warranties"), to the
extent in effect on the Closing Date and assignable
by the terms thereof and pursuant to applicable laws
and regulations;
(xiii) Utility Deposits. The deposits made by Seller with
utility companies relating to the Premises [other
than those identified on Schedule 1.1(xiii) hereto]
(the "Utility Deposits"), if and to the extent
charged to Purchaser in the adjustments made pursuant
to Article IV;
(xiv) Unrecorded Agreements. The unrecorded agreements
relating to the Premises as identified in Schedule
1.1(xiv) attached hereto (the "Unrecorded
Agreements"), to the extent in effect on the Closing
Date and assignable by the terms thereof;
(xv) Construction Contracts. Each of the construction
contracts identified on Schedule 1.1(xv) attached
hereto (together with such additional construction
contracts as are executed by Seller hereafter in
accordance with this Agreement, the "Construction
Contracts") to the extent in effect on the Closing
Date and assignable by the terms thereof;
(xvi) Casualty Proceeds/Taking Awards. The rights to
collect proceeds payable in connection with any
Casualty or Taking, if and to the extent required
under Section 9.1 or Section 9.2; and
(xvii) Books and Records. The books, records, files, tenant
data, leasing material and forms, current rent rolls,
plans, specifications, reports, tests and the other
similar materials which are used by or on behalf of
Seller in connection with the operation of the
Premises (collectively, the "Books and Records"), if
any, owned by and in the possession or control of
Seller or Manager on Seller's behalf on the Closing
Date.
1.2 No Representations. (a) EACH OF PURCHASER AND GENERAL
PARTNER SPECIFICALLY ACKNOWLEDGES AND AGREES THAT (i) SUBJECT TO THE TERMS AND
CONDITIONS CONTAINED HEREIN, SELLER SHALL SELL AND PURCHASER SHALL PURCHASE THE
PROPERTY "AS IS, WHERE IS AND WITH ALL FAULTS" AND (ii) EXCEPT FOR THE
REPRESENTATIONS AND WARRANTIES EXPRESSLY SET FORTH IN SECTION 7.2 OR
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CONTAINED IN ANY CERTIFICATE DELIVERED PURSUANT TO SECTION 5.2 (h) or (j),
NEITHER PURCHASER NOR GENERAL PARTNER IS RELYING ON ANY REPRESENTATION OR
WARRANTY OF ANY KIND WHATSOEVER, WHETHER ORAL OR WRITTEN, EXPRESS OR IMPLIED,
STATUTORY OR OTHERWISE, FROM SELLER, OR ANY PARTNER, OFFICER, EMPLOYEE,
ATTORNEY, AGENT OR BROKER OF SELLER, AS TO ANY MATTER, CONCERNING THE PROPERTY,
OR SET FORTH, CONTAINED OR ADDRESSED IN ANY DUE DILIGENCE MATERIALS (INCLUDING
WITHOUT LIMITATION, THE COMPLETENESS THEREOF), INCLUDING WITHOUT LIMITATION: (i)
the quality, nature, habitability, merchantability, use, operation, value,
marketability, adequacy or physical condition of the Property or any aspect or
portion thereof, including, without limitation, structural elements, foundation,
roof, appurtenances, access, landscaping, parking facilities, electrical,
mechanical, HVAC, plumbing, sewage, water and utility systems, facilities and
appliances, soils, geology and groundwater, (ii) the dimensions or lot size of
any of the Owned Land or the Ground Leased Land or the square footage of any of
the Improvements thereon or of any tenant space therein, (iii) the development
or income potential, or rights of or relating to, any of the Property, or the
fitness, suitability, value or adequacy of any of the Property for any
particular purpose, (iv) the zoning or other legal status of any of the Premises
or the existence of any other public or private restrictions on the use of the
Premises, (v) the compliance of any of the Premises or its operation with any
applicable codes, laws, regulations, statutes, ordinances, covenants, conditions
and restrictions of any Governmental Entity or of any other person or entity
(including, without limitation, the Americans with Disabilities Act of 1990, as
amended), (vi) the ability of Purchaser to obtain any necessary governmental
approvals, licenses or permits for Purchaser's intended use or development of
any of the Property, (vii) the presence, absence, condition or compliance of any
Hazardous Materials on, in, under, above or about any of the Premises or any
adjoining or neighboring property, (viii) the quality of any labor and materials
used in any Improvements, (ix) Seller's ownership of the Property or any portion
thereof, including without limitation, the condition of title to any of the
Owned Land or the Ground Leased Land, (x) the Leases, Permits, Warranties,
Service Contracts or any other agreements affecting any of the Premises or the
intentions of any party with respect to the negotiation and/or execution of any
lease or contract with respect to any Property or (xi) the economics of, or the
income and expenses, revenue or expense projections or other financial matters,
relating to the operation of, any of the Property. Without limiting the
generality of the foregoing, each of Purchaser and General Partner expressly
acknowledges and agrees that it is not relying on any representation or warranty
of any partner, member, director, trustee, officer, employee, attorney, agent or
broker of Seller, whether implied, presumed or expressly provided at law or
otherwise, arising by virtue of any statute, regulation, common law or other
legally binding right or remedy in favor of Purchaser or General Partner. Each
of Purchaser and General Partner further acknowledges and agrees that Seller is
not under any duty to make any inquiry regarding any matter that may or may not
be known to any partner, officer, employee, attorney, agent or broker of Seller.
This Section shall survive the Closing, or, if the Closing does not occur, the
termination of this Agreement. In addition, each of Purchaser and General
Partner acknowledges and agrees that no property (real, personal or otherwise)
owned by any Tenant or any other Person is intended to be conveyed hereunder
unless said property is described and purported to be conveyed herein, is on or
within the Premises and has or may, by operation of law, become the property of
Seller hereunder and, to the extent any such personal property may become the
property of Seller, only Seller's residual or reversionary interest therein is
intended to be conveyed hereunder.
(b) EACH OF PURCHASER AND GENERAL PARTNER ACKNOWLEDGES AND
AGREES THAT ANY REPORTS, REPAIRS OR WORK OBTAINED BY PURCHASER OR ANY OF ITS
AFFILIATES ARE THE SOLE RESPONSIBILITY OF PURCHASER, AND, EXCEPT TO THE EXTENT
EXPRESSLY REQUIRED PURSUANT TO THIS AGREEMENT, SELLER HAS NO OBLIGATION TO MAKE
ANY CHANGES, ALTERATIONS OR REPAIRS TO THE PROPERTY OR ANY PORTION THEREOF OR TO
CURE ANY VIOLATIONS OF LAW OR TO COMPLY WITH THE REQUIREMENTS OF ANY INSURER.
EXCEPT AS EXPRESSLY PROVIDED IN THIS AGREEMENT, AND FOLLOWING AND SUBJECT TO THE
OCCURRENCE OF CLOSING, PURCHASER IS SOLELY RESPONSIBLE FOR OBTAINING ANY
APPROVAL OR PERMIT
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NECESSARY FOR OCCUPANCY OF THE PROPERTY AND FOR ANY REPAIRS OR ALTERATIONS
NECESSARY TO OBTAIN THE SAME, ALL AT PURCHASER'S SOLE COST AND EXPENSE.
1.3 Release. (a) Without limiting the provisions of Section
1.2, each of Purchaser and General Partner, for itself and any successors and
assigns and their Affiliates (each, a "Releasing Party"), hereby irrevocably and
absolutely waives its right to recover from, and forever releases and
discharges, and covenants not to file or otherwise pursue any legal action
against, Seller or any asset of Seller, or any direct or indirect partner,
member, trustee, director, shareholder, controlling person, affiliate, officers,
attorney, employee, agent or broker of any of the foregoing, and any of their
respective heirs, successors, personal representatives and assigns (each, a
"Seller Party", and collectively, the "Seller Parties") with respect to any and
all suits, actions, proceedings, investigations, demands, claims, liabilities,
fines, penalties, liens, judgments, losses, injuries, damages, expenses or
costs, including, without limitation, attorneys' and experts' fees and expenses,
and investigation and remediation costs whether direct or indirect, known or
unknown, foreseen or unforeseen, that may arise on account of or in any way be
connected with the Property or any portion thereof, including, without
limitation, the physical, environmental and structural condition of the Property
or any law or regulation applicable thereto, or any other matter relating to an
Environmental law or the use, presence, discharge or release of Hazardous
Materials on, under, in, above or about any of the Premises; provided, however,
that no Releasing Party waives its rights, if any, to recover from, or releases
or discharges or covenants not to bring any action against Seller or any Seller
Party for any act of Seller or any Seller Party that constitutes fraud, and each
of Purchaser and General Partner expressly reserves its rights, if any, against
Seller or either of the partners in Seller to enforce (i) the express
indemnification obligation of Seller pursuant to Section 8.2 or any other
section hereof, subject to the limitations and conditions provided herein, (ii)
its rights and remedies pursuant to Section 11.3, including without limitation
its right to bring an action for specific performance to cure any breach of
Seller's obligations set forth in this Agreement to the extent permitted in
Section 11.3(b), (iii) the provisions of this Agreement authorizing it to
terminate this Agreement prior to Closing and, if applicable, to recover the
return of the Deposit in accordance herewith and with the terms of the Escrow
Agreement and (iv) any obligations of Seller hereunder or any other agreement or
instrument delivered concurrently herewith or pursuant to hereto if and to the
extent that Seller's obligations thereunder expressly survive Closing or the
earlier termination hereof. In addition, except as set forth in Section 11.9(d),
neither this Section 1.3 nor any other provision of this Agreement shall be
construed as limiting the Manager's right to recover amounts, if any, owed to it
or otherwise enforce its other rights, if any, in each case as expressly
provided in the Management Agreement or at law.
(b) In connection with this Section 1.3, Purchaser expressly
waives the benefits of any provision or principle of federal law or regulation
or of any law or regulation of the State of Hawaii which may limit the scope or
effect of the foregoing waiver and release.
(c) This Section 1.3 shall survive the Closing indefinitely.
ARTICLE II
PURCHASE PRICE; DEPOSIT
2.1 Purchase Price. On the Closing Date, assuming
satisfaction by Seller and/or
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waiver by Purchaser of all conditions set forth in Section 6.1, Purchaser shall
pay to Seller Eight Hundred and Ten Million U.S. Dollars ($810,000,000) (the
"Purchase Price"), less the amount of the Deposit (as defined below), for the
Property, such amount to be paid in cash by wire transfer of immediately
available funds to a bank account designated by Seller in writing to Purchaser.
Notwithstanding the preceding sentence, the Purchase Price shall be subject to
increase or decrease in accordance with the provisions of Article IV relating to
apportionments, Section 10.4 relating to the Modified Phase VA Work and any
other Section hereof expressly providing for adjustment to the Purchase Price.
The Purchase Price shall be allocated among the components of the Property (as
defined in Section 1.1) in accordance with Schedule 2.1, attached hereto.
2.2 Deposit. Concurrent with its execution hereof, Purchaser
shall deposit with LaSalle Bank N.A. (the "Escrow Agent"), earnest money in the
amount of SIXTEEN MILLION TWO HUNDRED THOUSAND DOLLARS ($16,200,000) (the
"Deposit"), such amount to be paid in cash by wire transfer of immediately
available funds to a bank account to be designated by Escrow Agent on or before
the date hereof, it being understood by Purchaser that time is of the essence
with respect thereto. The Deposit shall be held and disbursed by the Escrow
Agent pursuant to the provisions of this Agreement and the Escrow Agreement
attached as Exhibit C hereto (the "Escrow Agreement"). Upon and subject to the
occurrence of Closing, the Deposit (and interest earned thereon, if any), shall
be applied as partial payment of the Purchase Price (as defined below), unless
otherwise specified herein. Each of Purchaser, General Partner and Seller agrees
that it will instruct the Escrow Agent to disburse funds in writing in the
circumstances required under and otherwise in accordance with this Agreement and
the Escrow Agreement.
ARTICLE III
TITLE MATTERS
3.1 Title to Real Property. Unless this Agreement is sooner
terminated by Purchaser as expressly permitted hereunder, at Closing, Seller
shall transfer the Property to Purchaser and Purchaser shall accept the same
subject only to the following matters (collectively referred to herein as
"Permitted Exceptions"):
(a) Each of the title matters set forth in the
reports of Title Guaranty of Hawaii as agent for Chicago Title
Insurance Company (the "Title Company"), dated February 26, 1999 and
attached hereto as Schedule 3.1(a)(I) (the "Seller's Title Report"),
but excluding those exceptions to title described in Schedule
3.1(a)(II) (the "Initial Title Report Objections"), which exceptions
Seller agrees to Remove at or prior to, and as a condition to, Closing;
(b) The state of facts set forth in the land surveys
of the Premises prepared by Austin, Tsutsumi & Associates, Inc. and
described on Schedule 3.1(b) (such surveys, the "Preliminary Surveys"),
and the state of facts set forth in the Updated Survey and not objected
to by Purchaser as provided in Section 3.2(c);
(c) All laws including, without limitation, all
environmental, building and zoning restrictions, ordinances and
regulations, affecting the Property or the ownership, use or operation
thereof adopted by the United States, the State of Hawaii, the City of
Honolulu, and any and every other governmental agency, department,
instrumentality and/or political subdivision of any kind whatsoever
having jurisdiction over the Property or the ownership, use or
operation
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thereof, and all amendments or additions thereto now in effect or which
may be in force and effect on the Closing Date;
(d) All unpaid personal property, real estate and
excise taxes, and all water, sewer utility, trash and other similar
charges, in each case which are not yet due and payable as of the
Closing but which may become or give rise to a lien on all or any
portion of the Property;
(e) Each of the Leases listed on Schedule 1.1(vi)
attached hereto, as such Schedule may be amended, supplemented or
otherwise modified from time to time through the Closing Date to
reflect additional leases entered into by Seller in accordance with the
terms of this Agreement;
(f) Each of the Equipment Leases listed on Schedule
1.1(ix), as such Schedule may be amended, supplemented or otherwise
modified from time to time through the Closing Date in accordance with
the terms of this Agreement;
(g) Each of the Service Contracts;
(h) Each of the Unrecorded Agreements listed on
Schedule 1.1(xiv) attached hereto, as such Schedule may be amended,
supplemented or otherwise modified from time to time through the
Closing Date in accordance with the terms of this Agreement;
(i) Each and every Encumbrance of the type referred
to in Section 3.2 below identified to Purchaser prior to Closing as
contemplated therein and not objected to by Purchaser in writing within
the time allowed in that Section or otherwise waived by Purchaser as
provided at the end of Section 3.2(a); as well as each mechanic's lien,
if any, arising from or relating to Modified Phase V A Work for which
Seller, after using commercially reasonable efforts as required by
Section 10.4(c), has not been able to obtain a lien waiver (except with
respect to any mechanics lien arising from or related to Modified Phase
V A Work to the extent paid by Seller prior to February 28, 1999);
(j) Any public record filings by mechanics and other
workmen employed by Qualifying Tenants at their expense to provide
services at the Premises (to the extent, if any, that such filings
constitute Encumbrances); for purposes hereof a "Qualifying Tenant"
shall mean a Tenant that is occupying or scheduled to begin occupying
the Premises, is not subject to a proceeding in bankruptcy and is not
in default on the payment of any amounts owed under its Lease; and
(k) Any liens, encumbrances or other defects or
exceptions to title insurance coverage caused by Purchaser, by any of
its Affiliates, by any of their respective agents, employees or other
representatives or by Seller at Purchaser's request.
3.2 Title Defects.
(a) Certain Exceptions to Title. If any update of
Seller's Title Report or if the Updated Survey shall disclose any
matter adversely affecting the Property, including any
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mortgages, claims, charges, liens, encumbrances, restrictions, options,
conditional sales agreements, pledges, calls, commitments, security
interests, and other restrictions (collectively, "Encumbrances") or any
encroachments, changes in the boundaries of the Premises (as compared
to Preliminary Surveys) or other survey defects that are not Permitted
Exceptions and that adversely affect (i) Seller's title to the Owned
Land or the Ground Leased Land (ii) Seller's ability to complete the
Modified Phase V A Work, or (iii) the current or future use of any
portion of the Premises in a manner consistent with Seller's use of the
Premises as of the date of this Agreement (all such Encumbrances and
other encroachments, changes and other survey defects, herein
collectively referred to herein as "Other Exceptions"), then Purchaser
within ten (10) days after Purchaser first receives notice thereof or
such lesser time as remains between such receipt and the Closing Date
shall have the right to object in writing to such Other Exception.
Unless Purchaser notifies Seller in writing that it objects to an Other
Exception within the foregoing time period, each such Other Exception
shall be deemed to constitute an additional Permitted Exception. Other
Exceptions to which Purchaser timely objects shall be herein
collectively referred to as "Subsequent Title Objections". Seller may
elect to Remove (as defined below), at Seller's expense, any Subsequent
Title Objection, but Seller shall not be obligated to Remove any
Subsequent Title Objection other than a Mandatory Removal Objection. As
used herein, the term "Mandatory Removal Objection" shall mean any
Subsequent Title Objection that is a mortgage lien caused by Seller, a
judgment or other lien that secures or relates to a payment obligation
of Seller or any Tenant that is not a Qualifying Tenant (as opposed to
any other third party) or any Other Exception created by Seller or
arising from any action or omission of Seller without Purchaser's
consent. Seller shall be entitled by notice to Purchaser to defer the
Closing for such period (not to exceed forty-five (45) days) as Seller
deems necessary to Remove any Subsequent Title Objection whether or not
Removal is required by the preceding sentence. Seller shall notify
Purchaser in writing within ten (10) days after receipt of Purchaser's
notice of a Subsequent Title Objection (x) whether Seller intends to
seek to Remove the objection (to the extent such objection is not a
Mandatory Removal Objection) and (y) whether Seller anticipates that
Removal will require any deferral of the Closing. If Seller is unable
to Remove an Initial Title Report Objection or a Mandatory Removal
Objection, or is unable or unwilling to Remove a Subsequent Title
Objection (other than a Mandatory Removal Objection) prior to the
Closing, as the same may be extended as permitted herein, then in
either case Purchaser may elect (1) to terminate this Agreement (in
which event the Escrow Agent shall refund the Deposit together with any
interest earned thereon to Purchaser and, thereafter, the parties shall
have no further rights or obligations hereunder, except as provided in
any section hereof that by its terms expressly provides that it
survives any termination of this Agreement), or (2) to close the
transactions contemplated hereby and, to the extent (x) such Initial
Title Report Objection or Subsequent Title Objection constitutes an
Encumbrance arising due to Seller's failure to pay a definite and
ascertainable amount when due and (y) such can be discharged solely by
the payment of money, Purchaser shall receive a credit to Purchase
Price equal to the amount required to discharge such Encumbrance,
provided, however, that the maximum adjustment to the Purchase Price to
which Purchaser shall be entitled pursuant to this Section 3.2(a)(2)
for any and all such Encumbrances (other than those Encumbrances caused
by Seller without Purchaser's consent and not in furtherance of
Seller's obligations under Section 10.4, as to which there shall be no
upper limit) shall not exceed $1,000,000, or (3) to the extent such
Initial Title Report Objection or Subsequent Title Objection may not be
discharged solely by the payment of money as set forth in (2) above
(whether because the Encumbrance is not susceptible of cure solely by
the payment of money or because the amount of such eligible Encumbrance
when taken with all other such Encumbrances would exceed the dollar
limitation in clause (2) above), to waive such Initial Title Report
Objection or Subsequent Title Objection, in which event the objection
shall become a Permitted Exception and
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the Closing shall occur as herein provided without any reduction of or
credit against the Purchase Price in respect thereof.
(b) Discharge of Title Objections. At or prior to the
Closing, as the same may be extended pursuant to Section 3.2(a), Seller
shall use commercially reasonable efforts to Remove any and all
Subsequent Title Objections which Seller has elected to Remove by
written notice to Purchaser. As used in this Agreement the term "Title
Objection" shall refer to and include any Initial Title Report
Objection, any Mandatory Removal Objection and any Subsequent Title
Objection, and the term "Remove" shall mean that Seller in its
discretion and at its sole cost and expense shall (a) take such actions
as may be necessary to eliminate (of record or otherwise, as
appropriate) the Title Objection, (b) cause the Title Company to remove
the Title Objection as an exception to title in the Title Policy or to
insure against the same, in each case without any additional cost to
Purchaser, whether such insurance is made available in consideration of
payment, bonding, indemnity of Seller or otherwise, or (c) deliver its
own funds to the Title Company with instructions for the Title Company
to apply such funds to discharge fully the Title Objection, together
with such instruments, in recordable form, as are necessary to enable
the Title Company to discharge the Title Objection of record and funds
necessary to cover the fees and expenses of the Title Company for
discharging the claim and recording or filing such instruments.
(c) Updated Survey. Purchaser acknowledges that it
has received and reviewed each of the Preliminary Surveys and hereby
confirms that the conditions shown on those surveys are acceptable to
Purchaser. Within 30 days of the date of this Agreement, Seller shall
deliver to Purchaser for its review the Updated Survey. Purchaser shall
have the right to object to any new matters set forth in the Updated
Survey in accordance with the provisions of Section 3.2(a) above,
except that Purchaser shall not have the right to object to any such
new matters unless they constitute Other Exceptions and were not set
forth in the Preliminary Surveys.
(d) Title and Survey Costs. Purchaser and General
Partner agree that they will pay all costs in connection with the
preparation and issuance of the Seller's Title Report, the Title
Policy, the Preliminary Surveys and the Updated Survey.
ARTICLE IV
APPORTIONMENTS AND OTHER ADJUSTMENTS
4.1 General. Except as provided in Section 4.3 hereof, the
following items with respect to the Property shall be apportioned as of 11:59
p.m. H.S.T. on the day immediately preceding the Closing Date (the "Adjustment
Point"):
(a) Real estate taxes and assessments. Real estate
taxes and assessments (and refunds thereof, to the extent not payable
to Tenants) on the basis of the fiscal year or fiscal years for which
assessed. If the Closing shall occur before a new real property tax
rate or assessed valuation is fixed, the apportionment of real estate
taxes at Closing shall be upon the basis of the old tax rate for the
next-preceding fiscal year applied to the latest assessed valuation.
Promptly after the actual real estate taxes have been fixed, the
apportionment of taxes shall be recomputed and Seller or Purchaser, as
the case may be, promptly upon demand shall make a payment to the other
based upon the recomputed apportionment. In addition, if any real
property assessment
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affects any of the Premises at the Closing Date and such real property
assessment is payable in annual or other installments (whether at the
election of Seller or otherwise), only the installment relating to, or
payable over, the fiscal period of the assessing authority, part of
which is included within the period prior to the Closing Date and part
of which is included in the period after the Closing Date, shall be
apportioned between Seller and Purchaser as of the Adjustment Point. No
apportionment shall be made in respect of any real estate taxes or
assessments which are payable by any Tenant directly to the applicable
governmental or other authority pursuant to the terms of its Lease,
unless the Tenant is not current in its payment obligations under its
Lease on the Closing Date.
(b) Utilities. Utilities and fuel charges, including,
without limitation, water, sewer, steam, electricity, gas and oil
charges, on the basis of current bills and readings obtained by Seller
within thirty (30) days prior to the Adjustment Point (or, if none, on
the basis of the most recent previous bills and readings); provided,
that upon the taking of subsequent actual readings that are as of a
date closer in time to the Closing Date than the date of the readings
used to determine the adjustment made at the Closing pursuant to this
sentence, then such adjustment shall be recalculated based upon the
subsequent readings, and Seller or Purchaser, as the case may be,
promptly upon demand, shall make any necessary compensating payments to
the other party. No apportionment shall be made in respect of any
utility or fuel, the charges for which are payable by any Tenant
directly to the provider of such utility pursuant to the terms of its
Lease, unless the Tenant is not current in its payment obligations
under its Lease on the Closing Date.
(c) Escrows and Deposits. All escrows or similar
deposits, if any, made by Seller as security under any public service
contracts which will remain on deposit for the benefit of Purchaser
after the Closing to the extent such escrows or similar deposits are
assigned to Purchaser.
(d) Rents. Rents (other than Percentage Rents which
will be apportioned as provided in Section 4.1(d)(v) and Tax and
Operating Expense Reimbursements which shall be apportioned as provided
in Section 4.3), including prepaid Rents and unpaid Rents as and when
collected. The word "Rents", as used in this Agreement, shall include,
without limitation, (i) fixed monthly rents and other fixed charges
(the "Fixed Rents") payable by Tenants and occupants (including former
Tenants and occupants) of the Premises under the Leases relating to the
Premises that are listed on Schedule 1.1(vi) or that are entered into
subsequent to the date of said schedule and prior to the Closing Date
in accordance with Article X of this Agreement, (ii) percentage or
overage rents and other charges and amounts payable by Tenants based
upon their sales or receipts at or from the Premises ("Percentage
Rents"), (iii) amounts payable by Tenants on account of real estate
taxes and assessments or increases therein, mall maintenance charges,
common area maintenance, operating costs or increases therein,
insurance charges and the like ("Tax and Operating Expense
Reimbursements"), and (iv) rents or other charges payable by Tenants
for services of any kind provided to them (including, without
limitation, the furnishing of heat, electricity, gas, water, other
utilities and air-conditioning and the construction of store or mall
enclosures, capital improvements or repairs or other items) ("Tenant
Charge Reimbursements") for which a separate charge is made (the
amounts listed in clauses (ii) through (iv) above being hereinafter
collectively referred to as "Additional Rent"). The term "costs of
collection" shall mean and include reasonable attorneys' fees and other
costs incurred by Seller prior to the Closing Date or Purchaser after
the Closing Date, as the case may be, in collecting any
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Rents but shall not include the regular fees payable to Manager.
(i) Any Rents (other than Percentage Rents
and Tax and Operating Expense Reimbursements, which are
apportioned as provided in Section 4.1(d)(v) and Section 4.3
respectively) collected subsequent to the Closing (whether due
and payable prior or subsequent to the Adjustment Point) which
(as determined pursuant to the further provisions of this
Subsection 4.1(d)) relate partly to periods prior to the
Closing, and any such Rents collected prior to the Closing
which (as determined pursuant to the further provisions of
this Subsection 4.1(d)) relate partly to periods after the
Closing, shall be adjusted as of the Adjustment Point, with
any portion thereof properly allocable (as determined pursuant
to the further provisions of this Subsection 4.1(d)) to
periods prior to the Adjustment Point, net of costs of
collection, if any, to be retained by Seller or paid to Seller
promptly after receipt by Purchaser, subject, however, to the
further provisions of this Subsection 4.1(d), and any portion
thereof properly allocable (as determined pursuant to the
further provisions of this Subsection 4.1(d)) to periods
subsequent to the Adjustment Point to be retained by Purchaser
or paid to Purchaser promptly after receipt by Seller. Any
rents collected prior to the Closing that relate partly to
periods after the Closing shall be apportioned between Seller
and Purchaser.
(ii) Schedule 4.1(d)(ii) lists, as of its
date, all Tenants that are delinquent in payment of Rents or
have made prepayments of Rents, the amount of each such
delinquency or prepayment, the period to which each such
delinquency or prepayment relates and the nature of the amount
due, itemizing separately Fixed Rents and the specific items
and amounts of Additional Rent as to which each such
delinquency or prepayment exists. For purposes of this
Subsection 4.1(d)(ii), a Tenant (i) shall be deemed to be
delinquent in the payments of any Rents if such Rents have not
been paid and it is ten (10) or more days after the initial
due date thereof and (ii) shall be deemed to have made a
prepayment of any Rents if such Rents are paid prior to the
initial due date thereof. An update of such schedule, as of a
date as close as possible but in no event more than five (5)
Business Days prior to the Closing Date, shall be delivered by
Seller to Purchaser at the Closing.
(iii) If, with respect to Fixed Rents or any
component of Additional Rent under any Lease, the Tenant is
not more than one (1) month delinquent as of the Closing Date,
then any amount collected by or on behalf of Purchaser
subsequent to the Closing from such Tenant on account of such
Fixed Rents or component of Additional Rent shall be deemed to
have been paid as directed by the Tenant in writing
concurrently with such payment and in the absence of such
direction shall be deemed to have been paid first on account
of the month in which the Closing occurs, and then, if any
portion of such amount is remaining, on account of payments of
such Fixed Rents or component of Additional Rent due and
payable after the Closing. If, with respect to any Fixed Rents
or any component of Additional Rent under any Lease, the
Tenant is more than one (1) month delinquent as of the Closing
Date, then any amount collected by or on behalf of Purchaser
subsequent to the Closing from such Tenant on account of such
Fixed Rents or component of Additional Rent shall be deemed to
have been paid as directed by the Tenant in writing
concurrently with such payment and in the absence of such
direction shall be deemed to have been paid first on account
of payments of such Fixed Rents or
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component of Additional Rent due and payable no later than the
date of receipt of such amount (including payments due on or
prior to the Closing Date but not paid as of the date of the
Closing and payments due after the Closing Date but not later
than the date of receipt of such amount), but only to the
extent relating to periods subsequent to the Adjustment Point;
then, if any portion of such amount is remaining, on account
of the foregoing payments to the extent relating to periods
prior to the Adjustment Point; and finally, if any portion of
such amount is remaining, on account of prepayments of such
Fixed Rents or component of Additional Rent.
(iv) Payments of Rents received after
Closing (other than Rents collected pursuant to Section
4.4(b)) shall be deemed to have been made as directed by the
Tenant in writing concurrently with such payment and in the
absence of such direction shall be deemed to have been made by
the Tenant first to the payment of Fixed Rent, second to the
payment of Percentage Rents, third to the payment of Tenant
Charge Reimbursements, fourth, to payment of Tax and Operating
Expense Reimbursements and last to the payment of any other
items of Rent payable by such Tenant.
(v) Notwithstanding anything to the contrary
set forth in this Subsection 4.1(d), it is agreed that
Percentage Rents shall be apportioned on the following basis:
(x) at the Closing, Percentage Rents shall not be adjusted and
(y) following the end of the fiscal year on account of which
such Percentage Rents are payable by each Tenant and receipt
by Purchaser of any final payment on account thereof due from
such Tenant, Purchaser shall pay to Seller the excess, if any,
of (A) the amount of Percentage Rents actually paid by such
Tenant on account of such entire fiscal year, net of costs of
collection, if any, multiplied by a fraction, the numerator of
which is the number of days of such fiscal year subsequent to
the commencement and prior to expiration or termination of the
Lease which occurred prior to the Adjustment Point and the
denominator of which is the total number of days in such
fiscal year subsequent to the commencement and prior to the
expiration or termination of the Lease in question, over (B)
all amounts theretofore received by Seller on account of the
Percentage Rents in question for such fiscal year. If in any
case the amount provided for in (B) above exceeds the amount
provided for in (A) above, Seller shall pay the amount of such
excess to Purchaser on demand. Except as provided in Section
4.3, the provisions of this Subsection 4.1(d)(v) shall also
apply with respect to payments made by Tenants on an annual
basis as adjustments to amounts theretofore paid by them on
account of other components of Additional Rent.
(e) Advance Deposits. Any advance rental deposits
with respect to the Leases held by Seller on the Closing Date and
applicable to periods of time subsequent to the Closing, and any
security deposits held by Seller on the Closing Date (together with the
interest, if any, earned thereon for the account of any Tenant), shall
be delivered to Purchaser. Seller shall be entitled to its share of
interest earned on any such deposits for the account of Seller (i.e.,
to the extent not payable to the relevant Tenant under the term of its
Lease) up to the Adjustment Point.
(f) Promotional Fund Payments. Marketing expenses,
and amounts payable by or to Seller to or from the merchants
association for the Ala Moana Center. If Seller is holding any funds
collected by it from Tenants specifically for promotional or marketing
activities (other than funds held by a merchants association, which
shall remain the property of such
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association), Seller shall transfer such funds to Purchaser at Closing
and Purchaser shall accept such funds and shall assume responsibility
for holding such funds under the same arrangements as were applicable
to Seller prior to Closing.
(g) Equipment Lease Payments. Amounts payable under
the Equipment Leases if such leases are being assumed by Purchaser and
are to continue after the Closing.
(h) Service Contracts. Fees and regular charges
payable under the Service Contracts and other agreements to which
Seller, or Manager, on behalf of Seller, is a party and relating to
Seller's operations at the Premises if such agreements are being
assumed by Purchaser and are to continue after the Closing.
(i) Brokerage Commissions. All commissions and other
amounts due and payable to any brokers, agents, finders or similar
persons ("Brokers") on account of (i) the execution of any Lease or any
amendment or renewal thereof, (ii) the exercise by any Tenant of a
renewal or expansion option contained in a Lease, (iii) the failure by
any Tenant to exercise any termination or cancellation option contained
in a Lease or (iv) any other event relating to any Lease, regardless of
whether such amounts first become due before or after the Adjustment
Point. For purposes of this Subsection 4.1(i), all such commissions and
other amounts payable in respect of the initial terms of Leases signed
on or prior to April 29, 1999 and the Lease renewals and prospective
Leases identified on Schedule 4.1(i) hereto (collectively, the
"Underwritten Leases") shall be deemed to relate to periods prior to
the Adjustment Point (and Seller shall be liable to pay the same), and
all other such commissions and other amounts (regardless of when such
amounts actually become payable) shall be deemed to relate to periods
after the Adjustment Point (and Seller shall not be obligated to pay
any portion thereof). The provisions of this Subsection 4.1(i) shall
also apply to costs of Tenant Work (as defined in Subsection 10.1)
other than Tenant Work comprising Modified Phase V-A Work, or
allowances in lieu thereof, payable under such Leases, and legal fees
and disbursements of Seller and Purchaser relating thereto.
(j) Ground Lease Payments. Rents and other amounts
payable under the Ground Lease.
(k) Ground Lease Deposit. Seller shall receive
payment from Purchaser of the full amount of the security deposit made
by Seller (or any predecessor tenant) and still outstanding under the
Ground Lease.
(l) Deferred Lease Premiums/Other Leasing Charges.
Seller shall receive payment from the Purchaser of all amounts paid by
Tenants after Closing as deferred lease premiums or so-called "key
dollars" in respect of Underwritten Leases as and when such amounts are
received by Purchaser (this obligation shall survive the Closing and
the 18-month time limit set forth in Section 4.2). In addition, if and
to the extent that following Closing Purchaser collects amounts known
as a "barricade charge" from a new Tenant and Seller paid the expense
of installing the barricade to which such charge relates, Seller shall
be entitled to reimbursement in an amount equal to one half of the
amount collected by Purchaser.
(m) Annual Fees. Annual permit, license and
inspection fees, if any, on the basis of the fiscal year for which
levied, if the rights with respect thereto continue for the benefit of
Purchaser following the Closing.
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(n) Gift Certificates. Purchaser shall receive a
credit from Seller for the aggregate face amount of all gift
certificates issued by Seller in respect of the Property prior to the
Closing that have not been redeemed on or before Closing, and
thereafter Seller shall be entitled to retain for its own account all
funds then held by it in respect of such gift certificates. In
addition, at Closing, Purchaser shall become responsible for redeeming
all then-outstanding gift certificates and, to the extent required by
law, delivering any unclaimed funds collected in respect of outstanding
gift certificates to the appropriate Governmental Entity as and when
required by law, and Purchaser agrees to indemnify and hold Seller
harmless from and against any claims by any Person or Governmental
Entities relating to such gift certificates or amounts collected or
payable in respect thereto.
(o) Lease Termination Payments. Lease termination
payments made to Seller by Tenants during the period between the date
hereof and the Closing Date shall be apportioned between Seller and
Purchaser, with Purchaser receiving a credit in an amount equal to the
total Lease termination payment multiplied by the quotient of (A) the
number of days between the Closing Date and scheduled expiration of the
Lease term in force on the date of termination, divided by (B) the
number of days between the termination of the related Lease and the
scheduled expiration of the Lease term in force on the date of
termination. Any such Lease termination payments owing as of Closing in
respect of a termination that occurred prior to Closing shall be
apportioned as and when collected in accordance with the principles set
forth in this paragraph (o).
(p) Seller shall be entitled to a reimbursement from
Purchaser of the amount of the prepayment Seller has made with respect
to the Premises' 1999 Christmas ornaments (which amount is expected to
be approximately $365,000) as and when the ornaments are delivered to
Purchaser.
(q) Other Items. Any other operating expenses and any
other items relating to the Property which, in accordance with
generally accepted accounting principles and business practices,
customarily would be apportioned between sellers and buyers of real
estate.
4.2 Post-Closing Adjustments. To the extent that any of the
prorations made on the Closing Date pursuant to this Article IV are based upon
estimates of payments to be made to and/or expenses to be paid by Purchaser or
Seller subsequent to the Closing Date which later prove inaccurate or otherwise
are determined by either party to have been erroneously made, and the aggrieved
party has notified the other party hereto of the specific inaccuracy or other
error on or before the last Business Day of the eighteenth (18th) calendar month
following the month in which the Closing occurs, Seller and Purchaser agree to
adjust such prorations promptly upon receipt by Seller or Purchaser, as the case
may be, of bills or other documentation setting forth the actual and/or correct
amount of such payments or expenses.
4.3 Tax and Operating Expense Reimbursements. The portion of
Rents consisting of Tax and Operating Expense Reimbursements shall be
apportioned, after the end of the Applicable Closing Fiscal Period, on the same
fiscal basis as such Rents are calculated under the applicable Leases, so that
the amount thereof under each of the Leases to which Seller shall be entitled,
as finally determined, shall be the entire amount thereof with respect to any
fiscal period ending prior to the Closing Date, and, for the Applicable Closing
Fiscal Period, an amount which bears the same ratio to the total Tax and
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Operating Expense Reimbursements actually collected in respect of the applicable
Lease for the Applicable Closing Fiscal Period as the number of days in said
current fiscal period subsequent to the commencement and prior to the
termination of the Lease in question which shall have elapsed prior to the
Closing Date bears to the total number of days in the Applicable Closing Fiscal
Period subsequent to the commencement and prior to the termination of the Lease
in question. Upon any such apportionment, a settlement in cash shall be made by
the party who previously received amounts in excess of the amount to which it is
entitled on the basis of the final apportionment to the other party.
4.4 Collection of Rents.
(a) Purchaser shall bill all delinquencies existing at Closing
monthly and shall use commercially reasonable efforts to enforce and cause to be
enforced the collection of all unpaid Tax and Operating Expenses Reimbursements,
Percentage Rents and other Rents which are payable with respect to the
Applicable Closing Fiscal Period and any prior fiscal period, but Purchaser
shall not be required to commence litigation, commence an adversary proceeding
in a bankruptcy case or terminate Leases in connection with such collection
efforts. Purchaser shall not waive or settle any claims for any such amounts in
whole or in part to the extent such amounts, if collected, would be payable to
Seller hereunder without the prior written consent of Seller (which consent
shall not be unreasonably withheld). Costs of collection shall be charged
against amounts collected and charged to the parties hereto in the proportion in
which each is entitled to the proceeds of such collection. Purchaser shall
provide to Seller semi-annual reports after Closing with respect to the
collection by Purchaser after Closing of any such amounts which are payable with
respect to the Applicable Closing Fiscal Period and any prior fiscal period.
(b) Seller shall have the right to seek collection of any Rent
delinquencies owed to it and not collected by or on behalf of it within six (6)
months following the Closing Date; provided, however, that in seeking to collect
any such Rent delinquencies, Seller shall not be entitled to terminate any Lease
or otherwise seek any remedy which could materially affect or impact the
Property or the ownership or operation thereof other than a money judgment
against the delinquent Tenant. Purchaser shall not be required to join in any
such actions or proceedings commenced by Seller unless the provisions of any
law, rule or regulation at the time in effect shall require that such actions or
proceedings be brought by and/or in the name of Purchaser, in which event
Purchaser shall join and cooperate in such actions or proceedings or permit the
same to be brought by Seller in Purchaser's name but Seller shall pay all costs
of collection relating thereto, including without limitation Purchaser's
reasonable legal fees in reviewing pleadings and other materials filed in
connection with such litigation.
(c) Notwithstanding anything to the contrary contained herein,
Purchaser shall have the right at any time on or after the Closing, and whether
or not its joinder shall be required as a matter of law, to join in, or to be
substituted for Seller in, any proceedings for the eviction of Tenants and/or
the collection of Rent which may have been instituted by Seller either prior to
or after the Closing if the Tenant in question is still in possession of the
premises covered by its Lease and if, in connection therewith, Purchaser intends
to seek eviction of such Tenant, cancellation of the Lease or repossession of
the leased premises. If Purchaser joins in, or is substituted for Seller as
plaintiff in any such litigation, Purchaser shall, thereafter, assume sole
liability for all costs and expenses of such litigation, including legal fees
and expenses, as may thereafter be incurred (except as provided below) and shall
thereafter control all aspects of such proceedings, except that Purchaser shall
not be entitled to waive, reduce or otherwise compromise any claims for Rent
relating to any period prior to Closing without the prior written consent of
Seller (which consent shall not be unreasonably withheld). Seller in any event
may, at its option, continue to
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participate in such litigation. In any event, Seller shall reimburse Purchaser
for a pro rata portion of its costs and expenses of such collection in
proportion to, but in no event in an amount greater than, the amount, if any,
actually received by Seller after Closing as a result of such proceedings;
provided, however, Seller shall be entitled to a credit for reasonable legal
fees and expenses incurred by Seller prior to the intervention by Purchaser in
connection with the proceedings previously instituted by Seller in connection
with such collection efforts.
4.5 Additional Credits. In addition to the other adjustments
provided for herein, at Closing Purchaser shall receive credit for each of the
items set forth on Schedule 4.5.
4.6 Inspection of Books and Records. Seller shall have the
right from time to time during the first twenty-four (24) months following the
Closing to examine and audit so much of the books and records of Purchaser (or
any property manager therefor) as may relate to Rent delinquencies, any items of
income or expense or any other items that are the subject of adjustments
pursuant to this Agreement in order to verify the collections or other proper
treatment thereof; provided, that Seller gives Purchaser not less than 5 days
advance written notice of such examination and that it is conducted at Seller's
expense during normal business hours at the place or places where such books and
records are regularly maintained by Purchaser. Seller agrees that it will treat
as confidential and will not disclose or use any information obtained by it in
connection with any such inspection, except for disclosure to the persons or in
the circumstances permitted in Section 11.11(a) and as necessary for Seller to
enforce its rights under this Agreement.
4.7 Survival. The provisions of this Article IV shall survive
the Closing for the period set forth in Section 4.2 or such longer period as is
expressly provided herein (e.g., Section 4.1(l) and Section 4.6).
ARTICLE V
CLOSING
5.1 Closing. Subject to the remainder of this Section, the
Closing shall take place at the office of Carlsmith Ball, Pacific Tower, Suite
2200, 1001 Bishop Street, Honolulu, Hawaii 96813, at and as of 11:00 AM, H.S.T.
on Friday, July 30, 1999, or at such other time, date or place as may be
mutually agreed upon by Seller and Purchaser (the "Initial Scheduled Closing
Date"). Seller shall have the right, by delivering written notice to Purchaser
on or before ten (10) days prior to the Initial Scheduled Closing Date, to
extend or adjourn the Closing Date to a date (the "Subsequent Scheduled Closing
Date") not later than sixty (60) days after the Initial Scheduled Closing Date
if Seller determines in its judgment that such adjournment is necessary to
enable Seller to satisfy the conditions to Closing set forth in Section 6.1 (and
Purchaser and General Partner have not waived any of the conditions in issue),
such right being in addition to any other adjournment right provided for in this
Agreement. On or before the twentieth day preceding the Initial Scheduled
Closing Date, Seller shall provide Purchaser with a good faith assessment of
whether Seller will be unable to satisfy any of the conditions to Closing set
forth in Section 6.1 and the circumstances surrounding such potential inability;
provided, however, that Seller's estimate shall not in any way impair Seller's
right to extend or adjourn the Closing beyond the Initial Scheduled Closing
Date. As used in this Agreement, the term "Closing" shall mean the transfer and
assignment of the Property by Seller to Purchaser and the performance by each
party of the obligations on its part then to be performed under and in
accordance with the terms of this Agreement, and the term "Closing Date" shall
mean the date on which the Closing is to occur as provided in the preceding
sentences, as the same may be extended by
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Seller pursuant to any other provision of this Agreement. Seller and Purchaser
shall conduct a "pre-closing" commencing on the second Business Day preceding
the Closing Date. Effective upon delivery of the Deed, actual and exclusive
possession of the Property (subject only to the Permitted Exceptions) and risk
of loss to the Property shall pass from Seller to Purchaser. It is expressly
agreed by Seller, Purchaser and General Partner that time is of the essence with
respect to the parties' respective obligations to close this transaction on the
Closing Date.
5.2 Closing Deliveries by Seller. At the Closing, Seller shall
execute, acknowledge where appropriate, and deliver or cause to be delivered to
Purchaser each of the following instruments and documents:
(a) Deed of Transfer. A quitclaim deed without
covenants in the form set forth in Exhibit D annexed hereto (the
"Deed"), duly executed by Seller and acknowledged and conveying title
to the Owned Land to Purchaser free of all liens and encumbrances other
than the Permitted Exceptions.
(b) Bill of Sale. A bill of sale in the form of
Exhibit E attached hereto (the "Bill of Sale"), duly executed by Seller
and acknowledged and conveying all of Seller's right, title and
interest in and to the Equipment.
(c) Assignment of Leases. An assignment and
assumption agreement in the form attached hereto as Exhibit F (the
"Assignment of Leases"), duly executed and acknowledged by Seller,
pursuant to which Seller shall assign to Purchaser and Purchaser shall
assume all of Seller's rights and certain of Seller's obligations under
the Leases and any guarantees and other documents, if any, related
thereto and the Security Deposits which, on the Closing Date, are held
thereunder.
(d) Blanket Assignment of Contracts and Other Similar
Rights. An assignment and assumption of the Service Contracts,
Construction Contracts, Unrecorded Agreements, Equipment Leases,
Intellectual Property, Permits, Warranties and Utility Deposits in the
form attached hereto as Exhibit G (the "Blanket Assignment of Contract
and Other Similar Rights"), pursuant to which Seller shall assign to
Purchaser and Purchaser shall assume all of Seller's rights and certain
of Seller's obligations under such agreements.
(e) Assignment of Ground Lease. An assignment and
assumption agreement in the form attached hereto as Exhibit H, (the
"Assignment of Ground Lease"), pursuant to which Seller shall assign to
Purchaser and Purchaser shall assume all of Seller's rights and certain
of Seller's obligations under the Ground Lease and any security deposit
which, as of the Closing Date, is held thereunder.
(f) Tenant Notices; Landlord Notice. A notice signed
by Seller advising the Tenant under each of the Leases in force at the
Closing Date of the consummation of the transactions contemplated by
this Agreement and directing the Tenant to pay rent to, or as otherwise
directed by, Purchaser; and a notice signed by Seller advising the
Landlords under the Ground Lease of the consummation of the transfer of
Seller's interests in the Ground Lease to Purchaser;
(g) Books and Records, Etc. To the extent the same
exist and are in Seller
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or Manager's possession, custody or control, each of the following:
(i) originals, if available, or copies of
all permits and other authorizations or approvals issued by
governmental authorities having jurisdiction over the
Premises.
(ii) originals, if available, or copies of
all books, records and files relating to the ownership,
operation and maintenance of the Premises; such books, records
and files shall include, without limitation, executed
counterparts of the Leases, the Ground Lease, the Service
Contracts, Unrecorded Agreements, paid bills, original
invoices, correspondence with tenants, schedules of rent
arrearage, current tax bills and annual water, sewer and
utility bills relating to the Premises; Purchaser agrees that
(i) it will preserve such books, records and files for at
least seven (7) years after the Closing and (ii) Seller and
its constituent partners and any regulatory authorities having
jurisdiction over any of them may, upon reasonable advance
written notice to Purchaser, have access to review and/or copy
such books, records and files at Seller's expense from time to
time after the Closing during normal business hours at the
place or places where they are regularly maintained by
Purchaser. Seller agrees that it will treat as confidential
and not disclose or use any information obtained by it in
connection with any such inspection, except for disclosure to
the persons or in the circumstances permitted in Section
11.11(a) and as necessary for Seller to enforce its rights
under this Agreement.
(iii) originals of any document or
instrument evidencing a security deposit posted by a Tenant,
if not cash, together with such instrument or other
endorsement as is necessary to transfer Seller's rights
therein to Purchaser.
(iv) originals, if available, or copies of
all Warranties relating to the Property.
(v) originals, if available, or copies of
all site plans and other construction documents, including the
"as-built" plans for the Premises.
(h) FIRPTA Affidavit/ State of Hawaii Form N-289. An
affidavit, in the form of Exhibit I-1 attached hereto, stating that
Seller is not a "foreign person" under Section 1445 of the Internal
Revenue Code of 1986, as amended (the "Internal Revenue Code"), and a
State of Hawaii Form N-289, in the form of Exhibit I-2 attached hereto,
certifying that Seller is not a "nonresident person", as that term is
used in Section 235-68, Hawaii Revised Statutes, as amended, and the
regulations relating thereto.
(i) Title Matters. A seller's certificate in the form
of Exhibit J attached hereto, and such other certificates (without
indemnity) and supporting documents as are customarily provided by
sellers of commercial real estate in Hawaii and are required by the
Title Company as a condition to the issuance to Purchaser, at
Purchaser's expense, of the title insurance policy referred to in
Section 6.1(d), including without limitation, to the extent an
affidavit is required by the Title Company to remove any Initial Title
Report Objection, such an affidavit.
(j) Certificates.
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(i) Certificates, issued by the State of
Hawaii Department of Commerce and Consumer Affairs and dated
not earlier than ten (10) Business Days prior to the Closing
Date, certifying as to the good standing of Seller and its
constituent general partners under the laws of Hawaii.
(ii) A duly executed certificate of the
secretary of Managing Venturer, dated as of the Closing Date,
certifying:
(A) that the Board of Directors and
stockholders of Managing Venturer have
adopted resolutions approving the
transactions contemplated hereby and
authorizing Managing Venturer to execute and
deliver, for and on behalf of Seller, this
Agreement and each other agreement and other
instrument necessary for the consummation of
the transactions contemplated by this
Agreement (which resolutions shall be
attached to or incorporated in such
certificate), that such action by the Board
of Directors of the Managing Venturer
constitutes the only authorization required
for such execution, delivery and
consummation by Managing Venturer; and it
has not been revoked or otherwise withdrawn
and remains in full force and effect.
(B) As to a true and complete copy
of Managing Venturer's certificate of
incorporation and by-laws, and Seller's
partnership agreement and amendments
thereto, and that the same have not been
amended (except as noted therein) and are in
full force and effect as of the Closing
Date, and also certifying as to the
incumbency of the officers of Managing
Venturer of Seller executing and delivering
this Agreement and the other documents and
instruments provided herein to be executed
and delivered by Seller.
(iii) (A) A duly executed certificate of the
secretary of Daiei Hawaii Investments, Inc., dated as of the
Closing Date, certifying that the Board of Directors and
Stockholders of Daiei Hawaii Investments, Inc. have adopted
resolutions approving the transactions contemplated hereby and
authorizing Daiei Hawaii Investments, Inc. to execute and
deliver, for and on behalf of Seller, this Agreement and each
other agreement and other instrument necessary for the
consummation of the transactions contemplated hereby (which
resolutions shall be attached to or incorporated in such
certificate), that such action by such Board of Directors
constitutes the only authorization required for such
execution, delivery and consummation by Daiei Hawaii
Investments, Inc.; and it has not been revoked or otherwise
withdrawn and remains in full force and effect.
(B) As to a true and complete copy of Daiei
Hawaii Investments, Inc.'s certificate of
incorporation and by-laws, and that the same have not
been amended (except as noted therein) and are in
full force and effect as of the Closing Date, and
also certifying as to the incumbency of the officers
of Daiei Hawaii Investments, Inc. executing and
delivering this Agreement and the other documents and
instruments provided herein to be executed and
delivered by Daiei Hawaii Investments, Inc.
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(iv) A duly executed certificate of Seller,
dated as of the Closing Date, certifying that each of the
representations and warranties of Seller contained in Section
7.2 of this Agreement was true and correct as and when made
and that each of such representations and warranties is true
and correct as if remade on and as of the Closing Date (with
appropriate modifications of those representations and
warranties contained in Sections 7.2 to reflect actions taken
by or on behalf of Seller in accordance with the provision of
Article X or identifying any representation or warranty which
was not or no longer is true and correct and explaining the
state of facts giving rise to the change). In no event shall
Seller be deemed to be in default hereunder by reason of any
breach of representation or warranty which results from any
change that (a) occurs between the date hereof and the Closing
Date, (b) is identified in reasonable detail on the
certificate described in this Subsection 5.2(j)(iv) and (c)
arose by virtue of actions on Seller's or Purchaser's part
that were taken or not taken in accordance with the provisions
of Article X; provided, however, that the occurrence of any
such change that does not result in a Seller default may
constitute the non-fulfillment of the condition set forth in
Section 6.1(b). If, despite changes or other matters described
in such certificate, the Closing occurs, Seller's
representations and warranties set forth in this Agreement
shall be deemed to have been modified by all statements made
in such certificate. Seller's liability under such certificate
shall be subject to the limitations and time restraints set
forth in Section 7.3 and in Article VIII.
(k) Consents. Copies of such written consents to
assignment of Service Contracts and any other similar agreements
relating to the Property and identified by Purchaser to Seller in
writing, if any, as Seller after employing commercially reasonable
efforts is able to obtain from any other party to a Service Contract
(which efforts shall not require the payment of monies or the
incurrence of any liabilities on the part of Seller or Purchaser).
(l) Keys. Keys to all entrance doors to, Tenant
spaces located in and equipment and utility rooms located in, the
Premises, to the extent such keys are in the possession of Seller or
its agents.
(m) Unexpired Warranties. Originals, if available, or
copies of all unexpired Warranties, to the extent the same are in
writing, are in the possession of Manager and are transferable to
Purchaser.
(n) Termination of Management Agreement. Evidence of
the termination of the management agreement between Seller and Manager
effective as of the Closing Date and in accordance with its terms and
effective as of the Closing Date (it being understood that such
termination shall not be deemed to eliminate any payment or other
obligations of Seller that, by the terms of the Management Agreement,
survive its termination).
(o) Repayment of Loans.
(i) Evidence of release and satisfaction in
full of that certain Real Property Mortgage and Financing
Statement, Document No. 2491668, recorded in the Office of the
Assistant Registrar of the Land Court of the State of Hawaii
on October 9,
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1998, and any related financing statements and other security
agreements granted by Seller to the lenders for whose benefit
said mortgage was granted and recorded against the Land Court
records for any portion of the Premises, and similar evidence
of release and satisfaction in full with respect to any other
financings secured by the Premises that Seller may enter into
prior to Closing.
(ii) Evidence of release and satisfaction in
full of any other secured financing relating to the Property
that is to be discharged at or prior to Closing.
Notwithstanding the foregoing, the above-mentioned loans may
be repaid from the Purchase Price at Closing.
(p) Estoppels. Each of the Estoppel Certificates
referred to in Section 10.3 and received by Seller prior to Closing (to
the extent not previously delivered to Purchaser).
(q) Bulk Sale Tax Clearance Certificate. A bulk sales
tax clearance certificate, dated not earlier than five (5) Business
Days before Closing and issued by the Department of Taxation of the
State of Hawaii for Seller in compliance with Section 237-43 of the
Hawaii Revised Statutes.
(r) Conveyance Tax Certificate. State of Hawaii Form
P-64A, in the form of Exhibit L attached hereto, appropriately
completed and executed by Seller.
(s) Other Documents, etc. All other instruments and
documents, if any, required to be executed, acknowledged and/or
delivered by Seller to Purchaser pursuant to and in accordance with any
of the other provisions of this Agreement and such other documents or
instruments as Purchaser reasonably may request to effect the
transactions contemplated in this Agreement without further expense or
liability to Seller.
5.3 Closing Deliveries by Purchaser. At the Closing, Purchaser
shall execute, acknowledge, where appropriate, and deliver to Seller the
following agreements, instruments and payments:
(a) Purchase Price. The Purchase Price, payable in
the manner provided for in Section 2.1 of this Agreement.
(b) Assignments. Counterparts of the Assignment of
Leases, the Blanket Assignment of Contract Rights, and the Assignment
of Ground Lease, each duly executed by Purchaser.
(c) Certificates.
(i) Certificates issued by the Secretary of
State of the State of Delaware and dated not earlier than ten
(10) days prior to the Closing Date, certifying as to the good
standing of Purchaser and General Partner under the laws of
said State.
(ii) A duly executed certificate of the
Secretary of General Partner, dated as of the Closing Date,
certifying;
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(A) That the board of directors of General
Partner has adopted resolutions approving the
transactions contemplated hereby and authorizing
General Partner on its behalf and as general partner
of Purchaser, to execute and deliver this Agreement
and each other agreement and other instrument
necessary for the consummation of the transactions
contemplated by this Agreement (which resolutions
shall be attached to or incorporated in such
Certificate), that such action by General Partner's
board of directors, together with any other
authorization as set out in such certificate,
constitutes the only authorization required for such
execution, delivery and consummation by Purchaser and
General Partner, as the case may be; and it has not
been revoked or otherwise withdrawn and remains in
full force and effect.
(B) As to a true and genuine copy of
General Partner's certificate of
incorporation and by-laws, and Purchaser's
partnership agreement, and that the same
have not been amended (except as noted
therein) and are in full force and effect as
of the Closing Date, and also certifying as
to the incumbency of the officers of General
Partner executing and delivering this
Agreement and the other documents and
instruments provided herein to be executed
and delivered by Purchaser and/or General
Partner.
(iii) A certificate of Purchaser and General
Partner, dated as of the Closing Date, certifying that each
representations and warranties of Purchaser and General
Partner contained in this Agreement are true and correct in
all material respects as if remade on and as of the Closing
Date.
(d) Conveyance Tax Certificate. State of Hawaii Form
P-64A, in the form of Exhibit L attached hereto, appropriately
completed and executed by Purchaser.
(e) Notice of Purchase. State of Hawaii Form D-37, in
the form of Exhibit M attached hereto, appropriately completed and
executed by Purchaser; and
(f) Other Documents, Etc. All other instruments and
documents, if any, required to be executed, acknowledged and/or
delivered by Purchaser to Seller pursuant to and in accordance with any
of the other provisions of this Agreement and such other documents or
instrument as Seller reasonably may request to effect the transactions
contemplated in this Agreement without further expense or liability to
Purchaser or General Partner.
ARTICLE VI
CONDITIONS PRECEDENT TO CLOSING
6.1 Conditions Precedent to Obligation of Purchaser and
General Partner. The obligation of Purchaser and General Partner to consummate
the purchase of the Property shall be subject to the fulfillment on or before
the Closing Date of all of the following conditions, any or all of which may be
waived by Purchaser and General Partner in their sole discretion:
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(a) Delivery of Documents. Seller shall have
delivered to Purchaser all of the items required to be delivered to
Purchaser pursuant to Section 5.2.
(b) Accuracy of Representations and Warranties. Each
of the representations and warranties of Seller contained in Section
7.2 of this Agreement shall be true and correct as and when originally
made and as remade on and as of the Closing Date. Purchaser covenants
and agrees that it will use good faith efforts to advise Seller of any
respect in which it believes any of Seller's representations and
warranties is or becomes incorrect in any material respect promptly
after Purchaser first learns thereof (provided, however, that Purchaser
shall not have any liability to Seller for damages and none of
Purchaser's rights hereunder shall be affected if it fails to so notify
Seller except to the extent that the representations or warranties
shall be deemed modified by Purchaser's knowledge as set forth in
Section 7.3 below).
Notwithstanding the foregoing, if Seller is unable to remake any of the
representations or warranties set forth in Section 7.2(b)(ii), b(iv) or
(b)(v), Section 7.2(e)(ii), Section 7.2(h) or Section 7.2(f)
(collectively, the "Property Representations") as of Closing without
regard to the materiality qualifications contained therein and without
supplementing one or more of the disclosure schedules relating thereto
(any such supplement, a "Closing Supplement"), the condition set forth
in this Section 6.1(b) shall not be deemed to be unfulfilled by reason
thereof unless (i) the matters set forth in the Closing Supplements,
taken together, result in impairment to the value of the Property (an
"Impairment"), (ii) the Fair Value of the Impairments exceeds $8.1
million and (iii) Seller is unwilling to accept a reduction to the
Purchase Price equal to the amount of such excess (it being understood
that the Seller shall not be under any obligation to accept such a
reduction). If the aggregate Fair Value of all Impairments (as agreed
between the parties, or as determined pursuant to the dispute
resolution provisions below) is $8.1 million or less, and the
conditions to Closing set forth in this Section 6.1 otherwise have been
fulfilled or waived by Purchaser and General Partner as provided
herein, then the condition set forth in this Section 6.1(b) will not be
deemed unfulfilled as the result of the matters set forth in the
Closing Supplements and the Deductible Amount (as provided in Section
8.3) automatically will be reduced by the Fair Value of the Impairment.
Similarly, if at Closing the Fair Value of all Impairments exceeds $8.1
million and the Closing occurs, the Deductible Amount will be reduced
to zero. If, as a result of the foregoing, Seller accepts a reduction
in the Purchase Price, Seller's Liability Cap (as provided in Section
8.3) automatically will be reduced by the amount by which the Fair
Value of all Impairments exceeds $8.1 million. As used herein, "Fair
Value" means, with respect to an Impairment, the amount by which the
Impairment impairs the value of the Property taken as a whole, as the
same shall be mutually agreed between Seller and Purchaser acting in
good faith. If, at Closing, Seller and Purchaser are unable to agree on
the Fair Value of an Impairment, the parties agree to close the
transaction using the midpoint of their respective conclusions of Fair
Value and after Closing either party shall have the right to submit the
final question of Fair Value to binding arbitration and the
unsuccessful party to the arbitration will reimburse the prevailing
party in such arbitration for the difference between the Fair Value
used at Closing and the Fair Value established in arbitration in cash
within 10 days of the conclusion thereof. Any such arbitration shall be
conducted in Honolulu, Hawaii in accordance with the Commercial
Arbitration Rules (and the Expedited Procedures thereunder) of the
American Arbitration Association and with the additional guidelines set
forth in the next paragraph.
Seller or Purchaser may demand arbitration pursuant to the
foregoing paragraph by
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giving the other party written notice describing in reasonable detail
the nature and amount of the controversy within thirty (30) days of
Closing. Within fifteen (15) days after giving such notice, each of
Seller and Purchaser shall select and designate in writing to the other
Party one reputable, disinterested individual having not less than
seven (7) years experience in valuing similar properties and willing to
act as an arbitrator of the dispute in question. Within fifteen (15)
days after the foregoing selections have been made, the arbitrators so
selected shall jointly select a third reputable individual also having
not less than seven (7) years experience in valuing similar properties
and having no affiliation with either of the parties and willing to act
as an arbitrator of the dispute in question. If the first two
arbitrators selected are unable or fail to agree upon the third
arbitrator, the third arbitrator shall be selected by a sitting Judge
of the First Circuit Court of the State of Hawaii. The three
arbitrators selected shall constitute the arbitration panel and the
presentation of the parties in the arbitration proceeding shall be
commenced and completed within sixty (60) days after the selection of
the arbitration panel and the arbitration panel shall render its
decision in writing within thirty (30) days after the completion of
such presentations. The arbitrators shall have the discretion to order
a pre-hearing exchange of information by the parties, including,
without limitation, production of requested documents, exchanging of
summaries of proposed witnesses and examination by deposition of
parties or other persons. All issues regarding compliance with
discovery requests shall be decided by the arbitrators. Any decision
concurred in by any two (2) of the arbitrators shall constitute the
decision of the arbitration panel, and unanimity shall not be required.
Any decision rendered by the arbitration panel shall be final and
binding on the parties hereto, and judgement thereon may be entered by
any state or federal court of competent jurisdiction. To the extent the
dispute in question involves issues of law, the arbitrators shall apply
and be bound to follow the laws of the State of Hawaii and, to the
extent applicable, the laws of the United States of America. Purchaser,
General Partner and Seller agree that arbitration shall be the
exclusive method of resolving claims, disputes and controversies
described in this Section 6.1(b), and stipulate that the provisions
hereof shall be a complete defense to any suit, action or proceeding in
any court or before any administrative or arbitration tribunal with
respect to any such claim, controversy or dispute.
(c) Observance of Covenants. Seller shall have
performed and observed, in all material respects, all covenants and
agreements in this Agreement to be performed and observed by Seller as
of the Closing Date.
(d) Title. The Title Company shall have issued or
shall be prepared to issue, upon payment of the applicable premiums
therefore, a Title Policy with respect to the Owned Land and the
leasehold estate in the Leased Land, showing title to the Owned Land
and the leasehold estate in the Leased Land vested in Purchaser,
subject only to Permitted Exceptions. It shall not be a condition to
Closing that Purchaser be able to obtain any endorsements or coverages
not set forth in the definition of "Title Policy". The parties hereto
agree that any Encumbrance which arises after the date hereof and prior
to the Closing, and is not a Permitted Exception and is not Removed by
Closing, shall be deemed solely to cause a failure of a condition
precedent to Purchaser's obligation to close the transactions
contemplated by this Agreement and shall not form the basis of a breach
or default by Seller under this Agreement unless the Encumbrance
constitutes a Mandatory Removal Objection.
(e) No Injunction. No action, suit or legal or
administrative proceedings
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shall have been instituted by or before any agency, bureau, commission,
court, department, official, political subdivision, tribunal or other
instrumentality of any government, whether federal, state or local,
domestic or foreign, (referred to herein as "Governmental Entity")
seeking to enjoin the transactions contemplated by this Agreement,
other than any such proceeding initiated by or on behalf of Purchaser,
General Partner or any Affiliate of either of them.
(f) Transactions Not Prohibited. No statute, rule,
regulation, temporary restraining order, preliminary or permanent
injunction or other order issued by any court of competent jurisdiction
or other legal restraint or prohibition preventing the consummation of
the transactions contemplated by this Agreement shall be in effect or,
if applicable, have been threatened by any Governmental Entity or any
third party, other than any such order or other legal restraint or
prohibition or threat thereof obtained or initiated by or on behalf of
Purchaser, General Partner or any Affiliate of either of them.
(g) Seller Approval. The board of directors of each
partner in Seller shall have duly and validly authorized such partner
to cause Seller to deliver its interests in the Property as required
hereunder and to consummate each of the other transactions contemplated
hereby.
(h) Estoppel Certificates. Purchaser shall have
received (a) Estoppel Certificates from each of the Anchor Tenants at
the Ala Moana Center (other than Liberty House), (b) Estoppel
Certificates from Tenants representing at least 65% of the total gross
leasable area of the Ala Moana Center and Ala Moana Plaza leased to
in-line Tenants and (c) Estoppel Certificates from office Tenants
representing at least 65% of the total net rentable area of the Ala
Moana Pacific Center and the Ala Moana Building, taken together, leased
to office Tenants. Notwithstanding anything else in this Agreement to
the contrary, Seller shall have the unilateral right, but not the
obligation, to adjourn the Closing for up to thirty (30) days in order
to obtain any of the Estoppel Certificates required pursuant to the
preceding sentence, subject to the right of Purchaser to waive delivery
of such delivery requirement as a condition to Closing.
(i) Settlement Agreement. A "Closing" shall have
occurred as contemplated by the terms of the Settlement Agreement,
dated July 26, 1994, between Liberty House, Inc. and Seller, as amended
to the date hereof (the "Liberty House Settlement Agreement"), and
Liberty House, Inc. shall have delivered to Seller a certificate of
acknowledgment in substantially the form of Exhibit R attached hereto.
(j) HSR Act. Seller and Purchaser shall have mutually
concluded that no filing under the HSR Act is required with respect to
the transactions contemplated hereby, or, if applicable, any waiting
period applicable to the consummation of the transactions contemplated
hereby under the Hart-Scott-Rodino Antitrust Improvements Act of 1976,
as amended (the "HSR Act") shall have expired or been terminated, and
no action shall have been instituted by the United States Department of
Justice or the United States Federal Trade Commission challenging or
seeking to enjoin the consummation of the transactions contemplated
hereby, which action shall not have been withdrawn or terminated.
6.2 Conditions Precedent to Obligations of Seller. The
obligation of Seller to consummate the sale of the Property to Purchaser shall
be subject to the fulfillment on or before the Closing Date of all of the
following conditions, any or all of which may be waived by Seller in its sole
discretion:
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(a) Receipt of Purchase Price. Seller shall have
received the Purchase Price, as adjusted pursuant to and payable in the
manner provided for in this Agreement.
(b) Delivery of Documents. Purchaser shall have
delivered to Seller all of the items required to be delivered to Seller
pursuant to Section 5.3.
(c) Accuracy of Representations and Warranties. All
of the representations and warranties of Purchaser contained in this
Agreement shall be true and correct as originally made and as remade on
and as of the Closing Date.
(d) Observance of Covenants. Purchaser shall have
performed and observed, in all material respects, all covenants and
agreements of this Agreement to be performed or observed by Purchaser
as of the Closing Date.
(e) Funds. Intentionally Omitted.
(f) No Injunction. No action, suit or legal or
administrative proceedings shall have been instituted before any court
or Governmental Entity seeking to enjoin the transactions contemplated
by this Agreement, other than any such proceeding initiated by or on
behalf of Seller or any of its Affiliates.
(g) Transactions Not Prohibited. No statute, rule,
regulation, temporary restraining order, preliminary or permanent
injunction or other order issued by any court of competent jurisdiction
or other legal restraint or prohibition preventing the consummation of
the transactions contemplated by this Agreement shall be in effect, or,
if applicable, have been threatened by any Governmental Entity or by
any third party, other than any such order or other legal restraint or
prohibition or threat thereof obtained or initiated by or on behalf of
Seller or any Affiliate of Seller.
(h) Purchaser Approval. The board of directors of
General Partner shall have duly and validly authorized Purchaser to
deliver the Purchase Price required hereunder and to consummate each of
the transactions contemplated hereby.
(i) HSR Act. Seller and Purchaser shall have mutually
concluded that no filing under the HSR Act is required with respect to
the transactions contemplated hereby, or, if applicable, any waiting
period applicable to the consummation of the transactions contemplated
hereby under the HSR Act shall have expired or been terminated, and no
action shall have been instituted by the United States Department of
Justice or the United States Federal Trade Commission challenging or
seeking to enjoin the consummation of the transactions contemplated
hereby, which action shall not have been withdrawn or terminated.
ARTICLE VII
REPRESENTATIONS AND WARRANTIES
7.1 Representations and Warranties by Purchaser. In order to
induce Seller to sell the Property to Purchaser, Purchaser, as of the date of
this Agreement and again on and as of the Closing
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Date, represents and warrants to Seller as follows:
(a) Purchaser was duly formed, and is validly
existing and in good standing as a limited partnership under the laws
of the State of Delaware. Purchaser has all necessary partnership power
and authority to enter into and perform its obligations under this
Agreement. The execution, delivery and performance of this Agreement by
Purchaser, and the documents to be executed by Purchaser pursuant
hereto, have been duly and validly authorized by all necessary action
on the part of Purchaser. This Agreement constitutes and, upon
execution and delivery, each of the other agreements and instruments
required to be executed and delivered by Purchaser pursuant to Section
5.3 will constitute the valid, legal and binding obligation of
Purchaser, enforceable against Purchaser in accordance with its terms,
subject, as to enforcement, to bankruptcy, insolvency, reorganization,
moratorium and other laws of general applicability relating to or
affecting creditors' rights and to general equity principles.
(b) Execution and delivery by Purchaser of this
Agreement do not, and performance by Purchaser of its obligations under
this Agreement or any of the other agreements or instruments required
to be executed and delivered by Purchaser pursuant to Section 5.3 will
not, (i) violate or conflict with the terms of Purchaser's certificate
of limited partnership, partnership agreement, or any other similar
documents by which Purchaser is organized or governed (ii) violate in
any material respect the terms of any judgment, decree, order, statute,
rule or regulation of any Governmental Entity applicable to Purchaser,
or (iii) result in any material default under, the termination of or
the acceleration of any debt or other monetary obligation under any
mortgage, bank loan, credit agreement or other agreement or instrument
to which Purchaser is a party or by which Purchaser is otherwise bound.
(c) General Partner was duly formed, and is validly
existing and in good standing under the laws of the State of Delaware.
General Partner has all necessary corporate power and authority to
enter into and perform its obligations under this Agreement. The
execution, delivery and performance of this Agreement by General
Partner, and the documents to be executed by General Partner pursuant
hereto, have been duly and validly authorized by all necessary action
on the part of General Partner. This Agreement constitutes and, upon
execution and delivery, each of the other agreements and instruments
required to be executed and delivered by General Partner pursuant to
Section 5.3 will constitute the valid, legal and binding obligation of
General Partner, enforceable against General Partner in accordance with
its terms, subject, as to enforcement, to bankruptcy, insolvency,
reorganization, moratorium and other laws of general applicability
relating to or affecting creditors' rights and to general equity
principles.
(d) Execution and delivery by General Partner of this
Agreement does not, and performance by General Partner of its
obligations under this Agreement or any of the other agreements or
instruments required to be executed and delivered by General Partner
pursuant to Section 5.3 will not, (i) violate or conflict with the
terms of General Partner's certificate of incorporation, by-laws or any
other similar documents by which General Partner is organized or
governed, (ii) violate in any material respect the terms of any
judgment, decree, order, statute, rule or regulation of any
Governmental Entity applicable to General Partner, or (iii) result in
any material default under, the termination of or the acceleration of
any debt or other monetary obligation under any mortgage, bank loan,
credit agreement or other agreement or instrument to which General
Partner is a party or by which General Partner is otherwise bound.
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(e) Purchaser fully understands the nature and
significance of the transactions provided for in this Agreement and the
limitations provided in Section 1.2 and elsewhere herein. Purchaser (i)
is satisfied with the amount being paid by it for the Property, as set
forth herein, based and in sole reliance upon its own valuation of the
Property and its review and analysis of the business, operations,
condition and prospects of the Property, and (ii) is not relying upon
any statements, affirmations, representations or warranties of Seller,
or anyone purporting to act on behalf of Seller, except in each case
for the express representations, warranties and covenants set forth in
this Agreement and in any other documents to be executed and delivered
to Purchaser by Seller at the Closing as limited herein and therein.
7.2 Representations and Warranties of Seller. In order to
induce Purchaser to purchase the Property from Seller, Seller, as of the date of
this Agreement and again on and as of the Closing Date, represents and warrants
to and with Purchaser and General Partner as follows:
(a) Seller's Status, Etc.
(i) Seller was duly formed and is validly
existing and in good standing (if applicable) as a
general partnership under the laws of the State of
Hawaii. Seller has all necessary partnership power
and authority to enter into and perform its
obligations under this Agreement. The execution,
delivery and performance of this Agreement by Seller
and the documents to be executed by Seller pursuant
hereto have been duly and validly authorized by all
necessary action on the part of Seller and Seller's
constituent general partners. This Agreement
constitutes and, upon execution and delivery, each of
the other agreement and instruments required to be
executed and delivered by Seller pursuant to Section
5.2 will constitute the legal, valid and binding
obligation of Seller, enforceable against Seller in
accordance with its terms, subject, as to
enforcement, to bankruptcy, insolvency,
reorganization, moratorium, rehabilitation and other
laws of general applicability relating to or
affecting creditors' rights and to general equity
principles.
(ii) Execution and delivery by Seller of
this Agreement do not, and performance by Seller of
its obligations under this Agreement or any of the
other agreements or instruments required to be
executed and delivered by Seller pursuant to Section
5.2 will not (i) violate or conflict with the terms
of Seller's partnership agreement, (ii) violate in
any material respect the terms of any judgment,
decree, order, statute, rule or regulation of any
Governmental Entity applicable to Seller, or (iii)
result in any material default under, the termination
of or the acceleration of any debt or other monetary
obligation under any mortgage, indenture, loan
agreement or other agreement or instrument to which
Seller is a party or by which Seller is otherwise
bound.
(b) Real Property.
(i) Seller has not granted any options or
rights of first refusal or rights of first offer,
which are currently in effect, to purchase any of the
Premises, except any such rights that constitute
Permitted Exceptions.
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(ii) Except as set forth on Schedule
7.2(b)(ii), Seller has not received any written
notice from any Governmental Entity that all or any
portion of the Premises is in material violation of
any applicable building code, fire code or any
applicable zoning or land use or other similar local,
state or federal law or regulation to which Seller or
the Premises are subject, which material violation
has not been cured or remedied prior to the date
hereof.
(iii) Intentionally omitted.
(iv) To Seller's knowledge, other than as
disclosed in Schedule 7.2(b)(iv) attached hereto, (A)
Seller has not received any written notice from any
Governmental Entity or other Person that Seller or
the Premises are not in compliance with Environmental
Laws in any material respect; (B) there are no
administrative, regulatory or judicial proceedings
pending or threatened against Seller with respect to
the Premises pursuant to, or alleging any material
violation of or material liability under, any
Environmental Laws, and (C) prior to Manager's
management of the Premises, none of the Premises was
used as a disposal site for any Hazardous Materials
the disposal of which is governed by any
Environmental Laws. As used in this Agreement, the
term "Environmental Law" means any applicable law,
regulation, code, license, permit, order, judgment,
decree or injunction promulgated by any Governmental
Entity (I) for the protection of the environment,
(including air, water, soil and natural resources) or
(II) regulating the use, storage, handling, release
or disposal of Hazardous Materials, in each case as
presently in effect and as enforced in the relevant
jurisdiction.
(v) Except as set forth on Schedule
7.2(b)(v), no proceeding is pending or, to Seller's
knowledge, threatened for the taking of the Premises
or any portion thereof in condemnation or by powers
of eminent domain.
(c) Owned Equipment/Equipment Leases.
To Seller's knowledge, except as specified
in Schedule 7.2(c), Seller owns all Equipment free
and clear of any Encumbrances, other than Equipment
disposed of in the ordinary course of business since
the date set forth in Schedule 7.2(c).
(d) Leases.
Seller has not received any written notice
from any of Sears, J.C. Penney or Neiman Marcus that
it intends either to cease operation at the Property
(other than temporarily due to casualty, remodeling,
renovation or any similar cause) or to cease
operating under the name under which it is operating
at the Property as of the date hereof.
(e) Real Estate Taxes. (i) No application or
proceeding commenced by or on behalf of Seller is pending with
respect to any reduction in or refund of real estate
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taxes with respect to the Property, and (ii) no action or
proceeding is pending with respect to an increase of real
estate taxes with respect to the Property (although it is
possible that the pending Phase V A work and any additional
alterations at the Property will result in an increase in the
assessed value of the Property and, therefore, an increase in
the real estate taxes payable in respect thereof).
(f) Ground Lease.
To Seller's knowledge, on the date of this
Agreement (i) the names of the landlords under the
Ground Lease, (ii) the amount of the fixed minimum
rent per annum to be paid under the Ground Lease,
(iii) the amount of the security deposit held by the
landlords under the Ground Lease and (iv) the date of
the Ground Lease and of each amendment or
modification thereof were as set forth on Exhibit B.
Except as set forth on Exhibit B, to Seller's
knowledge, Seller is not in default in any material
respect under the Ground Lease. Purchaser and General
Partner agree that when Seller remakes the
representations in the first sentence of this
paragraph (f) at Closing in the certificate referred
to in Section 5.2(j)(iv) or Section 6.1(b), the
representations shall only be remade as of the date
of this Agreement and not as of the Closing Date.
(g) Intentionally omitted.
(h) Litigation. Except as set forth in Schedule
3.1(h) attached hereto, and except for claims covered in full by
Seller's public liability insurance (subject to any deductibles), there
are no pending suits, actions or proceedings relating to the Premises,
nor, to Seller's knowledge, have any such suits, actions, proceedings,
investigations, claims or complaints been threatened in writing against
Seller before any Governmental Entity, and, to Seller's knowledge,
there are no outstanding orders, writs, injunctions, decrees, judgments
or awards by any Governmental Entity against Seller, which,
individually or in the aggregate, could reasonably be expected to
materially and adversely affect the value of the Property taken as a
whole or to prevent or materially interfere with Seller's ability to
consummate the transactions required hereby.
(i) Consents. To Seller's knowledge, Schedule 7.2(i)
attached hereto contains a complete list of (i) all consents, waivers,
approvals or authorizations of, or declarations, filings,
qualifications or registrations with, or notices to, any Governmental
Entity or other Person which are required to be obtained, made or given
by Seller in connection with the execution, delivery and performance of
this Agreement or the consummation of the transactions contemplated
hereby (collectively, the "Consents"), and except for the Consents, to
Seller's knowledge no other consents, waivers, approvals or
authorizations of, or declarations, filings, qualifications or
registrations with, or notices to, any Governmental Entity or other
Person are required to be made, obtained or given by Seller in
connection with the execution, delivery and performance of this
Agreement or the consummation of the transactions contemplated hereby.
(j) Seller Not a Foreign Person. Seller is not a
"foreign person" within the meaning of Section 1445 of the Internal
Revenue Code or a "nonresident person", as that term is used in Section
235-68, Hawaii Revised Statutes, as amended, and the regulations
relating thereto.
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7.3 General Provisions.
(a) Seller's Right to Amend Representations. Seller shall have
the right from time to time by notice to Purchaser, and without liability
therefor (other than as expressly provided for in Section 11.3), to amend or
supplement its qualifications to the representations and warranties in Section
7.2, by amendment of the Schedules hereto or otherwise, to reflect changes in
facts or to correct any immaterial factual inaccuracies; provided, however, that
any such amendment or supplement, if adverse to Purchaser, may constitute the
nonfulfillment of the condition set forth in Section 6.1(b). If and to the
extent that any representation or warranty by Seller hereunder is confirmed with
respect to any Tenant by an Estoppel Certificate from such Tenant, the portion
of the representation or warranty so confirmed, insofar as it relates to that
Tenant, shall be deemed stricken from this Agreement (and from any bringdown or
other certificate delivered in connection herewith) and Seller shall not have
any further obligation or liability to Purchaser or General Partner with respect
thereto.
(b) Definition of "Seller's Knowledge". All references in this
Agreement to Seller's knowledge or words of similar import shall refer only to
the present actual knowledge of Kozo Yamagishi (the "Designated Employee") and
shall not be construed to refer to the knowledge of any other officer, agent or
employee of Seller or any affiliate thereof, or to impose upon the Designated
Employee any duty to investigate the matters to which such knowledge, or the
absence thereof, pertains, including, but not limited to, the contents of the
files, documents and materials made available to or disclosed to Purchaser or
the contents of files maintained by the Designated Employee or any of Seller's
agents or representatives. There shall be no personal liability on the part of
the Designated Employee arising out of any representations or warranties made
herein.
(c) Seller's Representations Deemed Modified. To the extent
that Purchaser actually knows at or prior to Closing that any of Seller's
representations and warranties are inaccurate, untrue or incorrect in any way
and Purchaser nevertheless closes, such representations and warranties shall be
deemed modified to reflect Purchaser's knowledge. Seller shall not have any
liability in connection with this Agreement by reason of any inaccuracy of a
representation or warranty if and to the extent that such inaccuracy has been
identified by Seller to Purchaser in writing or otherwise is actually known by
Purchaser, in each case at or prior to the Closing and Purchaser elects,
nevertheless, to consummate the Closing. For purposes of this Agreement,
Purchaser shall be deemed to actually know that a representation or warranty is
untrue, inaccurate or incorrect if and to the extent that (i) Manager is aware
at or prior to Closing of the facts or circumstances that render such
representation or warranty untrue, inaccurate or incorrect, or (ii) this
Agreement, any Exhibit or Schedule attached hereto, any estoppel certificate
executed by any Tenant of the Property and delivered to Purchaser or General
Partner at or prior to Closing, or any study, test, report, or analyses
delivered to or prepared by or for Purchaser or General Partner or any of their
respective Affiliates or any employees, agents, representatives or attorneys of
any of the foregoing (all of the foregoing employees, agents, representatives
and attorneys being herein collectively called the "Purchaser's
Representatives"), at or prior to Closing or otherwise obtained by Purchaser or
General Partner or any Affiliate of either of them or any Purchaser's
Representative at or prior to Closing contains information which is inconsistent
with such representation or warranty.
(d) Notice of Breach: Seller's Right to Cure. If after the
date hereof and prior to the Closing, Purchaser becomes aware or is deemed to
know (within the meaning of Section 7.3 hereof) that any of the representations
or warranties made herein by Seller are untrue, inaccurate or incorrect in any
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material respect (other than as a result of receipt of written notice thereof
from Seller pursuant to the requirement of the next sentence), Purchaser shall
use good faith efforts to notify Seller in writing within five (5) Business Days
of obtaining such knowledge and, in any event, prior to the Closing (provided,
however, that Purchaser shall not have any liability to Seller for damages or be
deemed to have compromised any of its other rights hereunder if it fails to so
notify Seller). If at or prior to the Closing, Seller obtains knowledge that any
of the representations or warranties made herein by Seller is untrue, inaccurate
or incorrect, Seller shall notify Purchaser in writing thereof within five (5)
Business Days of obtaining such knowledge and, in any event, prior to the
Closing. In either such event, Seller shall not be obligated to cure any such
misrepresentation or breach unless said misrepresentation or breach was caused
by or resulted from an act or omission of Seller in bad faith or in violation of
Seller's covenants in Article X. If Seller is required or otherwise willing to
attempt to cure the misrepresentation or breach, Seller shall be entitled to a
reasonable adjournment of the Closing (not to exceed ninety (90) days) for the
purpose of any such cure, provided, however, Purchaser shall have the right to
waive such breach at any time during said period of adjournment and in the event
of such waiver Seller and Purchaser shall consummate the Closing without any
reduction or credit against the Purchase Price with respect thereto. If Seller
fails to cure any misrepresentation or breach, required by the preceding
sentence to be cured, or declines to cure any other misrepresentation or breach
not required to be cured, then Purchaser, as its sole remedy for any and all
such materially untrue, inaccurate or incorrect material representations or
warranties, shall be entitled to exercise the remedies set forth in Section
11.3(b). If any such representation or warranty is untrue, inaccurate or
incorrect but is not untrue, inaccurate or incorrect in any material respect,
Purchaser shall be deemed to waive such misrepresentation or breach of warranty,
and Purchaser shall be required to consummate the transactions contemplated
hereby without any reduction of or credit against the Purchase Price.
7.4 Survival. The representations and warranties in this
Article VII shall survive the Closing, subject to the limitations set forth in
Article VIII.
ARTICLE VIII
INDEMNIFICATION
8.1 Obligation of Purchaser to Indemnify. Purchaser and
General Partner, jointly and severally, hereby agree to indemnify, defend and
save harmless Seller and its Affiliates from any costs, damages, liabilities and
expenses (including, without limitation, reasonable attorneys' fees and
disbursements but excluding consequential and other indirect damages) imposed
upon, incurred by (whether by way of judgment, award, decree, settlement payment
or otherwise) or suffered by Seller by reason of any (i) breach or inaccuracy in
any material respect of any representation or warranty contained in Section 7.1
or (ii) breach in any material respect of any covenant of Purchaser or General
Partner contained in this Agreement.
8.2 Obligation of Seller to Indemnify. Seller hereby agrees
to indemnify, defend and save harmless Purchaser from and against all costs,
liabilities, damages and expenses (including, without limitation, reasonable
attorneys' fees and disbursements but excluding consequential and other indirect
damages) imposed upon, incurred by (whether by way of judgment, award, decree,
settlement payment or otherwise) or suffered by Purchaser by reason of any (i)
breach or inaccuracy of any representation or warranty of Seller contained in
Section 7.2 (without regard to the materiality qualifications contained
therein), as such representation or warranty may have been deemed modified by
Section 7.3, or in any certificate delivered by Seller pursuant to Section
5.2(h) or (j) or (ii) breach in any
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material respect of any covenant of Seller contained in this Agreement or any
other agreement or instrument being delivered to Seller concurrently herewith or
required by the terms hereof or thereof to be delivered to Seller at Closing
which covenant is required to be performed or observed after the Closing.
8.3 Limitations on Recovery. (a) Notwithstanding anything
to the contrary in this Article VIII, it is expressly understood and agreed by
the parties that, without limiting or affecting any other obligation of either
party to defend and indemnify contained in this Article VIII or otherwise in
this Agreement, Purchaser shall not be entitled to any claim for indemnification
pursuant to Section 8.2(i) (x) if the breach or inaccuracy of representation or
warranty in question results from or is based on a condition, state of facts or
other matter that was actually known to Purchaser prior to the Closing, (y)
unless the valid claims of Purchaser for all such breaches collectively
aggregate more than $8,100,000, as the same may have been reduced pursuant to
Section 6.1(b) (the "Deductible Amount"), it being understood and agreed that
Purchaser shall only be entitled to indemnification for amounts in excess of the
foregoing threshold, and (z) unless Purchaser or General Partner has given
Seller written notice of such claim stating the representation or warranty
alleged to have been breached, an explanation in reasonable detail of the
circumstances giving rise to the claim, and its good faith estimate of the total
dollar amount of the harm suffered and likely to be suffered as a result of the
alleged breach, provided, however, that no such estimate shall serve to limit
the amount of actual recovery available to Purchaser and/or General Partner in
respect of such claim (such notice, a "Notice of Claim"), on or prior to the
180th day following the Closing Date, it being understood and agreed that Seller
shall have no further liability under or in respect of such warranties and
representations from and after the 180th day following the Closing Date, except
to the extent of any breach thereof of which Purchaser or General Partner has
delivered Seller a Notice of Claim prior to such 180th day. For the avoidance of
doubt, on the 180th day following Closing, Seller shall be fully discharged and
released (without the need for any separate release or other documentation) from
any and all liability or obligation to Purchaser, General Partner or any
successor or permitted assign with respect to claims arising out of Seller's
representations and warranties contained in Section 7.2, except solely for those
matters that are then the subject of a pending Notice of Claim delivered by
Purchaser or General Partner to Seller prior to such date. Any claim that
Purchaser may have at any time against Seller for a breach of any representation
or warranty contained in Section 7.2, whether known or unknown, with respect to
which a Notice of Claim has been delivered to Seller on or prior to such 180th
day may only be the subject of subsequent litigation brought by Purchaser
against Seller if (1) Seller has accepted and is defending Purchaser or General
Partner in respect of the claim specified in the Notice of Claim on such 180th
day or (2) such litigation is commenced against such Seller on or prior to the
last Business Day of the 18th calendar month following the month in which the
Closing occurs. For the avoidance of doubt, on the last Business Day of such
18th month, Seller shall be fully discharged and released (without the need for
separate releases or other documentation) from any liability or obligation to
Purchaser or General Partner and/or either of their successors or permitted
assigns with respect to any claims Purchaser or General Partner may have against
Seller for a breach of any representation or warranty contained in Section 7.2,
except solely for those matters that are covered by (1) above or the subject of
a litigation by Purchaser or General Partner (or any successor or permitted
assign thereof) against Seller that is pending on such date.
(b) In addition, and notwithstanding any provision to the
contrary herein or in any other agreement being delivered concurrently herewith
or at Closing, (i) Seller shall have no liability with respect to any claim
under any of the representations and warranties contained in this Agreement or
in any document that is to be delivered at Closing, which claim relates to or
arises in connection with (1) any
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Hazardous Materials (except solely to the extent that Seller's representation in
Section 7.2(b)(iv) was untrue or incorrect), (2) the physical condition of any
Property (except solely to the extent that Seller's representation in Section
7.2(b)(ii) was untrue or incorrect) or (3) any other matter not expressly
addressed in Seller's representations and warranties in Section 7.2 or in a
certificate delivered by Seller pursuant to Section 5.2(h) or (j) and (ii) in no
event shall Seller's total aggregate liability in respect of all claims for
which Seller has agreed to provide indemnity pursuant to Section 8.2(i),
together with all claims payable by Seller pursuant to it indemnification
obligations in the Assignment Instruments, ever exceed $16,200,000, as the same
may have been reduced as set forth in Section 6.1(b) (the "Liability Cap").
Purchaser agrees that it will not deliver any Notice of Claim unless it believes
in good faith that the claim, together with any then-pending claims, will exceed
the minimum threshold to recovery provided in Section 8.3(a). Seller hereby
agrees that the limitations upon recovery contained in Section 8.3(a) (other
than clause (x)) and this Section 8.3(b)(ii) shall not apply to any claims of
Purchaser for breaches of the representations in 7.2(a) and 7.2(j). For purposes
hereof, "Assignment Instruments" means collectively the assignment instruments
referred to in clauses (c), (d) and (e) of Section 5.2.
8.4 Claim Procedures and Escrow. (a) If any claim for
indemnification is asserted by Purchaser or General Partner against Seller
pursuant to this Agreement or any other instrument or agreement delivered
concurrently herewith or at Closing, Seller shall have the right, at its own
expense, to participate in the defense of any claim, action or proceeding
asserted against Purchaser or General Partner which resulted in the claim for
indemnification and, if such right is exercised, the parties agree to cooperate
in the defense of such action or proceeding. At Closing, Seller agrees to
deposit an amount of cash equal to the Liability Cap (the "Cash Collateral")
into escrow with First Hawaiian Bank, Bank of Hawaii or another bank located in
the United States selected by Seller and approved by Purchaser (such approval
not to be unreasonably withheld or delayed) and to cause that bank (the
"Indemnity Escrow Agent") to enter into an escrow agreement on terms
substantially similar to the terms of the Escrow Agreement for the purpose of
maintaining such funds (such escrow, the "Indemnity Escrow").
(b) If, within thirty (30) days after receipt of a Notice of
Claim, Seller delivers to Purchaser a written notice indicating that Seller
disputes the circumstances giving rise to or the amount of the subject claim,
Purchaser may submit the matter for binding arbitration in accordance with the
provisions of the last paragraph of Section 6.1(b) by delivering a notice to
Seller in accordance with Section 11.6 demanding arbitration and describing in
reasonable detail the nature and amount of the claim, dispute or controversy (a
"Demand Notice"). If, after receiving timely notice of a dispute hereunder from
Seller, Purchaser fails to so submit the matter for binding arbitration within
twenty (20) days after receipt of such notice from Seller, then Seller shall be
relieved of the claimed indemnification obligation described in the Notice of
Claim. In the event Seller (i) receives a Notice of Claim and fails timely to
notify Purchaser of its dispute as to the indemnification obligation referred to
therein and fails to make payment within (30) days after Seller's receipt of the
Notice of Claim (or, in the case of a third party claim, fails to perform as
required hereunder), or (ii) has an indemnification obligation to Purchaser or
General Partner under this Article XII as determined pursuant to arbitration as
referenced above and Seller does not satisfy the obligation within ten (10) days
after the decision rendered in the arbitration (or, in the case of a third party
claim, fails to perform as required hereunder in accordance with the decision
rendered in the arbitration), then, in either event, Purchaser or General
Partner (as the case may be) shall be entitled to receive funds from the
Indemnity Escrow sufficient to satisfy the Seller's obligations with respect to
the relevant claim and in such circumstances Seller and Purchaser agree to
deliver written instructions to the Indemnity Escrow Agent directing
disbursement of the relevant portion of the Cash Collateral to Purchaser or
General Partner, as applicable.
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(c) Purchaser, General Partner and Seller agree that
arbitration shall be the exclusive method of resolving claims, disputes and
controversies described in this Section 8.4, and stipulate that the provisions
hereof shall be a complete defense to any suit, action or proceeding in any
court or before any administrative or arbitration tribunal with respect to any
such claim, controversy or dispute.
(d) (i) On the 181st day following the Closing, the amount of
the Cash Collateral shall be reduced to the sum of (x) 50% of the
Liability Cap plus (y) Purchaser's good faith estimate (which estimate
shall be provided to Seller in writing no later than the 170th day
following Closing and shall be supplemented by Purchaser in writing to
add Purchaser's good faith estimate of additional claims, if any, of
which Purchaser notifies Seller prior to the 181st day following
Closing) of the total amount of unsatisfied claims that are the subject
of Notices of Claim delivered to Seller through the 180th day following
Closing that have not then been resolved in accordance with the
Agreement.
(ii) On the Business Day following the last Business Day of
the 18th month following the month in which Closing occurs (such last
business day, the "Expiration Date"), the amount of the Cash Collateral
shall be reduced to Purchaser's good faith estimate (which estimate
shall be provided to Seller in writing no later than the 10 days prior
to the Expiration Date and shall be supplemented by Purchaser in
writing to add Purchaser's good faith estimate of additional claims, if
any, of which Purchaser notifies Seller prior to the Expiration Date)
of the total amount of unsatisfied claims that are the subject of
Notices of Claim delivered to Seller through the Expiration Date that
have not then been resolved in accordance with the Agreement.
(iii) Purchaser and General Partner agree that Seller shall be
entitled to direct the Indemnity Escrow Agent to invest funds held in
the Indemnity Escrow in one or more investments of the type described
on Schedule 8.4(D)(iii). Interest and other investment returns earned
on such funds shall not be included as part of the Cash Collateral, and
Seller shall be entitled to withdraw any such interest or other
investment returns no less frequently than monthly.
8.5 Sole Remedy; Survival. If the Closing occurs, the
indemnification and other provisions in this Article VIII shall be, except in
the case of fraud, the sole and exclusive remedies of Seller, on the one hand
and Purchaser and General Partner, on the other hand each against the other with
respect to any and all claims arising from any breach of any representation,
warranty or covenant under this Agreement. The foregoing sentence shall not be
interpreted as limiting Purchaser's or General Partner's right to seek recovery
under the indemnification provisions contained in any of the Assignment
Instruments. The provisions of this Article VIII shall be effective only if the
Closing occurs and shall survive the Closing and consummation of the
transactions contemplated by this Agreement, subject only to the specific time
limitations set forth herein.
ARTICLE IX
CASUALTY AND CONDEMNATION
9.1 Condemnation
(a) Right to Terminate. Seller shall provide
Purchaser written notice of
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any Taking action commenced or threatened in writing by a Governmental Entity
against the Premises prior to the Closing Date. If, prior to the Closing Date,
there shall occur a Substantial Taking of the Premises, Seller shall notify
Purchaser in writing of such fact promptly after obtaining knowledge thereof,
and Purchaser shall have the right to terminate this Agreement by giving written
notice to Seller no later that ten (10) days after receipt of Seller's notice,
and the Closing Date shall be extended, if necessary, to provide Purchaser with
sufficient time to make such election. The failure of Purchaser to notify Seller
in writing of its election to terminate this Agreement within such ten (10) day
period shall be deemed an irrevocable election not to terminate this Agreement.
If Purchaser determines to terminate this Agreement as aforesaid, the provisions
of Section 9.4 shall apply.
(b) Assignment of Proceeds If (a) a Substantial
Taking of the Premises shall occur and if Purchaser does not Taking of the
Premises shall occur and if Purchaser does not elect to terminate this Agreement
as aforesaid, or (b) a portion of the Property constituting less than a
significant portion of the Property is taken or becomes subject to a pending
condemnation action or taking by powers of eminent domain that does not
constitute a Substantial Taking, there shall be no right of Purchaser to
terminate this Agreement, and no abatement of the Purchase Price; provided,
however, that, at the Closing Purchaser shall receive a credit to Purchase Price
in the amount of any award for or other proceeds on account of such condemnation
or taking action that has been actually paid to Seller prior to the Closing Date
as a result of such condemnation or taking action after deducting from such
amount all reasonable costs and expenses, including reasonable attorneys' fees
and costs incurred by Seller ("Taking Realization Costs") through the Closing
Date in connection with the negotiation and/or settlement of such condemnation
or taking action. To the extent such awards or proceeds have not been paid,
Seller shall assign to Purchaser at the Closing (without recourse to or warranty
from Seller) the rights of Seller to, and Purchaser shall be entitled to receive
and retain, any and all awards that otherwise would have been delivered to
Seller in respect thereof, provided that upon receipt of such funds Purchaser
and/or General Partner promptly shall pay over to Seller therefrom an amount
equal to the previously unreimbursed Taking Realization Costs incurred by Seller
through the Closing in respect of such proceeds or award.
9.2 Destruction or Damage. In the event the Property is
damaged or destroyed in any material respect prior to the Closing Date, Seller
shall notify Purchaser of such fact promptly after obtaining knowledge thereof.
If any such damage or destruction (a) is an insured casualty and (b) constitutes
less than a Substantial Casualty, then this Agreement shall remain in full force
and effect and Purchaser shall acquire the Property on the terms and conditions
set forth herein. In such event, at Closing Purchaser shall receive a credit
against the Purchase Price equal to (x) the amount of any insurance proceeds
received by Seller and not applied toward restoration of the damage or
destruction in respect of which it was paid to Seller plus (y) the deductible
amount plus any co-insurance applicable under Seller's casualty policy, less (z)
all reasonable costs and expenses, including attorneys' fees plus any co-insurer
fees and costs, incurred by Seller as of the Closing Date in connection with the
negotiation and/or settlement of the casualty claim with the insurer (the
"Casualty Realization Costs") and Seller shall assign to Purchaser all of
Seller's right, title and interest in and to all proceeds of insurance on
account of such damage or destruction.
In the event a Substantial Casualty occurs at the Premises
then, notwithstanding anything to the contrary set forth above in this Section,
Purchaser shall have the right, at its election, ether (i) to terminate this
Agreement or (ii) to proceed to purchase the Property in accordance with the
terms of this Agreement. Purchaser shall have thirty (30) days after Purchaser
receives notice from Seller that such Casualty has occurred to make the
foregoing election by delivering to Seller a written election notice (the
"Election Notice") and the Closing Date shall be extended, if necessary, to
provide sufficient time for
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Purchaser to make such election. The failure by Purchaser to deliver the
Election Notice within such thirty (30) day period shall be deemed an election
not to terminate this Agreement. In the event that Purchaser does not elect to
terminate this Agreement as set forth above, this Agreement shall remain in full
force and effect, and at Closing Seller shall pay to Purchaser any proceeds
theretofore recovered by Seller in respect of casualty insurance (less Casualty
Realization Costs) and shall assign to Purchaser (without recourse to or
warranty from Seller) all rights of Seller in and to, and Purchaser shall be
entitled to receive and retain, any and all proceeds of insurance on account of
such damages or destruction, if any, and, if the casualty was an insured
casualty, Purchaser shall receive a credit against the Purchase Price equal to
the deductible amount and any co-insurance amount under Seller's casualty
insurance policy.
In the event a Material Uninsured Casualty occurs at the
Premises then, notwithstanding anything to the contrary set forth above in this
Section, Purchaser shall have the right to terminate this Agreement, unless
Seller agrees in its sole discretion to give Purchaser a credit against the
Purchase Price equal to the reasonable cost of repairing the damage caused by
such Material Uninsured Casualty (it being understood that Seller is not under
any obligation to give Purchaser such a credit). Purchaser shall have ten (10)
days after Purchaser receives notice from Seller that a Material Uninsured
Casualty has occurred to make the foregoing election by delivering to Seller an
Election Notice and the Closing Date shall be extended, if necessary, to provide
sufficient time for Purchaser to make such election.
9.3 Insurance. Seller shall maintain the property insurance
coverage currently in effect for the Property through the Closing Date.
9.4 Effect of Termination. If this Agreement is terminated
pursuant to Section 9.1 or Section 9.2, Seller promptly shall direct that the
Deposit together with interest earned thereon, if any, be refunded to Purchaser.
Upon such refund neither party to this Agreement shall have any further rights
or obligations hereunder other than any arising under any section herein which
expressly provides that it shall survive the termination of this Agreement.
9.5 Waiver. The provisions of this Article IX supersede the
provisions of any applicable statutory or decisional law with respect to the
subject matter of this Article IX.
ARTICLE X
PRE-CLOSING OPERATIONS
10.1 Pre-Closing Operations. Seller hereby covenants and
agrees that from the date hereof and continuing until the Closing Date, Seller
shall:
(a) Intentionally omitted.
(b) cause the Property to be managed and operated in a manner
consistent with Seller's past practices and policies, subject to reasonable wear
and tear, casualty and taking by eminent domain, including, without limitation,
the performance of ongoing and routine maintenance of the Property and such
other work Seller deems reasonably necessary to cure a misrepresentation by
Seller under this Agreement (it being understood that this Article X shall not
be interpreted as requiring Seller to undertake or continue any expansion or
other capital expenditure programs at the Property except as expressly provided
in Section 10.4);
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(c) use reasonable efforts to cause all work, improvements,
fixtures, fittings, equipment and services required to be furnished or provided
by Seller to any Tenant under the provisions of its Lease ("Tenant Work") to be
performed in a timely manner in accordance with the applicable provisions of
such Lease;
(d) subject to the provisions of Subsection 4.1(i) providing
for a credit to Seller in certain instances, pay or cause to be paid, when due
and out of Seller's funds, all costs and expenses incurred in connection with
the leasing of space (including lease renewals) in the Premises and the
occupancy of such space by Tenants, which shall include, without limitation,
costs of Tenant Work and costs incurred in connection with the execution and
delivery of any Leases, such as legal fees and expenses and leasing commissions
payable to the property manager(s) or other third parties (collectively "Tenant
Costs"), and shall use reasonable efforts to keep the Premises free and clear of
any mechanic's, materialman's or supplier's lien relating to any of the Tenant
Work, or, if any such lien shall be filed, shall use reasonable efforts, at
Seller's expense, to cause the same promptly to be removed by bonding or
otherwise; provided that Seller prior to Closing shall have the right to contest
any liens, claims or other encumbrances with respect to any Tenant Costs, and,
in that connection, to permit the liens to remain of record during the pendency
of such contest, so long as Seller shall pursue such contest diligently and in
good faith (it being understood that this proviso shall not be interpreted as
modifying Purchaser's right to receive title to the Premises free and clear of
Encumbrances as set forth in Article III);
(e) not enter into any new or additional Lease, or extend,
modify, terminate or renew any existing Lease, in each case without Purchaser's
prior written consent, which consent shall not be unreasonably withheld or
delayed, provided, however, that Purchaser hereby consents in advance to, and
Seller shall not require any further approvals from Seller in connection with,
any renewal or extension resulting from the exercise by a Tenant of an existing
renewal or extension option;
(f) Notwithstanding anything to the contrary contained in this
Article X, Seller reserves the right, but is not obligated, to institute summary
proceedings on behalf of Seller against any Tenant or terminate any Lease
following a material default by the Tenant thereunder prior to the Closing Date
and to apply all or any portion of any security deposits then held by Seller
toward any loss or damage incurred by Seller by reason of any defaults by
Tenants. Seller makes no representations and assumes no responsibility with
respect to the continued occupancy of the Premises or any part thereof by any
Tenant. Further, Purchaser agrees that it shall not be grounds for Purchaser's
refusal to close the transactions contemplated by this Agreement that any Tenant
is a holdover tenant or in default under its Lease on the Closing Date and
Purchaser shall close hereunder subject to such holding over or default without
credit against, or reduction of, the Purchase Price; provided, that the
provisions of this Section 10.1(f) shall not constitute a waiver of any other
rights of Purchaser hereunder;
(g) (i) not enter into any new Construction Contract or
extend, modify, terminate or renew any existing Construction Contract or
Unrecorded Agreement, in each case without Purchaser's prior written consent,
which consent shall not be unreasonably withheld or delayed, and (ii) not enter
into any new Service Contract or Equipment Lease, or extend, modify, cancel,
terminate or renew any existing Service Contract or Equipment Lease, except in
the ordinary course of Seller's business and in accordance with Seller's past
practices and policies and Seller shall not without written consent of Purchaser
enter into any new Service Contract or Equipment Lease that is not terminable on
30 days' notice and without penalty. Notwithstanding the preceding sentence,
Seller shall be entitled to terminate any Service Contract, Equipment Lease or
Unrecorded Agreement that is identified on Schedule 7.2(i) as requiring the
consent of
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another party for assignment to Purchaser in the event such consent is not
received.
(h) not create or cause to exist any Encumbrances on any of
the Premises other than such Encumbrances as arise as a result of Seller
carrying out its obligations under this Article X, any Encumbrance relating to
any additional financing Seller may wish to obtain prior to Closing (it being
understood that this provision shall not be interpreted as modifying Purchaser's
right to receive title to the Premises free and clear of Encumbrances as set
forth in Article III) and such other Encumbrances as constitute Permitted
Exceptions;
(i) use reasonable efforts to keep the Permits in force and
effect and to obtain any other licenses, permits, certificates, authorizations
or approvals necessary for the ownership and operation of the Premises;
(j) use commercially reasonable efforts at Seller's cost to
(i) complete the pending underground storage tank investigation on the CEC
Properties in accordance with the scope of work established with Dames & Moore
therefore in writing prior to the date of this Agreement, cause such
investigation to be completed in accordance with applicable Environmental Law
(including tank removal and, if applicable, remediation of soils and/or ground
water contamination identified in that investigation to the extent required by
Environmental Law) and, apply for a so-called "no further action" from the
relevant Governmental Entity with respect to any storage tanks actually removed
from the CEC Properties in connection with such investigation, and restore the
areas of the Premises affected thereby (ii) terminate the leases with Ti Leaves
and Tiffany's affecting the portions of the CEC Properties identified as Tax Map
Key No. (1) 2-3-40-7 and Tax Map Key No. (1) 2-3-40-5, respectively (and any
termination payment in connection therewith shall be at Seller's sole cost) and
(iii) record one or more amendments to the existing plats of subdivision as
necessary to cause the boundaries of the subdivided lots comprising the Premises
as reflected in the land records of Honolulu County to match the boundaries of
those lots as reflected in the records of the Land Court; in addition, Seller
agrees to use commercially reasonable efforts, at Purchaser's (and not Seller's)
cost, to obtain reliance letters in favor of Purchaser and any lender or joint
venture partner of Purchaser identified by Purchaser to Seller from Dames &
Moore, with respect to their written report on the tank removal work referred to
in clause (i) above, and from WMF Hawaii, with respect to their most recent
written reports on the Premises.
(k) not sell, transfer, exchange, encumber or grant interests
in the Property or any part thereof, other than (i) in carrying out leasing
activity as permitted above, (ii) as is necessary to perform Seller's
obligations under Section 10.4 and (iii) as has otherwise been approved in
writing by Purchaser;
(l) not, except as expressly permitted or required hereunder
(including following a casualty or condemnation), make any material alterations
to the Property;
(m) not perform any of the deferred capital or owner capital
work referenced on Schedule 4.5(ii) unless such work is performed pursuant to
plans and specifications approved by Purchaser in writing or otherwise approved
by Purchaser in writing, which approval shall not be unreasonably withheld or
delayed; and
(n) pay all rents due pursuant to the Ground Lease as the same
become due and not extend, modify or terminate the Ground Lease.
10.2 Purchaser Consents. Whenever in this Article X the
consent of Purchaser is
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required, if Seller shall obtain the written consent of any of John Bucksbaum,
Robert Michaels or Joel Bayer to the matter in question, Purchaser shall thereby
be conclusively deemed to have consented thereto. If Purchaser does not respond
within five (5) Business Days to a written notice by Seller seeking Purchaser's
consent as required under this Article X, Purchaser shall be deemed to have
given its consent to those matters arising under this Article set forth therein.
10.3 Estoppel Certificates. Commencing promptly after the date
hereof, Seller shall deliver (i) to each Tenant at the Ala Moana Center, the Ala
Moana Plaza, the Ala Moana Pacific Center and the Ala Moana Building, other than
Sears, Roebuck and Co., Inc., J.C. Penney Company, Inc., Liberty House, Inc. and
Nieman Marcus Group, Inc. (such excluded Tenants, the "Anchor Tenants"), an
estoppel certificate in the form attached hereto as Exhibit P-1 (each a "Tenant
Estoppel") and (ii) to each Anchor Tenant an estoppel certificate in the form
attached hereto as Exhibit P-2, as applicable, (an "Anchor Estoppel"; the Tenant
Estoppels and Anchor Estoppels, collectively, the "Estoppel Certificates"), in
each case completed to reflect the terms of such Tenant's particular Lease. In
addition, if requested by Purchaser before June 15, 1999, Seller shall deliver
to the landlords under the Ground Lease an estoppel certificate in the form
attached hereto as Exhibit P-3. Seller shall use commercially reasonable efforts
(but without being required to incur any additional expense) to obtain signed
Estoppel Certificates from each of above-referenced Tenants, and, if requested
by Purchaser before June 15, 1999, from the landlords under the Ground Lease, in
each case in substantially the form attached hereto on or before the Closing
Date; provided, however, that if a different form of estoppel certificate is
attached to or otherwise prescribed in a particular lease document (or, in the
case of an Anchor Tenant, is currently in use by that Anchor Tenant in other
similar circumstances), that form shall be deemed to be acceptable to Purchaser
in the event that the party to such estoppel certificate is unwilling to sign
the relevant estoppel certificate in the form attached hereto. Seller agrees to
instruct Manager to deliver copies of the foregoing estoppel certificates to
Purchaser as and when they are received from Tenants and/or the landlords under
the Ground Lease. Purchaser acknowledges that Seller's only obligation hereunder
is to solicit estoppel certificates, and that if any estoppel certificate
returns identifying discrepancies or inaccuracies in Seller's rent roll or other
Property files, the existence of those discrepancies shall not give rise to a
failure of a condition precedent to Closing or any adjustment in the Purchase
Price except as expressly provided herein.
10.4 Completion of Modified Phase V A Work.
(a) From and after the date hereof and until Closing, Seller
shall diligently perform the Modified Phase V A Work in accordance with the
Modified Phase V A Plans and Modified Phase V A Budget, and in a good and
workmanlike manner and otherwise in accordance with industry practice for a
first-class regional mall and all applicable laws.
(b) At Closing, Purchaser shall receive a credit against the
Purchase Price in an amount equal to (i) the aggregate amount of the Modified
Phase V A Budget, less (ii) all Modified Phase V A Costs actually paid by Seller
after February 10, 1999 for Modified Phase V A Work performed in accordance with
the Modified Phase V A Budget prior to the Closing Date. At Closing, Purchaser
shall assume all of Seller's then outstanding obligations under the Construction
Contracts pursuant to which the Modified Phase V A Work is then being conducted
in accordance with the Assignment Instruments and from and after Closing,
Purchaser shall pay all Modified V A Costs incurred in connection with the
Modified Phase V A Work that remain unfunded (including any undisbursed
retainage) as of the Closing Date, even if the Modified Phase V A Work to which
such costs relate was performed prior to the Closing Date.
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(c) At Closing, Seller shall use commercially reasonable
efforts to obtain and deliver to the Title Company lien waivers for any amounts
paid in respect of the Modified Phase V A Work on or prior to the Closing Date
and such certificates and other documentation as the Title Company may
reasonably request in order to issue the Title Policy without exception for
liens, claims or other Encumbrances with respect to that portion of the Modified
Phase V A Work that was performed prior to the Closing Date.
(d) Seller agrees that it will not (i) amend the Modified
Phase V A Plans or perform any Modified Phase V A Work other than in accordance
with the Modified Phase V A Plans (and any Approved Change Orders), or (ii)
adopt any Change Order that is not an Approved Change Order in connection with
such Work, in each case without the prior written consent of Purchaser, which
consent may not be unreasonably delayed or withheld.
(e) Seller agrees to cooperate with Purchaser to cause the
carriers of Seller's so-called "OCIP" and Seller's Errors and Omissions
insurance coverage to consent to the assignment of the related policies to
Purchaser at Closing and, assuming such consent is given, Seller agrees to
assign said policies to Purchaser at the Closing (and there shall be no
proration or other adjustment at Closing or thereafter with respect thereto
except as provided in next sentence). If Seller is unable to assign either of
the insurance policies to Purchaser, Seller shall terminate such policy as of
Closing and Purchaser shall receive a credit against the Purchase Price equal to
the amount Seller receives from the insurance carrier(s) in respect of the
unused portion of the terminated policy. Seller shall be entitled to recover any
amounts payable in respect of claims relating to occurrences prior to the
Closing Date.
10.5 Liberty House Settlement Seller covenants that between
the date hereof and Closing Seller will use all commercially reasonable efforts
(but without the requirement to offer Liberty House any monetary incentive) to
cause a "Closing" to have occurred as contemplated by the terms of the Liberty
House Settlement Agreement, and to cause Liberty House to deliver the
certificate of acknowledgment in substantially the form attached hereto as
Exhibit R. In addition, Seller covenants to use commercially reasonable efforts
(but without the requirement to offer Liberty House any monetary incentive) to
cause Liberty House to obtain applicable bankruptcy court approval to its
participation in the closing of the Settlement Agreement and execution and
delivery of the certificate as described in the preceding sentence, provided,
however, that the obtaining of such approval is not a condition precedent to
Purchaser's or General Partner's obligation to close under this Agreement. Each
of Purchaser and General Partner hereby agrees that it will cooperate with
Seller and will use all commercially reasonable efforts (without the requirement
to offer Liberty House any economic incentive) to assist Seller in satisfying
the condition precedent set forth in Section 6.1(i) hereof, and that none of
Purchaser, General Partner, Manager or any of their respective Affiliates shall
engage in any discussions with Liberty House concerning the delivery of the
foregoing items unless representatives of Seller also are present or unless such
discussions otherwise have been expressly authorized by Seller. In addition,
Seller agrees that it will advise Purchaser of its progress with Liberty House
on a regular basis. If, after having applied such commercially reasonable
efforts, Seller determines, in its discretion exercised in good faith, that
there is reasonable likelihood that Seller will not be able fulfill the
condition precedent to Closing set forth in Section 6.1(i) hereof, Seller shall
notify Purchaser of its determination in writing. If Purchaser does not respond
to Seller in writing within ten (10) days of receipt of such notice
unconditionally waiving the requirement of Section 6.1(i), Seller shall have the
right to terminate this Agreement (in which event the Escrow Agent shall refund
the Deposit together with any interest earned thereon to Purchaser and,
thereafter, the parties shall have no further rights or obligations hereunder,
except as provided in any section hereof that by its terms expressly provides
that it survives any termination of this Agreement).
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10.6 Survival. With exception of Section 10.1(j)(i) and (ii),
which provision and Seller's covenants therein shall survive the Closing until
Seller has completed the undertakings set forth therein, and Section 10.4, which
shall survive the Closing to the extent necessary to finalize the adjustments to
Purchase Price required thereunder, the provisions of this Article X shall not
survive the Closing.
ARTICLE XI
MISCELLANEOUS
11.1 Broker. Seller and Purchaser expressly acknowledge that
Goldman, Sachs & Co. ("Broker") has acted as Seller's exclusive broker with
respect to the transaction contemplated herein and with respect to this
Agreement and that Broker has retained the services of Overseas Investors, Inc.
as its local real estate broker in Hawaii. Seller shall pay any brokerage
commission due to Broker in accordance with the separate agreement between
Seller and Broker, and Seller shall cause Broker to pay any brokerage commission
due to Overseas Investors, Inc. in accordance with a separate agreement between
Broker and said local broker. Each of Seller, on the one hand, and Purchaser and
General Partner, on the other hand, represents and warrants to the other that it
has not dealt with any other broker in this transaction and each agrees to hold
harmless the other and indemnify the other from and against any and all damages,
costs or expenses (including, but not limited to, reasonable attorneys' fees and
disbursements) suffered by the indemnified party as a result of acts of the
indemnifying party that would constitute a breach of its representation and
warranty in this Section. The provisions of this Section 11.1 shall survive the
Closing.
11.2 Survival/Merger. Except for the provisions of this
Agreement that are explicitly stated to survive the Closing, (a) none of the
terms of this Agreement shall survive the Closing, and (b) the delivery by
Seller of the Deed and the other documents and instruments required hereunder
and the acceptance thereof by Purchaser shall effect a merger, and shall be
deemed the full performance and discharge of every obligation on the part of
Seller and Purchaser to be performed hereunder.
11.3 Termination upon Default.
(a) Default by Purchaser or General Partner. If, on the
Closing Date, any condition precedent to the obligation of Seller to
consummate the sale of the Property hereunder has not been satisfied as
a result of breach by Purchaser or General Partner of any of its
representations or warranties in Section 7.1 or default by Purchaser or
General Partner in any material respect in the performance of any of
its obligations under this Agreement or any other agreement or
instrument delivered by Purchaser or General Partner concurrently
herewith or subsequent hereto, including, without limitation, its
obligation to deliver any of the agreements or other instruments
required to be delivered under Section 5.3 , then Seller's sole and
exclusive remedy shall be either to (i) if Purchaser, together with its
equity investors, if any, in respect of the transactions contemplated
hereby, had the funds available and/or commitments for funds in amounts
sufficient to pay the Purchase Price (without the need by GGP Limited
Partnership, the General Partner, or any such equity investor in
Purchaser to conduct any securities offering or disposition of assets)
but nevertheless Purchaser failed to close, file an action against
Purchaser and/or General Partner for
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specific performance, or (ii) if Seller elects not to pursue or is not
entitled to pursue rights under clause (i) or is unable to obtain the
remedy provided therein (or, after having commenced an action for
specific performance Seller elects to abandon such efforts), then in
any such case Seller shall be entitled to the Deposit together with
interest earned thereon as full and complete liquidated damages for
Purchaser's default of its obligations under this Agreement, it being
agreed between the parties that Seller's actual damages in the event of
such a breach or default would be extremely difficult or impractical to
determine and the amount of the Deposit is a reasonable estimate
thereof. Except as set forth above, neither party to this Agreement
shall have any further rights or obligations hereunder other than any
arising under any section herein which expressly provides that it
survives the termination of this Agreement. EACH OF PURCHASER AND
GENERAL PARTNER SPECIFICALLY CONFIRMS THAT IT WAS REPRESENTED BY
COUNSEL WHO EXPLAINED, AT THE TIME THIS AGREEMENT WAS MADE, THE
CONSEQUENCES OF THE LIQUIDATED DAMAGES PROVISIONS CONTAINED IN THIS
PARAGRAPH (a).
(b) Default by Seller. If, on the Closing Date, any condition
precedent to the obligation of Purchaser and General Partner to
consummate the purchase of the Property hereunder has not been
satisfied as a result of a breach by Seller of any of its
representations or warranties in Section 7.2 or default by Seller in
any material respect in the performance of any of its obligations under
this Agreement or any other agreement or instrument delivered by Seller
concurrently herewith or subsequent hereto, including, without
limitation, its obligation to deliver any of the agreements or other
instruments required to be delivered under Section 5.2, then the sole
and exclusive remedy of Purchaser and General Partner shall be either
to (i) file an action against Seller for specific performance, or (ii)
terminate this Agreement by delivering written notice to Seller, in
which event Purchaser shall be entitled to receive the Deposit together
with interest earned thereon. In addition, (A) if Seller's default or
breach consists of a deliberate action or omission by Seller prior to
Closing in bad faith and in violation of any of Seller's covenants in
this Agreement prior to Closing, (B) said action or omission frustrates
in any material respect Purchaser's right or ability to close hereunder
or negatively and materially impairs the value of the Property and (C)
as a result of such action or omission Purchaser terminates this
Agreement, Seller agrees that it will reimburse Purchaser for all of
Purchaser's and General Partner's reasonable out-of-pocket costs and
expenses incurred in preparation for the purchase of the Property
contemplated herein. Except as set forth above, neither party to this
Agreement shall have any further rights or obligations hereunder other
than any arising under any section herein which expressly provides that
it survives the termination of this Agreement. SELLER SPECIFICALLY
CONFIRMS THAT IT WAS REPRESENTED BY COUNSEL WHO EXPLAINED, AT THE TIME
THIS AGREEMENT WAS MADE, THE CONSEQUENCES OF THE LIMITED RIGHTS
CONTAINED IN THIS PARAGRAPH (b).
(c) Other Circumstances. In the event that either Purchaser,
on the one hand, or Seller, on the other hand, shall fail to satisfy
any conditions to the other's obligations under this Agreement, other
than those specified in Subsection 11.3(a) or 11.3(b), as applicable,
the other party, as its sole remedy, shall have the right to terminate
this Agreement, and thereafter Purchaser shall be entitled to receive
the Deposit together with any interest earned thereon and neither party
shall have any further liability to any other party hereunder. In the
event that each of Purchaser, on one hand, and Seller, on the other
hand, is in material default of its obligation to deliver any of the
agreements or other instruments required to be delivered under Section
5.3 or Section 5.2, as applicable, hereunder at Closing, neither party
shall have any rights against the other including,
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without limitation, under Subsection 11.3(a) or 11.3(b), as applicable,
other than to terminate this Agreement, and upon any such termination
the parties agree that the Deposit and any interest earned thereon
promptly shall be returned to Purchaser.
11.4 Further Assurances. Seller, Purchaser and General Partner
agree, at any time and from time to time after the Closing, to execute,
acknowledge where appropriate and deliver such further instruments and documents
and to take such other action as the other party may reasonably request in order
to carry out the intent and purpose of this Agreement, at the expense of the
party making such request, provided, however, that none of Seller, Purchaser or
General Partner shall, in connection with the foregoing, be obligated to incur
any liabilities or obligations in addition to their respective liabilities or
obligations otherwise contemplated in this Agreement. The provisions of this
Section 11.4 shall survive the Closing.
11.5 Payment of Expenses. Each party shall pay the expenses
provided for in this Agreement to be paid by it and the fees and disbursements
of its attorneys, accountants and other professionals and experts incurred in
connection with the negotiation of this Agreement and in preparation for
Closing. In addition, Purchaser and Seller agree that they will share all
transfer taxes and recording fees arising in connection with the transfers
required hereunder equally (i.e., 50%/50%) and will prepare and file with the
relevant Hawaii authorities all transfer tax returns, affidavits and other
similar instruments required in connection therewith.
11.6 Notices. All notices, demands, consents, requests or
other communications which may or are required to be given to a party under this
Agreement or any other instrument or agreement delivered concurrently herewith
or pursuant hereto by any other party shall be given by hand delivery,
transmitted by facsimile (with hard copy to follow by mail or courier), by
registered or certified mail, return receipt requested, or by
nationally-recognized overnight courier. Notices shall be deemed properly given
upon actual receipt, delivery or facsimile transmittal (or rejection of
delivery) and shall be addressed to the respective parties hereto at their
addresses as set forth below or to such other addressees, addresses or facsimile
numbers as may be designated by any party hereto by notice to the other parties
in accordance herewith.
If to Seller:
D/E Hawaii Joint Venture
1585 Kapiolani Boulevard, Suite 910
Honolulu, Hawaii, 96814
Attention: Kozo Yamagishi
Facsimile: 808 973-3939
with a copy sent simultaneously to Seller's attorneys:
Sullivan & Cromwell
125 Broad Street
New York, N.Y. 10004
Attention: Benjamin R. Weber
Facsimile: 212 558-3588
Carlsmith Ball
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Pacific Tower, Suite 2200
1001 Bishop Street
P.O. Box 656
Honolulu, Hawaii 96809-0656
Attention: Karl Kobayashi
Facsimile: 808 523-0842
Fujiyama, Duffy & Fujiyama
Suite 2700, Pauahi Tower, Bishop Square
1001 Bishop Street
Honolulu, Hawaii 96813-3427
Attention: Rodney M. Fujiyama
Facsimile: 808 536-5117
If to Purchaser:
GGP Limited Partnership
110 North Wacker Drive
Chicago, Illinois 60606
Attention: Matthew Bucksbaum
Facsimile: 312 960-5475
with a copy sent simultaneously to Purchaser's attorneys:
Neal, Gerber & Eisenberg
Two North LaSalle Street
Suite 2200
Chicago, Illinois 60606
Attention: Marshall E. Eisenberg
Facsimile: 312 269-1747
If to General Partner:
General Growth Properties, Inc.
110 North Wacker Drive
Chicago, Illinois 60606
Attention: Matthew Bucksbaum
Facsimile: 312 960-5475
with a copy sent simultaneously to General Partner's attorneys:
Neal, Gerber & Eisenberg
Two North LaSalle Street
Suite 2200
Chicago, Illinois 60606
Attention: Marshall E. Eisenberg
Facsimile: 312 269-1747
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Any of the aforementioned parties may change its address for the receipt of
notices, demands, consents, requests and other communications by giving written
notice to the others in the manner provided for above.
11.7 Assignment. Except as provided in the next sentence, none
of the parties to this Agreement shall have the right to assign, transfer,
convey and/or otherwise sell (or enter into any agreement to do the same),
directly or indirectly, any interest it may have in or under this Agreement or
any other agreement or instrument being delivered concurrently herewith or
pursuant hereto without first having obtained the written consent of the other
parties, which consent may be withheld by each such other party in its sole and
absolute discretion. Each of Purchaser and/or General Partner shall have the
right to assign its interests in and rights under this Agreement to another
Person without Seller's consent if and only if (i) the assigning party provides
Seller with the name, signature block, address and federal taxpayer
identification number, (ii) from the time of assignment and continuing until
immediately following Closing Purchaser or General Partner, as applicable, or an
Affiliate thereof controls (as defined in Section 12.1) the assignee, (iii) the
assignee assumes all of the obligations of the assigning party under this
Agreement and each other agreement or instrument delivered by the assignor
concurrently herewith or pursuant hereto pursuant to an assignment and
assumption agreement in form reasonably acceptable to Seller, (iv) the assigning
party confirms to Seller in writing that the assignment does not relieve the
assigning party of its obligations hereunder except to the extent that such
obligations actually are satisfied by the assignee, (v) the assignment does not
have the effect of delaying the Closing in any respect, and (vi) the assigning
party pays and remains fully and completely liable for any and all State and
local taxes that may be payable in connection with such assignment.
The provisions of this Agreement shall be binding upon and
inure to the benefit of the parties hereto and their respective legal
representatives, successors and permitted assigns, but shall not inure to the
benefit of, or be enforceable by, the Title Company or any other person or
entity.
11.8 Waiver. Neither this Agreement nor any term hereof may be
changed, waived, discharged or terminated orally, but only by an instrument in
writing signed by the party against whom the enforcement of the change, waiver,
discharge or termination is sought or, in the case of a default, by the
non-defaulting party or parties.
11.9 Pre-Closing Matters
(a) Full Access. Prior to Closing, Seller shall afford to
Purchaser and Purchaser's representatives upon request full access to the
Premises in order that Purchaser may have full opportunity to make such visual
inspections as it may desire, provided, however, that such inspections shall not
include any further environmental sampling or other intrusive testing of the
Premises unless such sampling or other testing is specifically recommended in a
Phase I environmental report and required by Purchaser's potential mortgage
lender as a condition to funding of that loan or Purchaser's potential joint
venture partner as a condition to funding of its co-investment in the Property.
Purchaser shall notify Seller of its intention or the intention of its agents or
representatives or lender's or a joint venturer's representatives to enter the
Property for any such inspection, sampling or other testing at least forty-eight
(48) hours prior to such intended entry. If Purchaser or any such other Person
intends to conduct any sampling or other testing of the Premises, Purchaser
shall describe the scope of the proposed sampling or testing in its notice and
the scope of such work shall be subject to approval by Seller, which approval
shall not be
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unreasonably withheld. Purchaser shall cause the consultants performing any such
sampling or testing to comply with all applicable worker's compensation,
employer's liability insurance, environmental and employee health and safety
laws and maintain comprehensive general liability insurance, in customary
amounts. Copies of certificates of such insurance shall be supplied to Seller at
Seller's request. Seller's agents may, at their option, be present for any such
inspection, sampling or other testing. Any such investigations or permitted
sampling or other testing shall be conducted in such a manner as not to
interfere unreasonably with Seller's normal business operations. Seller shall
also furnish or make available during normal business hours to Purchaser and
Purchaser's Representatives for their review such information as Purchaser may
reasonably request in cooperation with any audit, review, investigation or
examination of the books and records, accounts, contracts, properties, assets,
operations and facilities of Seller relating to the Property, other than that
information which Seller is legally or contractually obligated to keep
confidential. Subject to applicable law and prior to Closing, Purchaser and
General Partner will hold any such information which is not then publicly
available in confidence (and disclose such information only to the persons and
in the circumstances described in Section 11.11(a)) until such time as such
information otherwise becomes publicly available. In addition, Seller shall
cooperate fully with Purchaser and Purchaser's Representatives in connection
with the due diligence investigation conducted by Purchaser.
In conducting any inspection or investigation of the Property,
Purchaser, General Partner and the Purchaser's Representatives shall (i) not
disturb or interfere in any material respect with any Tenant's use of the
Premises pursuant to its Lease, (ii) not interfere in any material respect with
the operations and maintenance of the Property, (iii)subject to the immediately
preceding paragraph which permits sampling and other invasive testing under
certain circumstances and subject to certain conditions, not damage in any
material respect any part of the Property or any property owned or held by any
Tenant or any other Person, (iv) not injure or otherwise cause bodily harm to
Seller or its Tenants, agents, guests, invitees, contractors and employees or
any other Person, (v) promptly pay when due the costs of all such inspections
and investigations, (vi) not permit any Encumbrance to attach to the Property by
reason of the exercise of its rights hereunder, (vii) at no cost to Seller
restore the Property to substantially the condition in which it was found before
any such inspection or investigation was undertaken, and (viii) comply with all
statutes, laws, ordinances and regulations of any Governmental Entity applicable
to any such inspection or investigation.
(b) Purchaser's Indemnity; Delivery of Reports. Purchaser and
General Partner, jointly and severally, hereby agree to indemnify, defend, and
hold the Seller Parties and the Property free and harmless from and against any
and all costs, loss, damages and expenses, of any kind or nature whatsoever
(including reasonable attorneys fees and costs), arising out of or resulting
from the entry and/or the conduct of activities upon the Premises by Purchaser
or General Partner or any Purchaser's Representatives (but, for the purposes of
this Section 11.9 (b), not including Manager) in connection with any visitation
or visual inspections of the Property conducted at any time prior to the
Closing, which indemnity shall survive the Closing (and not be merged therein)
or any earlier termination of this Agreement. The foregoing indemnity shall not
be deemed to apply to any actual or alleged loss or damage to the value of any
of the Property or any loss of the sale contemplated by this Agreement, to the
extent due solely from (i) the results of any inspections made by Purchaser (or
by any of Purchaser's Representatives) being unfavorable, or (ii) Purchaser's
decision not to proceed with the purchase of the Property. Purchaser shall
deliver promptly to Seller copies of all third party reports commissioned by
Purchaser evidencing the results of inspections of the Property.
(c) Governmental Contact. Notwithstanding any provision in
this Agreement to the contrary, during the period from the date hereof through
the Closing, neither Purchaser nor any or
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Purchaser's Representatives shall contact any Governmental Entity regarding the
compliance of any portion of the Property with any laws or regulations of any
Governmental Entity without Seller's prior written consent thereto, which
consent shall not be unreasonably withheld. In addition, if Seller's consent is
obtained by Purchaser, such Seller shall be entitled to receive at least five
(5) Business Days prior written notice of the intended contact and to have a
representative present when Purchaser has any such contact with any governmental
official or representative. This paragraph shall not be interpreted as limiting
Manager's ability or responsibility to perform its obligations under the
Management Agreement between Seller and Manager.
(d) General Partner agrees that during the period from the
date hereof through the Closing or the earlier termination of this Agreement as
permitted hereunder it will cause Manager to continue (i) to serve as Seller's
property manager with respect to the Property in accordance with the terms of
the Management Agreement (and Seller agrees not to terminate the Management
Agreement, except with cause and except that Seller intends to and shall be
entitled to terminate the Management Agreement on and as of Closing) and (ii) to
use commercially reasonable efforts to assist Seller to meet its obligations
under this Agreement including, without limitation, its obligations under
Section 10.4.
(e) The provisions of this Section 11.9 shall survive the
termination of this Agreement and the Closing.
11.10 Incorporation of Recitals and Schedules. The Recitals to
this Agreement and the Exhibits and Schedules attached hereto are hereby
incorporated by reference into the body of this Assignment and made a part
hereof.
11.11 Confidentiality.
(a) Agreement. No party shall disclose the contents of this
Agreement to any third parties without the consent of the other, except and then
only to the extent that such disclosure is required for compliance with any
applicable laws, rules or regulations of any Governmental Entity having
jurisdiction over such party and except that each party may issue one or more
press releases announcing transactions contemplated hereby; provided, however,
that prior to any such disclosure the disclosing party shall give the other
parties hereto reasonable advance notice of any such disclosure and if such
disclosure is in written form the disclosing party shall give each other party
hereto reasonable approval rights over the wording of any description of such
other party or such other party's involvement in the transactions contemplated
hereby. Nothing contained in this Section 11.11 or in the Confidentiality
Agreement (as defined below) shall be construed as prohibiting (i) Seller from
disclosing the contents of this Agreement on a confidential basis to Seller's
counsel, accountants, consultants, property managers and other agents, or (if
necessary or appropriate in Seller's reasonable judgment) to regulatory
authorities having jurisdiction over Seller (which authorities, by law, may not
be bound by any confidentiality restrictions) or (ii) Purchaser or General
Partner from disclosing the contents of this Agreement on a confidential basis
to its counsel, accountants, consultants, property managers and other agents or,
if necessary or appropriate in Purchaser's reasonable judgment, to regulatory
authorities having jurisdiction over Purchaser (which authorities, by law, may
not be bound by any confidentiality restrictions) or to parties from which it
seeks debt or joint venture financing. Seller and Purchaser each agree to
consult with and cooperate with the other parties on the content and timing of
all press releases and other public announcements relating to the transactions
contemplated by this Agreement issued concurrently with the execution of this
Agreement or otherwise issued prior or immediately subsequent to the Closing.
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(b) Property Information. In the event this Agreement is
terminated, Purchaser and General Partner agree promptly to deliver and cause
all Purchaser's Representatives promptly to deliver to Seller all originals and
copies of the information relating to the Property supplied by, or at the
direction of, Seller in the possession of Purchaser, General Partner and
Purchaser's Representatives (other than Manager to the extent such information
is required by it to fulfill its responsibilities under the Management
Agreement). In addition to the foregoing, Purchaser shall remain obligated and
bound pursuant to the terms and provisions of that certain Confidentiality
Agreement by and between Seller and Purchaser, dated December 29, 1998 (the
"Confidentiality Agreement"); provided, however, that in the event of any
conflict between the terms and provisions of this Agreement (permitting
disclosure of certain information under certain circumstances) and the
Confidentiality Agreement, the terms and provisions of this Agreement shall
govern. Upon the occurrence of the Closing, Purchaser's and General Partner's
obligations under the Confidentiality Agreement shall terminate.
11.12 Merger. Subject only to the following sentence, all
understandings and agreements heretofore had between the parties hereto are
merged in this Agreement and the instruments and documents referred to herein,
which fully and completely express their agreements with respect to the purchase
of the Property and related transactions, and supersede all prior agreements,
written or oral, with respect thereto. Notwithstanding the foregoing, the
Confidentiality Agreement shall not merge into this Agreement, but shall
continue in accordance with its terms unless and until the Closing occurs.
11.13 GOVERNING LAW. THIS AGREEMENT SHALL IN ALL RESPECTS BE
GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF HAWAII
APPLICABLE TO AGREEMENTS MADE AND TO BE PERFORMED ENTIRELY WITHIN SUCH STATE,
WITHOUT REGARD TO THE CONFLICT OF LAWS PRINCIPLES OF SUCH STATE.
11.14 Jurisdiction. Each of Seller, Purchaser and General
Partner hereby irrevocably and unconditionally submits to the jurisdiction of
any Hawaii State Court or Federal Court of the United States of America sitting
in the District of Hawaii, and any appellate court from any such court, in any
suit, action or proceeding arising out of or relating to this Agreement, or for
recognition or enforcement of any judgment, and each hereby irrevocably and
unconditionally agrees that all claims in respect of any such suit, action or
proceeding shall be brought in and may be heard and determined in such Hawaii
State Court or, to the extent permitted by law, in such Federal Court. Each of
Seller, Purchaser and General Partner agree that a final judgment in any such
suit, action or proceeding shall be conclusive and may be enforced in other
jurisdictions by suit on the judgment or in any other manner provided by law.
Each of Seller, Purchaser and General Partner hereby irrevocably and
unconditionally waives, to the fullest extent it may legally and effectively do
so, any objection which it may now or hereafter have to the laying of venue of
any suit, action or proceeding arising out of or relating to this Agreement in
any Hawaii State Court or Federal Court sitting in the District of Hawaii. Each
of Seller, Purchaser and General Partner hereby irrevocably waives, to the
fullest extent permitted by law, the defense of an inconvenient forum to the
maintenance of such suit, action or proceeding in any such court. Nothing
contained in this Section 11.14 shall be construed as preventing any of Seller,
Purchaser or General Partner, or any of their respective Affiliates, from (i)
objecting to the jurisdiction of any Hawaii State Court on the ground that the
matter involved exceeds the statutory jurisdiction of such court or (ii) from
seeking to remove any suit, action or proceeding from a Hawaii State Court to a
Federal Court sitting in the District of Hawaii, or vice versa.
11.15 Captions. The captions and Article headings included in
this Agreement and the table of contents are for convenience only, do not
constitute part of this Agreement and shall not be
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considered or referred to in interpreting the provisions of this Agreement.
11.16 Counterparts. This Agreement may be executed in two or
more counterparts, each of which shall be deemed to be an original, but all of
which shall constitute one and the same instrument. The submission of a
signature page transmitted by facsimile (or similar electronic transmission
facility) shall be considered as an "original" signature page for purposes of
this Agreement so long as the original signature page is thereafter transmitted
by mail or by other delivery service and the original signature page is
substituted for the facsimile signature page in the original and duplicate
originals of this Agreement.
11.17 Severability. If any provision hereof is held invalid or
not enforceable to its fullest extent, such provision shall be enforced to the
extent permitted by law, and the validity of the remaining provisions hereof
shall not be affected thereby.
11.18 Prior Negotiations; Construction. No negotiations
concerning or modifications made to prior drafts of this Agreement shall be
construed in any manner to limit, reduce or impair the rights, remedies, duties
and obligations of the parties under this Agreement or to restrict or expand the
meaning of any of the provisions of this Agreement or to construe any of the
provisions of this Agreement in any party's favor. The parties acknowledge that
each party and its counsel have reviewed and revised this Agreement and that the
normal rule of construction to the effect that any ambiguities are to be
resolved against the drafting party shall not be employed in the interpretation
of this Agreement or any amendment, Schedule or Exhibit hereto.
11.19 Litigation Expenses. In the event that either Seller, on
the one hand, or Purchaser or General Partner, on the other hand, is required to
employ an attorney because any litigation arises out of this Agreement between
the parties hereto, the non-prevailing party shall pay the prevailing party all
reasonable fees and expenses, including attorneys' fees and expenses, incurred
in connection with such litigation.
11.20 No Recordation. Each of Seller, Purchaser and General
Partner each agrees that neither this Agreement nor any memorandum or notice
hereof shall be recorded and each of Purchaser and General Partner agrees (a)
not to file any notice of pendency or other instrument (other than a judgment or
lis pendens filed in connection with enforcement of its rights hereunder)
against any of the Property or any portion thereof in connection herewith and
(b) to indemnify Seller against all costs, expenses and damages, including,
without limitation, reasonable attorneys' fees and disbursements, incurred by
Seller by reason of the filing by it of such notice of pendency or other
instrument in violation hereof.
11.21 WAIVER OF TRIAL BY JURY. EACH OF PURCHASER, SELLER AND
GENERAL PARTNER HEREBY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, THE RIGHT
TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM FILED BY IT OR ANY
OTHER PARTY, WHETHER IN CONTRACT, TORT OR OTHERWISE, WHICH RIGHT OR CLAIM
RELATES DIRECTLY OR INDIRECTLY TO THIS AGREEMENT, ANY DOCUMENTATION RELATED
THERETO, OR ANY ACTS OR OMISSIONS IN CONNECTION WITH THIS AGREEMENT. THIS WAIVER
HAS BEEN AGREED TO AFTER CONSULTATION WITH LEGAL COUNSEL.
11.22 Cooperation Following Closing. From and after the
Closing, Seller, at the sole cost and expense of Purchaser and General Partner,
shall cooperate with Purchaser and General Partner in
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connection with the preparation by Purchaser and/or General Partner of financial
statements for the Property and an independent audit thereof for the fiscal
period in which the Closing occurred (including delivery by Seller of a
representation letter to Purchaser's or Seller's accountants in the form
attached hereto as Exhibit Q), the adjustment of losses and claims relating to
the Property and such other matters as Purchaser or General Partner reasonably
may request. Similarly, from and after the Closing, Purchaser and General
Partner, at Seller's sole cost and expense, shall cooperate with Seller in
connection with the preparation by Purchaser of financial statements and tax
returns for the fiscal period in which the Closing occurred or any prior period,
the adjustment of losses and claims relating to the Property and such other
matters as Seller reasonably may request.
11.23 Survival. The provisions of this Article 11 shall
survive the Closing or any earlier termination of this Agreement.
ARTICLE XII
DEFINITIONS
12.1 Definitions. For purposes of this Agreement, in addition
to the terms defined above, the following terms shall have the meanings
indicated below:
"Affiliates"shall mean with respect to any Person, any other
Person or Persons, directly or indirectly through one or more intermediaries,
controlling, controlled by or under common control with the Person or Persons in
question. The term "control" shall mean, with respect to a Person that is a
corporation, the right to exercise, directly or indirectly, 10% or more of the
voting rights attributable to the shares of the controlled corporation and, with
respect to a person that is not a corporation, the possession, directly or
indirectly, of the primary responsibility to make or the right to veto material
decisions with respect to the operation, management, financing and/or
disposition of assets of such Person or the ownership of 10% or more of the
equity interests in such Person.
"Agreement" shall mean this Purchase and Sale Agreement, as
amended or modified from time to time hereafter in accordance with the terms
hereof.
"Ala Moana Building" shall mean the Land described on Exhibit
A-2 attached hereto and made a part hereof and all Improvements thereon.
"Ala Moana Center" shall mean the Land described on Exhibit
A-1 attached hereto and made a part hereof and all Improvements thereon.
"Ala Moana Pacific Center" shall mean the Land Described on
Exhibit A-3 attached hereto and made a part hereof and all Improvements thereon.
"Ala Moana Plaza" shall mean the Land described on Exhibit A-4
attached hereto and made a part hereof and all Improvements thereon.
"Applicable Closing Fiscal Period" shall mean the fiscal
period in which the Closing occurs.
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"Approved Change Order" shall mean any Change Order required
to comply with applicable law or contractual obligations of Seller, to account
for weather conditions or the discovery of unknown conditions during
construction, to correct or adjust for material errors or omissions in Modified
Phase V A Plans and Specifications (the scope of any such Change Order shall be
subject to the prior written approval of Purchaser, which approval shall not be
unreasonably withheld or delayed) or which otherwise are approved in writing by
Seller and the Purchaser.
"Business Day" means any day other than a Saturday or Sunday
or any other day on which national banks in the City of Chicago, Illinois are
not open for business.
"Casualty" shall mean any damage to or destruction of the
Property or any portion thereof caused by fire or other casualty, whether or not
insured.
"CEC Properties" shall mean the Land described on Exhibit A-6
attached hereto and made a part hereof and any and all Improvements thereon.
"Change Order" shall mean any change order that relates to a
deviation in the Modified Phase V A Plans.
"GAAS" shall mean Generally Accepted Auditing Standards as
promulgated by the Auditing Standards Division of the American Institute of
Certified Public Accountants from time to time.
"Hazardous Materials" means any materials, wastes or
substances that are included within the definition of any one or more of the
terms "hazardous substances", "hazardous materials", "toxic substances", "toxic
pollutants" and "hazardous waste" in any Environmental Law or otherwise
regulated under any Environmental Law (as hereinafter defined).
"Kapiolani Properties" shall mean the Land described on
Exhibit A-5 attached hereto and made a part hereof and all Improvements thereon.
"Land" shall mean one or more parcels of the Owned Land or the
Ground Leased Land, as the case may be.
"Management Agreement" shall mean that certain Management
Agreement dated June 1, 1995, between Seller and Manager, as amended through the
date hereof.
"Material Uninsured Casualty" mean a Casualty not covered by
Seller's insurance where the cost to fully repair the damage resulting from such
Casualty will exceed $2 million.
"Modified Phase V A Budget" shall mean that certain budget
attached hereto as Exhibit T, as revised from time to time pursuant to Approved
Change Orders but excluding additional costs resulting from other Change Orders,
reflecting the total Modified Phase V A Costs associated with the completion of
the Modified Phase V A Work.
"Modified Phase V A Costs" shall mean all costs and expenses
incurred or to be incurred to perform the Modified Phase V A Work, including
costs of materials, labor costs, costs of barricades, security and directional
signs, permit and license fees, taxes, architects' fees, engineering fees,
general contractor's overhead and profit, legal fees and costs associated with
Approved Change Orders but
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excluding additional costs resulting from other Change Orders.
"Modified Phase V A Plans" shall mean (a) the plans and
specifications listed on Exhibit S, and (b) any further plans and specifications
with respect to the Parking Deck and/or any other portion of the Modified Phase
V A Work that have been approved by Purchaser in writing, which approval shall
not be unreasonably withheld or delayed. The parties acknowledge that the plans
and specifications for the Parking Deck have not yet been approved by Seller and
Purchaser.
"Modified Phase V A Work" shall mean the work more
particularly described on Exhibit T and/or as contemplated in the Modified Phase
V A Plans, including without limitation construction of (i) a third level on
Blocks B, C and L, (ii) a four (4) level parking deck which shall have
sufficient structural support necessary to expand such deck to a nine (9) level
deck without the further installation of any additional structural support (the
"Parking Deck"), and (iii) certain other related improvements within the Ala
Moana Center.
"Partnership Agreement" shall mean the Second Amended and
Restated Agreement of Limited Purchaser of the Purchaser dated as of April 1,
1998, as amended and as the same may be further amended hereafter.
"Person" shall mean any individual, corporation, partnership,
limited liability company, governmental unit or agency, trust, estate or other
entity of any type.
"Substantial Casualty" or "Substantial Taking" shall mean, a
Casualty or Taking, as the case may be, where:
(a) the condemnation award paid or mutually agreed between
Seller and Purchaser in good faith as likely to be paid, or the proceeds payable
under the applicable policy or policies of casualty insurance maintained by
Seller, together with any additional amounts that Seller is willing to fund (it
being understood that Seller shall not be under any obligation to do so), are
insufficient by more than $5 million to fully repair the damage caused by such
Casualty or Taking, unless Seller shall (at its sole option and without any
obligation to do so) grant to the Purchaser a credit to the Purchase Price equal
to such deficiency; or
(b) an Anchor Tenant shall, by reason of such Casualty or
Taking, either terminate its Lease or cease operating at the Property (other
than temporarily due to such damage and destruction, remodeling, renovation or
any similar cause), or have the right to do any of the foregoing (unless such
right shall have expired or been waived) or by reason of such casualty or taking
the same shall occur with regard to in-line Tenants occupying more than 200,000
leasable square feet at the Property in the aggregate; or
(c) in the case of a Taking, a Taking with respect to such
portion of the Premises as when so taken would, in the reasonable opinion of the
Purchaser, leave remaining a balance of the Premises that, due either to the
area taken or the location of the part taken would not, under applicable zoning
laws and building regulations or otherwise, readily accommodate a new or
restructured building or buildings having an economic value of at least ninety
percent (90%) of the economic value of the building or buildings existing on the
date hereof, or would result in materially inadequate parking or a lack of
reasonable access to public roads.
"Taking" shall mean a taking of all or any portion of the
Premises in condemnation or by
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exercise of the power of eminent domain or by an agreement in lieu thereof.
"Title Policy" shall mean an ALTA form owner's policy of title
insurance issued by Title Company, dated the date and time of Closing and with
policy coverage in the amount of the Purchase Price, insuring Purchaser as owner
of good and marketable fee title to the Owned Land and the owner of the
leasehold estate in the Ground Leased Land, subject only to the Permitted
Exceptions, and affirmatively insuring as a part of Schedule A to such Title
Policy Purchaser's rights under designated appurtenant easements that benefit
the Premises. The Purchaser also may request the issuance at the Closing of such
endorsements as the Purchaser deems appropriate (to the extent available in
Honolulu, Hawaii and provided that the obtaining of the same shall be without
cost or expense to Seller and shall not require any deposit of funds, assumption
of liabilities or indemnity on the part of Seller, other than such as Seller
elects to provide in order to remove any Title Objects as contemplated by
Section 3.2 hereof), but the issuance thereof shall not be a condition to the
Purchaser's obligations hereunder.
"Updated Survey" shall mean an Urban ALTA/ACSM Land Title
Survey of the Property (other than the CEC Properties) by a surveyor licensed or
registered in the State of Hawaii, made in compliance with and meeting the
accuracy standards under the "Minimum Standard Detail Requirements for ALTA/ACSM
Land Surveys" jointly established by the American Land Title Association and
American Congress on Surveying and Mapping in 1997 (excluding the requirements
of paragraphs 5g and 7 of those standards) and containing Table A Optional
Survey Responsibilities and Specifications 1, 2, 3, 4, 7(a), 7(b)(1), 8, 9, 10,
11 and 13; show the boundaries of each of the Land parcels; shall disclose
whether or not the Land comprises a single parcel of land with no strips, gores
or gaps within its boundaries; shall disclose any encroachments of any
Improvements located primarily on the Land onto adjoining premises and public
ways or onto or over setback or building lines located on the Premises or of
improvements located primarily on adjoining premises onto any portion of the
Land; shall locate all easements created by recorded instruments (to the extent
plottable) or visible on the Land and shall disclose any encroachment by any of
the Improvements, or any other structures located on the Land, in violation of
any such easements; shall contain a legal description of the Land; shall show
the location of any adjacent public streets, disclosing access, if any, to the
Land therefrom; shall show building line(s) and side yard line(s), if any; shall
show the configuration and number of parking spaces on the Land; shall show the
area of the Land; shall state whether the Land is located in an area designated
by HUD as having special flood risks; and shall contain a certificate of the
surveyor attesting to the accuracy of the Updated Survey and its conformity to
the requirements of the aforesaid Minimum Standard Detail Requirements, which
certificate shall be certified to Seller, Purchaser and the Title Company, and
to such other persons having an interest in the Property which Purchaser may
designate.
[THE REMAINDER OF THIS PAGE HAS BEEN INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the day and year first above written.
SELLER:
D/E HAWAII JOINT VENTURE
By: HAWAII CENTRAL DEVELOPMENT, INC.
MANAGING VENTURER
By: /s/ KOZO YAMAGISHI
--------------------------
Name: Kozo Yamagishi
Title: President
By: DAIEI HAWAII INVESTMENTS, INC.
GENERAL PARTNER
By: /s/ KOUJI MORIKAWA
--------------------------
Name: Kouji Morikawa
Title: President
PURCHASER:
GGP LIMITED PARTNERSHIP, a
Delaware limited partnership
By: General Growth Properties, Inc., a
Delaware corporation and its general partner
By: /s/ MATTHEW BUCKSBAUM
--------------------------
Name: Matthew Bucksbaum
Title: Chairman
55
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GENERAL PARTNER:
GENERAL GROWTH PROPERTIES, INC.
By: /s/ MATTHEW BUCKSBAUM
---------------------------
Name: Matthew Bucksbaum
Title: Chairman
56
<PAGE> 1
EXHIBIT 3.1
SECOND CERTIFICATE OF AMENDMENT
OF
SECOND AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
GENERAL GROWTH PROPERTIES, INC.
It is hereby certified that:
1. The name of the Corporation (which is hereinafter referred to as the
"Corporation") is General Growth Properties, Inc.
2. The amendment to the Second Amended and Restated Certificate of
Incorporation, as amended, effected by this Second Certificate of Amendment is
as follows:
By deleting the definition of "Existing Holder" in Article IV D as it
now exists and inserting in lieu thereof a new definition of "Existing
Holder", reading as follows:
"`Existing Holder' shall mean the Bucksbaum Group."
By deleting the definition of "Existing Holder Limit" in Article IV D
as it now exists and inserting in lieu thereof a new definition of
"Existing Holder Limit", reading as following:
"`Existing Holder Limit' shall mean, initially, the greater of
the Ownership Limit and the percentage of the value of the
outstanding Common Stock Beneficially Owned by the Existing
Holder immediately after the Initial Public Offering, and
after any adjustment pursuant to subparagraph D(10) of this
Article IV, shall mean such percentage of the outstanding
Equity Stock as so adjusted."
3. The aforesaid amendment was duly adopted in accordance with the
provisions of Section 242 of the General Corporation Law of the State of
Delaware.
<PAGE> 2
IN WITNESS WHEREOF, General Growth Properties, Inc. has caused this
Second Certificate of Amendment to be executed by its duly authorized
President this 13th day of May, 1999.
GENERAL GROWTH PROPERTIES, INC.,
a Delaware corporation
By: /s/ ROBERT A. MICHAELS
-------------------------------------
Name: Robert A. Michaels
--------------------------------
Title: President
-------------------------------
<PAGE> 1
EXHIBIT 3.2
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF DESIGNATIONS, PREFERENCES AND RIGHTS
OF 7.25% PREFERRED INCOME EQUITY REDEEMABLE STOCK, SERIES A
OF
GENERAL GROWTH PROPERTIES, INC.
It is hereby certified that:
1. The name of the Corporation is General Growth Properties, Inc.
2. The amendment to the Certificate of Designations, Preferences and
Rights of 7.25% Preferred Income Equity Redeemable Stock, Series A, effected by
this Certificate of Amendment is as follows:
By deleting Article IV.(a) as it now exists and inserting in lieu
thereof a new Article IV.(a), reading in its entirety as follows:
"IV. Dividends.
(a) The holders of shares of the Series A Preferred
Stock shall be entitled to receive, when, as and if declared
by the Board, out of assets legally available for the payment
of dividends, quarterly cumulative cash dividends in an amount
per share of Series A Preferred Stock equal to the greater of
(i) 7.25% of the $1,000 liquidation preference thereof per
annum (or $18.125 per quarter) and (ii) the quarterly cash
dividends paid or payable (determined on each of the quarterly
Dividend Payment Dates referred to below) on that number of
shares of Common Stock equal to the number of shares of Common
Stock (or portion thereof) into which a share of Series A
Preferred Stock is convertible. Dividends on the shares of the
Series A Preferred Stock shall accrue from and after the
following dates, whether or not in any Dividend Period or
Periods there shall be funds of the Company legally available
for the payment of such dividends:
(1) for shares of such series issued in
connection with the first offering and sale of shares
of such series (the "Initial Series A Shares"), June
10, 1998;
(2) for shares of such series (other than
the Initial Series A Shares) issued on or before the
Dividend Record Date (as defined below) for the then
current Dividend Period, the first day of such
Dividend Period; and
<PAGE> 2
(3) for shares of such series (other than
the Initial Series A Shares) issued after the
Dividend Record Date for the then current Dividend
Period, the first day of the immediately succeeding
Dividend Period.
Dividends on the shares of the Series A Preferred Stock shall
be payable in arrears quarterly when, as and if declared by
the Board, on the fifteenth day of each January, April, July
and October or, if not a Business Day, the next succeeding
Business Day, beginning October 15, 1998 (each, a "Dividend
Payment Date"). Each such dividend shall be payable in arrears
to holders of record of shares of the Series A Preferred
Stock, as such holders appear in the stock records of the
Company at the close of business on the applicable record
date, which shall be the first day of the calendar month in
which the applicable Dividend Payment Date falls or such other
date designated by the Board for the payment of dividends that
is not more than 30 nor less than 10 days prior to such
Dividend Payment Date (each, a "Dividend Record Date").
Accrued and unpaid dividends for any past Dividend Periods may
be declared and paid at any time, without reference to any
Dividend Payment Date, to holders of record on such date, not
exceeding 45 days preceding the payment date thereof, as may
be fixed by the Board."
3. The aforesaid Certificate of Amendment was duly adopted in
accordance with the provisions of Section 242 of the General Corporation Law of
the State of Delaware.
IN WITNESS WHEREOF, General Growth Properties, Inc. has caused this
Certificate of Amendment to be executed by its duly authorized President this
13th day of May, 1999.
GENERAL GROWTH PROPERTIES, INC.,
a Delaware corporation
By: /s/ ROBERT A. MICHAELS
-------------------------------------
Name: Robert A. Michaels
--------------------------------
Title: President
-------------------------------
<PAGE> 1
Exhibit 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
Independent Auditors' Consent
We consent to the incorporation by reference in the Registration Statements of
General Growth Properties, Inc. on Forms S-3 (File Nos. 333-11067,
333-15907,333-17021, 333-23035, 333-37247, 333-37383, 333-41603, 333-58045,
333-68505, 333-76379, and 333-76757) and the Registration Statements on Forms
S-8 (File Nos. 33-79372, 333-07241, 333-11237, 333-28449, 333-74461 and
333-79737) of our report dated June 25, 1999, relating to our audit of the
combined statement of revenues and certain expenses of the Ala Moana Properties
("the Properties") for the year ended December 31, 1998, included in this Form
8-K dated July 12, 1999, and to the references to us as experts in such
registration statements.
Deloitte and Touche LLP
Honolulu, Hawaii
July 12, 1999
