REAL ESTATE ACQUISITION, DEVELOPMENT AND
DISPOSITION FROM THE DEVELOPER'S PERSPECTIVE
By John D. Hastie
Andrews Davis Legg Bixler Milsten & Price
Oklahoma City, Oklahoma
Copyright © 1999 John D. Hastie
All Rights Reserved
STUDY OUTLINE
1.
Introduction. The comments which follow have been prepared with an
emphasis on the perspective of the developer and the developer's attorney.
Notwithstanding the length of the publication, it is not an exhaustive treatment of the
subjects which are addressed. Not all of the subjects which are covered by the following
materials will be included in the faculty discussions; the materials are published to
provide a survey of activities applicable to real estate transactions against which specific
areas can be explored. The materials reflect a pragmatic and not a scholarly approach to
the subject matter.
2.
Project Chronology. One means of understanding the various segments of a
commercial project is to place the component parts in the chronological sequence in
which they customarily occur.
2.1 Planning; Feasibility.
The development of a project ordinarily
encompasses a number of separate undertakings which might be pursued
simultaneously or in tandem, but all of which must combine to produce
success. All of those undertakings are brought together and the project is
generally considered to be feasible when commitments for financing are
issued to the developer.
_______________________________________
Modern Real Estate Transactions, July 2006
- 1-
2.1.1 Land Acquisition. The first cost of the project is fixed at the time
of acquisition of the land. The true cost of land to the developer is not the
per acre or per square foot cost, but the total cost to bring the land to the
point of consumption. That cost customarily includes raw land cost, the
cost of providing utility and other governmental services to the land, the
costs of obtaining zoning, use and environmental approvals, the cost of
creating access to and within the development, the cost of curing title
defects and the interest expense or return on investment charged to the
carrying period prior to development. To the extent that those costs can be
minimized or shifted to the seller of the land, the developer can create
substantial savings and reduce the risks of development. In an effort to
minimize risk and carrying cost, the developer might enter into an option
agreement or purchase contract with the landowner setting forth the
conditions precedent to the developer's obligation to purchase (or forfeit
option or earnest money deposits), which conditions precedent will
generally include: (a) approval of title as suitable to the development; (b)
approval of zoning and other use restrictions; (c) approval of engineering
reports as to soil conditions, drainage, flood plain designations and the
absence of hazardous or toxic substances; (d) availability of utilities in
adequate capacities and appropriate costs to service the development; (e)
availability of pedestrian and vehicular access ways; (f) obtaining of
environmental permits and other approvals of governmental agencies; (g)
acceptability to the developer of the costs of rendering the land ready to
develop; and (h) any other peculiarities of the land which must be resolved
prior to the final decision to proceed with development. It should always
be noted that the acquisition of the land offers the first significant
opportunity for leverage by use of a purchase money loan, a long term
ground lease or a joint venture arrangement with the landowner. The use
of those financing devices must be coupled with appropriate provisions
which will enable the developer to discharge or modify the terms of the
purchase money financing to facilitate later financing and marketing of the
development.
2.1.2 Market Studies. Every project begins with a market study. The
magnitude of that study might range from the visceral reaction of the
developer to a comprehensive analyses prepared at great expense over a
substantial period of time. The nature of the study is ordinarily dictated by
the number of parties other than the developer who must be convinced as
to the economic viability, desirability and probability of success of the
proposed project. The market study should produce preliminary estimates
of the cost of the project, its marketability, the impact of the geographic
location, the presence of local impediments to development, a timetable
for development and the identification of the personnel required to
supplement the developer's personal efforts.
_______________________________________
Modern Real Estate Transactions, July 2006
- 2-
2.1.3 Project Design. The timing of the design of the project usually
depends on the confidence that the developer has in the project, the
peculiarities of the site or the project, the extent to which reliable cost
estimates are required, the procedure which will be used to produce final
plans and specifications and the perceived requirements of the lenders or
end users which are anticipated to be involved in the project. At a
minimum, the developer must preliminarily define the use of the land, the
extent of subdivision, the number and/or size of the improvements, the
general appearance and amenities to be incorporated in the project and the
timetable and cost to produce final plans and specifications.
2.1.4 Cost Estimates. At the preliminary stage the developer generally
relies on the developer's prior experience with similar projects and
"guesstimates" of third parties with respect to the cost and resale value of
the project. As the feasibility study proceeds, the cost estimate will be
polished by the use of bids and negotiated contract amounts so that the
fixed costs and contingencies of the project can be defined in a reliable
estimate appropriate for submission to lenders.
2.1.5 Selection of Owning Entity. Prior to the passage of the Internal
Revenue Code of 1986, the nature of the entity which owned the project
was in large measure dictated by the tax treatment which the developer
wished to obtain. Although the current tax law deemphasizes the
importance of entity selection, the tax treatment the development would
yield remains an important consideration. Apart from tax planning, there
are a number of nontax considerations which are of importance in
selecting the ownership vehicle. The vesting of title to the project in a
fictitious entity (whether a trust, corporation, partnership or limited
liability company) will provide a vehicle to permit continuity of
ownership, divisibility of ownership interests, creation of subordinate
equity financing devices, limitation of liability and insulation of a project
from claims of the developer's creditors. For those reasons, many
commercial projects are owned by fictitious entities created by the
developer to own only one project. The documents creating the owning
entity should contain provisions dealing with initial and additional equity
contributions or advancements (with remedies specified in the event of a
member's failure to fund), restrictions on transfer of ownership interests,
rights to indemnification, contribution and restitution among the members
of the owning entity and buy-sell arrangements operative in the event of
the bankruptcy, death or default of the members. The documents creating
the owning entity will be the subject of scrutiny by lenders advancing
funds for the project and, in the event of default, the legal sufficiency of
the entity will ordinarily be tested by its creditors. The entity should be
_______________________________________
Modern Real Estate Transactions, July 2006
- 3-
correctly and completely formulated at the inception of the project and
operated as an independent entity by the developer. The developer's
ultimate basis for selecting the owning entity must involve a careful
determination of whether the developer will ultimately seek to maximize
ownership or reduce risk by sharing ownership of the project with a
codeveloper, financial partner or end user. That decision is made based on
the developer's financial strength, time availability, expertise with similar
projects and risk analysis.
2.2
Financing Commitments. One of the first contacts made by the developer
(usually prior to serious negotiations to acquire the land) will be the developer's
existing lenders. The developer will usually discuss the project at some length to
obtain the lenders' advice (or on the pretense of obtaining the lenders' advice) and
a preliminary indication as to the lenders' willingness to extend credit in
connection with the project. One of the developer's unspoken purposes in the
discussions is to generate a personal involvement by the lending officer in the
evolution of the project so that the officer can represent the project in future
deliberations by the officer's institution. This courtship will continue during the
feasibility period until it ripens into the issuance of written commitments to the
developer for the extension of construction and term loans to finance the project.
2.2.1 Term Financing. After the developer has completed the feasibility
studies, made arrangements to acquire the land, created (or at least
designated) the owning entity and obtained preliminary plans and
specifications, the developer is ready to apply for term financing which
will amortize the cost of the project over a period which might range from
five to forty years. That financing is customarily provided by insurance
companies, savings associations, savings banks, pension funds, real estate
investment trusts, foreign investors and various agencies of local, state and
federal governments. The availability of financing is evidenced by the
issuance of the lender's written commitment setting forth the terms of the
financing arrangement and the requirements which the developer must
satisfy as conditions precedent to the lender's obligation to disburse funds
under the commitment.
_______________________________________
Modern Real Estate Transactions, July 2006
- 4-
2.2.2 Construction Financing. After the developer has obtained a
commitment for term financing, and has formalized the feasibility studies,
land acquisition agreements and the estimate of the cost to produce the
project, the developer will approach a commercial bank or savings
institution to obtain construction or interim financing pending funding
under the term financing commitments. The lending considerations of the
interim lender are substantially different from those of the term lender.
The interim lender is primarily concerned with (and the lender's major risk
centers around) the ability of the developer to complete the project within
the dollar limitations imposed by the funds available under the term
financing commitment and the assets dedicated by the developer to the
project. The repayment of the construction loan necessarily requires the
satisfaction of the term lender's conditions precedent to disbursement and
the collateral requirements of the construction lender are accordingly
directed to the continued personal involvement (by means of personal
liability) of the developer and the assembly in the hands of the
construction lender of collateral rights covering all of the property
interests associated with the project. In theory, the construction lender
should be placed in a position so that a default by the developer will
enable the construction lender to foreclose and fulfill the requirements of
the term lender thereby forcing funding under the term financing
commitment to retire the construction loan.
2.2.3 Combined Financing. The current financial difficulties experienced
by traditional institutional lenders and the prior entry into the market of
less experienced real estate lenders (now in the hands of the Resolution
Trust Corporation or Federal Deposit Insurance Corporation) have lead to
the creation of a combined form of financing commonly referred to as a
"mini-perm" loan. In many areas of the country, the mini-perm has
become the usual form of financing given the fact that traditional term
lenders have been unwilling to issue forward-financing commitments.
Using this device, a single lender funds the construction loan followed by
a relatively short term loan which is either standing (without amortization)
or which calls for principal amortization using a 20 to 25 year schedule
with a balloon maturity three to five years after the completion of
construction (this portion of the financing is often called a "bullet loan" for
obvious reasons in current financing markets). While this device has
provided significant fee income for many lenders and has fostered
continuing development, it has two major shortcomings. Under the
traditional structure of separate construction and term lenders, the
feasibility of the project was subjected to at least two different sets of
underwriters, one of which was concerned with the cost to produce the
project and the second of which was primarily concerned with longer term
_______________________________________
Modern Real Estate Transactions, July 2006
- 5-
operation and marketing. That diversity of focus sometimes contributed to
the success of a project by imposing stricter requirements than a single
underwriter might have made. The second difficulty with the mini-perm
philosophy is the requirement that the unamortized portion of the term
loan be refinanced or renewed at maturity. Currently maturing mini-perm
loans have presented significant problems for both developers and lenders
because it was the intent of neither that the lender would enter into serial
renewals of the loan at maturity and, given the level of financial institution
failures in the last ten years, many of the mini-perm loans have ended up
in the hands of the liquidators or their successors. Given the continuing
uncertainties in real estate markets throughout the country, one wonders
whether it is a prudent decision to enter into a relatively short term
transaction as either a lender or a borrower on the assumption that
financing markets will improve prior to the maturity of the mini-perm loan
thereby allowing the lender to regain liquidity and the developer to
refinance at favorable interest rates.
2.3
Production. If the developer's timing is good, the developer will
simultaneously close the construction loan, fund the land acquisition, accept the
commitment of the term lender and finalize the construction contracts.
Thereafter, the project proceeds to realization by means of periodic disbursements
of the construction loan proceeds to pay the costs of building the project. During
the course of constructing the project, the developer will perform the marketing
functions which are required to satisfy the conditions of the term financing
commitment which serves as the primary basis for repayment of the construction
loan. Those marketing efforts might include the leasing of space or the presale of
subdivided parts of the project pending completion of construction.
2.3.1 Architectural/Engineering Contracts. As a part of the feasibility
stage, the developer will have retained the services of architects and/or
engineers to provide site plans and preliminary plans and specifications.
Those preliminary arrangements are now reduced to formal agreements,
the terms of which will be dictated by the peculiarities of the site, the
project, the lenders and the developer. The contractual arrangements and
costs of the services vary widely from project to project, but the basic
documentary forms customarily follow those promulgated by the
American Institute of Architects ("AIA").
2.3.2 Construction Contracts. After the initial expression of interest by
the lenders involved in the project, the developer will customarily begin
the negotiation of construction contracts. The project might involve the
use of a single general contractor, a series of multiple general contractors,
the developer acting as "general contractor," a design-build contractor, a
construction manager or various combinations of the foregoing
_______________________________________
Modern Real Estate Transactions, July 2006
- 6-
compensated at a percentage or fixed fee with a guaranteed maximum
price or on "cost plus" basis. The project might be let for bids, privately
negotiated or both.
The performance of the contractors' and/or
subcontractors' obligations might be bonded, secured by other collateral or
unsecured. The device selected is ordinarily a function of the developer's
preference, the size of the project, the availability of work and the
requirements of the lenders. In any event, the AIA documents will almost
always be used by one or more of the parties and those documents should
be carefully adapted to the laws of the jurisdiction, the project and the
client's interests.
2.3.3 Marketing. During the course of constructing the project the
developer will exert significant marketing efforts to assure that the units
are sold or the project is leased at the earliest possible date to maximize
the realization of income and offset the interest expense associated with
the project. The developer's attorney will prepare letters of intent,
contracts of sale and occupancy leases conditioned on completion and
delivery of the project. In most cases the developer is overly optimistic,
the contractor is delayed and the end user is impatient.
2.4
Completion. If the developer's marketing program is successful and the
conditions precedent to funding under the term financing commitment are
satisfied, construction of the project will be completed in close proximity to
occupancy by tenants or sale to consumers. The proceeds of funding under the
term financing commitment will be realized by the developer and applied to the
costs incurred in producing the project which are customarily represented in large
part by the unpaid balance of the construction loan.
2.4.1 Term Financing. Term financing devices are discussed elsewhere
at some length. In summary, the closing of the term financing generally
requires: (a) the execution and delivery of the term loan documents (or
the assignment of all or a part of the loan documents held by the
construction lender, if the term loan has been "pre-closed"); (b) the
issuance of a policy of title insurance without exceptions for mechanics',
materialmen's and laborers' liens; (c) the delivery of a final survey and
architect's certificate; (d) the approval of lease agreements and delivery of
tenant estoppel certificates; and (e) the delivery of assurance of the
developer's authority to consummate the term financing. Thereafter, the
developer amortizes the term financing from the income stream of the
project. Where the term financing structure involves alternative devices
such as sale-leaseback arrangements, joint ventures or other risk-reward
allocation mechanisms, the foregoing will be overlaid with substantial
additional requirements.
_______________________________________
Modern Real Estate Transactions, July 2006
- 7-
2.4.2 Lease/Sale Closings. Some projects such as tract developments,
condominium projects, public housing projects and single user buildings
are developed for sale immediately after completion of construction and
the sale proceeds are used to retire the construction financing. In those
cases, there will be a single or multiple sale closings and the developer
will be faced with satisfying the conditions precedent to closing imposed
by the purchaser and by the lender extending financing to the purchaser.
In other projects such as apartment, shopping center, office and industrial
properties, the closing will surround the execution of lease agreements and
the occupancy of the project by primary tenants designated by the term
lender or by a rental achievement based on a percentage of occupancy and
minimum rental rates specified by the term lender.
2.4.3 Operating Contracts. Depending on the nature of the project, the
contracts associated with operation might be very simple or very complex.
Perhaps the most complex examples involve development of industrial
sites where matters such as fire protection, liquid and solid waste disposal,
rail service, extraordinary electrical, gas and water supplies are required.
The creation of a subdivided regional shopping center with multiple land
locked store pads and peripheral out parcels creates significant operating
relationships and reciprocal easement burdens and benefits which must be
carefully crafted. The organization of the homeowners' association in a
major condominium development or umbrella associations in major
planned unit developments are often complex, time consuming and
frustrating. Management of many projects is independently contracted
and the management and leasing agreements become basic documents
involved in real estate transactions; in certain instances the management
agreements are used as financing devices. Likewise, the broker lurks at
every corner seeking to be compensated for plying his trade.
2.4.4 Project Sale. In order to ultimately realize the maximum financial
benefit from a project, at some point the developer must sell. Because real
estate markets are cyclical and because most projects are highly leveraged,
the timing of the sale is absolutely critical. If unit sales or occupancy rates
collapse, the value of the project evaporates and the carrying expenses of
the project create massive cash requirements to fund negative cash flow.
Timing of a sale is more a matter of intuition than analysis. Because of
the importance of sale transactions and the virtually uniform involvement
of attorneys by the parties, a significant amount of time is spent elsewhere
in these Course Materials addressing the issues which are involved.
3.
Parties. Another introductory approach toward real estate transactions is to
identify the characters (the term is used in both its literal and figurative sense) which are
commonly involved. As with any other commercial transaction, it helps to have a
_______________________________________
Modern Real Estate Transactions, July 2006
- 8-
program identifying the players and to understand what motivates their participation.
3.1
Developers. One of my former law school students very appropriately
identified the developer as "the man with the plan." The essence of the matter for
the developer is the ability to control each stage of the transaction and to move the
project forward to completion.
3.1.1 Characteristics: Entrepreneur; Kingpin; Risk-Taker; Generalist;
Borrower; Negotiator; Dictator; Promoter.
3.1.2 Identity:
Individuals; Groups of Individuals; Closely Held
Corporations; Public Corporations; Specialty Subsidiaries of Insurance
Companies and Other Financial Institutions.
3.1.3 Financial Goals: Excess Mortgage Proceeds ("Top Money"); Fee
Income; Net Cash Flow; Tax Shelter; Net Worth; Sale/Refinancing
Proceeds.
3.1.4 Nonfinancial Goals: Prestige; Ego; People; Challenge; Tangible
Accomplishment.
3.2
Planners. These participants are the technicians who are hired by the
developer, the lenders, the end users and other planners to provide the specialized
skills required to design, finance, operate and merchandise the project.
3.2.1 Characteristics: Artists; Time to Perform; Cost to Produce;
Technical Complexity; Guessers.
3.2.2 Identity: Engineers (Land Planners, Structural Design, Mechanical
Design, Specialized Design [e.g., Environment, Acoustics, Traffic, etc.])
determine how the project will work after completion of construction;
Architects (Design, Production, Landscape, Graphics, etc.) determine how
the project will look after completion of construction; Other Consultants
(Accountants, Marketing Analysts, Mortgage Bankers, Brokers, Financial
Advisors, Appraisers, etc.) estimate or determine the financial
performance of the project.
3.2.3 Goals. Fee Income (measured by a fixed amount, percentage of
certain amounts or hourly charges); Professional Gratification.
3.3
Builders. These participants are the manual laborers and their supervisors
that produce the physical improvements that constitute the project.
_______________________________________
Modern Real Estate Transactions, July 2006
- 9-
3.3.1 Characteristics:
Pragmatic; Hard-Nosed; Quality v. Cost
Compromisers; RiskTakers; Time to Perform; Price-Setters; Guarantors.
3.3.2 Identity: General Contractors; Project Managers; Subcontractors;
Materialmen; Suppliers; Manufacturers; Laborers.
3.3.3 Goals: Fee Income (excess of fixed contract price over cost,
percentage of cost, hourly charges or a combination of the foregoing);
Professional Gratification.
3.4
Lenders. These participants provide the leverage and the capital required
to pay immediate costs and recoup that investment over the life of the project. If
the developer is the man with the plan, the lender is the "man with the money."
3.4.1 Characteristics: Rule-Makers; Unconscious Risk-Takers; Big
Dollars with Small Margins; Transient Personnel; Combination
Promoter/Policeman; Slow to Act.
3.4.2 Identity: Commercial Banks; Savings Banks; Savings and Loan
Associations; Insurance Companies; Pension Funds; Private Investment
Companies; Real Estate Investment Trusts; Foreign Investors; Developers;
Individuals; Alphabet Agencies (FNMA, GNMA, etc.).
3.4.3 Goals. Interest Income (percentage of amounts advanced or
committed, share in equity value created or combination); Professional
Gratification.
3.5
Regulators. These participants are always uninvited and many times
unexpected. As our society has matured, their involvement has increased and
they are generally viewed by the other participants as impediments to progress.
3.5.1 Characteristics:
Enforcers; Rule-Makers; Not Risk-Takers;
Uninvited Technical Advisors; Transient or Intractable Personnel; Slow to
Act; Subject to Inappropriate Pressures; Overburdened.
3.5.2 Identity: City Planning Commission; City Building Department;
City Fire Department; City Council; Redevelopment and Other Local
Authorities and Commissions; County Health Department; County
Commissioners; County Assessor; State Health Department; State
Highway Department; State Tax Commission; State Securities
Commission; Environmental Protection Agency; Department of Housing
and Urban Development; Department of the Interior; Securities and
Exchange Commission; Internal Revenue Service; Department of Labor;
Federal Trade Commission.
_______________________________________
Modern Real Estate Transactions, July 2006
- 10-
3.5.3 Goals: To enforce applicable laws and regulations deemed to
apply to the project in the protection of the public's interest; to collect the
fees, permit charges, penalties and taxes relating to the project and the
activities associated therewith; Professional Gratification.
3.6
End Users. These participants are the consumers and are the elusive
parties the marketing studies try to identify. They are the reason the project is
developed.
3.6.1 Characteristics: Vary with the nature of the project and range from
unsophisticated apartment tenants and home buyers to Fortune 500
Companies and major law firms.
3.6.2 Identity: Residential Tenants; Residential Purchasers; Office
Tenants; Shopping Center Tenants; Single Users; Syndicators; Pension
Funds; Financial Institutions; Foreign Investors; etc.
3.6.3
Goal: To purchase the maximum quality for the lowest price.
4.
Attorneys' Roles. Because each of the foregoing parties has a lawyer, one can
appreciate that the attorney's role will vary significantly from project to project
depending on the identity of the client, the extent of the client's involvement in the
project and the extent to which the client makes requests for the attorney's services.
4.1
Developer's Counsel. We identify the role of the developer's lawyer to be
threefold:
4.1.1 Forecasting. In representing a client engaged in development, the
attorney must be well versed in real property law, but must also have a
working knowledge (if not some degree of specialization) in the areas of
partnership, corporate, securities, environmental, tax and bankruptcy law
as they relate to the client and the project. It is not possible to assist a
client in creating a complicated financial package without having an
understanding of the developer's business and the manner in which after
tax profits can be maximized. The client bears the business risks which
are inherent in the transaction, but many of the developer's business risks
must be identified and assessed by the developer's attorney. It might not
be the attorney's duty to make the final business decision, but it certainly
is the attorney's duty to see that the client makes an informed decision
based on the facts and the law applicable to those facts. In a major real
estate development, the attorney should always structure to afford the
client the maximum amount of flexibility to pursue alternate solutions to
financial and marketing crises. Because of the cyclical nature of the
_______________________________________
Modern Real Estate Transactions, July 2006
- 11-
business, the attorney should simultaneously plan for the maximum
realization of profits by the client and the fire sale liquidation of the
project. Unless the attorney can identify the potential events of default,
the remedies available to the parties and the risk of loss to the client at
each stage of the development, the planning and structuring of the project
are not complete.
4.1.2 Documentation. A great deal of time is spent by the attorney in
preparing, reviewing and negotiating the various documents required in
connection with the project. Documents associated with real estate
transactions represent some of the best and worst examples of
draftsmanship, but good or bad, they are always long. It should be
apparent that a major development takes a substantial amount of
integration of documents so that the developer's obligations to the various
parties do not come into conflict with each other (e.g., the payment
provisions of the general construction contract should correspond with the
disbursement provisions of the construction loan agreement; the
condemnation award provisions of a prime tenant lease should dovetail
with the provisions of the term mortgage). It is important to realize that
corporate, partnership, lease, mortgage, and other documents are merely
the tools of our trade and each document being prepared should not
necessarily constitute a monument to the attorney's ego. Just as a
developer builds a project of brick and mortar, the developer's attorney
must build the project on paper in an effort to define agreements, resolve
ambiguities, allocate risks and specify remedies. The production of an
inadequate, overreaching or unenforceable document is generally a waste
of the attorney's time and the client's money.
4.1.3 Enforcement. Because of the level of risk, the substantial amounts
of money, the number of parties, the life span of a project and the speed
with which market reversals occur, the attorney involved in commercial
real estate projects will be given ample opportunity to litigate the
documents which the attorney has drawn and to see them tested in the
bankruptcy courts. If the transaction was structured and the documents
prepared with enforcement in mind, that eventuality will present no major
trauma for the attorney or the client; if not, both of them might be in for
major surprises.
4.2
Attorney's Opinions. It is important to understand that regardless of the
client which is being represented, the attorney is being employed to use the
professional expertise required to solve the problems which confront that client.
One of the devices which is common in many transactions is to require a written
opinion of counsel--the lawyer is asked to put the attorney's professional liability
insurance coverage where the attorney's mouth is. Written legal opinions are
_______________________________________
Modern Real Estate Transactions, July 2006
- 12-
used: (a) as a problem locating device; (b) as a problem solving device; (c) as a
client estoppel; (d) as a basis for disqualification of the opining counsel; and (e) as
a professional indemnification against loss if the opinion is incorrect.
4.2.1 Informal. Informal opinions are usually verbal and can be express
or implied. Informal opinions constitute a continuing problem in all areas
of practice because the attorney has no clear means to limit the extent of
professional liability. Attorneys involved in real estate transactions are
often asked to respond to issues where the advice is more business than
legal.
4.2.2 Formal. Formal written opinions are generally either "closing
opinions" which require the attorney's blessing of the transaction as a
condition precedent to its consummation or opinions addressing a specific
question relating to a proposed transaction (e.g., usury, enforceability of
"kicker" provisions, foreclosure procedure, bankruptcy treatment, etc.)
4.3
Documents.
Real estate transactions are prone to voluminous
documentation because there are ordinarily a multitude of parties involved whose
rights will be exercised over a protracted period of time. The attorney involved in
a commercial project must mechanically convert the transaction to written form in
a manner which accurately reflects the agreement of parties with varied interests,
integrates agreements documenting independent, but related relationships and can
be understood and applied by a judge and jury long after the transaction has
cooled and the litigation begun. Over the years, we have adopted several drafting
techniques in an effort to improve efficiency and reduce the probability of error.
4.3.1 Table of Contents. If a document has several pages, we prepare a
table of contents listing the descriptive headings of the paragraphs
(hopefully limited to no more than three words) and describing the
attached schedules. The table of contents serves as a checklist and
facilitates later review. The use of a table of contents also imposes a
discipline of thought and organization on the document which seeks to
avoid a patchwork of cross references and duplicate provisions each of
which fails to fully address the same subject matter.
4.3.2 Defined Terms. We like to define important terms and use those
terms consistently throughout the document. In lengthy documents, the
terms will be collected in a section devoted to definitions. We have found
that the draftsman can focus on the meaning of "Net Cash Flow" more
intently if that definition stands by itself and is not buried in contractual
undertakings. We try to label defined terms and parties with common
names which are not easily confused or prone to typographical errors (e.g.,
we prefer "Landlord" and "Tenant" to "Lessor" and "Lessee" and would
_______________________________________
Modern Real Estate Transactions, July 2006
- 13-
never use "Party of the First Part" because the designation is fictitious and
fosters confusion). After a term has been defined, the defined term is
repeated in the document with initial capital letters and random
capitalization of other terms is avoided. It is entirely possible to overdo
definitions so that every third word in the document has some mysterious
meaning which, in most cases, is clear only to the draftsman. Such
overuse of defined terms imparts significance to terms which are not of
significance, injects confusion instead of clarity and results in a document
which is at best silly and at worst offensive to the reader.
4.3.3 Cross References. We try to reduce cross references to a
minimum. If a provision is clearly stated in a document, we doubt that
any material benefit is achieved by later stating that the provision is part of
the agreement. We attempt to limit cross references to those instances
where the reference provides clarity or describes a specific exception to a
contractual undertaking. The use of connecting phrases such as "in
accordance with the procedures described in paragraph ___" or "except as
otherwise specifically provided by paragraph __" are helpful bridges in the
document; however, we are always troubled by the use of generic
qualifications such as "except as otherwise provided herein" which require
a search of the entire document to determine whether the words have
meaning.
4.3.4 Numbering. We ordinarily adopt a decimal numbering system so
that if a cross reference is required or discussion of a provision is
warranted, the provision can be easily identified (e.g., "paragraph 3.10.2"
rather than "Subparagraph b of Section 10 of Article III"). If the decimals
become unmanageable, the structure of the document is usually wrong and
the draftsman is treating a major subject as a subdivision of a separate
provision.
4.3.5 Pronouns. We make every effort to minimize the use of pronouns
to avoid confusion. The deletion of pronouns sometimes results in
redundancy, but that result is more acceptable to us than having a jury
decide who "it" is when used in a document.
4.3.6 Legalese. Lawyers seem to have an unending propensity to say
things at least twice. Traditional legal draftsmanship and archaic
expressions do not necessarily serve the client or reflect the precision
which most commercial transactions demand (e.g., "by and between,"
"hereinafter sometimes referred to as," "covenants and agrees,"
"incorporated by this reference for all purposes as if fully set out herein").
Where legalese has taken on a significant legal definition, the words are
certainly incorporated to obtain the precision of the time honored
meaning, but otherwise we prefer proper grammar.
_______________________________________
Modern Real Estate Transactions, July 2006
- 14-
4.3.7 Length. When time permits, we try to use as few words as
possible to express the agreement of the parties.
4.3.8 Schedules. We prefer to attach important documents as schedules
to a master agreement rather than paraphrase their terms or rely on a form
to be negotiated. Although the resulting master document becomes bulky,
the agreement is more likely to be complete and the draftsman's work for
closing is virtually finished when the master agreement is executed.
4.3.9 Packaging. Merchants learned long ago that the value of the
product is sometimes judged by the manner in which it is packaged. We
think it important to realize that packaging also plays a role in the law
business. Attorney's fees are more easily collected from a client who is
pleased with the appearance of the work product than from one which is
not. The organization, appearance and ease of manipulation of a
document have a certain intrinsic value which should not be overlooked.
The attorney should realize that the work product is being sold by the
attorney to the client and opposing counsel and most usually will be sold
by the client (and, if the product is good, by opposing counsel) to someone
else.
5.
Project Economics. An understanding of the financial considerations involved in
real estate transactions is essential to the representation of the developer. Unless the
attorney understands the economic benefits and the financial risks involved in the project,
the agreements which the attorney negotiates and documents will not represent the
client's interest. Without becoming involved in an economics course, there are three
precepts which are so basic to real estate development that we should not pass the
introductory stage without noting their application.
5.1
Subdivision. Beginning with the legal concept of a fee simple absolute
and a tract of raw land, it is possible to legally and physically subdivide both the
land and the legal rights attendant to ownership of the land into many parts and
the sum of those parts will have a greater economic value than the whole.
Subdivision Example
START:
100 acres of raw land are purchased by a developer for $5,000 per acre;
beginning economic value is $500,000.
_______________________________________
Modern Real Estate Transactions, July 2006
- 15-
STEP 1:
50 acres are subdivided into 5 lots per acre for construction of 250
detached single-family homes; development costs are $2,000 per lot; lot
sale prices are $10,000 per lot.
Lot Sale Proceeds
$2,500,000
(250 x $10,000)
=
Less Land Cost
( 50 x $ 5,000)
= (
Less Development
Cost
500,000)
(250 x $ 2,000)
= (
250,000)
Increase in Value
STEP 2:
$1,750,000
20 acres are subdivided for condominium development having a density of
10 units per acre producing 200 condominium units; construction costs
average $50,000 per unit; sale price is $70,000 per unit.
Condominium Sale
Proceeds (200 x $70,000)
Less Land Cost
( 100,000)
Less Construction
Cost
(10,000,000)
Increase in Value
=
$14,000,000
( 20 x $ 5,000)
=
(200 x $50,000)
=
$ 3,900,000
_______________________________________
Modern Real Estate Transactions, July 2006
- 16-
STEP 3:
10 acres are subdivided for development of rental apartments having a
density of 15 units per acre; construction costs average $40,000 per unit;
average unit contains 1,000 square feet and leases for $400 per month net
of operating expenses or $4,800 per year; market value is 12 times annual
net cash flow after deducting a 5% vacancy factor.
Market
Value
$8,208,000
($4,800 x 150 x .95 x 12) =
Less Land Cost
(10 x $5,000)
= (
50,000)
Less Construction
Cost
(6,000,000)
(150 x $40,000)
Increase in Value
STEP 4:
=
$2,158,000
10 acres are subdivided for construction of a shopping center containing
500,000 net rentable square feet; construction costs are $60 per square
foot; rent is $12.00 per square foot net of operating expenses; market
value is 8 times annual net cash flow after deducting a 5% vacancy factor.
Market
Value
$45,600,000
($500,000 x $12 x .95 x 8)
Less Land Cost
(10 x $5,000)
=
= (
50,000)
Less Construction
Cost
(30,000,000)
Increase in Value
(500,000 x $60)
=
$15,550,000
_______________________________________
Modern Real Estate Transactions, July 2006
- 17-
STEP 5:
5 out-parcels comprising 1 acre each are sold to franchised restaurants at
$250,000 for each parcel.
Sale Proceeds
(5 x $250,000)
= $
Less Land Cost
(5 x $ 5,000)
= (
1,250,000
25,000)
Increase in Value
STEP 6:
$ 1,225,000
The remaining 5 acres is developed in two office towers, each containing
500,000 net rentable square feet with attendant parking facilities;
construction cost is $80 per square foot; space is leased at $15 per square
foot net of operating costs; market value is 7 times annual net cash flow
after deducting a 5% vacancy factor.
Market
Value
$99,750,000
(1,000,000 x $15 x .95 x 7)
Less Land Cost
(5 x $5,000)
=
= (
25,000)
Less Construction
Cost
(80,000,000)
(1,000,000 x $80)
Increase in Value
STEP 7:
=
$19,725,000
The 150 unit apartment project developed at Step 3 is purchased at
$8,208,000 and converted to condominium units; the cost of repair and
conversion is $10,000 per unit; the resale price is $100,000 per unit.
Condominium Sale Proceeds
=
Less Apartment Purchase Price
=
Less Conversion
Cost
$15,000,000
( 8,208,000)
(150 x $10,000)
= (
2,500,000)
Increase in Value
$ 5,292,000
_______________________________________
Modern Real Estate Transactions, July 2006
- 18-
STEP 8:
The 200 condominiums developed at Step 2 are purchased at $14,000,000
and divided into 25 two week time share units each (5,000 units) and sold
for $5,000 for each two week time share unit; sales cost is $1,000,000.
Time Share
Proceeds (5,000 x $5,000)
=
$25,000,000
Less Condominium Purchase Price
=
(14,000,000)
Less Sales Cost
=
( 1,000,000)
Increase in Value
$10,000,000
SUMMARY
Increase
Project:
Land Cost:
1. Single Family
$250,000
2. Condominium Units 100,000
3. Apartments
50,000
4. Shopping Center
50,000
5. Out Parcels
25,000
6. Office Buildings
25,000
7. Condominium Conversion -08. Time Share
-0Totals
*
$500,000
Gross Value:
$ 2,500,000
14,000,000
8,208,000
45,600,000
1,250,000
99,750,000
15,000,000
25,000,000
$211,308,000*
in Value:
$ 1,750,000
3,900,000
2,158,000
15,550,000
1,225,000
19,725,000
5,292,000
10,000,000
$59,700,000
Excludes improvement value attributable to 250 detached single-family homes and 5
restaurants.
5.2
Inflation. As applied to real estate development, the term inflation means
more than the general economic definition. Development is dedicated to the
proposition that the completed project will have a greater economic value than the
cost to produce the project. This has historically been true because of the
inflationary cycle of our economy; however, there are many other ingredients
which constitute a value added by the development itself (e.g., the change in the
physical property, comparative quality, location, value, aesthetics, demographics,
geography, management expertise, etc.). You should not overlook the fact that
inflation is not necessarily good for all of the real estate participants and for that
reason inflationary hedges have become common in all long term contracts
affecting real estate (e.g., percentage rents, reappraisal provisions, mortgage loan
"kickers", expense stops, etc.). In current markets in some areas, the value added
_______________________________________
Modern Real Estate Transactions, July 2006
- 19-
has not been sufficient to offset the base deflation in land values.
5.3
Leverage. The term means an "increased means of accomplishing some
purpose." With respect to real estate investment, leverage refers to the ratio of
cash (equity) which must be invested to money which can be borrowed (debt) to
own the asset. Real estate has traditionally been viewed by lenders as having a
high collateral value (stability in value, immovable, legal certainty, fungibility,
constant demand, etc.) and therefore provides a greater debt-to-equity ratio (and
hence more leverage) than other investments.
6.
Land Acquisition. At the inception of a project it is not the developer's objective
to own the land--the objective is to control the land. Ownership brings cost burdens
which are usually inappropriate to the developer's plan until such time as the project has
been determined to be feasible and financing commitments have been arranged. That is
not to say that the land itself is not an important element in the germination of the project.
The availability of the proposed building site is almost always the catalyst which gives
birth to the project from the developer's perspective. Land is and should be viewed by
developers as a commodity which is consumed in the development process. Most
developers are either unable or unwilling to inventory land for long range capital
appreciation, most developer-held land inventories are the result of short range
development plans in which multiple projects are being developed, excess building sites
being held for resale or mistakes. Our objective in the following discussion is to help the
developer client avoid the mistakes.
6.1
Control Devices. With the understanding that control rather than
ownership is the objective comes the realization that many legal devices can
achieve that objective. Although most of our discussion will be directed to the
use of land acquisition contracts, the attorney structuring the transaction should
not overlook the possibility to obtain the objective by use of short or long term
leases or joint venture arrangements. Each of those subjects is treated in more
detail elsewhere in the Course Materials; however, there are a number of very
important considerations which must be resolved where an arrangement which is
tantamount to a joint venture is contemplated with a landowner.
6.1.1 Developer Control. Entity Selection; Conflicts of Style; Conflicts
of Objectives; Insulation of Land Investment from Development Risks;
Limitation of Landowner Liability; Management Deadlocks.
6.1.2 Simplicity. Difficulty in Negotiation; Relative Sophistication;
Risk of Overreaching; Creation of Fiduciary Obligations.
6.1.3 Ability to Unwind. With or Without Cause; Good Faith Dealings;
Fiduciary Obligations; Deadlock Resolution; Earn Out Devices; Project
Default; Landowner's Subordination to Third Party Claims.
_______________________________________
Modern Real Estate Transactions, July 2006
- 20-
6.2
Land Acquisition Contracts. Assuming that the use of a lease or joint
venture device has been considered and discarded, there remain a number of
choices to be exercised by the developer and the developer's counsel in attempting
to gain control of the land without necessarily buying the farm. The provisions of
the various forms will be similar, but the primary business and legal distinction to
be made is whether the purchaser has the right to purchase or the obligation to
purchase and, if an obligation to purchase is created, the cost which will be
incurred by the purchaser to obtain a release of that obligation.
6.2.1 Option Contracts. Most Straightforward, Most Difficult to Obtain;
Treatment of Option Payments; Complexity in Other Than Cash Sales;
Serial Options; Rule Against Perpetuities; Restraints on Alienation;
Executory Contracts; Agreements to Agree.
6.2.2 Contract to Purchase. Developer Termination Rights and Illusory
Contracts; Agreements to Agree; Enforceability of Liquidated Damage
Clauses; Remedies on Default.
6.2.3 Rights of Refusal.
Specialized Applications; Failure of
Consideration; First Refusal; First Offer; Last Offer; Rule Against
Perpetuities; Restraint on Alienation; Executory Contract; Illusory
Contract.
6.3
Business Terms. Regardless of the contractual arrangement which is
created between the landowner and the developer, many of the contract terms and
the legal considerations are similar, if not identical.
6.3.1 Property Description. Area and Price Computations (Net Usable
or Gross Computation); What Does "More or Less" Mean; Mineral Rights;
Air Rights; Water Rights; Transferable Development Rights; Access Ways
and Easements; Survey Considerations (Encroachments, Fence Lines,
Boundary Locations, Utility Locations and Use, Blanket and Specific
Easements, etc.); Other Appurtenances.
6.3.2 Title. Means of Title Assurances; Capacity of Seller (Estates,
Trusts, Homestead, Curtesy and Dower Rights, Corporate, Partnership and
Limited Liability Company Authority); Early Satisfaction of Defects;
Severed Mineral, Water and Development Rights; Existing
Encumbrances; Existing Leases; Existing Easements; Utility or Roadway
Relocations; Responsibility and Time to Cure Defects; Buyer Ability to
Cure and Offset; Limitation of Buyer Damages; Limitation of Seller
Obligations.
_______________________________________
Modern Real Estate Transactions, July 2006
- 21-
6.3.3 Terms of Payment.
Application of Earnest Money/Option
Payments; Installment Sale Contract (Contract for Deed); Purchase Money
(Carryback) Mortgage/Deed of Trust; Variable Purchase Price (Use, Time,
Location); Phased Projects; Agreements to Subordinate; Partial Releases
of Collateral; Substitution of Collateral; Recourse on Default.
6.3.4 Conditions Precedent.
Land Plan (Topographical Survey,
Feasibility Studies, Cost Estimates, Permitted Uses and Density); Surface
Water Considerations (Flood Plain Designations, Detention Ponds,
Riparian Rights, Channelization, etc.); Permitted Uses (Zoning,
Subdivision Requirements, Restrictive Covenants, Environmental Impact,
Licenses and Permits, Abutting Owners); Available Public Services
(Utilities, Water, Sanitary Sewer, Waste Disposal, Schools, Parks, Fire
Protection, Cable Television, Trackage, etc.); Soil Tests (Stability,
Plasticity, Permeability, Ground Water); Title; Hazardous Substances.
6.3.5 Tax Considerations. Like Kind Exchange; Installment Sale
Treatment; Allocation of Basis; Dealer Status; Entity Treatment.
6.4
Preprinted Forms. Most of the preprinted forms used for land acquisition
contracts are promulgated by the Board of Realtors in the locality where the land
is situate, although a local office supplier, title company or bank might also be
engaged in the practice. There is a wide disparity among locales in the types of
preprinted forms which are available and in the quality of those forms. It is not
unusual for a form intended to be used for single family residential transfers to be
used by the realtor involved in a commercial transaction. It is often felt that the
use of a "standard" form will expedite the negotiations and save money. This is
certainly the case if a "standard" transaction is the subject of the contract;
otherwise, the attorney dealing with the preprinted form is forced to do battle with
the unknown draftsman as well as the opposing party, the broker and the client.
6.4.1 Format. It is entirely possible (and sometimes preferable) to
operate from the preprinted form tendered by one of the parties by
attaching riders and using deletions and interlineations to match the
contract terms to the agreements of the parties. Many times this approach
becomes supercilious and the preprinted form is merely a cover sheet
identifying the parties and preserving some of the boilerplate terms. One
common difficulty in the use of preprinted forms is that the primary
economic agreements are left blank--that treatment is essential to whatever
standardization has occurred. As a result, the most important part of the
document is left to the imagination of the person initially preparing the
form. Never forget that some brokers are afflicted with vivid imaginations
and short memories.
_______________________________________
Modern Real Estate Transactions, July 2006
- 22-
6.4.2 Proprietary Interest. As with any "standard" form prepared by a
trade organization, the treatment accorded by the document to the
organization's member should be carefully reviewed. Apart from legal
defects in the form, it is common to find that the earnest money is paid to
the broker, the broker is entitled to retain some portion of the earnest
money if the transaction doesn't close and that a commission agreement is
an integral part of the document. The terms dealing with the required title,
title evidence, prorations and remedies should also be analyzed. It is not
unusual for a preprinted form to allocate the risk of loss by casualty or
condemnation in a manner different from the Uniform Vendor and
Purchaser Risk Act or the jurisdiction's application of the doctrine of
equitable conversion.
6.4.3 Letters of Intent. One of the reasons for the use of preprinted
forms is to force the parties to reach preliminary decisions so that the offer
and acceptance mating dance can begin. Some sellers and purchasers have
devised forms of letters of intent which purport to be something other than
an enforceable contract. That practice is very dangerous given most
courts' willingness to supply unresolved details and override self serving
declarations. Where the negotiating posture of the parties precludes the
immediate preparation of a definitive agreement, yet requires the
production of a piece of paper, we recommend the use of a "terms sheet."
The terms sheet is produced by the broker (usually with our assistance)
and states the negotiated points as succinctly as possible. Neither party
signs the terms sheet (or anything else). This mechanical device will
usually meet the objectives of the parties and hopefully will not constitute
a written memorandum within the meaning of the applicable Statute of
Frauds.
6.5
Option Agreements. Addendum A sets forth a form Option Agreement
executed by a financial institution for the sale of developed lots which secured
payment of a loan previously made by the financial institution. Without restating
the terms of the document, it might be helpful to briefly summarize the business
terms. In the specimen transaction the lender/owner has elected to require no
option payment and has created initial price reductions to induce a developer to
build model homes and sell lots. The option extends for a term of two years, but
contains performance hurdles which the developer must meet or risk termination.
Each sale is "as is" and the developer is required to assume all liabilities and to
perform the usual tract development tasks.
6.6
Development Agreements. Addendum B reflects a more complex and
heavily negotiated contract between two developers where the selling developer
anticipated retaining abutting land for significant future development. It is
contemplated that the tract retained by the selling developer and the tract sold to
the purchasing developer (as well as other land to be acquired by the purchasing
_______________________________________
Modern Real Estate Transactions, July 2006
- 23-
developer) will be developed pursuant to common publicly approved and
privately negotiated development restrictions. Accordingly, the contract is the
subject of massive contingencies which, in the final analysis, impair or at least
complicate the enforceability of the contract. In any event, the form is published
to demonstrate approaches to problems and not necessarily their solution.
6.7
Right of Refusal Agreements. Addendum C sets forth a form Right of
Refusal using the customary responsive structure and adding an alternative "right
of first offer" provision. Rights of refusal are specialized documents which are
used when there is a business reason to restrict resale (e.g., family relationships,
bargain purchases, related developments, asset restrictions where entity
restrictions are not possible) or when the parties are unable or unwilling to reach
agreement on the business terms of the sale.
6.7.1 Price. Ordinarily no purchase price is specified and the parties rely
on a determination of market value at the time the option is exercised.
The market value can be established by the offer of a third party, the
establishment of an asking price by the seller, appraisal or arbitrated
agreement.
6.7.2 Exercise. The timing of exercise is important because the right of
refusal has a chilling effect on sale to a third party. Notice that there is no
clause providing that time is of the essence in the published form.
Depending on the law of the jurisdiction and the identity of your client,
such a clause might be advisable.
6.7.3 Application. Rights of refusal can be limited to a first sale or have
a "tar baby" effect.
6.7.4 Perpetuities. A perpetuities savings clause is important in many
jurisdictions.
6.8
Reciprocal Easement Agreements. Addendum D is a copy of the base
document tying together the redevelopment of downtown Oklahoma City which
was placed of record prior to the commencement of the central city urban
redevelopment project. Its purpose is to allow phased development of
commercial projects which, when complete, will have a common infrastructure.
6.8.1 Application. The Master Development Plan described in the
document included three office buildings, a hotel, a shopping center with
two stories of small tenant space and three anchor department stores, a
parking garage in subterranean space and a six-story above grade structure
with connecting tunnels and skywalks.
6.8.2
Creation of Easements. The legal basis for the document is the
_______________________________________
Modern Real Estate Transactions, July 2006
- 24-
creation of mutual easements. The essential requirement for an easement
is that a burdened tract and a benefited tract be in existence at the time the
easement is created. To accomplish that result, there had to exist a
severance of title to the master tract. For that reason, this document was
executed simultaneously with the first conveyance by the redevelopment
authority.
6.8.3 Designation of Easements. The document creates pedestrian
easements, vehicular easements, common component easements, utility
easements, access easements and "self-help" easements. With certain
limitations, the owner of each tract reserves the right to designate and
relocate the areas which are subject to the easements and to regulate the
use of the easements.
6.8.4 Benefited Parties. Participants are limited to fee owners and all of
the easements are private, not public.
6.8.5 Maintenance; Restoration. Allocations of costs for operation,
maintenance, repair and restoration are problematical and vary with the
nature of the use and the types of improvement. The format selected in
this document relates to the extent of benefit, the location of the particular
easement and the ratios of gross square footage of the improvements (not
the size of the burdened tract) to each other.
6.8.6 Term. While the easements are perpetual, there is an attempt to
require definition of the areas burdened by the easements within sixty
years and to provide for termination on abandonment of an easement.
6.8.7 Condemnation. Condemnation awards are problematical. The
document gives the benefited tract no pecuniary interest in any award.
6.8.8 Enforcement. The nature of the rights call for at least two special
remedies-- injunctive relief and self-help. Although all other remedies are
preserved, the document specifically authorizes those special remedies in
the hope that the court having jurisdiction will concur.
7.
Purchase Money Financing. The terms of the financing transaction and the
corresponding documents differ significantly between the financing attendant to the sale
of a completed project and that accorded in connection with the acquisition of raw land.
In the first instance the purchase money financing is usually subordinate to existing
financing; in the second instance the purchase money financing is usually in a first lien
position, but might contain provisions calling for subordination of the lien priority to
future financing.
_______________________________________
Modern Real Estate Transactions, July 2006
- 25-
7.1
Completed Projects. The presence or absence of financing by the seller of
the project can be an essential element in the determination of the price of the
project. In addition, the creation of additional leverage and tax benefits by the
extension of secondary credit shapes and ultimately controls the terms of sale
applicable to many transfers.
7.1.1 Existing Financing Review. Financial Terms (Amount, Interest
Rate, Amortization, Maturity, Kickers, Prepayment, Impound Accounts);
Existing Collateral (Real Property, Personal Property, Contract Rights,
Guaranties, etc.); Restrictions (Due on Sale, Due on Encumbrance,
Management Transfers, Personal Covenants); Unusual Terms.
7.1.2 Financing Structure.
Treatment of Existing Financing
(Assumption, Release of Seller, Subject To); Recourse or Nonrecourse;
Identity of Collateral (Unsecured, Cash Collateral [Letters of Credit,
Deposits]), Other or Additional Collateral; Subordinate Liens (Gaps and
Omissions in Existing Financing Collateral); Wraparound Financing.
7.1.3 Financing Terms. Amount (Kickers to Adjust Sale Price); Interest
Rate (Kickers, Variable Rates); Amortization (Balloon Payments, Bullet
Loans, Triggers); Maturity (Stated, Sale, Encumbrance, Refinancing);
Prepayment Options and Obligations; Call Devices (Insecurity,
Management Transfers, Occupancy Tests, Cash Flow Tests, Maintenance,
Adverse Change).
7.1.4 Subordinate Mortgages. Call and Cure on Prior Mortgage Default;
Rights to Reinstate Prior Loans; Subrogation to Prior Liens; Waivers of
Counterclaims; Use of Escrows and Cash Collateral; Marshalling of
Assets. See Addendum E.
7.1.5 Wraparound Mortgages. Business Terms (Net Interest Spread,
Conversion of Principal to Interest, Amortization Schedule, Future
Advances, Amortization of Balloon at Maturity, Agreements to Recast
Terms); Business Risks (Prior Mortgage Payment Mechanics, Notice and
Opportunity to Cure Defaults, Right or Ability to Reinstate Prior Loans,
Condemnation, Casualty Loss, Phantom Income). See Addendum F.
7.2
Raw Land. Many of the foregoing considerations are applicable to
purchase money financing of land which is being acquired for future
development; however, there are four additional areas of common concern in such
transactions.
7.2.1 Partial Release Provisions. Computation of Release Prices;
Release Menu; Contiguity; Collateral Margins; Default Considerations;
_______________________________________
Modern Real Estate Transactions, July 2006
- 26-
Mechanics; Amortization; Sales; Initial Payment. See Addendum G.
7.2.2 Substitute Collateral Provisions.
Prepayment Limitation;
Installment Sale Treatment; Subdivision Receivables; Release from
Liability; Lien Priority; Creation of Defenses; Preference Periods;
Collection; Suitability Standards. See Addendum G.
7.2.3 Subordination Provisions. Enforceability (Subordination, Sale
Agreement); Conditions Precedent (Lender, Term, Rate, Purpose,
Amortization, Administration, etc.); Remedies of Developer; Protection of
Mortgagee; Conditional Subordinations; Documentation (Automatic,
Subsequent Document); Mechanics; Adjustment of Price, Subordination
Fee; Ability to Cure Senior Mortgage Default; Rights to Reinstate and
Acquire; Marshalling Concepts; Application of Prior Mortgage Proceeds;
Prior Mortgage Liability; Title Insurance Considerations; Casualty
Insurance. See Addendum H.
7.2.4 Splinter Mortgages. Mechanics; Documentation; Lien Priority;
Mortgagee Protection; Release from Liability; Creation of Defenses.
7.3
Common Concerns. Notwithstanding the form which the financing might
take, there are certain provisions of the financing documents which bear some
particular attention in purchase money situations.
7.3.1 Prepayment. The seller should understand the prepayment
provisions and their impact on any planned installment sale treatment.
The buyer should understand the limitations which an inability to prepay
the purchase money financing will place on a later sale, leasing or
financing of the project.
7.3.2 Prior Mortgages. The use of wraparound financing will ordinarily
produce a radically changed amortization schedule for the project, convert
what would otherwise be principal to interest payments, result in increased
deductions for the buyer and increased income for the seller and produce a
substantial balloon payment at maturity. In wraparound situations, the
buyer must be certain that the underlying mortgage payments are made on
a timely basis and that the wraparound mortgagee does not otherwise
precipitate a default in the underlying mortgage which could lead to loss
of the project. In any subordinate mortgage position, the holder of the
junior mortgage must be in a position to reinstate the prior mortgage(s)
and exercise the junior mortgagee's remedies without precipitating
maturity of the prior indebtedness.
7.3.3
Management.
Unlike the institutional investor who is in the
_______________________________________
Modern Real Estate Transactions, July 2006
- 27-
business of lending money, the seller has been in the business of managing
the project. The management and maintenance standards for the project
imposed by the seller might be more demanding and more readily
enforced than those extracted by an institutional lender. The purchase
money mortgagee is usually equipped to reassume management of the
project, can identify danger signals at an early date and can become
emotionally involved in the preservation of an asset which the mortgagee
previously owned. The buyer must realize that the purchase money
mortgage might not be held by an institutional lender prone to lethargic
action and committee management.
7.3.4 Defenses. To the extent that the sale agreement gives rise to
continuing representations and warranties, requires future performance by
the seller or if the seller-mortgagee demands management to a higher
standard than practiced during the seller's ownership or in the community,
the collection of a purchase money mortgage can become an exceedingly
difficult task. The exercise of rights of offset and counterclaims can
reduce the amounts owed and raise questions as to the reasonableness of
the seller-mortgagee's declaration of default. In addition, the availability
of a deficiency judgment in purchase money situations becomes highly
questionable in most jurisdictions and is barred in others.
8.
Long Term Leases. In the survey of options available to establish developer
control, we mentioned the lease as an alternative to purchase of the land or completed
project. The lease can create the entire estate which is contemplated to be acquired by
the developer (e.g., the usual ground lease transaction), the lease can be used in tandem
with other control or acquisition devices (e.g., lease coupled with agreement or option to
purchase) or the lease can be used to effect financial risk or reward allocations between
the parties (e.g., sale with operating lease back). Addendum I sets forth a Ground Lease
Agreement used in connection with a sale-leaseback of the land underlying a high-rise
office building in which the lease was subordinated to the term first mortgage financing
affecting the project.
8.1
Premises. Description (Land, Improvements, Appurtenances, Contract
Rights); Title (Encumbrances, Restrictions, Severances, Defects); Survey;
Physical Condition; Title Assurance.
8.2
Term. Statutory Limitations; Custom; Minimum Financing Requirements;
Commencement; Termination; Proration of Expenses/Income; Options to Extend
or Renew; Restoration Obligations; Early Termination Provisions.
8.3
Rent. Absolute Net; Base Rent; Percentage Rent; Additional Rent;
Kickers; Subordination Fees; Transfer Fees; Adjustments (Appraisers, CPI, Fixed,
Other Indices); Appraisal Basis (Land Value or Total Value, With Lease or
_______________________________________
Modern Real Estate Transactions, July 2006
- 28-
Unencumbered, As Used or Best Use, Existing or Market Rate of Return);
Abatement; Deposits.
8.4
Use. Flexibility; Subletting; Construction; Creation of Fee Burdens
(Easements, Subdivision, Dedication, Zoning, Tax Lots and Rates, etc.); Waste.
8.5
Improvements. New Construction (Tenant Obligation, Plan Approval,
Financing Approval, End User Feasibility, Financial Performance); Assurance of
Payment; Maintenance; Restoration; Demolition; Repair; Additions; Legal
Requirements.
8.6
Encumbrance. "Subordinated" Fee; Joint Mortgage; Subordinated Lease;
Leasehold Mortgage; Fee Mortgage With Unsubordinated Lease. See Addendum
J.
8.6.1 Subordination Agreements. Definition; Enforceability; Remedies;
Landlord Protection; Marshalling; Landlord Compensation; Mechanics.
8.6.2 Leasehold Mortgages.
Lease Provisions (Limitations on
Encumbrance, Assignment or Subletting, Term, Use, Rental Escalation,
Recourse, Landlord's Right to Terminate, Casualty and Condemnation
Proceeds, etc.); Description of Mortgaged Premises; Merger; Lease
Performance; Lease Modification; Mortgage Performance; New Lease
Option.
8.6.3 Landlord Mortgage. Collateral Assignment of Lease; Attornment
and Nondisturbance; Lease Subordination; Casualty and Condemnation
Proceeds; Merger; Lease Modification; Mortgagee Performance.
8.7
Transfers. Limitations (During Development, Expertise, Net Worth,
Lender Exemptions, etc.); Assumption by Transferee; Release of Transferor;
Rights of Refusal; Attornment; Nondisturbance.
8.8
Default. Definition; Notice; Opportunity to Cure; Remedies; Duty to
Mitigate; Exculpation; Surrender; Holding Over.
8.9
Eminent Domain. Partial Taking; Temporary Taking; Total Taking;
Transfer in Lieu of Taking; Parties in Interest; Allocation of Award; Abatement of
Rent; Separate Awards; Minor Taking; Integration of Provisions; Arbitration;
Participation in Proceedings; Repair; Restoration.
8.10 Casualty Loss. Indemnification; Latent Defects; Tenant Operations;
Liability Coverage; Fire and Extended Coverage Insurance; Violation of Building
Codes; Insured Parties; Coinsurance Limitations; Application of Proceeds; Policy
_______________________________________
Modern Real Estate Transactions, July 2006
- 29-
Forms; Repair; Restoration.
9.
Architectural Contracts. Because the AIA holds copyrights on the preprinted
forms which the AIA produces for sale, no forms of architectural agreements are
presented in these Course Materials. The most commonly used forms of agreement
between the developer and the architect are AIA Document B141, April 1987 Edition
(with the accompanying Instruction Sheet, AIA Document B141a) which constitutes the
basic form of architectural agreement or AIA Document B151, April 1987 Edition
(Instruction Sheet, AIA Document B151a) which is a short form for smaller projects.
The AIA forms are intended to protect the architect and should always be used with that
understanding. Notwithstanding the bias, the AIA forms represent an efficient,
economical tool for the production of an integrated set of construction documents.
9.1
Dealing with Architects. Although the architect's contribution to the
project is significant, the extent of the architect's involvement varies from project
to project. Unless modified, the AIA documents do not so vary; it is therefore
essential to measure the contemplated services against the document provisions.
Although architects purport to be a cohesive group with well defined standards,
their practices have appreciable variations in different parts of the country and
among architects within a particular locale.
9.1.1 Control. The architect contractually undertakes the obligation to
be all things to all people; however, the developer pays the architect's fees.
The prospect of a developer being unable to directly communicate with
the general contractor, having no approval of the amount owing to the
contractor, being absolutely bound by the architect's judgment of the
contractor's performance or granting the architect absolute artistic license
is a fairy tale.
9.1.2 Time. Time is not the essence of any architectural contract and the
timely production of plans and specifications is a continuing problem.
9.1.3 Cost Estimates. The architect's aesthetic dedication is not always
in harmony with project budgets. As the AIA documents so carefully
indicate, the architect is not employed to render reliable cost estimates.
9.1.4 Standards. It is often difficult for the developer to understand the
precise services the architect will perform with respect to the specific
project. The AIA documents accord the architect a substantial latitude in
defining the architect's performance as being "normal" or "consistent with
professional skill" or rendered in the "orderly progress of the work" or
"customary" or "in accordance with generally accepted architectural
practices."
_______________________________________
Modern Real Estate Transactions, July 2006
- 30-
9.2
Definition of Services. Basic Services (Schematic Design, Design
Development, Construction Documents, Bidding, Construction Administration);
Project Representative; Additional Services; Owner's Responsibility; Excluded
Services (Feasibility, Investigation, Alternates, Cost Estimates, Interior Design,
Tenant Layouts, Revisions, Casualty).
9.3
Compensation. Basic Services (Percentage of Construction Cost, Multiple
of Direct Personnel Expense, Fee Plus Expenses, Fixed Fee); Additional Services;
Consultant Multipliers; Reimbursable Expenses (Travel, Living Expenses,
Communication, Qualification, Reproduction, Data Processing, Overtime,
Models, Insurance); Termination Expenses; Project Deletions; Times of Payment
(Retainer, Monthly, Percentage Allocation by Phases, Simultaneous Phases, Final
Payment).
9.4
Miscellaneous Problems. Certification (Compliance with Building Codes,
Lender Documents); Inspection or Visitation; Instruments of Service; Arbitration;
Governing Law; Limitations Period.
10.
Term Financing. The funds provided by term lenders afford the leverage and the
capital required by the developer to pay the cost to produce the project and the resulting
investment contemplates the lender's recoupment of the funds and the payment of an
acceptable rate of return over the life of the term loan. The willingness of the term lender
to participate in the project is traditionally evidenced by the issuance of a written
commitment to extend a term loan to the developer after the developer's satisfaction of
significant conditions precedent to the advancement of funds. Given the importance of
this document, it is appropriate that some attention be dedicated to the nature of the
contractual relationship which is created by the issuance of a lending commitment.
10.1 Lending Commitments. It is necessary to distinguish between several
very different types of lending commitments in order to understand the
relationships which are being created among the parties to the lending
transactions.
10.1.1 Take-Out Commitments. This type of commitment is the most
common and is the form of commitment to which most of the comments
which follow will be addressed. The take-out commitment is issued by a
term lender with every expectation that the loan will be funded as a term
investment by the lender. The relationship between the developer and the
lender is anticipated to continue over a substantial period of time and
while the negotiation of the commitment might be heated on certain
business or legal issues, the parties always maintain some degree of
civility given the ongoing relationship which is being established. These
commitments are responsive to market pressures and are customarily
priced in terms of refundable and nonrefundable fees ranging from one_______________________________________
Modern Real Estate Transactions, July 2006
- 31-
half to three percent of the loan amount, fixed or variable annual interest
rates approximating the market rates and additional interest or "kicker"
provisions varying with the project, the developer, the lender and the
market. Regardless of the form the additional interest takes, it is generally
payable from the earnings of the project and the developer is generally
fully or partially exculpated from personal liability for repayment of the
mortgage loan.
10.1.2 Standby Commitments. This form of lending commitment is
significantly different from the take-out commitment. The standby
commitment is issued to facilitate construction lending with no
expectation that the loan proceeds will be disbursed by the standby lender.
The financial motivation of the standby lender is the generation of income
in the form of nonrefundable fees which are charged for the issuance of
the commitment. The expectation of the standby lender is that the
developer will obtain a take-out commitment from another lending source
prior to the date for funding the standby loan. Accordingly, the terms of
the standby commitment require payment of nonrefundable fees ranging
from three to ten percent of the loan amount, the standby loan is either a
demand obligation or has a very short maturity date and the interest rate
prior to maturity is priced well above conventional short or term interest
rates. The standby lender's objective is to force the developer to refinance
the project at the earliest possible date. Notwithstanding the punitive
financial terms of the standby commitment, its other terms must render it
"bankable," meaning that there must exist a reasonable expectation that the
funds will be advanced to the developer so that a construction lender can
extend financing for the project in reliance on the standby lender's funding
as the primary source for repayment of the construction loan. The
availability of immediate income against a contingent liability has caused
some mortgage bankers, mortgage brokers and lending institutions to
collect standby fees and subsequently avoid funding by strict
interpretation of the commitment conditions, establishing unreasonable
times for performance or being financially unable to fund. The use of a
standby commitment is a high risk transaction for all of the parties
involved and should be viewed and documented accordingly.
10.1.3 Bridge Commitments. Given the volatility of the financing
markets, it is not surprising that a hybrid commitment form has emerged
several years ago. This form is commonly referred to as the "bridge"
commitment. It generally carries nonrefundable fees and interest rates at
above market levels, but not at the punitive rates charged for standby
commitments. In these transactions the lender has a moderate probability
of funding the loan and it is not unusual for an additional fee to be paid at
loan funding, for the loan to bear an above market interest rate which
_______________________________________
Modern Real Estate Transactions, July 2006
- 32-
escalates with the term and for there to be a bullet maturity within one to
five years after the loan funding. Again, the bridge lender's expectation is
that the developer will be able to locate more favorable financing prior to
the maturity of the bridge loan.
10.1.4 Gap Commitments. A final type of commitment embodies an
agreement to extend a subordinate mortgage loan if the developer is
unable to achieve full funding under the take-out commitment by reason
of a failure to achieve the leasing, occupancy or financial performance
required of the project. The terms of the commitment vary tremendously
with different transactions, but the range of variations is generally
described above with the exception that the gap lender customarily
requires additional protection (and usually additional collateral) by reason
of the gap lender's contemplated subordinate lien position with respect to
the project.
10.2 Commitment Enforcement. Because of the complexity of the lending
arrangement, the period of time during which the commitment is outstanding and
the nature of the conditions imposed by the term lender, the commitment presents
special legal problems with respect to its enforceability. A threshold inquiry is
whether the commitment creates a unilateral option in favor of the developer and
the developer's permitted assignees or creates a mutual agreement to lend and to
borrow. Or, as the question is presented in the jargon of the trade - Does the
developer have the right to "walk the commitment." The answer to that question
from a legal standpoint is not as precise as one might hope.
10.2.1 General Rule. The rule which applies in most jurisdictions is that
an agreement to extend credit is not a specifically enforceable obligation
and the parties will be limited to an action for damages arising from the
breach of contract absent exceptional circumstances. The rationale
applied by the courts is that money is a commodity, alternative financing
can be obtained and damages measured by the developer's cost to obtain
replacement financing is a determinable and adequate remedy at law.
10.2.2 Default. In recent years, the "exceptional circumstance" portion of
the general rule has inspired courts in various jurisdictions to specifically
enforce mortgage loan commitments against lenders and borrowers on the
theory that where the loan relates to land, the action is tantamount to an
agreement to purchase land and is therefore specifically enforceable. In
addition, several courts have acknowledged that the lending arrangement
is itself unique, might not be capable of replacement and that damages for
the lender's or borrower's breach would be difficult if not impossible to
ascertain.
_______________________________________
Modern Real Estate Transactions, July 2006
- 33-
10.3 The Commitment Process. To understand the basis for negotiating
mortgage loan commitments, the developer and the developer's attorney must
have a basic understanding of the process by which the commitment is issued.
The process generally takes several weeks, but if negotiations are difficult and the
project is complex, the process can take several months.
10.3.1 Application. The process begins with informal contacts between
the developer and the lender's representatives which culminates in a
written loan application. The application can be extensive or very
abbreviated, but generally sets forth the developer's financial information,
a summary of the developer's experience, preliminary plans and
specifications (artist's elevations, site plan) for the project, market
information, pro forma capital and operating budgets and the requested
loan terms.
10.3.2 Broker. The application might be filed with a local broker or
mortgage banker who represents one or more potential investors or the
application might be filed directly with the regional or home office of a
potential investor with which the developer has an existing relationship or
which the developer has learned is interested in such investments.
10.3.3 Initial Approval. The terms of the application are preliminarily
negotiated with the lending or investment officer representing the potential
investor. Where these negotiations take place with a loan officer
employed by the potential investor, the negotiations are generally
productive because the parties are dealing as principals. Where the
negotiations take place with the broker or mortgage banker, the developer
must be conscious of the drive of the middleman to collect the brokerage
fee. Likewise, the developer must understand that the loan or investment
officer employed by the potential investor is compensated and will be
promoted based on the officer's ability to generate good investments. In
either event, the developer must inspire an element of loyalty to the
developer and the project which will cause the individual presenting the
application to advocate its approval. The developer must also continually
distinguish between the "Mutt and Jeff" negotiating ploy and the minimum
requirements actually imposed on the investment.
10.3.4 Committee Approval. Most term lenders have a formalized
process requiring approval of the application by a committee composed of
senior management. The committee is usually styled the "Senior Loan
Committee" or "Investment Committee" or "Finance Committee" or
"Credit Policy Committee." In some institutions the loan committee might
consist of the entire board of directors or representatives from the board of
directors. Loans of different amounts or types might be referred to
_______________________________________
Modern Real Estate Transactions, July 2006
- 34-
different committees. In any event, the committee is usually the body
which is vested with the authority to approve the application and
determine the terms on which the commitment will be issued. Having
battered through the potential investor's first line of defense, the developer
and the project are now subjected to the scrutiny of a nameless, faceless
group sitting in some far away place. At the committee the application
and the project are usually presented in a summarized fashion and the
committee's determination is generally made along policy lines with
consideration being given to the area in which the project is located, the
type of project, the investment needs of the institution, the risk associated
with the investment and the profitability of the transaction. It is not
unusual for the application to be presented to the committee by a senior
loan or investment officer with suggested modifications which will
improve the transaction from the investor's standpoint. The committee
will then approve or disapprove the application and will establish (either
within policy guidelines or on specific transactions) the areas for further
negotiation with the developer. Depending on the results of those
negotiations, the committee might require resubmission of the application
to the committee for final approval--a result which the developer does not
want because of the delay involved.
10.3.5 Commitment Issuance. The format in which the commitment is
documented varies among lenders. Some lenders merely accept the loan
application with amendments to incorporate modifications. The more
common approach is for the lender to issue a letter or agreement form
(many times containing special provisions relating to the individual loan
with attached general conditions which presumably apply to all loans
made by the lender) addressed to the developer or the mortgage banker or
broker. The commitment will generally incorporate the application by
reference and express the lender's agreement to extend credit on the terms
stated in the commitment provided that the developer is able to satisfy the
special and general conditions precedent to the lender's obligation.
10.3.6 Developer's Response.
The developer's response to the
commitment must be measured by the terms the developer approved in the
application, the financing markets and the timetable to which the
developer is committed. In large measure the type of response is governed
by the thoroughness of the application process. If the application is fully
negotiated and complete, the commitment will present a minimal number
of negotiating items which generally address pricing. If the application
was abbreviated, a more extensive response will probably be required.
The most expeditious response is by the use of a conditional acceptance
attaching a rider to the commitment setting forth the specific modifications
which the developer requests (with an understanding that the counteroffer
_______________________________________
Modern Real Estate Transactions, July 2006
- 35-
which results is a rejection of the institution's offer to make the loan on the
terms of the original commitment). An alternative and more timeconsuming approach to the conditional acceptance is to request reissuance
of the commitment on the modified terms. A usual and probably least
satisfactory approach is the exchange of letters requesting and receiving
amendments to the commitment. This approach is time-consuming and
results in a complex document with piecemeal modifications which is
difficult to explain to the construction lender and which usually creates
ambiguities in the loan terms. The developer's response generally arises
from five circumstances: (a) the commitment reflects a counter-offer by
the investor from the offer made by the developer in the application and
will require additional negotiation; (b) the commitment contains
provisions not addressed by the application on which the parties have not
reached agreement; (c) the commitment terms are ambiguous when
applied to the specific project; (d) the commitment contains conceptual or
mechanical errors; or (e) the commitment terms impose a cost of
performance which was not anticipated by the developer when the
application was made. In any event, the accepted commitment will
become one of the foundation documents relating to the project and will
govern all future negotiations and disputes among the various parties
involved in closing the term loan.
10.4 Business Terms. The negotiation of the application, the commitment and
the term loan documents by the developer and the developer's attorney will
require resolution of a number of matters which constitute a mixture of business
terms and legal limitations.
10.4.1 Loan Amount. Loan to Value Ratio; Completion Holdback;
Occupancy Holdback; Financial Achievement Holdback; Interest
Reserves.
10.4.2 Loan Term; Amortization.
Payment Loans; Optional Calls.
Standing or "Bullet" Loans; Level
10.4.3 Interest Rate. Fixed Rate; Adjustable Rate; Kickers; Convertible
Loans; Usury Limitations; Unrelated Business Income.
10.4.4 Prepayment Options.
Default; Prepayment on Call.
Prohibition; Premiums; Prepayment on
10.4.5 Personal Liability. Full Liability; Limited Liability (Carve Outs
Related to Fraud, Misrepresentation, Insurance Proceeds, Uninsured Loss,
Condemnation Proceeds, Diversion of Rents, etc.); Guaranty of Payment;
Guaranty of Collection; Limited Guaranty (Time, Amount, Several
_______________________________________
Modern Real Estate Transactions, July 2006
- 36-
Liability, Application of Payments); Guaranty of Completion; Take Out
Agreements.
10.4.6 Closing Expenses. Commitment Fees; Brokerage Fees; Inspection
Fees; Appraisal Expenses; Environmental Audits; Impound Accounts;
Lender's Attorneys' Fees; Title Insurance Premiums.
10.4.7 Legal Requirements.
Loan Document Forms; Estoppel
Certificates; Survey Requirements; Title Insurance Requirements;
Architect's Certificates; Attorneys' Opinions; Environmental Opinions;
Compliance with Laws (Zoning, Use, Building Codes, Environmental
Requirements, Americans with Disabilities Act); Qualification to Do
Business.
10.4.8 Restrictive Provisions. Due on Sale; Due on Encumbrance; Future
Financing; Credit Lease Requirements (Tenant Financial Condition, Lease
Execution, Occupancy, Current Rental Payment); Related Contracts
(Reciprocal Easements, Tax and Insurance Services, Life Insurance Sales,
Management Agreements, etc.); Cross Defaults to Other Projects;
Environmental Indemnities.
10.4.9 Assignability. Collateral Assignment; Buy-Sell or Tri-Party
Agreements; Pre-Closing the Term Loan (Document Forms, Mortgage
Tax, Expense).
10.4.10
Times for Performance.
Commitment Acceptance;
Commencement of Construction; Environmental Remediation and
Closure; Completion of Construction; Project Occupancy; Loan Funding
(Initial, Hold-backs); Extension Options; Force Majeure.
10.4.11 Adverse Change.
Applicable Law.
Definition; Parties Covered; Change in
10.4.12 Operating Expenses. Impound Accounts; Financial Reports;
Insurance Program; Management Fees.
10.5 Party Issuing Commitment. Retreads by Mortgage Bankers; Split
Commitments by Participating Lenders; Lender's Assignment Rights.
10.6 Borrowing Entity.
Use of Nominees; Transfer of Commitment;
Admission of Additional Partners; Death of Individual Developer or Guarantor;
Transfer of Project.
10.7
Conditions Subject to Early Satisfaction. Status of Title; Title Insurance
_______________________________________
Modern Real Estate Transactions, July 2006
- 37-
Policies; Survey Requirements; Plans, Specifications, Change Orders;
Commitment Acceptance; Construction Commencement; Approval of Credit
Leases and Standard Lease Forms; Legality of Loan (Usury, "Doing Business,"
Enforceability of Loan Documents, etc.); Architect Certification; Governmental
Compliance (Zoning, Use Restrictions, Building Codes, Tax Parcels,
Environmental Approvals); Casualty Insurance Program (FEC, Liability, Flood,
Loss of Rent, etc.); Loan Document Forms (Note, Mortgage, Security Agreement,
Financing Statement[s], Assignment of Leases, Assignment of Rents, Special
Collateral Documents, Assignment Forms for Pre-Closing, Developer Estoppel,
Tenant Estoppel, Guaranty Agreements, Architect's Certificate, Developer's
Attorneys' Opinion, etc.); Appraisals.
10.8 Conditions Not Subject to Early Satisfaction. Completion of Construction
(Substantial Completion, Substantial Compliance with Approved Plans and
Specifications, Force Majeure, Fast Track Procedures); Certifications (Cost
Certifications by the Developer, Final Appraisal, Architect's Certificate, Tenant
Estoppels, Developer's Estoppel, Construction Lender's Warranties); Adverse
Change (Ownership Transfers, Developer's Death, Developer's Bankruptcy,
Financial Change in Developer, Guarantor, Prime Tenant, Change in Law
[Zoning, Building Codes, Tax Treatment, Lender Qualification, Environmental
Limitations], Actual v. Pro Forma Financial Performance).
10.9 Term Loan Documents. Although the types, number and length of
documents required will vary with each transaction, the documents customarily
used to record the term loan agreements are the following.
10.9.1 Promissory Note. Amortization; Interest; Additional Interest;
Kickers; Prepayment; Usury Savings; Exculpation.
10.9.2 Real Estate Mortgage. Property Description (Appurtenances); Due
on Sale/ Encumbrance; Appraisement; Related Agreements; Notice;
Opportunity to Cure; Condemnation; Casualty Loss.
10.9.3 Security Agreement. Items Covered; Real Estate or Personal
Property; Insurance; Continuation Statements.
10.9.4 Lease/Rental Assignment. Assignment of Leases; Assignment of
Rents (Present, Future); Present Assignment with License Back;
Enforcement;
Lease
Subordination;
Attornment
Agreements;
Nondisturbance Agreements.
10.9.5 Miscellaneous. Assignment Forms; Developer's Estoppel; Tenant
Estoppel Certificates; Attorneys' Opinions; Disbursement Instructions.
_______________________________________
Modern Real Estate Transactions, July 2006
- 38-
10.9.6 Buy-Sell Agreements. Term Lender Form; Construction Lender
Form; Developer Considerations; Mortgage Tax.
11.
Construction Financing. Assuming that the developer has obtained acceptable
term financing commitments, the developer's negotiation with the construction lender
will usually center around four areas: (a) pricing the loan; (b) funding loan amounts
which are the subject of holdback provisions of the term lending commitment; (c)
limitation of the developer's liability for repayment of the loan; and (d) the manner in
which the conditions of the term lender's commitment will be satisfied. If the developer
has not obtained a term loan commitment, the negotiations will parallel those involved in
obtaining a term loan commitment because the construction lender will be forced to
independently underwrite the transaction looking toward funding of a term loan
commitment to be obtained during the course of construction or the proceeds of sale of
the completed project as the ultimate source of repayment. In either event, the developer
can expect the construction loan documentation to be burdensome, expensive and slow in
production. If the developer is able to identify the construction lender at an early date,
the construction loan process will usually proceed simultaneously with (and sometimes
ahead of) the term loan commitment process.
11.1 Construction Lender Impediments.
To facilitate the expeditious
commencement of the project, it helps to understand the business concerns and
legal handicaps which the construction lender faces.
11.1.1 Project Control. Like the developer, the construction lender feels
the need to exert some element of control over the prosecution of the
project. Otherwise, the conditions of the term loan commitment, end user
leases or contracts to purchase, construction and architectural agreements
and other obligations cannot be performed on a timely basis and result in
the repayment of the construction loan. The lender's drive for control is
all too often evidenced in ponderous documentation with extensive and
burdensome reporting requirements which seem to indicate that the weight
of the paper will somehow shield the lender from loss. Unfortunately, the
paper shield is only that. The lender cannot exercise control of the project,
the lender can only determine whether or not the lender will advance
funds. If the developer does not perform the contractual obligations
created by the construction loan documents, the only remedy available is a
declaration of default, termination of advances and foreclosure. The
ability to decide whether or not to own an incomplete project is hardly
tantamount to control.
11.1.2 Collateral Value. Until the project is successful, the construction
lender is usually undercollateralized. The true salvation is funding by the
term lender, yet the construction lender cannot control the satisfaction of
the conditions precedent to that funding. The value of the incomplete
_______________________________________
Modern Real Estate Transactions, July 2006
- 39-
project will rarely balance with the funds advanced to the date of default.
11.1.3 Inadequate Remedies. When faced with a developer default, the
remedies available to the construction lender are to: (a) waive the default
and advance additional money to the developer to complete the project;
(b) declare the default, demand additional developer equity, waive the
default and advance additional money to the developer to complete the
project; (c) declare the default, foreclose the project and advance
additional money for the lender's account to complete the project; (d)
declare the default, foreclose the project, sell the project and advance
additional money to the purchaser to complete the project; or (e) declare
the default, foreclose the project and sell the project by discounting the
sale price by an amount sufficient to enable the purchaser to complete the
project. An understanding of the practical remedies available to the
construction lender is essential prior to the initial advance under the
construction loan; thereafter, future advances have a snowballing effect
and reverse gear is very difficult to locate notwithstanding the terms of the
loan documents. To the extent equity is required, provision must be made
prior to the initial disbursement; to the extent the developer's credibility is
an issue, the loan should not be made at all. Although the construction
lender and the loan officer in the transaction might view the termination of
future advances and replacement of the developer's management as
appropriate remedies, the exercise of those remedies cannot be undertaken
without significant risk to the lender.
11.2 Construction Loan Documents. With a few exceptions, the forms of
collateral documents used in construction loans are identical to other real estate
loans. The recognition and treatment of those exceptions is the essence of
construction lending.
11.2.1 Loan
Agreement.
Umbrella
Document;
Covenants;
Representations and Warranties; Conditions Precedent to Initial and
Subsequent Advances; Use of Loan Proceeds; Events of Default;
Obligatory or Nonobligatory Advances. Addendum K sets forth a
construction loan commitment which with minor changes, can serve as a
letter form construction loan agreement; Addendum L sets forth a more
extensive and formal construction loan agreement.
11.2.2 Promissory Note.
Future Advancements; Cross Default;
Maximum Amount; Maturity Date; Serial Notes; Equal Dignity or
Subordinate Notes.
11.2.3 Mortgage/Deed of Trust. Future Advances (Priority Accorded
Mechanics and Materialmen, Priority After Default); Cross Default;
_______________________________________
Modern Real Estate Transactions, July 2006
- 40-
Prohibition of Sale or Further Encumbrance; Assignment to Term Lender;
Equal Dignity or Subordinate Liens.
11.2.4 Security Agreements.
Description of Collateral; Off Site
Materials; Contract Rights; Specific Collateral Assignments (Construction
Contracts, Architectural Contracts, Sale Agreements, Loan Proceeds);
Term Loan Commitment; Trade Names; General Intangibles.
11.2.5 Other Documents. Guaranty Agreements; Limited Guaranty
Agreements; Guaranty of Completion; Assignments of Leases and Rents;
Stock Pledges and Security Interests in the Owning Entity; Subordination
Agreements; Attornment Agreements; Environmental Indemnities;
Attorneys' Opinion; Certificates of Authority; Tri-Party or Buy-Sell
Agreements.
11.3 The Pre-Closed Loan. Definition: The use of integrated loan documents
which incorporate the terms of the construction loan and the permanent loan
coupled with a meaningful buy-sell agreement which satisfies all of the
contingencies of the term lender's commitment which can be resolved prior to
disbursement of construction loan proceeds. The basis of the buy-sell agreement
is that the term lender grants some assurance (however limited) to the
construction lender that the term loan commitment will be funded in return for the
construction lender's agreement that payment of the construction loan will not be
accepted from a party other than the term lender, to which agreement the
developer consents. The buy-sell agreement is the construction lender's tool to
obtain written satisfaction of the conditions of the term lender's commitment
which can be satisfied prior to disbursement of the construction loan proceeds.
"Pre-Closing" a transaction invariably complicates the lives of the parties and
their counsel and certain advantages and disadvantages should be considered prior
to expending the effort required to "pre-close."
11.3.1 Project Delay. The simplicity of a term loan closing afforded by
the assignment to the term lender of approved loan documents should be
weighed against the delay and difficulty involved in drafting integrated
documents prior to the commencement of construction. A portion of the
expenses of closing the term loan and a great many of the problems
peculiar to the term lender will be inherited by the construction lender.
11.3.2 Cost Savings. "Pre-Closing" can effect some savings in attorneys'
fees, recording costs, transfer taxes and mortgage taxes.
11.3.3 Declining Rates. The agreement of the construction lender and the
developer that the construction loan will not be prepaid or sold to another
mortgage lender, fortified by the use of integrated documents, might not
_______________________________________
Modern Real Estate Transactions, July 2006
- 41-
be in the developer's best interest in the face of declining interest rates.
11.3.4 Increasing Rates. The additional assurance given by the term
lender that the commitment will be funded should be compared with the
administrative difficulty imposed on the term lender, and the possible loss
of the term lender's ability to amend the commitment or take advantage of
a possible developer's default in the face of increasing interest rates.
11.3.5 Lien Priority. The priority of the lien of the construction loan
mortgage is accorded to the term lender and the term lender's title insurer,
but possible defenses and defects in the transaction arising while the loan
was held by the construction lender might infect the loan in the hands of
the term lender.
11.3.6 Complexity. The end result of pre-closing is a complicated
transaction which is most difficult to restructure, even with the agreement
of the parties. It is not unusual for the developer to be caught in the cross
fire of negotiations between the construction lender and the term lender.
11.4 Production. Assuming that market collapses, material shortages, labor
disputes, significant cost escalation, substantial interest rate increases, casualty
loss, death, drastic changes in governing law or other calamities do not occur
during the course of construction, the project will usually proceed as originally
conceived. That is not to say that each project will succeed or that there are not
significant matters of both a business and legal nature which occupy the
developer, the construction lender and their respective attorneys during this
period. Regardless of the comprehensive application of all of the legal principals
and minute treatment of every possible risk by counsel, in the final analysis the
mechanics of producing the project must be capable of being administered by
those who are relatively unfamiliar with the law and the documents. Simplicity
and practicality cannot be replaced by the most beautiful of legal theories. For the
most part, the documents which have been so laboriously produced or received by
the various attorneys are placed in an appropriate client file never to be seen again
unless some problem arises. The following problems are encountered in most
projects.
11.4.1 Retainage. Payment of retainage to the general contractor and
subcontractors is not authorized in many construction loan agreements but
is required at certain stages in most subcontracts. The general contractor
is sometimes forced to finance an unreasonable portion of the cost of the
work and therefore overstates the estimates of completion accordingly (a
practice known in the trade as "front loading").
11.4.2 Loan Balancing. The developer and the construction lender must
_______________________________________
Modern Real Estate Transactions, July 2006
- 42-
continually determine that the reserves available for the completion of the
project (whether in the form of undisbursed loan proceeds or the
developer's equity) are sufficient to complete construction of the project.
The bookkeeping and reporting procedures should facilitate periodic
analysis of the project's progress to allow cost overruns to be identified at
an early date and measured against contingency funds available. Excess
costs can often be eliminated if those costs do not come as a surprise.
11.4.3 Approvals. The administration of the construction loan should
assure compliance with the construction contract (to avoid discharging the
obligations of the contractor and the contractor's surety) and in accordance
with the provisions of the term loan commitment and prime user contracts.
Material changes in the scope of the project sometimes arise from
unforeseen business opportunities or reverses.
11.4.4 Technical Default. In cases where a technical default has occurred
or the construction lender otherwise desires to waive a condition precedent
to a future advance, the construction lender might be confronted by an
obligatory/nonobligatory quandary with respect to the priority accorded
the future advances.
11.4.5 Term Loan Closing. If the term loan commitment has been
properly negotiated, the term loan pre-closed and term lender approval
obtained for all material changes in the project, the term loan closing is
more a formality than a trauma. If the foregoing items have not been
done, the term loan closing can become a most frustrating and expensive
proposition for all parties. In either event, the primary difficulties usually
surround the ability of the developer to expeditiously deliver third party
estoppel agreements or certificates in a form which the third party will
sign and the term lender will accept.
12.
Operating Agreements. The nature and the complexity of the agreements relating
to the operation of the project varies with the type of project which is involved and the
business practices in the area in which the project is located; however, most operating
agreements present areas of common concern.
12.1 Management Agreements.
One contractual arrangement which is
becoming even more commonplace as ownership of projects is transferred to
lenders is the management agreement between the operator of the project and the
absentee owner. Addendum M sets forth an owner-oriented management
agreement used for small retail and office projects which has been promulgated as
a "standard form" by a lender which is rapidly converting to an equity real estate
investor by reason of defaulted mortgage loans. The terms of management
agreements involving hotel and major retail developments are somewhat more
complex and customized to individual projects, but generally cover the same areas
_______________________________________
Modern Real Estate Transactions, July 2006
- 43-
of concern.
12.2 Impact on Financing. The terms of all operating agreements must be
measured against the requirements of existing and anticipated financing relating
to the project. Some operating agreements are essential to the availability of
financing (e.g., reciprocal easement agreements, franchise agreements, trackage
agreements, utility service agreements). Other operating agreements are treated
as contracts for fungible services generally available in the marketplace which do
not affect the availability of financing so long as the claims of the supplier are or
will be clearly subordinate to the rights of the lender under the loan documents.
Where an operating agreement creates a benefit to the project and is for a
protracted term, it is sometimes an interesting process to determine whether the
lender should claim the contract right as a part of the lender's collateral package or
terminate the contractual obligation by foreclosure of the liens securing payment
of the loan. That inquiry becomes even more difficult if the lender contemplates
taking a transfer of the project in lieu of foreclosure of the lender's liens.
12.3 Impact on Sale. Each operating agreement must be reviewed in
anticipation of a future sale of the project and provision made for: (a) the release
of further performance by the original owner (whether as a contract obligor or
guarantor) at the time of sale; (b) assignment of the contractual benefits to the
successor in ownership of the project; (c) termination of the contractual obligation
on relatively short notice and without punitive payments; and (d) devices for the
verification of the status of performance under the operating agreement. You
should not be surprised if a number of the operating agreements have been
executed "in the name of the project" with little consideration given to the identity
of the contract obligor.
13.
Contracts for Disposition. The following discussion is intended to highlight
major areas for consideration by the attorney representing parties to the sale of a
commercial property. The form of sale agreement attached as Addendum N has been
prepared from the seller's point of view with alternative provisions more satisfactory to
the buyer inserted as Addendum O.
13.1 General Considerations. To place our discussions in context, it is
important to consider certain matters of general concern in any sale transaction.
13.1.1 Investigation. The terms of the contract documents and the quality
of the legal representation are a function of the attorney's understanding of
the facts and the law as it applies to those facts. We view those
considerations as being of equal importance and, for that reason, will not
ordinarily undertake a major commercial sale or acquisition without
visiting the project. The more the draftsman knows about the project, the
better the work product; however, the extent of investigation varies with
_______________________________________
Modern Real Estate Transactions, July 2006
- 44-
the nature of the property and quickly becomes limited by the time and
money available for the acquisition. We would customarily investigate
the following items: the identity of the parties; the status of title; the
nature and condition of the improvements; the availability of access; the
history of ownership; the nature of financing in place; the brokerage
arrangements; the probability of environmental contamination; and the
identity of tenants, casualty insurers, title insurers, surveyors, managers
and other parties associated with the project. In projects which are being
acquired with a view to future syndication or other securitization, the time
committed to the factual investigation required to discharge the buyer's
obligation of due diligence and the seller's potential liability for breach of
representations and warranties can far outweigh the time spent in
negotiating and drafting the documents.
13.1.2 Negotiation. It is essential that the draftsman have an appreciation
of the negotiating posture of the parties. The contract terms applicable to
a bargain purchase are appreciably different from those applied to a top
dollar sale. The documents are merely an expression of the parties'
agreements allocating the perceived risks and rewards of the transaction.
Each transaction has a different flavor and the attorney who serves vanilla
when pralines and cream was ordered is no worse than the draftsman who
converts a single dip to a banana split. The attorney should help the client
identify and quantify the risks of the transaction and offer alternative
solutions to minimize those risks. There must be developed an empathy
for the parties involved and the "deal" and a lack of sensitivity to those
ingredients ordinarily results in an inability to close the transaction, the
client's loss of anticipated profits and the attorney's eventual loss of the
client.
13.2 Description of Property. Our sale agreements divide the description of the
property to be sold into four categories (land, improvements, tangible personalty
and intangible personalty) using broad generic descriptions highlighting items of
particular importance and specifically naming excluded items. The purchase of a
commercial project represents the acquisition of more than fixed assets--it
represents the transfer of a going business and should therefore include all of the
rights which make that business operate. In most transactions there are no
inventories of personal property attached at the time of contract execution because
itemized descriptions are not usually available at the time the sale agreement is
executed. The inventories will be made by the buyer pending closing, certified by
the seller and attached to the bill of sale at the time of closing. Absent special
circumstances, the only property customarily excluded from the sale is cash,
property of tenants and the seller's personal business records. The property
description will vary with the project and you should not overlook easements,
leasehold estates, licenses, trade names and other intellectual properties, air rights
_______________________________________
Modern Real Estate Transactions, July 2006
- 45-
and important contract rights which constitute a part of the assets being acquired.
In the acquisition of specialty projects where the real estate is an incidental
consideration to the acquisition of a business enterprise conducted on the
premises (e.g., retail centers, hotels and industrial properties), the description of
the project is customarily expanded by naming specific items of importance or
attaching inventories of those items. In farm or ranch sales and sales of other
properties where improvements are moveable (e.g., skid mounted buildings,
fences, irrigation systems) it is many times important to itemize the personal
property which is included. You should not forget that the description of the
property purchased is directly related to the sale price.
13.3 Purchase Price. The statement of a purchase price sometimes presents
more difficulty than one might expect. It is not uncommon for businessmen to
deal on the basis of an "equity" price. Where possible, we will convert the equity
price to a gross sale price and subdivide the terms of payment into an amount for
earnest money, cash payable on closing in addition to the earnest money and the
financed balance.
13.3.1 Earnest Money. The earnest money amount represents a good
faith deposit by the buyer which is refundable if the contract terms are not
met by the seller, forfeited as liquidated damages (if the contract so
provides and the law so permits) on default by the buyer or applied in
partial payment of the purchase price if the sale closes. There are a
number of considerations in drafting the earnest money provisions,
including: (a) the amount to be required; (b) the party to serve as the
depository; (c) whether interest will accrue on the deposit and, if so, who
receives the interest earned; and (d) the form of the deposit. The amount
of the deposit varies significantly with the size of the transaction, the type
of property, the period of time which will elapse between contract
execution and closing, the relative negotiating strength of the parties, the
likelihood of default, the enforceability of liquidated damage clauses in
the jurisdiction and how earnest the parties might be. It is obviously to the
advantage of the buyer to make the deposit as low as possible while the
seller desires as much deposit as possible. (One warning should be made
at this point--most preprinted form sale and listing contracts furnished by
realtors provide that one-half of the earnest money deposit will be paid to
the realtor on forfeiture--a separate brokerage agreement should deal with
the realtor's treatment in the event of forfeiture.) As a rule of thumb, the
amount of earnest money should, as a minimum, be an amount sufficient
to compensate the seller for the expenses and lost opportunity (but not
necessarily lost profit) if the sale does not close; the maximum will be
determined by the law of the jurisdiction, the buyer's eagerness to make
the acquisition and whether or not the earnest money deposit will be used
as a basis for liquidated damages. With respect to the choice of a
_______________________________________
Modern Real Estate Transactions, July 2006
- 46-
depository, the first effort will probably be made by the realtor in an
attempt to control the sale and protect the realtor's participation in the
event of forfeiture. If that effort is successfully resisted, the earnest
money might be paid directly to the seller or to a bank or trust company
under appropriate escrow instructions. The choice of a depository
depends on the amount of money, the financial worth and reputation of the
depository and the ease of retrieving the deposit. The form of the escrow
deposit might be cash, securities or a letter of credit, and the attorney
representing the seller should seriously consider the collection difficulties
which might be involved in realizing the value of any deposit other than
cash. When considering the nature of the earnest money deposit, and
whether all or some portion thereof will be retained by the seller if the sale
does not close, you should take into account any statutory or common law
vendee's lien which will preclude the seller from subsequently marketing
the project until title is cleared.
13.3.2 Down Payment. The down payment is customarily made in
certified or collected funds at closing. In highly leveraged transactions,
the seller should estimate the expenses and prorations payable by the seller
to be certain that the seller will not be required to deposit cash in order to
close. Depending on the anniversary date and treatment of prepaid
insurance premiums and the allocation of other expenses, the prorations
will ordinarily result in a credit to the buyer arising from accrued ad
valorem taxes, prepaid rent and tenant security deposits. Most closing
agents will deduct those items from the seller's down payment thereby
reducing the amount of cash received by the seller. It is equally
appropriate (if you represent the seller) to apply the net prorations in
reduction of the amount to be financed leaving the down payment as a
fixed amount.
13.3.3 Financed Amount. The financed portion of the sale price might
involve the buyer's assumption or acceptance of the project subject to
existing financing or involve an extension of purchase money financing by
the seller to the buyer.
13.4 Title. Commercial transactions almost always involve title insurance
because title policies have been required by lenders involved in the project.
Notwithstanding that fact, it is common in some jurisdictions to see preprinted
sale agreement forms calling for title opinions based on examination of an
abstract of title. There are a number of matters relating to title which should be
dealt with in the sale agreement.
13.4.1 Title Exceptions. The usual treatment of title exceptions in
preprinted sale agreement forms goes to one of two extremes: (a) the
_______________________________________
Modern Real Estate Transactions, July 2006
- 47-
buyer requires marketable fee simple title; or (b) the seller offers to
convey title subject to encumbrances, rights-of-way, easements,
restrictions and mineral interests previously reserved or conveyed of
record. Both approaches arise primarily from a lack of investigation and
result in an unreasonable allocation of risk which does not ordinarily
reflect the intention of the parties. Every effort should be made to make a
cursory title examination, obtain copies of and review the instruments
creating the title exceptions and describe those exceptions in the sale
agreement to the extent the exceptions are known.
13.4.2 Cost. The customs relating to payment of title insurance premiums
vary with the locality. Notwithstanding the applicable custom, the sale
agreement should specify the party responsible for the payment of the
costs associated with obtaining the title assurance which is contemplated.
13.4.3 Title Examiner. In some jurisdictions the buyer's attorney
examines title and the resulting opinion serves as the basis on which the
title policy is issued; in others, the seller's attorney provides the title
opinion. Our firm usually elects not to perform the title examination on
behalf of the seller because of the conflict of interest which we feel arises
from the representation of the title insurer (and, indirectly, the buyer). If
we represent the buyer in the transaction we request that the title insurer
obtain separate counsel to avoid the conflict of interest which will arise if
a demand is made by our client based on a claim under the title policy.
Our firm will represent the buyer or the seller in satisfying the
requirements of the title insurer, but we ordinarily want the title insurer to
be represented by independent counsel.
13.4.4 Curative Work. Where a title defect exists, there are a number of
considerations which should be covered by the sale agreement. The
contract need not necessarily require that all defects be cured by the seller
regardless of cost and may allow a termination of the agreement at the
option of either party on discovery of defects. The contract can also
provide that defects will be cured by the buyer either at the buyer's
expense or permit recoupment by an offset to the sale price. Provision for
extensions of time, escrow arrangements and title insurer indemnification
should be considered where title defects are anticipated.
13.5 Closing. The mechanics of consummating the sale should be dealt with by
the sale agreement. Those mechanics can involve substantive issues and the
payment of significant amounts of money. The important items to be considered
in this section of the sale agreement include: (a) the transfer of the risk of loss;
(b) the forms of conveyance and financing documents; (c) the warranties of title;
(d) informational items to be supplied by the seller; (e) required times and places
_______________________________________
Modern Real Estate Transactions, July 2006
- 48-
for performance; and (f) allocation of closing costs.
13.5.1 Closing Documents. The attachment of significant document
forms as schedules to the sale agreement avoids the problems created by
agreements to agree and avoids protracted negotiation at the closing table.
We will customarily briefly describe the documents to be delivered by the
parties at closing and incorporate attached document forms by reference.
Simultaneously with the preparation of the sale agreement, we will draft a
closing checklist which serves as a progress chart and listing of job
assignments culminating in the completion of the transaction.
13.5.2 Closing Date. The selection of a closing date is one of the basic
business determinations made by the buyer and the seller and purports to
establish the final date on which the transaction will be performed or fail.
That result involves more than merely selecting a date for performance
and requires: (a) consideration of the law of the jurisdiction to determine
whether times for performance will be strictly enforced in the absence of
an express contract provision; (b) a determination as to whether the seller
will be able to render timely performance of the seller's obligations under
the agreement (e.g., delivery of title information, surveys, rent rolls,
mortgage releases, estoppel certificates, etc.); and (c) what the default
provisions of the agreement will provide with respect to notice of and
opportunities to cure a failure by either party to perform. If an ambitious
closing date is negotiated by the buyer, it is often prudent to provide for
extensions or adjournments on a preapproved basis with the buyer having
the right to buy more time by increasing the amount of the earnest money
deposit or paying a nonrefundable extension fee.
13.6 Project Condition. One of the most negotiated provisions of the sale
agreement deals with the physical condition of the project. The appropriateness
of representations and warranties varies from project to project based on the
nature of the project, the price and other terms of sale, the identity of the seller or
the buyer and the relative bargaining positions of the parties. Although
representations and warranties are generally commingled in their drafting by
attorneys and in their interpretation by the courts, there is a basic theoretical
difference--the breach of a representation serves as a basis to avoid closing or
rescind the completed transaction and the breach of a warranty serves as the basis
for an action to recover damages sustained by the buyer. Putting aside the legal
niceties (as the courts usually have) the representations and warranties with
respect to the condition of the project generally reduce themselves to two primary
considerations: (a) whether the contract provisions survive the closing of the sale
(and, if so, for how long); and (b) the nature of the buyer's remedy if a material
breach of the contract provisions occur. If the buyer is using the representations
and warranties as a contractual fishing license to avoid closing and obtain a
_______________________________________
Modern Real Estate Transactions, July 2006
- 49-
refund of any earnest money deposit based on a material misrepresentation, the
representations are probably appropriate. Under those circumstances, the seller's
attorney should require that the representations be merged at closing, strike all
references to warranties and negotiate some definition of materiality. If the buyer
is using the representations and warranties as a form of guarantee of performance,
the seller should be (and many times is) compensated for the continuing financial
undertaking and risk of future litigation. Under those circumstances, the seller's
attorney should negotiate for a shortening of the statutory limitation period (with
an appreciation that any action subsequently brought by the buyer might be
grounded on fraud) and negotiate materiality. A final consideration with respect
to the representations and warranties relates to their effective date. Most contracts
provide that the representations and warranties are effective on the date of
contract execution and the closing date, meaning that the seller retains the risk of
changed circumstances during the gap between contract execution and closing
although the gap is usually negotiated for the buyer's benefit. That retained risk
can be particularly problematical where changes in occupancy, zoning laws,
environmental requirements or building codes occur during the gap. From a
documentary standpoint, the approaches taken by the parties and their attorneys
can be classified in three broad categories:
13.6.1 "AS IS" Sale. Under this approach, the seller makes no warranties
as to the project's condition and, in extreme cases, makes no warranties of
title. The buyer is left wholly to the buyer's own devices to determine the
existence, ownership and condition of the property being purchased. This
approach might be successful with an unsophisticated or poorly
represented buyer or an insolvent seller, but usually leads to a protracted
period of negotiation and inspection before contract execution.
13.6.2 Full Warranty Sale.
This approach sets forth various
representations and warranties by the seller which seek to assure the buyer
that the buyer's judgment is correct and that the buyer will not experience
any problem in the ownership of the project. Presumably, the buyer's
remedies before closing are either: (a) to refuse to close the purchase,
obtain a refund of any earnest money deposit and sue for damages
resulting from the fraud perpetrated by the seller's attempt to hoodwink the
buyer; (b) to demand specific performance, tender the purchase price and
require the seller to make the representations and warranties true; or (c) to
renegotiate the purchase price based on the reduced value of the
misrepresented merchandise. In our experience the buyer usually elects
option (c) with threats of exercising options (a) and (b). Assuming that the
seller permits the representations and warranties to survive closing, the
buyer can (at least theoretically) rescind the transaction based on the
misrepresentations or seek damages incurred by failure of the warranties.
In either of the foregoing events, the seller is at a decided disadvantage
_______________________________________
Modern Real Estate Transactions, July 2006
- 50-
because the project has not really been sold--merely transferred to a new
owner with substantial conditions subsequent outstanding.
13.6.3 Inspection Sale. Assuming knowledgeable and well represented
parties, the best approach (in our opinion) is for the seller to provide time
for an expeditious investigation of the project by the buyer and to make
the buyer's obligation to close under the sale agreement contingent on that
inspection. After the buyer's inspection and disclosure by the seller of
such information as the buyer requests, the buyer agrees to accept
possession of the project at closing in an "AS IS" condition. Under those
circumstances, the terms of the sale can be fully negotiated with the buyer
being afforded a fail-safe opportunity to avoid purchasing misrepresented
or misunderstood merchandise. The payment of substantial earnest money
can be deferred until the contingencies have been resolved to the buyer's
satisfaction. From the seller's standpoint, the terms of the sale are clear
from the inception, any renegotiation of price occurs long before the
parties reach the closing table and the transaction is completed without the
seller's incurring continuing liability for claimed misrepresentation or
breaches of warranties.
13.7 Prorations. Although there are certain customs dealing with prorated
items, those customs vary in different parts of the country and can be significantly
altered by the facts or the parties' agreement. The sale agreement should deal
with the most important items and establish the rationale for dealing with the
balance.
13.7.1 Receipts. The most important item of income is usually rent.
Although rent is customarily payable monthly in advance, some items
(e.g., percentage rent and amounts payable under tax, insurance, utility
and common area maintenance arrangements) are payable in arrears or
prepaid on an estimated basis (to the extent such charges are over
estimated, there will be an accrued liability owing to the tenants or an
offset against future cash flow of the project). Some leases will provide
for annual advance rental payments (e.g., concession arrangements). The
leases pertaining to the project must be examined and a review of the
income statements of the project for past operations will aid in identifying
sources of income and times of payment. Accrued nonrecurring receipts
should be specifically identified and dealt with (e.g., sale proceeds,
insurance settlements, condemnation awards, promotional allowances,
payments for tenant improvements, tenant termination payments, etc.). To
the extent that there exist substantial arrearages in tenant rents or other
recurring accounts receivable relating to the project, the sale agreement
should define the treatment of post closing collections as between the
buyer and the seller. In retail developments where percentage rents
_______________________________________
Modern Real Estate Transactions, July 2006
- 51-
constitute a major portion of the annual income stream and sales are
seasonal (e.g., Christmas, Easter and special events) the use of a daily or
monthly proration formula is not necessarily appropriate.
13.7.2 Disbursements. The disbursements of the project and the
management policies pending closing should be discussed by the parties
and documented to the extent deemed necessary. The description of the
property purchased should include inventory on hand and the allocation of
payables can be based on the date the expense was incurred or the date the
services or merchandise were received (e.g., who pays for ten cases of
light bulbs ordered by the project manager one week before closing and
delivered to the project one week after closing). The practicalities of a
change in management and the financial position and reputation of the
parties will sometimes require special treatment. As a rule of thumb, the
party receiving the income should be charged with the expenses incurred
in generating that income. The application of that rule is difficult where
annualized income fluctuates with seasonal receipts. We generally notify
trade creditors of any change in ownership of the project where we
represent the seller and request a listing of trade creditors where we
represent the buyer.
13.7.3 Deposits. The existence of deposits can create an asset (as in the
case of utility service deposits) or a liability (as in the case of tenant
security deposits). In either event, the sale agreement should deal with the
disposition of deposits and the treatment of and notice requirements
relating to tenant security deposits under local law should be reviewed.
13.7.4 Employees. Employees tend to be transferred as employees of the
project and not retained by the prior owner. Accordingly, where
employees are to remain with the project under new ownership, the buyer
should be careful to prorate all costs of employment (e.g., accrued
vacation, sick leave, fringe benefits, bonus compensation, pension and
profit sharing plan liabilities, etc.) and understand the terms of
employment. The seller should carefully determine the method of
terminating the seller's obligations to the project's employees and the
continuing liability which can be incurred (e.g., unemployment
compensation, workers' compensation, withholding tax, pension and profit
sharing plan liabilities, etc.). The terms of all union or collective
bargaining agreements should be reviewed prior to the execution of the
sale agreement or included as a contingency to avoid closing if the terms
are unacceptable to the buyer.
13.7.5 Insurance. Unless the project is part of a blanket multi-property
coverage, the seller ordinarily desires that the existing insurance policies
_______________________________________
Modern Real Estate Transactions, July 2006
- 52-
be transferred with the project resulting in the full reimbursement of any
prepaid premiums. Otherwise, the seller will receive only a partial
reimbursement according to the applicable short rate schedule. The
transfer of the existing policies might work to the benefit of the buyer
where there has been a general rate increase or the discontinuation of
certain coverages since the date of policy issuance or the buyer might
prefer to obtain different coverage or coverage under existing blanket
policies at reduced rates. In any event, the buyer should check the amount
and types of insurance coverage required by existing or proposed purchase
money loan documents and compare the purchase price against the
amounts and coinsurance provisions of the policies to determine whether
additional insurance is required. In addition, if the agreement or
applicable law imposes any risk of loss or any obligation or option to close
the sale after a casualty loss has occurred, the buyer should request a
"pending sale" endorsement naming the buyer as an additional insured
after the purchase agreement has been executed. The proration of
insurance premiums and real estate taxes must take into account the
deposits made by the seller in any impound accounts required by mortgage
documents (don't be surprised if the lender has overcollected,
undercollected or waived the requirement). Finally, the parties should be
substituted as named insureds and loss payees commensurate with their
interests at closing.
13.7.6 Taxes. In most jurisdictions ad valorem taxes are assessed
annually and the assessed valuation and tax rate varies from year to year.
Real property taxes can be comprised of a single or multiple assessments
and the attorney drafting the sale agreement must be familiar with the
local tax structure. Where taxes are payable in arrears, the proration
establishes an estimated amount owing by the seller to the buyer and, in
major transactions, escrow deposits might be required pending
determination of exact amounts. Special assessments can be imposed at
any time by the taxing authorities to defer the cost of capital
improvements or arise from the creation of a new taxing authority. It is
possible to purchase a project without notice of the pendency of a special
assessment and find that the nice new street abutting the project was
installed at the buyer's expense without record notice of the pending
special assessment. Special assessments are generally payable in a lump
sum at the time of the assessment but are customarily amortized over a
term of years. In some jurisdictions no discount is obtained on
prepayment of special assessments. As in the case with insurance
premiums, the amount deposited in lender impound accounts should be
taken into account in computing prorations.
_______________________________________
Modern Real Estate Transactions, July 2006
- 53-
13.8 Operations Pending Closing. The enthusiasm of a seller to vigorously
manage a project after signing a sale agreement understandably wanes. The sale
agreement should impose reasonable standards of operation on the seller and
prohibit any dissipation of the assets to be purchased. The importance of the
future operations clause varies with the length of the gap between execution of the
sale agreement and the closing date. If repairs or additional construction are to be
performed by the seller in advance of closing, the work should be described in
detail in the sale agreement and appropriate remedies provided to the buyer if the
repairs are not expeditiously made (e.g., reduction of the purchase price, escrow
accounts, extended closing dates, etc.). If leasing activity is contemplated during
the gap, it is appropriate that the sale agreement establish the seller's negotiating
parameters and any approval rights which the buyer might legitimately exercise.
In any event, the seller's activity during the pendency of closing should be
measured against the representations and warranties contained in the sale
agreement.
13.9 Casualty Loss. Notwithstanding the Uniform Vendor and Purchaser Risk
Act, an uninsured casualty loss or condemnation on the eve of closing can still be
a harrowing experience. Our usual approach is to place the risk of minor loss on
the buyer and afford the buyer the insurance proceeds for the purpose of repair
with a credit against the sale price for any deductible amount. The risk of
substantial loss is borne by both parties with each having the option to terminate
the sale where the damage materially affects the project. We prefer to
differentiate between minor loss and substantial loss based on the dollar amount
of the damage rather than the time required for restoration. We would include a
condemnation clause only where there exists a true risk of taking (e.g., street
widening, urban renewal, etc.) or where the closing is delayed for a significant
period of time after contract execution.
13.10 Default and Remedies. Many sale agreements which we review have no
provisions dealing with default or remedies. We are never certain whether the
law in this area is well developed as a result of sloppy draftsmanship or
draftsmanship is sloppy because the law is well developed. In either event, our
clients want to know what will happen if the sale fails and, over the years (and as
a result of litigating contracts we have drawn), we have inherited a bit of their
curiosity. Our contracts will virtually always contain provisions dealing with
default and seeking to define remedies. Whether we represent the seller or the
buyer, we always want formal written notice of default with some time to cure
(instantaneous telephoned ultimatums don't work because you are prone to
receive so many in this line of work). A review of the myriad judicial decisions
in the area indicates that the buyer's remedies for a seller's default are: (a)
termination of the buyer's obligation to purchase; (b) return of any earnest money
deposit; (c) recovery of damages measured by the lost bargain, out-of-pocket
expenses or liquidated damages (if the sale agreement and the law so permit); (d)
_______________________________________
Modern Real Estate Transactions, July 2006
- 54-
specific performance; (e) rescission of the contract or completed sale; (f)
reformation of the contract; or (g) any one or more of the above. Assuming the
application of the doctrine of mutuality of remedies, the seller has the same
remedies in the event of the buyer's default.
13.10.1 Liquidated Damages. To avoid the difficulties attendant to
litigation, most attorneys and their clients have seized on the earnest
money deposit as a device to assure performance by the buyer or provide a
"walk away" option to the seller by incorporating liquidated damage
provisions in the sale agreement. Unfortunately, this device has proved to
be generally unreliable as an expeditious means for resolving disputes.
13.10.2 Inadequacy. The range of remedies available to the parties
lends an uncertainty which is unacceptable in a commercial undertaking.
The seller can be certain that litigation will preclude a subsequent sale of
the project; the buyer can be certain that litigation will increase the cost of
acquisition, foster mismanagement and rearrange the timetable for the
intended use of the project. Litigation is usually bad news for both sides
and is almost always produced by a poorly investigated and documented
sale. Our objective is to seek equitable business solutions by agreement in
advance of controversy. Sometimes it works.
13.11 Order of Execution. The mechanics of executing sale agreements
sometimes becomes cumbersome. Customarily the contract is submitted by a
buyer through a broker in executed form for acceptance by the seller with an
earnest money check attached. If the form is unacceptable, the attorney for the
seller redrafts the sale agreement, rejects the executed document which has been
presented and provides an unexecuted but acceptable form back to the broker for
execution by the buyer. As an alternative, the seller might return an executed sale
agreement to the buyer for execution and return with a replacement earnest money
check. Regardless of the mechanics which are chosen, it is important that some
expiration date be placed on the offer which is embodied in an executed sale
agreement. We would not customarily retain a buyer's earnest money check if the
sale agreement tendered to us by the buyer or the buyer's broker is unacceptable.
13.12 Assignment. Where we represent a seller we assume that the buyer's rights
under the sale agreement are assignable unless assignment is specifically
prohibited. Where purchase money financing is to be accorded by a seller, the
identity of the buyer, the buyer's general reputation, financial strength and
management ability will form an important part of the consideration for the sale.
Where we represent a buyer, it is not unusual that the buyer is acting in a nominee
capacity or that the equity funds required to close the purchase will be dependent
on the syndication of the project or its transfer to a fictitious entity. In either
event, the assignability of the contract rights of the buyer (and in some cases, the
_______________________________________
Modern Real Estate Transactions, July 2006
- 55-
seller) should be a matter which is discussed by the parties and dealt with by the
sale agreement. The issue of assignment becomes of great significance if a like
kind exchange is contemplated by the parties.
13.13 Amendment. It is not uncommon for the buyer and the seller to conduct a
continuing discourse between the time that the sale agreement is executed and the
closing date. During this period the parties are actively engaged in the
performance of the agreement and the boilerplate provisions dealing with the
formalities attendant to an amendment of the written contract and the integration
of agreements become important. To the extent that modifications to the existing
sale agreement are approved and separate agreements are reached, they should be
incorporated into a formal amendment to the sale agreement rather than relying on
exceptions to the Statute of Frauds or the Parol Evidence Rule.
13.14 Ancillary Documents. Apart from the tax returns, liquor and other
licensing requirements, Hart-Scott-Rodino Act filings, bulk sales compliance and
other specialized documents which a given sale transaction might require, the
closing of a commercial transaction breeds ancillary documents to the extent that
the seller's attorney permits it to do so. Many buyers' attorneys seem to take great
pleasure in drafting a separate bill of sale or assignment for each item of tangible
property or contract right which is being assigned thereby producing an
impressive but redundant array of closing documents. Our approach is to keep the
number of closing documents to a minimum. While it is not possible to list all of
the "side letters" and certificates which might be generated to govern special
instances, there are a number of documents which are common.
13.14.1 Deeds. The forms of deed which are used is dependent on the
laws of the jurisdiction and the agreement of the parties, but generally
consist of a general warranty deed, a special or limited warranty deed or a
quitclaim deed. Until recent years, the most accepted practice was the use
of general warranty deeds and that point was rarely negotiated in
commercial contracts. With increased efforts by all parties to limit or
exculpate their liability for future performance, the special warranty deed
has become more commonplace. The deed becomes more than a simple
instrument of conveyance where provisions are inserted dealing with the
assumption or refusal to assume liability for payment of indebtedness to
which the project is subject. Where an assumption of indebtedness is
involved we would customarily include a provision in the deed form. One
such insertion dealing with a limited assumption reads as follows:
"It is specifically understood that the Grantee has accepted title to
the above described property subject to certain mortgage liens
described at Schedule "___" attached as a part hereof and the
Grantee has not assumed or agreed to pay the indebtedness thereby
_______________________________________
Modern Real Estate Transactions, July 2006
- 56-
secured and will have no personal liability for payment of such
indebtedness or for performance of the covenants contained in the
instruments creating or securing payment of such indebtedness."
Where the assumption of liability has been required by a mortgage lender,
the lender will customarily require the execution of a separate assumption
agreement and we would request a formal release of the liability of the
seller by the lender. In most jurisdictions a conveyance is required to have
revenue stamps affixed or transfer taxes paid. In transactions involving
substantial amounts of money, the structuring of the conveyances should
be undertaken with an appreciation of the transfer tax liability which will
be incurred by the parties.
13.14.2 Bills of Sale. The bill of sale is ordinarily a warranty or
quitclaim form. The bill of sale might also disclaim warranties with
respect to the condition of the property and attach a detailed inventory of
the personal property which is being transferred. We would customarily
integrate a bill of sale with an assignment of contract rights. It is not
uncommon for separate bills of sale or assignments to be used for specific
assets, particularly in those instances where a consent to the transfer is
required by some third party.
13.14.3 Price Allocation. The allocation of the purchase price being
paid becomes important for the purpose of sales or transfer tax
determination and allocation of the buyer's purchase price among the land,
personal property and improvements comprising the project to establish a
cost basis for depreciation. Where the sale agreement provides that the
buyer will pay all sales and transfer taxes, the seller is not particularly
interested in entering into an allocation of the purchase price among the
items of property being purchased--the seller's allocation will become a
matter discussed among the seller, the seller's accountant and the Internal
Revenue Service in the absence of a special allocation. From the buyer's
standpoint, the allocation of purchase price becomes important if a
substantial amount of the purchase price can be allocated to depreciable
assets. Where a reasonable allocation is made by the parties to a sale, that
allocation will ordinarily be very persuasive on the local taxing authorities
and the Internal Revenue Service to establish values for reporting sales
and transfer taxes and justifying the buyer's depreciation schedule.
13.14.4 Certified Information.
A change in management of a
commercial project invariably involves the continued performance of
contractual obligations of the seller or owing to the seller by third parties.
In order to perform those obligations, it is essential that the buyer obtain
copies of the leases, service contracts, insurance policies, tenant rosters
_______________________________________
Modern Real Estate Transactions, July 2006
- 57-
and other items which are an integral part of continuing the business of the
project. For that reason, we customarily prepare a master certificate
covering the items of important information which have been discovered
as a result of the buyer's inspection of the project and that certificate is
reviewed by the seller, signed at closing and generally results in a smooth
transition of the management of the project. As counsel to the seller we
will generally require some type of assumption of the contractual
obligations by the buyer with an indemnification from liability for postclosing performance or a release by the contract obligee of the seller's
liability.
13.14.5 Certificates of Authority. Where we are dealing with fictitious
entities, we will customarily require the execution of certificates of
corporate, partnership, manager or trust authority, as appropriate.
Depending on the nature of the project, the size of the transaction and the
possibility for unauthorized action, we will require delivery of certificates
of good standing, partnership certificates, opinions of counsel and other
advisory items which will enable us to satisfy ourselves as to the authority
of the seller to convey the project and the authority of the buyer to
execute, deliver and perform the sale agreement and any financing
documents which are associated with closing.
13.14.6 Closing Memoranda. After the execution of a sale agreement,
our office will customarily prepare a closing checklist using a basic form
which is set forth at Addendum P. That checklist ultimately matures into a
closing memorandum summarizing the items to be delivered by the
various parties as a result of the closing of the sale. If the checklist is
used, the preparation of the closing memorandum becomes a simple
matter and the memorandum serves as an agenda for the closing to be
held. If funds are to be disbursed by a closing agent, we customarily
request a copy of the closing statements for both the buyer and the seller in
advance of the closing date so that we can verify the amounts to be
disbursed prior to reaching the closing table. Our form closing
memorandum contains an estoppel by which the parties acknowledge
receipt of the described items and discharge each other from further
performance under the sale agreement except for those provisions which
specifically survive closing. The execution and delivery of the closing
memorandum serves as the final act merging the obligations of the parties
to the sale agreement into the performed sale. A form of closing
memorandum adapted to our hypothetical sale appears at Addendum Q.
13.14.7 Notice Letters. We ordinarily suggest that the seller of a
project serve notice to each supplier and contract creditor of the project of
the change of ownership. Most commercial projects involve security
_______________________________________
Modern Real Estate Transactions, July 2006
- 58-
deposits held by the municipality, utility companies and major suppliers
serving the project. It is important that continuing guaranties of payment
be terminated by the seller and that security deposits be retrieved unless
those deposits were sold as a part of the transaction.
13.15 Escrow Instructions. We have found that escrow agreements or escrow
instructions are among the most difficult documents to draft as an attorney for any
of the parties to the escrow arrangement. Most banks and trust companies have
preprinted documentary forms which contain the provisions demanded by the
escrow agent to absolve the escrow agent from liability. Given the nominal
escrow fees which are charged, those exculpatory clauses are for the most part
reasonable. The difficulty in draftsmanship comes from the detailed instructions
which must be given in order to render the instructions unambiguous and easily
interpreted in the event of a dispute between the parties. While it is not difficult
to verbally explain the actions which the escrow agent is to perform, it somehow
becomes much more complicated when reduced to writing. Both parties to any
escrow arrangement should be aware that the escrow agent will customarily
reserve the right to do nothing in the event of a dispute between the parties.
Under those circumstances, it will be necessary for the parties (and the escrow
agent will probably be empowered with an express contractual provision) to apply
to a court of appropriate jurisdiction for relief. In that eventuality, the very
creation of the escrow can precipitate the litigation which the parties sought to
avoid by establishing the escrow in the first instance. All too often escrow
arrangements are used to avoid making difficult decisions or to excuse untimely
performance and are based on instructions which are hurriedly drawn and poorly
conceived. The form of escrow agreement set forth at Addendum R deals with an
escrow deposit of earnest money under a sale agreement.
13.16 Variations. The sale agreement is merely a tool that the attorney uses in
modern real estate transactions; under more complicated structuring, the sale
agreement becomes a preliminary document which ties the transaction together. It
is not unusual for the sale agreement to be executed and delivered simultaneously
with the closing of more complicated transactions. We might briefly consider a
number of structuring variations which involve sale agreements.
13.16.1 Sale-Leaseback. Under the sale-leaseback transaction the
owner sells all or some portion (e.g., the underlying land) of a project to
an investor and simultaneously leases back the project or the portion
thereof which has been sold under the terms of a long term lease. The
sale-leaseback might be only one of a number of financial arrangements
which are made simultaneously and some investors will couple a saleleaseback of the project with a mortgage loan covering the resulting
leasehold estate and overlay a joint venture participation in ownership of
the entity holding the project. The use of the sale-leaseback enables the
_______________________________________
Modern Real Estate Transactions, July 2006
- 59-
investor to avoid restrictions on loan amounts measured by a percentage of
appraised value, converts a nondepreciable land investment to deductible
rent and, in theory, simplifies the procedure for terminating the occupancy
of the ownerlessee. In a sale-leaseback transaction the sale agreement
becomes the master document which integrates the creation of the various
estates and ownership interests which are to be held by the parties.
13.16.2 Option; Operating Lease. Where the sale closing is to be
postponed for a period of time, but the buyer takes possession of the
project, the sale agreement might take the form of an option coupled with
an operating lease in anticipation of a deferred closing date. The same
format might also be used in a situation where a seller is willing to be
relieved of the management of a troubled project and grants an option to
purchase the project as an inducement to the operatortenant. The terms of
the option to purchase should be no less extensive than the terms of a sale
agreement and where an option provides that the parties will enter into a
definitive sale agreement, the enforceability of the exercised option to
purchase is only as good as the attorney's persuasive ability in the court
having jurisdiction.
13.16.3 Sale; Installment Sale Back. This structuring contemplates an
absolute sale of a commercial project (usually large tracts of raw land)
with options to repurchase granted by the buyer to the seller. When
properly structured, this format can avoid the necessity for judicial
foreclosure by the investor inventorying land on behalf of a developer.
When improperly structured, the sale will be held to be a lending
transaction and the deed will be nothing more than a mortgage requiring
foreclosure. Under those circumstances, the holder of the deed-mortgage
does not have the benefit of the protective mortgage covenants which
would have been included if a mortgage loan had been documented. The
absence or existence of those protective covenants is determined by the
terms of the sale agreement.
13.16.4 Sandwich Sale; Flips. When we think about the sale of a
project, we customarily identify the property as an integrated unit. It is
not uncommon for the sale to constitute the conveyance of air rights which
will result in a sandwich development of multiple projects on a given site.
It is also possible to create multiple pyramiding sales of a single project
("flips") where the sale agreement permits assignment or where closings
are simultaneously scheduled with multiple sequential buyers.
_______________________________________
Modern Real Estate Transactions, July 2006
- 60-
13.16.5 Variable Price. While most sale agreements contemplate a
fixed purchase price, it is entirely possible for the price to increase or
decrease depending on a number of factors, including: the time when the
property is purchased; the use to which the property will be devoted; the
success or failure of zoning; the extension of purchase money credit; the
rate of inflation; and many other factors. The sale agreement can provide
for nonrefundable extension payments which increase the purchase price.
In any transaction, the variations in purchase price are limited only by the
client's imagination and the attorney's draftsmanship.
13.16.6 Multiple Projects. The sale agreement need not be limited to
the purchase of a single project. The sale of multiple projects can be
documented by a single sale agreement containing allocations of price to
each project with separate schedules containing the legal description, title
exceptions, financing and other items relating to each project. The
transaction can likewise be accomplished with multiple sale agreements
containing provisions making the closing of all or a specified minimum
number of sales a condition precedent to the closing of any one sale.
Special closing chronologies might be specified so that the acquisitions
can occur sequentially or simultaneously. Allocations of price can
become hotly negotiated items in multiple project sales. Purchase money
financing documents containing cross default or cross collateralization
provisions or blanket descriptions ordinarily require partial release clauses
and prepayment options.
13.17 Reflections. In commercial transactions there is really no such thing as a
standard form sale agreement; however, the attorney should have a standard
approach toward each undertaking. That approach must constitute an organized
and careful analysis of the facts relating to the project, an assessment of the risks
which the client has agreed to assume and an understanding of the rewards which
the client hopes to reap. The attorney's contribution is an acquired ability to
analyze, document and enforce. Contrary to what some attorneys might believe,
very few attorneys make money for a client; the reverse is ordinarily true. It is
more probable that an attorney will lose money for a client by being untimely or
so complicating a factor as to render the transaction uneconomical. The attorney
must make every effort to close the transaction yet be willing to walk away from
the closing table if the client's interest so dictates; the ability to convene a closing
must be coupled with the fortitude to adjourn a closing.
14.
Dealing with Brokers. The purpose of the following discussion is to summarize
general principles of law which are applicable in dealings with brokers of all types;
however, particular attention will be directed to dealings between sellers and brokers in
connection with the sale of projects.
_______________________________________
Modern Real Estate Transactions, July 2006
- 61-
14.1 Controlling the Relationship. No effort has been made to tailor the
discussions to the law of any particular jurisdiction because the law applicable to
brokers is similar in most jurisdictions except where specific statutory enactments
have limited the preferences which brokers generally enjoy as a matter of law.
The avoidance of conflict with the broker is based on an understanding of the
relationship, the preferred status which the broker occupies as a matter of law and
controlling the facts which customarily give rise to conflicts.
14.1.1 Broker Mentality. One of the frustrating aspects of dealing with
brokers is a product of what is sometimes described as the "broker
mentality" (meaning an enthusiastic drive by an allegedly qualified real
estate professional to precipitate the closing of a transaction whether or
not the closing creates unintended risk exposure for the parties involved).
Because the payment of the brokerage commission is usually contingent
on the closing of the sale, the economic interest of the broker is only
served by causing the transaction to close whether or not the transaction
represents an advantageous business arrangement for the party which the
broker represents. In many instances, the broker does not want to be
troubled with the facts which relate to the project and the broker's primary
drive is to precipitate a closing at the earliest possible date so that the
commission will be paid.
14.1.2 Agency Relationship. The legal relationship which exists between
the seller and the broker is one of principal and agent. From that
relationship flow important legal consequences such as the fact that the
broker, when acting within the scope of the agency relationship, is
authorized to bind the principal. In addition, the law generally implies
either a fiduciary or quasi-fiduciary obligation on the broker to act in the
best interest of the principal. The law also implies an obligation of fair
dealing between the principal and the broker so that the principal must
consider the impact which the principal's actions with respect to a pending
sale will have on the ability of the broker to earn a contracted commission.
_______________________________________
Modern Real Estate Transactions, July 2006
- 62-
14.1.3 Project Information. Because the broker acts as agent for the
seller, in each transaction affecting a project it is important that the seller
verify that the information which is provided to the broker is correct.
Although it is common for the seller to attempt to disclaim responsibility
for information which is provided to the broker, that disclaimer has
significant legal limitations where the broker subsequently provides the
information to a prospective buyer, the buyer relies on the information and
the information is subsequently determined to be incorrect. An even
greater risk exists with respect to information which is developed by the
broker without the knowledge or approval of the seller. Brokers are
entrepreneurial ferrets and seem to have the ability to obtain (or
manufacture) information with respect to the project which might or might
not have any relevance to the facts. Because of the principal-agent
relationship, a prospective buyer is authorized to rely on the information
provided to the prospect by the broker and the seller is chargeable with
knowledge of the misstatements of fact whether or not those
misstatements were authorized by the seller. Accordingly, it is important
to establish a working relationship with the broker which in some manner
controls the factual information which is being provided to a prospective
buyer and to include appropriate limitations of representations and
warranties with respect to the project as a part of a definitive contract of
sale signed by the buyer and the seller.
14.2 Overview of the Law. Most of the cases relating to brokerage claims arise
from verbal agreements where no written brokerage contract was executed.
Where no written contract is in existence, the law greatly favors the broker to the
disadvantage of the seller. Dealings between brokers and sellers almost always
give rise to facts on which liability against the seller for payment of a commission
arising from a subsequent sale can be claimed and the only meaningful defense to
such claims is to control the facts by use of written agreements. It is not of a great
deal of help to win a lawsuit instituted by the broker based on a verbal agreement
given the waste of time, energy and money which the litigation produces.
14.2.1 Statute of Frauds. Virtually every jurisdiction has enacted a
revised revision of the Statute of Frauds; however, the application of the
Statute of Frauds is subject to many exceptions, the most notable of which
in the brokerage context is the doctrine of part performance. As a result of
the implication of an enforceable contract based on part performance of an
oral agreement which would otherwise be subject to the Statute of Frauds,
most brokerage litigation proceeds on a quantum meruit claim. In most
jurisdictions, there is no effective requirement that the broker have a
written agreement with the seller before the broker can collect a
commission which is claimed to be owing. The seller who avoids
negotiating and signing a listing agreement is playing a dangerous game.
_______________________________________
Modern Real Estate Transactions, July 2006
- 63-
14.2.2 Seller Liability. The general rule applicable to sellers of real estate
is that where the seller employs a broker, the seller is liable to pay to the
broker a commission when the broker has procured a ready, able and
willing buyer on the terms provided to the broker by the seller, even
though there is no written contract employing the broker and the seller and
the prospective buyer do not enter into a written contract for the sale
which is the subject of the claimed commission. The simple statement by
a seller that "I would be willing to pay you the customary commission for
the sale of X project at a price of X dollars" is probably sufficient to give
rise to an obligation to pay a brokerage commission if the broker appears
with a buyer. That result is probably true even though the party to whom
the statement is made is not a licensed real estate broker.
14.2.3 Determination of Employment. The determination of whether or
not a broker has been employed is always a question of fact which
depends on the circumstances in each particular case; however, that
statement implies that the broker will in most instances have sufficient
facts to commence suit and reach the jury if there is any course of dealing
between the broker and the seller which results in the presentation of an
offer to purchase by a buyer who has been contacted by the broker.
14.2.4 Failure to Close. Although most sellers seem to think that the
brokerage commission is not earned until the seller has collected the sale
price as a result of a closing, that is not the law in a majority of
jurisdictions. That is not to say that the contractual arrangement between
the seller and the broker cannot be made on a basis making the payment of
the commission contingent on the closing of the sale; however, verbal
agreements to that effect are invariably the cause of extensive litigation.
14.2.5 Procuring Cause. In the absence of a written agreement (and under
many fact situations involving written agreements), the broker must
generally show that the sale for which the broker claims a commission was
brought about because of the broker's efforts. Whether the broker can
satisfy that burden of proof is a question of fact for the jury. There is no
requirement that the broker participate in every aspect of negotiations or
that the seller even be aware that the buyer was procured by the broker
which the seller hired. Accordingly, given the fact that discussions occur
between the seller and the broker and the broker and the prospective
buyer, there is usually a sufficient factual basis to reach the jury in any
litigation which is filed by the broker to collect a commission.
14.2.6 Contract Terms. In order to recover on a quantum meruit claim,
the broker must generally prove that the seller and the prospective buyer
had agreed on the "essential terms" of the sale. The fact situations which
_______________________________________
Modern Real Estate Transactions, July 2006
- 64-
customarily surround negotiations dealing with the sale of real property
often give rise to conflicting evidence, but if there is agreement on the
property to be sold, the sale price and the terms of payment, the "essential
terms" are usually present.
14.2.7 Ability to Purchase. The broker has the burden to show that the
prospective buyer was financially able to consummate the sale in order to
recover on a quantum meruit claim; however, most courts have not held
the broker to a high level of proof to avoid shifting the burden of proof to
the seller.
14.2.8 Licensing. All states have some form of licensing requirements for
brokers. Although the failure of a broker to be licensed might be used as a
basis for defense against a quantum meruit claim under some
circumstances, but a number of courts have denied payment of a brokerage
commission only to allow payment of a finder's fee to an unlicensed
intermediary in a real estate sale notwithstanding statutes permitting only
licensed real estate brokers to collect commissions.
14.2.9 Multiple Commissions. It is entirely possible to pay more than one
brokerage commission arising from the sale of a project. Where there is a
dispute as to which broker was the procuring broker and tandem suits are
brought, multiple liability can be found based on the fact that the seller
entered into multiple brokerage agreements which were not mutually
exclusive. In addition, where the seller has employed multiple brokers on
a "ready, willing and able" noncontingent commission basis, the seller will
be liable for the payment of as many commissions as there are prospective
buyers tendered to the seller by the multiple brokers involved.
14.3 Customary Arrangements. In order to understand the terms of a brokerage
agreement, it is helpful to understand the customary contractual arrangements
which are entered into between brokers and sellers. Those contracts fall into three
broad categories which are briefly described as follows:
14.3.1 Net Listings. Under this arrangement, the amount of the
commission is not specified and the seller agrees to pay the broker any
amount received for the sale of the project in excess of the price
established by the seller with the broker. If this format is used, the seller
should understand that a net listing can result in the broker entering into
protracted negotiations to increase the amount of commission although the
seller is willing to accept the price which has been offered. We would not
customarily approach a sale on this basis when representing a seller and,
when representing a buyer faced with such a commission arrangement, we
will require disclosure of the commission agreement as soon as we realize
_______________________________________
Modern Real Estate Transactions, July 2006
- 65-
the situation. At that point, we begin negotiating the amount of the
commission rather than the purchase price to be paid for the project.
14.3.2 Open Listings. Under an open listing arrangement, the seller
reserves the right to enter into listing agreements with multiple brokers
and the broker first finding a buyer earns the commission. While open
listings are not favored by brokers, they are quite frequently used in
commercial transactions.
14.3.3 Exclusive Listing. Under this arrangement a single broker is given
the exclusive right to sell the project and a commission might be owing to
the broker even though the project is sold by the seller directly with no
broker participation or the project is withdrawn from the market without
the consent of the broker. A variation of the exclusive listing is known as
an "exclusive agency" which is an arrangement providing the commission
will be earned by the listing broker even though the broker is not the
procuring broker for the sale. This format is customarily used where a
seller desires that all offers be channeled through a single broker and the
single commission is customarily divided among the participating brokers.
14.4 Written Brokerage Agreements. For the foregoing reasons, we view the
use of written brokerage agreements as being essential in any commercial
transaction. Otherwise, the seller is at the mercy of the jury in most respects and
will be confronted with a significant body of law which has been developed for
the protection of brokers. The only manner in which the seller's liability can be
limited is by reducing the brokerage agreement to writing simultaneously with the
employment of the broker and prior to the submission of proposals to purchase
from prospective buyers which the broker represents.
14.4.1 Negotiable Terms. In commercial transactions, the terms of
employment of the broker are highly negotiable and the amount of the
commission, the terms of payment of the commission, the circumstances
under which the commission will be paid and even the party responsible
for paying the commission can be resolved on a basis which is favorable
to the seller.
Because of the practice of incorporating a brokerage
agreement into residential sale contract forms, it is not unusual for a
broker in a commercial transaction to request that the brokerage agreement
be incorporated as a part of the sale contract. We view that structure as
unnecessarily complicating the agreement between the buyer and the seller
and, in many circumstances, it is totally inappropriate for the sale contract
to specify the terms on which a commission will be paid to the broker.
However, it is important that the sale contract contain a provision
identifying the party required to pay the commission with corresponding
indemnifications against claims which might be asserted by other brokers
_______________________________________
Modern Real Estate Transactions, July 2006
- 66-
as a result of dealings with the buyer or the seller.
14.4.2 Sample Form. Attached as Addendum S is a letter form brokerage
agreement which we have prepared for a seller's use in dealing with
brokers for the sale of multiple projects.
15.
Conclusion. Notwithstanding the length of this publication, there are a great
many subjects which have not been addressed. The purpose of this presentation is to
provide a view of the forest and afford the opportunity to fell an occasional tree.
Hopefully, that purpose has been accomplished; however, there are at least three points
which should be made in closing.
15.1 Complexity. When the "deal books" have been published on a successful
project, the legal complexity of a major real estate project becomes readily
apparent. The developer's counsel is presented with a bound transcript of the
work product and the hours dedicated to nursing the project from infancy to
maturity. In retrospect and in anticipation of the next project to be undertaken
there should be some realization that the defenses against the inherent complexity
are: (a) to take one step at a time; (b) know where you are going; (c) know where
you are at each step; and (d) don't let the deal get lost in the documents.
15.2 Remedies. To represent the developer an attorney has to understand what
happens when tantrums, ultimatums, charm and finesse fail. The dichotomy
between office practitioners and litigators might be commonplace in our
profession, but the developer has no litigation or bankruptcy section to which the
project can be referred when the transaction sours. The ability of the developer to
defend the project under default circumstances is substantial. The developer's
counsel must understand what remedies are available and when they should be
used even though the attorney might choose to employ other counsel to apply
those remedies.
15.3 Unpredictability. The constantly cyclical nature of the real estate market
has in recent years been overlaid with general economic instability in other
market segments and a general deterioration in the strength of financial
institutions. Although real estate development is always responsive to local
markets it is also responsive to broad market changes. Because the developer is
engaged in the most highly leveraged of all businesses (other than banking) where
the time to completion is protracted, it is very difficult to adjust to changes in the
marketplace. Those factors coupled with the risks which the business has always
entailed make the success of a project more unpredictable than ever. Listen
carefully to the bankruptcy discussions.
_______________________________________
Modern Real Estate Transactions, July 2006
- 67-
OPTION AGREEMENT
THIS AGREEMENT is made effective the ____ day of __________, 199_
(the "Effective Date"), between LIQUIDATION BANK, N.A., a national banking
association (the "Seller"), and HOMESTEAD DEVELOPMENT COMPANY, L.L.C., an
Oklahoma limited liability company (the "Buyer").
WITNESSETH:
1.
Option Agreement. In consideration of the sum of Ten Dollars ($10.00) and other
good and valuable consideration paid by the Buyer to the Seller, the receipt and
sufficiency of which are hereby acknowledged by the Seller, the Seller hereby grants to
the Buyer the exclusive and irrevocable option to purchase all of the Seller's right, title
and interest in the following described property (hereafter collectively called the "Lots"
and separately called a "Lot"):
1.1
Land. All of the following described land situated in Oklahoma County,
Oklahoma:
All of Lots 1 through 20, both inclusive, in Section 1, Twin
Acres Addition to the City of Oklahoma City, according to
the recorded plat thereof;
and
All of Lots 1 through 10, both inclusive, in Section 2, Twin
Acres Addition to the City of Oklahoma City, according to
the recorded plat thereof;
together with all easements, rights of way, licenses, privileges,
hereditaments and appurtenances, if any, inuring to the benefit of such
land, including, without implied limitation, all abutter's rights and title to
all land underlying roadways adjacent to such land;
1.2
Improvements. All improvements and fixtures situated on the above
described land, if any; and
_______________________________________
Modern Real Estate Transactions, July 2006
- 68-
1.3
Intangible Personal Property. All intangible personal property owned by
the Seller and used in the ownership, operation and maintenance of the
aforesaid land and improvements, including, without implied limitation,
all contract rights, instruments, documents of title, general intangibles,
transferable licenses and goodwill pertaining to the ownership, operation
and management of the aforesaid land and improvements, if any.
2.
Term of Option. The option hereby granted may be exercised by the Buyer in full
or in part at any time on or before two (2) years after the Effective Date (the "Expiration
Date"). To the extent the option to purchase all of the Lots has not been fully exercised
prior to the Expiration Date, all of the rights of the Buyer under this Agreement will
expire and this Agreement will terminate at 12:00 midnight Oklahoma City time on the
Expiration Date.
3.
Exercise of Option. The option hereby granted may be exercised by written notice
delivered by the Buyer to the Seller at the address stated in paragraph 14.2 of this
Agreement.
4.
Purchase Price. Subject to the adjustments and prorations hereafter described, the
purchase price to be paid by the Buyer to the Seller for the purchase of the Lots is as
follows:
4.1
4.2
Lots in Section 1. The Buyer agrees to pay to the Seller the sum of Thirty
Thousand Dollars ($30,000.00) for each Lot in Twin Acres Addition,
Section 1. The purchase price for each such Lot will be paid to the Seller
on the Closing Date (as hereafter defined) in immediately available funds.
Lots in Section 2. The Buyer agrees to pay to the Seller the sum of Fifty
Thousand Dollars ($50,000.00) for each Lot in Twin Acres Addition,
Section 2. The purchase price for each such Lot will be paid to the Seller
on the Closing Date in immediately available funds.
5.
Minimum Purchases. The Seller will have the right to terminate all of the Seller's
obligations under this Agreement with respect to all Lots which have not been purchased
by the Buyer or with respect to which the Buyer has not exercised the option to purchase
under this Agreement by service of written notice of termination to the Buyer if the
Buyer fails for any reason whatsoever to purchase a minimum of: (a) five (5) Lots in
Twin Acres Addition, Section 1, and two (2) Lots in Twin Acres Addition, Section 2,
prior to the date which is six (6) months after the Effective Date; (b) ten (10) Lots in
Twin Acres Addition, Section 1, and four (4) Lots in Twin Acres Addition, Section 2,
prior to the date which is one (1) year after the Effective Date; and (c) fifteen (15) Lots in
Twin Acres Addition, Section 1, and six (6) Lots in Twin Acres Addition, Section 2,
prior to the date which is eighteen (18) months after the Effective Date.
_______________________________________
Modern Real Estate Transactions, July 2006
- 69-
6.
Model Homes. The Seller agrees that the Seller will convey two (2) Lots (the
"Model Homes Lots") located in Twin Acres Addition, Section 1 to the Buyer, to be used
by the Buyer for the construction of two (2) model homes. With respect to the Model
Home Lots, the parties specifically agree as follows:
6.1
Selection. The Buyer will select the Model Home Lots subject to the
approval of the Seller, which approval will not be unreasonably withheld
or delayed.
6.2
Transfer. The Model Home Lots will not be transferred by the Seller to
the Buyer until the Buyer has: (a) provided satisfactory evidence to the
Seller that: (i) the Buyer has obtained an unconditional commitment
issued by an institutional lender to lend construction funds in an amount
sufficient to construct a model home on the Model Home Lot which is the
subject of the transfer; and (ii) the Buyer will commence construction of
the model home on the Model Home Lot which is the subject of the
transfer no later than ten (10) days after the date of transfer; and (b)
executed and delivered to the Seller loan documents in form and substance
satisfactory to the Seller to evidence the purchase price therefor and to
create the Purchase Money Liens (as hereafter defined).
6.3
Purchase Price. The purchase price for each Model Home Lot will be
Twenty Thousand Dollars ($20,000.00). Simultaneously with the transfer
of each Model Home Lot, the Buyer agrees to execute and deliver to the
Seller a promissory note, mortgage, security agreement, financing
statements and such other documents as the Seller might reasonably
request in form and substance satisfactory to the Seller to grant to the
Seller a purchase money mortgage lien and security interest (the "Purchase
Money Liens") covering the Model Home Lots and the improvements to
be constructed thereon by the Buyer to secure payment of the total
purchase price of the Model Home Lots. The Seller agrees to execute and
deliver such documents as might be reasonably requested by the lender
extending construction financing to the Buyer to subordinate the Purchase
Money Liens to the priority of the liens securing payment of the
construction loan for the model home to be constructed on the Model
Home Lots.
6.4
Terms of Payment. The purchase price for the Model Home Lots will bear
interest at the rate of six percent (6%) per annum and the unpaid principal
balance and all accrued interest thereon will be due and payable on the
earlier of: (a) the sale of each Model Home Lot by the Buyer; or (b) the
date which is six (6) months after the Effective Date.
6.5
Lot Purchase Credit. The Seller agrees to credit against the purchase price
_______________________________________
Modern Real Estate Transactions, July 2006
- 70-
of the Model Home Lots the sum of One Thousand Dollars ($1,000.00)
plus 1/6th of any interest accrued on the purchase price of the Model
Home Lots for each Lot (other than the Model Home Lots) purchased by
the Buyer in Twin Acres Addition, Section 1. If the Buyer sells the model
homes prior to the Buyer's purchase of ten (10) or more Lots in Twin
Acres Addition, Section 1, the unpaid balance of the purchase price of the
Model Home Lot which is the subject of the sale will be due and payable
on the date the sale of the model home closes. Credits in payment of the
purchase price for the Model Home Lots for Lots purchased in Twin Acres
Addition, Section 1, will be allocated equally between the Model Home
Lots.
7.
Title. The Buyer acknowledges receipt from the Seller of the following: (a) the
Commitment for Title Insurance (the "Title Commitment") set forth at Schedule "A"
attached as a part hereof, providing for issuance by Southwest Title Company (the "Title
Insurer") of ALTA owner's title insurance policies (the "Title Polic[y][ies]") containing
the exceptions to coverage (the "Approved Title Exceptions") described at Schedule B of
the Title Commitment which are hereby approved by the Buyer; (b) a copy of all
instruments (the "Exception Documents") creating each Approved Title Exception; and
(c) a copy of a survey (the "Survey") of the Lots prepared by Clour, Roberts and
Associates. The Buyer hereby specifically approves the Title Commitment, the Title
Insurer, the Approved Title Exceptions, the Exception Documents and the Survey and
agrees that the Buyer will have no right to require the Seller to perform any action or
incur any expense to cure any objection to the Seller's title to any Lot arising from the
Approved Title Exceptions, the Exception Documents or matters disclosed by the Survey.
Subject to the limitations hereafter stated, as to any Lot which the Buyer elects to
purchase the Seller agrees to use reasonable efforts to satisfy the requirements (the "Title
Requirements") which are conditions precedent to issuance of a Title Policy to the extent
set forth at Schedule C of the Title Commitment and to cure any other defect in title (a
"Title Defect") which is discovered by the Buyer, the Seller or the Title Insurer
subsequent to the effective date of the Title Commitment. At the Seller's option, any
Title Requirement may be satisfied and any Title Defect may be cured by the Seller's
obtaining affirmative insurance coverage to be issued by the Title Insurer indemnifying
the Buyer against losses arising from any Title Defect or the Seller's failure to satisfy any
Title Requirement. In the event the Seller is unwilling or unable to satisfy any Title
Requirement or cure any Title Defect by the Closing Date (as hereafter defined), the
Seller will have the option to either: (a) accept title to the Lot subject to the Title Defect
or the Title Requirement; (b) extend the Closing Date by that period of time which is
reasonably required to enable the Seller to satisfy the Title Requirement or cure the Title
Defect; or (c) terminate this Agreement as to any Lot by written notice to the Buyer.
8.
Closing. The Buyer and the Seller agree that the purchase of the Lots will be
consummated as follows:
_______________________________________
Modern Real Estate Transactions, July 2006
- 71-
8.1
Closing Date. The sales of the Lots will close from time to time during
the term of this Agreement on a business day which is no earlier than five
(5) business days and no later than ten (10) business days after each
exercise of a purchase option by the Buyer (the "Closing Date[s]"). The
closing of the sales of the Lots will take place at the offices of the Title
Insurer, with the exact time for closing to be designated by the Buyer by
written notice to the Seller and approved by the Seller.
8.2
Seller's Instruments. On the Closing Date the Seller will deliver or cause
to be delivered to the Buyer the following items (all documents will be
duly executed and acknowledged where required):
8.2.1
Special Warranty Deed. A special warranty deed in substantially
the form of Schedule "B" attached as a part hereof executed
by the Seller conveying the Lot to the Buyer, subject to the
Approved Title Exceptions, rights of tenants in possession,
restrictions, building lines or limitations, reservations,
easements, rights of way, mineral leases, mineral interests
previously reserved or conveyed of record, covenants of
record, encroachments, shortages in area and any other
exceptions to title approved by the Buyer;
8.2.2
Assignment. An assignment in substantially the form of Schedule
"C" attached as a part hereof assigning to the Buyer all of
the Seller's obligations and duties under the contracts and
other intangible personal property, if any, relating to the
Lot;
8.2.3
Title Insurance. Subject to the Buyer's payment of the premium
therefor as provided in paragraph 8.5 of this Agreement,
the Title Policy naming the Buyer as insured in the amount
of the purchase price containing the Approved Title
Exceptions and any other exceptions to coverage approved
by the Buyer;
8.2.4
Title Affidavits. Such affidavits and other documents as might be
reasonably requested by the Title Insurer to issue the Title
Policy in accordance with the terms of the Title
Commitment;
8.2.5
Contracts. Copies of all contracts to be assumed by the Buyer or
by which the Lot is otherwise bound;
8.2.6
Evidence of Authority.
A certificate of authority executed on
_______________________________________
Modern Real Estate Transactions, July 2006
- 72-
behalf of the Seller authorizing the sale of the Lot to the
Buyer, together with such other evidence of the authority of
the person or persons executing the documents
contemplated by this Agreement on behalf of the Seller as
the Title Insurer might reasonably request;
8.3
8.2.7
Nonforeign Affidavit. An affidavit executed by the Seller in
substantially the form and containing the terms of Schedule
"D" attached as a part hereof confirming that the Seller is
not a foreign person within the purview of 26 U.S.C. §1445
and the regulations issued thereunder; and
8.2.8
Additional Documents. Such additional documents as might be
reasonably requested by the Buyer or the Title Insurer to
consummate the sale of the Lot to the Buyer.
Buyer's Instruments. On the Closing Date the Buyer will deliver to the
Seller the following items (all documents will be duly executed and
acknowledged where required):
8.3.1
Payment.
The payment required by paragraph 4 of this
Agreement;
8.3.2
Taxes. Copies of any tax returns required to be filed by the Buyer
together with evidence of payment of any sales or transfer
tax payable by reason of the sale of the Lot to the Buyer;
8.3.3
Assumption Agreement.
An assumption agreement in
substantially the form of Schedule "E" attached as a part
hereof assuming all of the Seller's obligations and duties
under the contracts and other intangible personal property,
if any, relating to the Lot;
8.3.4
Title Affidavits. Such affidavits and other documents as might be
reasonably requested by the Title Insurer to issue the Title
Policy in accordance with the terms of the Title
Commitment;
8.3.5
Evidence of Authority. Such resolutions, certificates of good
standing and incumbency certificates and other evidence of
authority with respect to the Buyer, any nominee of the
Buyer acting under this Agreement and the person or
persons acting on behalf of the Buyer or the Buyer's
nominee as might be reasonably requested by the Seller or
_______________________________________
Modern Real Estate Transactions, July 2006
- 73-
the Title Insurer; and
8.3.6
Additional Documents. Such additional documents as might be
reasonably requested by the Seller or the Title Insurer to
consummate the sale of the Lots to the Buyer.
8.4
Possession. Possession of the Lot will be delivered by the Seller to the
Buyer on or before the close of business on the Closing Date, free from all
parties claiming rights to possession of or having claims against the Lot
other than pursuant to contractual obligations approved or to be assumed
by the Buyer or pursuant to the Approved Title Exceptions or any other
exception to title approved by the Buyer. Effective on the delivery of the
deed conveying title to the Lot by the Seller to the Buyer, beneficial
ownership and the risk of loss of the Lot will pass from the Seller to the
Buyer.
8.5
Costs. The Seller will pay the following closing costs: the Seller's
attorneys' fees; all costs of providing the Survey; and all abstracting, title
examination and other costs relating to the issuance of the Title
Commitment. The Buyer will pay the following closing costs: the
Buyer's attorneys' fees; the cost of any documentary stamps or other tax
relating to the documents conveying title to the Lots to the Buyer; the
costs of recording all documents; all premium expense, closing fees and
other charges related to the issuance of the Title Policy; all sales and
transfer taxes imposed by the jurisdictions in which the Lots are located, if
any; and any other charge imposed in connection with the transfer of
ownership of any Lot.
9.
Physical Condition. The Buyer acknowledges that the Buyer and the Buyer's
representatives have been afforded the opportunity to inspect the Lots, to conduct such
environmental and engineering studies as the Buyer has deemed appropriate and to verify
all information furnished by the Seller. Without reliance on any information provided by
the Seller, the Buyer has determined that the physical properties, improvements, title,
contracts and all other matters relating to the Lots are satisfactory to the Buyer in all
respects. It is understood that the Seller has made no representation as to the condition of
the Lots, including, without implied limitation, any condition arising in connection with
the use, storage or disposal of hazardous substances on or in the vicinity of the Lots or
compliance by the Lots with any zoning, use or other governmental regulation applicable
thereto, and has made no agreement to alter or improve the Lots. The sole obligation of
the Seller will be to deliver possession of the Lots to the Buyer on the Closing Dates in
substantially the same condition (normal wear and tear and casualty loss excepted) as
existed on the date of this Agreement and the Buyer agrees to accept possession of each
of the Lots on the Closing Dates in an AS IS condition WITH ALL FAULTS and
WITHOUT EXPRESS OR IMPLIED WARRANTY AS TO FITNESS FOR ANY
_______________________________________
Modern Real Estate Transactions, July 2006
- 74-
PARTICULAR PURPOSE.
10. Adjustments; Prorations. All receipts and disbursements relating to the Lots will be
prorated on the Closing Date as of 12:00 midnight Oklahoma City time on the day
preceding the Closing Date and the purchase price will be adjusted on the following
basis:
10.1
Receipts. Any rents or other sums receivable with respect to the Lots
earned and attributable to the period prior to the Closing Date will be paid
to the Seller to the extent that such sums have been collected on or before
the Closing Date; amounts earned and attributable to the period beginning
on the Closing Date and thereafter will be paid to the Buyer. On receipt
after the Closing Date by the Buyer of accounts receivable with respect to
the Lots which were earned prior to the Closing Date, the same will be
promptly paid to the Seller; provided that the Buyer will have no
obligation to enforce collection of such sums.
10.2
Disbursements. All sums due for accounts payable which were owing or
incurred in connection with the Lots prior to the Closing Date will be paid
by the Seller. The Buyer will promptly furnish to the Seller any bills for
such period received after the Closing Date for payment and the Buyer
will have no further obligation with respect thereto.
10.3
Property Taxes. All real and personal property ad valorem taxes,
installments of special assessments and other taxes, if any, for the calendar
years preceding the year in which the Closing Date occurs will be paid by
the Seller. All real and personal property ad valorem taxes, installments of
special assessments and other taxes, if any, whether payable in
installments or not, for the calendar year in which the Closing Date occurs
will be prorated to the Closing Date, based on the latest available tax rate
and assessed valuation.
10.4
Insurance. The Seller will terminate all existing insurance policies on the
Closing Date and the Buyer will be responsible for placing all insurance
coverage desired by the Buyer. Any prepaid insurance premiums will be
retained by the Seller.
11. Buyer's Indemnification. After the Closing Date, the Buyer agrees to defend,
indemnify and hold the Seller harmless from all damages, liabilities, costs and expenses
(including attorneys' fees and other litigation expenses) arising from accounts payable
incurred or accrued after the Closing Date or which are specifically assumed by the
Buyer and all claims arising from the development, use, ownership or improvement of
the Lots.
_______________________________________
Modern Real Estate Transactions, July 2006
- 75-
12. Condemnation. If the Lots are taken or condemned in whole or in part for any
public purpose by right of eminent domain (with or without litigation) or are transferred
by agreement in lieu of or under threat of condemnation, the Buyer agrees that such
taking will terminate this Agreement to the extent of all Lots which are so taken in whole
or in part. All awards arising from such taking will be paid solely to the Seller and the
Buyer will have no claim with respect thereto.
13. Default; Remedy. In the event that either party fails to perform such party's
obligations hereunder (except as excused by the other party's default), the party claiming
default will make written demand for performance. If the Seller fails to comply with
such written demand within ten (10) days after receipt thereof, the Buyer will have the
option to waive such default, to demand specific performance or to terminate this
Agreement. If the Buyer fails to comply with such written demand within ten (10) days
after receipt thereof, the Seller will have the option to waive such default or to terminate
this Agreement by written notice to the Buyer. On termination of this Agreement by
reason of default, the parties will be discharged from all further obligations and liabilities
hereunder.
14.
Miscellaneous. It is further agreed as follows:
14.1
Time. Time is the essence of each provision of this Agreement.
14.2
Notices. Any notice, demand or communication required or permitted to
be given by any provision of this Agreement will be in writing and will be
deemed to have been given when delivered personally or by telefacsimile,
receipt confirmed, to the party designated to receive such notice, or on the
date following the day sent by a nationally recognized overnight courier,
or on the third (3rd) business day after the same is sent by certified mail,
postage and charges prepaid, directed to the following addresses or to such
other or additional addresses as any party might designate by written
notice to the other part[ies]:
To the Seller:
Liquidation Bank, N.A.
120 North Robinson Avenue
Oklahoma City, Oklahoma 73102
Attn: Mr. Prime Seller,
Vice President
Telefacsimile: (405) 272-1800
With Copy To:
Hastie and Kirschner
3000 First Oklahoma Tower
210 West Park Avenue
Oklahoma City, Oklahoma 73102
Telefacsimile: (405) 239-6404
_______________________________________
Modern Real Estate Transactions, July 2006
- 76-
To the Buyer:
Homestead Development Company,
L.L.C.
3128 Holstead Drive
Midwest City, Oklahoma 73110
Attn: Mr. James A. Homestead,
Manager
Telefacsimile: (405) 360-5498
14.3
Survival. All representations and warranties of the Seller and the Buyer
contained in this Agreement with respect to each Lot will terminate on and
as of the Closing Date of the sale of the Lot and will not survive the
closing of the sale of the Lot, except for: (a) the warranties of title of the
Seller and the assumption of obligations by the Buyer, if any, expressed in
the conveyance documents delivered on the Closing Date; (b) the
agreements regarding payment of closing costs set forth at paragraph 8.5;
(c) the agreement of the Buyer with respect to amounts collected after the
Closing Date set forth at paragraph 10.1; (d) the agreements of the Buyer
and the Seller with respect to payment of accounts set forth at paragraph
10.2; (e) the indemnification of the Seller by the Buyer set forth at
paragraph 11; and (f) the agreement regarding brokerage fees set forth at
paragraph 14.12. The provisions of paragraph 13, limiting the remedies of
the Seller will not apply to any action brought by the Seller after the
Closing Date to enforce the documents creating the Purchase Money Liens
or any covenant or representation described in this paragraph 14.3.
14.4
Entire Agreement. This Agreement constitutes the entire agreement
between the Buyer and the Seller relating to the sale of the Lots. This
Agreement supersedes, in all respects, all prior written or oral agreements,
if any, between the parties relating to the sale of the Lots and there are no
agreements, understandings, warranties or representations between the
Buyer and the Seller except as set forth herein.
14.5
Binding Effect. This Agreement will inure to the benefit of and bind the
respective successors and permitted assigns of the Buyer and the Seller.
14.6
Attorneys' Fees. If either party institutes an action or proceeding against
the other relating to the provisions of this Agreement or any default
hereunder, the unsuccessful party to such action or proceeding will
reimburse the successful party therein for the reasonable expenses of
attorneys' fees, disbursements and other litigation expenses incurred by the
successful party.
14.7
Severability. If any provision of this Agreement is determined by a court
_______________________________________
Modern Real Estate Transactions, July 2006
- 77-
having jurisdiction to be illegal, invalid or unenforceable under any
present or future law, the remainder of this Agreement will not be affected
thereby. It is the intention of the parties that if any provision is so held to
be illegal, invalid or unenforceable, there will be added in lieu thereof a
provision as similar in terms to such provision as is possible that is legal,
valid and enforceable.
14.8
Counterpart Execution. This Agreement may be executed in counterparts,
each of which will be deemed an original document, but all of which will
constitute a single document. This document will not be binding on or
constitute evidence of a contract between the parties until such time as a
counterpart of this document has been executed by each party and a copy
thereof delivered to the other party to this Agreement.
14.9
Assignment. The rights of the Buyer under this Agreement may not be
assigned in whole or in part without the prior written consent of the Seller,
which consent will not be unreasonably withheld.
14.10
Amendment. Neither this Agreement nor any of the provisions hereof can
be changed, waived, discharged or terminated, except by an instrument in
writing signed by the party against whom enforcement of the change,
waiver, discharge or termination is sought.
14.11
Governing Law. This Agreement is being executed, delivered and is
intended to be performed in Oklahoma County, Oklahoma, and the
substantive laws of Oklahoma will govern the validity, construction and
enforcement of this Agreement. The parties consent to the venue and
jurisdiction of any federal or state court sitting in Oklahoma County,
Oklahoma in any action brought to enforce the terms of this Agreement.
The parties irrevocably and unconditionally submit to the jurisdiction
(both subject matter and personal) of any such court and irrevocably and
unconditionally waive: (a) any objection any party might now or hereafter
have to the venue in any such court; and (b) any claim that any action or
proceeding brought in any such court has been brought in an inconvenient
forum.
14.12
Brokerage. The Seller and the Buyer acknowledge that pursuant to a
certain Management Agreement between the Seller and Pierce Realty, Inc.
("Pierce"), the Seller will pay Pierce a sales commission equal to three
percent (3%) of the sale price of each Lot sold. The parties represent and
warrant each to the other that except for the commission to be paid to
Pierce as described in this paragraph 14.12: (a) the sales of the Lots will
be made without liability for any finder's, realtor's, broker's, agent's or
other similar commission; and (b) the parties mutually agree to indemnify
_______________________________________
Modern Real Estate Transactions, July 2006
- 78-
and hold each other harmless from claims for commissions asserted by
any party as a result of dealings claimed to give rise to such commissions.
14.13
Expiration. The dates of execution of this Agreement are set forth below
the parties' respective signatures. It is understood that all obligations of
the Seller, if any, under this Agreement will terminate on that date which
is two (2) business days after the date this Agreement is executed by the
Seller unless the Buyer has duly executed and delivered a copy of this
Agreement to the Seller.
14.14
Headings. The headings used in this Agreement are for ease in reference
only and are not intended to affect the interpretation of this Agreement in
any way.
14.15
Construction. The parties acknowledge that each party and each party's
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 will not be employed in the interpretation of this
Agreement or any amendments or schedules hereto.
IN WITNESS WHEREOF, this instrument has been executed by the
parties on the dates hereafter indicated to be effective on the date first above written.
LIQUIDATION BANK, N.A., a
national banking association
By
___________________
Vice President
Date Executed:
(the "Seller")
HOMESTEAD DEVELOPMENT
COMPANY, L.L.C., an Oklahoma limited
liability company
By
____________________
Sale Manager
Date Executed:
_______________________________________
Modern Real Estate Transactions, July 2006
- 79-
(the "Buyer")
SCHEDULE "A"
TITLE COMMITMENT
SCHEDULE "B"
SPECIAL WARRANTY DEED
SCHEDULE "C"
ASSIGNMENT
SCHEDULE "D"
AFFIDAVIT OF NONFOREIGN STATUS
SCHEDULE "E"
ASSUMPTION AGREEMENT
[All schedules have been deleted for the purpose
of this publication]
_______________________________________
Modern Real Estate Transactions, July 2006
- 80-
DEVELOPMENT AGREEMENT
THIS AGREEMENT is made effective the ___ day of ________, 19__,
between LAND INVESTMENT COMPANY, an Oklahoma general partnership, having a
notice address at Suite 2760, First Oklahoma Tower, 210 West Park Avenue, Oklahoma
City, Oklahoma 73102 (the "Seller") and PROJECT CONSTRUCTION COMPANY, a
Delaware corporation, having a notice address at Suite 2000, Second Oklahoma Tower,
220 West Park Avenue, Oklahoma City, Oklahoma 73102 (the "Buyer").
WITNESSETH:
1.
Sale Agreement. The Seller agrees to sell and the Buyer agrees to purchase on the
terms hereafter stated all of the Seller's right, title and interest in and to the SURFACE
ONLY of that certain real property situated in Oklahoma County, Oklahoma, more
particularly described at Schedule "1" attached as a part hereof (the "Land").
2.
Purchase Price. Subject to the adjustments and prorations hereafter described, the
total purchase price to be paid by the Buyer to the Seller for the purchase of the Land is
that sum which is equal to the product of: (a) Three Dollars and Eighty-Five Cents
($3.85), times (b) the number of square feet of real property within the Gross Acres, as
hereafter defined, contained within the Land. The exact number of square feet of real
property within the Gross Acres will be determined by a survey of the Land prepared by a
registered surveyor selected by the Seller and approved by the Buyer. The purchase price
will be paid and determined in the following manner:
2.1
Initial Earnest Money. The sum of Fifty Thousand Dollars ($50,000.00)
in immediately available funds (the "Initial Deposit") is herewith
deposited by the Buyer with the Seller as earnest money to be applied in
accordance with the terms of this Agreement.
2.2
Commitment Earnest Money. The sum of One Hundred Thousand Dollars
($100,000.00) in immediately available funds (the "Commitment
Deposit") will be paid by the Buyer to the Seller on that date which is
ninety (90) days after the Effective Date of this Agreement (unless the
Buyer terminates this Agreement in accordance with the provisions of
paragraph 6 hereof) to be applied in accordance with the terms of this
Agreement (the Initial Deposit and the Commitment Deposit are hereafter
collectively called the "Earnest Money Deposits").
_______________________________________
Modern Real Estate Transactions, July 2006
- 81-
2.3
Promissory Note. On the Closing Date, the Buyer will execute and deliver
to the Seller: (a) a promissory note (the "Note") in the principal amount
equal to the total amount of the purchase price, less: (i) the Earnest
Money Deposits and less (ii) an amount equal to the product of Three
Dollars and Eighty-Five Cents ($3.85), times the number of square feet of
real property within the Gross Acres of the Headquarters Tract (as
hereafter defined); and (b) a real estate mortgage (the "Mortgage")
covering the Land less the Headquarters Tract to secure payment of the
Note. The terms of payment of the Note and the provisions of the
Mortgage will be substantially as set forth at Schedules "2" and "3"
respectively, the terms of which schedules are incorporated by this
reference.
2.4
Cash at Closing. On the Closing Date, the Buyer will pay to the Seller the
balance of the purchase price (computed by subtracting the sum of the
principal amount of the Note and the amount of the Earnest Money
Deposits, from the total purchase price determined in accordance with
paragraph 2 above) in immediately available funds.
2.5
Gross Acres. For the purposes of this Agreement, the term "Gross Acres"
means the total gross acreage of real property within the Land, determined
to the nearest ten thousandth (1/10000th) of an acre, computed on the
following basis: (a) the sum of the total acreage of real property located
within the tracts comprising the Land as shown on Schedule "1"; plus (b)
the sum of the total acreage of real property lying within and under,
computed to the center line thereof, all public and private streets, roads,
avenues, alleys, easements, rights-of-way, opened or proposed, adjoining
or abutting the Land; plus (c) a sum equal to the product of (i) a fraction
having as its numerator the total acreage of real property within the Land
and having as its denominator the total acreage of real property within the
Property, times (ii) the total acreage of real property lying within and
under the Drainage System (as hereafter defined) to be constructed in
accordance with the provisions of paragraph 5.5 of this Agreement; plus
(d) a sum equal to the product of: (i) a fraction having as its numerator the
total acreage of real property within the Land and having as its
denominator the total acreage of real property within the Property (as
hereafter defined), times (ii) the total acres of real property lying within
those plazas, concourses, malls, parks and greenbelt areas, opened or
proposed, or located within the Property (as hereafter defined) as shown
on the Master Plan (as hereafter defined).
3.
Title. The Seller will deliver the following items to the Buyer at the times
hereafter specified:
_______________________________________
Modern Real Estate Transactions, July 2006
- 82-
3.1
Title Commitment. On or before forty-five (45) days prior to the Closing
Date, the Seller will furnish to the Buyer, at the Seller's expense, a current
commitment (the "Title Commitment") for issuance of an ALTA Form B
Owner's Title Insurance Policy covering the Land (the "Title Policy") in
an amount equal to the purchase price of the Land determined in
accordance with paragraph 2 above, issued and reinsured or coinsured by
title insurance companies designated by the Seller and approved by the
Buyer (collectively hereafter called the "Title Company") showing
marketable, fee simple title to the Land to be vested in the Seller, together
with copies of the instruments creating all requirements and exceptions set
forth in the Title Commitment, including easements, restrictions, rights-ofway, covenants, restrictions and other conditions, if any, affecting the
Land.
3.2
Title Defects. If the Title Commitment sets forth exceptions other than
either those listed at Schedule "4" attached as a part hereof (the "Approved
Title Exceptions") or the standard printed exceptions, the Buyer will have
fifteen (15) days after such delivery of the Title Commitment to furnish to
the Seller a written report specifying any objections to such exceptions
and the Seller will thereafter have ninety (90) days after the date of
delivery of such written notification to cure such defects or to obtain a
revised Title Commitment from which the objectionable exceptions have
been removed, with the Closing Date being extended until the earlier of
the expiration of such ninety (90) day period or the removal by the Title
Company of the objectionable exception. No matter will be construed as,
or constitute, a title defect so long as the same is not so construed under
the Real Estate Title Examination Standards of the Oklahoma Bar
Association. In the event that the Title Commitment contains, at the
expiration of the above described ninety (90) day extension period, an
exception other than the Approved Title Exceptions, this Agreement will,
at the option of the Buyer, become null and void and the Earnest Money
Deposits will be returned to the Buyer, unless the Buyer elects to waive
such objection to title.
3.3
Title Policy. The Seller's sole obligation with respect to the status of title
to the Land is to furnish the Title Commitment in the manner required
under paragraphs 3.l and 3.2 and all further costs and premiums relating to
the issuance of the Title Policy will be borne by the Buyer.
4.
Closing. The Buyer and the Seller agree that the purchase will be consummated
as follows:
4.1
Closing Date. The Closing Date will be the first business day after the
date thirty (30) days subsequent to the date on which all of the conditions
_______________________________________
Modern Real Estate Transactions, July 2006
- 83-
precedent set forth in paragraphs 5 and 6 of this Agreement have been
satisfied; provided, however, that in no event will the Closing Date be
later than one (1) year after the date of the Seller's execution of this
Agreement (the "Effective Date"), unless extended by the mutual
agreement of the Seller and the Buyer. Absent a contrary agreement by
both parties, the closing will take place at 10:00 a.m. on the Closing Date
at the offices of Capitol Abstract & Title Co., Oklahoma City, Oklahoma.
4.2
Seller's Deliveries. At closing the Seller will deliver or cause to be
delivered to the Buyer the following items (all documents will be duly
executed and acknowledged where required): (a) a special warranty deed
in substantially the form of Schedule "5" attached as a part hereof; (b) the
Master Easement Agreement described in paragraph 8.2 below; and (c)
such additional documents as might be reasonably required by the Buyer
to consummate the sale of the Land to the Buyer.
4.3
Buyer's Deliveries. At closing the Buyer will deliver or cause to be
delivered to the Seller the following items (all documents will be duly
executed and acknowledged where required): (a) the cash payment
described in paragraph 2.4 above; (b) the Note and Mortgage described in
paragraph 2.3 above; (c) the Master Easement Agreement described in
paragraph 8.2 below; and (d) such other documents as might be reasonably
required by the Seller to consummate the sale of the Land to the Buyer.
4.4
Closing Costs. The Seller will pay the following closing costs: (a) the
Seller's attorney's fee; (b) the expenses charged by the Title Company for
issuance of the Title Commitment; (c) the expenses relating to the
satisfaction of any objections to title made in accordance with paragraph
3.2; (d) the cost of mortgage registration tax; (e) the expenses relating to
the survey required by paragraph 2; and (f) one-half (1/2) of any escrow or
closing fee charged by the Title Company. The Buyer will pay the
following closing costs: (a) the Buyer's attorney's fees; (b) all recording
fees; (c) the cost of documentary stamps to be affixed to the deed
conveying the Land to the Buyer; (d) any premium charge or other
expense related to the issuance of the Title Policy; and (e) one-half (1/2)
of any escrow or closing fee charged by the Title Company.
4.5
Prorated Items. All real property ad valorem taxes and installments of
special assessments, if any, for the calendar year in which the Closing
Date occurs accrued to the Closing Date and for prior years will be paid by
the Seller. All real property ad valorem taxes and installments of special
assessments, if any, for the calendar year in which the Closing Date occurs
which accrue on and after the Closing Date and for subsequent years will
be paid by the Buyer. Such taxes and assessments for the year in which
_______________________________________
Modern Real Estate Transactions, July 2006
- 84-
the Closing Date occurs will be prorated to the Closing Date, based on the
latest available assessed valuation applied to the then prevailing tax rate.
4.6
Possession. Possession of the Land will be given to the Buyer on the
Closing Date free from all persons claiming rights adverse to the Buyer
(other than persons benefited by easements or other rights constituting
Approved Title Exceptions). All risk of loss associated with the Land will
pass from the Seller to the Buyer on the Closing Date.
4.7
Closing Memorandum. On the Closing Date the parties agree to execute
and deliver a memorandum of the closing to acknowledge delivery and
acceptance of the items required by this paragraph 4, the satisfaction of the
conditions precedent to closing stated at paragraphs 5 and 6 and the status
of performance of the other provisions of this Agreement.
5.
Seller's Obligations Conditional. The obligations of the Seller to consummate the
transaction contemplated by this Agreement are expressly conditioned on the satisfaction
of each of the following conditions precedent and if any such condition is not satisfied, as
hereafter provided, the Seller will be entitled either: (a) to waive the same in writing; or
(b) to terminate this Agreement. On such termination, except as specifically hereafter
otherwise provided, the Earnest Money Deposits will be returned to the Buyer and the
parties will thereafter be released from further performance hereunder. The conditions
are more particularly described as follows:
5.1
Development Plan. The Seller will cause to be prepared at the Seller's
expense a plan (the "Master Plan") for development of the Land and the
real property which is being retained by the Seller as more particularly
described at Schedule "6" attached as a part hereof (collectively with the
Land hereafter called the "Property") as an integrated office, retail, hotel
and residential development. In addition to the allocation by the Master
Plan of specific portions of the Property to specific types of uses for
development, the Master Plan will designate the location of the
Headquarters Tract (as hereafter defined) and will further designate
commencement and completion dates for construction of the
improvements to be located on the Headquarters Tract.
5.1.1
Approval. For fifteen (15) days after receipt of the Master Plan the
Buyer will have the right of approval, which approval will not be
unreasonably withheld, with respect to the designation of one of
the tracts comprising the Land as the Headquarters Tract and the
configuration and uses assigned to the tracts comprising the Land
as shown thereon. Approval by the Buyer will be deemed to have
taken place if the Buyer fails in writing to approve or disapprove
the Master Plan within such fifteen (15) day period.
_______________________________________
Modern Real Estate Transactions, July 2006
- 85-
5.1.2
Disapproval. If the Buyer disapproves either (a) the designation or
the location of the Headquarters Tract, or (b) the configuration of
the parcels located within the Land or (c) the uses assigned to the
tracts comprising the Land; the Buyer agrees to specify in its
written notice of disapproval to the Seller the reasons for such
disapproval; provided, however, it is agreed that in no event will
the Headquarters Tract be located at the northeast corner of the
Land. The Seller will have thirty (30) days after the receipt of the
Buyer's written notice of disapproval to either modify the Master
Plan to satisfy all the Buyer's objections as to any of the three (3)
above described items of consideration and to submit an amended
Master Plan to the Buyer for approval or disapproval, or to
terminate this Agreement by service of written notice of
termination to the Buyer. In the event of such termination by the
Seller, the Earnest Money Deposits will be retained by the Seller as
compensation for services performed by the Seller and the Seller
and the Buyer will be discharged from all further performance
under this Agreement.
5.1.3
Action on Resubmission. The Buyer will have ten (10) days after
receipt from the Seller of an amended Master Plan in which to
serve written notice to the Seller of the Buyer's approval or
disapproval thereof. If the Buyer disapproves the amended Master
Plan, the Seller, in the Seller's absolute discretion, will have the
right to extend the Closing Date to allow the Seller additional time
to modify the Master Plan or to terminate this Agreement by
service of written notice of termination to the Buyer. In the event
of such termination by the Seller, the Earnest Money Deposits will
be retained by the Seller as compensation for services performed
by the Seller and the Seller and the Buyer will be discharged from
all further performance under this Agreement.
5.2
PUD Approval. On or before the Closing Date, the Seller will have
received all necessary approvals from all governmental authorities having
jurisdiction over the Property, including, without limitation, final approval
and acceptance by the City Council of the City of Oklahoma City, for the
platting of the Property as a planned unit development (the "PUD") in
accordance with the configuration and uses set forth in the Master Plan.
5.3
Declaration of Covenants. It is understood that due to the time exigencies
involved with the Seller's prosecution of the PUD approval described in
paragraph 5.2 above, the Declaration of Covenants, Conditions and
_______________________________________
Modern Real Estate Transactions, July 2006
- 86-
Restrictions (the "DCCR's") which will be submitted for approval to the
City of Oklahoma City (the "City") in concert with the Seller's submission
and prosecution of the PUD approval process, will not include all the
provisions deemed necessary by the Seller to ensure the phased
development of the Property as a first class, mixed-use, commercial
development. Accordingly, on or before the Closing Date, the Seller will
have prepared revised DCCR's and will have received all necessary
approvals, acceptance and filings by all governmental authorities having
jurisdiction over the Property, including, without implied limitation, the
approvals, acceptance and filings necessary from the City, sufficient to
impose the revised DCCR's against the Property. The Seller and the
Buyer agree that the revised DCCR's will include, but not be limited to,
provisions that: (a) create an owner's association for all of the Property,
the purposes of which will be the maintenance of the common elements
dedicated to the association, including, but not limited to, drainage and
detention facilities, private roads and streets, lighting facilities,
landscaping, recreational facilities, irrigation and security systems, i.e.,
each owner will have responsibility for common areas primarily intended
for the sole use by tenants, licensees and invitees of each individual parcel
within the Property and the association will have responsibility for
common elements beneficial to the health, safety, and welfare of the
association, be those common elements within the boundaries of specific
parcels within the Property or not; (b) require the membership of the
association to be composed of all of the owners of parcels within the
Property and be mandatory; (c) require the collection of assessments for
the association (the basis of the share of assessment obligation for each
member of the association being the ratio that the amount of real property
within the parcel or parcels owned by the member bears to the aggregate
real property in the Property); (d) include, but are not limited to, the
following matters pertaining to the association: voting rights of members,
places, dates and occasion of meetings, boards of directors (and powers
and duties of members thereof which shall include, but shall not be limited
to: rules, maintenance, insurance, budget, enforcement of assessment
rights, management, and administration), fiscal management, officers,
obligations of members, rules and regulations, abatement of violations and
committees; and (e) require architectural control in the Property, the effect
of which will be to require that owners of real property in the Property,
before commencing, altering, erecting, placing, or moving any building,
fence, wall or other improvement or structure within the Property, secure
approvals in writing as to harmony of exterior design, color, and location
in relation to other structures in the Property, as to the topography of the
Property and as to conformity within the design concept for the Property,
all pursuant to rules, regulations, and procedures established by the
architectural control committee of the association.
_______________________________________
Modern Real Estate Transactions, July 2006
- 87-
5.4
Drainage System Approval. On or before the Closing Date, the Seller will
have received all necessary approvals from governmental authorities
having jurisdiction over the Property concerning the design and
construction of the Drainage System, which will be designed and
constructed in accordance with the terms set forth at paragraph 5.5 below.
5.5
Drainage System Agreement. The Seller and the Buyer acknowledge that
to obtain the approvals set forth at paragraphs 5.2, 5.3 and 5.4 above, a
surface drainage and storm sewer water retention system (the "Drainage
System"), must be designed in accordance with the requirements of all
governmental authorities having jurisdiction over the Property.
Accordingly, within ninety (90) days after the Effective Date of this
Agreement, the Seller and the Buyer shall have entered into an agreement
(the "Drainage System Agreement") for construction by the Buyer of the
Drainage System on terms mutually satisfactory to the Seller and the
Buyer; provided, however, it is specifically agreed that the Drainage
System Agreement will include the following terms: (a) the Buyer will
cause plans and specifications for construction of the Drainage System to
be prepared by architects or engineers reasonably satisfactory to the Seller
and in a manner which: (i) meets the reasonable approval of the Seller;
(ii) meets the requirements of governmental authorities having jurisdiction
over the Property; and (iii) permits timely preparation and submission to
such governmental authorities to allow the Seller to obtain the approvals
set forth in paragraphs 5.2, 5.3 and 5.4 of this Agreement; (b) the Buyer
will post such performance bonds as are required by such governmental
authorities to assure construction of the Drainage System; (c) the Buyer
will enter into a contract for construction of the Drainage System with a
general contractor satisfactory to the Seller; (d) the Buyer and Seller will
bear the actual cost of the design and construction of the Drainage System
in the following ratios: (i) the Buyer will pay that portion of the cost
which is equal to the product of such cost times a fraction having as its
numerator the total acreage of real property within the Land, and having as
its denominator the total acreage of real property within the Property, and
(ii) the Seller will pay that portion of the cost which is equal to the product
of such cost times a fraction having as its numerator the remainder of the
total acreage of real property within the Property less the total acreage of
real property within the Land, and having as its denominator the total
acreage of real property within the Property; and (e) the Buyer and the
Seller will enter into such easements and other agreements as are
reasonably necessary for the construction and operation of the Drainage
System.
_______________________________________
Modern Real Estate Transactions, July 2006
- 88-
5.6
Roadway System Agreement. The Seller and the Buyer acknowledge that
to obtain the approvals set forth at paragraphs 5.2, 5.3 and 5.4 above, in
addition to allowing the Buyer to obtain necessary governmental
approvals for construction of the Headquarters Building (as hereafter
defined), a system of public and private streets and roadways (the
"Roadway System") in substantially the form designated on the Master
Plan must be designed in accordance with the requirements of all
governmental authorities having jurisdiction over the Property.
Accordingly, within ninety (90) days after the Effective Date of this
Agreement, the Seller and the Buyer will enter into an agreement (the
"Roadway System Agreement") for construction by the Buyer of the
Roadway System on terms mutually satisfactory to the Seller and the
Buyer; provided, however, that it is specifically agreed by the Seller and
the Buyer that the Roadway System Agreement will include the following
terms: (a) the Buyer will cause plans and specifications for construction
of the Roadway System to be prepared by architects or engineers
reasonably satisfactory to the Seller in a manner that such plans and
specifications: (i) meet the reasonable approval of the Seller, (ii) meet the
requirements of governmental authorities having jurisdiction over the
Property, and (iii) are prepared and submitted in a timely fashion to such
governmental authorities to allow the Seller to obtain the approvals set
forth in paragraphs 5.2, 5.3 and 5.4 of this Agreement; (b) the Buyer will
post such performance bonds as are required by such governmental
authorities to assure construction of the Roadway System; (c) the Buyer
will enter into a contract for construction with a general contractor
satisfactory to the Seller, which provides for construction of all portions of
the Roadway System which will be dedicated to the public (the "Public
Streets"), in addition to the construction at that time of such private streets
as are necessary to allow the Buyer to obtain such approvals as are
necessary to allow construction of the Headquarters Building as set forth
in paragraph 8.1 hereof (the "Private Streets"); (d) the Buyer and the Seller
will bear the actual cost of the design and construction of the Public
Streets in the following ratios: (i) the Buyer will pay that portion of the
cost which is equal to the product of such cost times a fraction having as
its numerator the total acreage of real property within the Land, and
having as its denominator the total acreage of real property within the
Property, and (ii) the Seller will pay that portion of the cost which is equal
to the product of such cost times a fraction having as its numerator the
remainder of the total acreage of real property within the Property less the
total acreage of real property within the Land, and having as its
denominator the total acreage of real property within the Property; (e) the
Buyer will bear all of the actual cost of the design and construction of the
Private Streets; (f) the obligations concerning design and construction
between the Seller and the Buyer of the remaining portions of the
_______________________________________
Modern Real Estate Transactions, July 2006
- 89-
Roadway System will be specifically set forth and agreed therein; and (g)
the Buyer and the Seller will enter into such easements and agreements as
are reasonably necessary for the construction and operation of the entire
Roadway System.
6.
Buyer's Obligations Conditional. The obligations of the Buyer to consummate the
transaction contemplated by this Agreement are expressly conditioned on the satisfaction
of each of the following conditions subsequent and, if any such condition is not satisfied
as hereafter provided, the Buyer will be entitled either: (a) to waive the same in writing;
or (b) to terminate this Agreement. On such termination, the Initial Deposit will be
retained by the Seller as compensation for services performed by the Seller and the Buyer
and the Seller will be released from further performance hereunder. Such conditions are
more particularly described as follows:
6.1
Engineering Reports. Within ninety (90) days after the Effective Date, the
Buyer shall have received engineering, soil and environmental reports,
obtained by the Buyer at the Buyer's expense, which reflect that the Land
is suitable for development of the uses set forth in the Master Plan.
6.2
Utilities. Within ninety (90) days after the Effective Date, the Buyer shall
have received evidence, in form reasonably satisfactory to the Buyer,
obtained by the Buyer at the Buyer's expense, which reflects that public
water, gas, electrical, sanitary sewer and storm sewer lines are located
within the reasonable proximity of the perimeter boundary of the Land.
6.3
Access. Within ninety (90) days after the Effective Date, the Buyer shall
have received evidence, in form satisfactory to the Buyer, obtained by the
Buyer at the Buyer's expense, which documents unimpeded access to and
from the Land from the dedicated public rights-ofway abutting the Land.
7.
Representations. The Seller and the Buyer hereby each represent and warrant, as
follows:
7.1
Seller's Representations. The Seller represents to the Buyer as of the
Effective Date and as of the Closing Date that:
7.1.1
Authority. The Seller is a general partnership duly formed,
existing and in good standing under the laws of the State of
Oklahoma and the partner executing this Agreement on behalf of
the Seller has been duly authorized to execute, deliver and perform
the transaction contemplated by this Agreement.
7.1.2
Title. The Seller is the owner of marketable fee simple title to the
Land, free and clear of any liens, encumbrances or restrictions of
_______________________________________
Modern Real Estate Transactions, July 2006
- 90-
7.1.3
7.2
any kind, except the Approved Title Exceptions.
Litigation. There are no actions, suits or other legal proceedings
presently pending or, to the knowledge of the Seller, threatened
against the Land.
Buyer's Representations: The Buyer represents to the Seller that the Buyer
is and on the Closing Date will be a corporation duly organized, existing
and in good standing under the laws of the State of Delaware which is
duly qualified to transact business under the laws of the State of Oklahoma
and that the Buyer's officers have been duly authorized to execute, deliver
and perform this Agreement.
8.
Additional Covenants. The Seller and the Buyer further specifically agree as
follows:
8.1
The Headquarters Building. The Buyer acknowledges that part of the
Seller's consideration for entering into the transaction contemplated by this
Agreement is the agreement by the Buyer to perform the following: (a)
the Buyer will construct an office building (the "Headquarters Building")
on one of the tracts located within the Land, the exact location of which
will be determined in accordance with the provisions of paragraph 5.l (the
"Headquarters Tract"); (b) the Buyer will submit to the Seller for approval,
within ninety (90) days subsequent to the Closing Date, preliminary site
plans, diagrammatic drawings and color renderings of the Headquarters
Building which adequately show all major elements of the Headquarters
Building and the surrounding areas of influence; (c) the Buyer will submit
to the Seller for approval, within two hundred seventy (270) days
subsequent to the Closing Date, preliminary plans and specifications
which describe the Headquarters Building and related improvements in
such detail as is necessary to permit the construction and completion of the
Headquarters Building, the development of the Headquarters Tract and
any further appurtenant construction located within the Land (the
Schematic Design Documents and the Preliminary Plans and
Specifications are hereafter sometimes collectively called the
"Construction Plans"); (d) the Headquarters Building will consist of not
less than one hundred fifty thousand (150,000) square feet of gross space
for use only as general office purposes, or such other directly related use
as the Seller might approve from time to time; (e) the Buyer will
commence construction of the Headquarters Building on or before 11:59
p.m. of the calendar day immediately preceding the first anniversary of the
Closing Date; (f) the Buyer will thereafter diligently prosecute the
construction of the Headquarters Building to completion, in accordance
with the approved Construction Plans; and (g) the Buyer will relocate,
maintain and operate the Headquarters Building as the Buyer's general
_______________________________________
Modern Real Estate Transactions, July 2006
- 91-
corporate offices, headquarters and principal place of business.
8.1.1
Approval. For thirty (30) days after receipt of any portion of the
Construction Plans the Seller will have the absolute right to
approve or disapprove all or any part thereof. Approval will be
deemed to have taken place if the Seller serves written notice to the
Buyer approving any portion of the Construction Plans or if the
Seller fails to serve written notice to the Buyer of the Seller's
disapproval of all or any part of the Construction Plans within such
thirty (30) day period.
8.1.2
Disapproval. If the Seller disapproves all or any part of the
Construction Plans, the Seller agrees to specify the reasons for
such disapproval and the Buyer will have twenty (20) days after
receipt of the Seller's written notice of disapproval to cure all of
the Seller's objections and submit amended Construction Plans to
the Seller for approval or disapproval.
8.1.3
Action on Resubmission. The Seller will have ten (10) days after
receipt of such amended Construction Plans in which to serve
written notice to the Buyer of the Seller's approval or disapproval
thereof. If the Seller disapproves the amended Construction Plans,
the Seller, in the Seller's absolute discretion, will have the right
either to waive all or any portion thereof in writing, or to seek any
remedy to which the Seller may be entitled at law or in equity.
8.1.4
Failure to Submit Plans. If the Buyer fails to submit any portion of
the Construction Plans to the Seller as above provided, the Seller
will have the absolute right, in the Seller's sole discretion, to either
waive all or any portion thereof in writing, or to seek any remedy
to which the Seller may be entitled at law or in equity.
8.2
Master Easement Agreement. To facilitate the development of the
Property as an integrated office, retail, hotel and residential development,
it is agreed that prior to the Closing Date the Seller will have imposed on
the various parcels comprising the Land certain easements and rights of
use as equitable servitudes constituting covenants running with the Land,
in favor of the individual parcels comprising the Land and the individual
parcels comprising the remainder of the Property. It is anticipated that
such equitable servitudes will be contained within a reciprocal easement
agreement (the "Master Easement Agreement") which, in the Seller's sole
discretion, and by way of illustration but not limitation, will create
easements for: pedestrian traffic; vehicular traffic; common components
for support; installation, operation and repair of water, telephone, gas,
_______________________________________
Modern Real Estate Transactions, July 2006
- 92-
sanitary sewer, electrical and other utility lines or systems; construction,
installation, operation and maintenance of the Drainage System; and
construction, installation, operation and maintenance of the Roadway
System; provided, however, that such easements will be created and
imposed in a manner not to unreasonably interfere with the use of the
parcels located within the Land or the parcels comprising the remainder of
the Property, all as set forth in the Master Plan.
9.
8.3
Restrictions on Use. The Buyer acknowledges that part of the Seller's
consideration for entering into the transaction contemplated by this
Agreement is the Buyer's agreement to take the Land subject to the
limitations imposed by the Master Plan on the use of various parcels
comprising the Land. Accordingly, the Buyer agrees for itself, and its
successors and assigns, and every successor in interest to the Land, or any
part thereof, for the benefit of the Seller, and its successors and assigns,
that the Land will be devoted to, and only to and in accordance with, the
uses specified in the Master Plan. Moreover, it is specifically agreed that
the covenants provided in this paragraph 8.3 will be covenants which run
with the Land which will remain in effect from the Closing Date until the
twentieth (20th) anniversary of the Closing Date. It is further agreed that
the Seller may file of record such document or documents as the Seller
deems appropriate with the County Clerk of Oklahoma County,
Oklahoma, prior to the Closing Date, to ensure that such covenants bind
the Land, the Buyer and the Buyer's successors in interest.
8.4
Related Parcel. The Buyer acknowledges that the Buyer is attempting to
purchase that certain real property more particularly described at Schedule
"7" attached as a part hereof (the "Related Parcel") and further
acknowledges that part of the Seller's consideration for entering into the
transaction contemplated by this Agreement is the agreement by the Buyer
to include the Related Parcel within the Master Plan and the PUD at such
time as the Buyer acquires title to the Related Parcel. Accordingly, the
Buyer agrees to use good faith efforts to acquire the Related Parcel and
further agrees on such acquisition to either: (a) include the Related Parcel
within the PUD, if acquisition occurs prior to the PUD approval set forth
in paragraph 5.2 hereunder; or (b) to diligently prosecute in good faith
with the City an amendment to the PUD to include the Related Parcel.
The Buyer further acknowledges that the use of the Related Parcel will be
subject to the limitations set forth in the Master Plan and that the Related
Parcel will be subjected to the provisions of the DCCR's and the Master
Easement Agreement as if the Related Parcel had been part of the Land on
the Effective Date.
Default; Remedies. In the event that either party fails to perform such party's
_______________________________________
Modern Real Estate Transactions, July 2006
- 93-
respective obligations hereunder (except as excused by the other party's default), the
party claiming default will make written demand for performance. If the Seller fails to
comply with such written demand within ten (10) days after receipt thereof, the Buyer
will have the option to waive such default, to demand specific performance or to
terminate this Agreement and, on such termination, the Buyer will: (a) be returned the
Earnest Money Deposits; and (b) may seek any other remedy to which the Buyer may be
entitled at law or in equity. If the Buyer fails to comply with such written demand within
ten (10) days after receipt thereof, the Seller will have the option either to waive such
default, to demand specific performance or to terminate this Agreement and, on such
termination, the Seller will: (a) be entitled to retain the Earnest Money Deposits for
services performed by the Seller under this Agreement; and (b) may seek any other
remedy to which the Seller may be entitled at law or in equity.
10.
Assignment. The interest of the Buyer under this Agreement cannot be assigned
in whole or in part by the Buyer, without the prior written consent of, which consent may
be granted or withheld in the absolute discretion of the Seller.
11.
Brokerage. The Seller and the Buyer represent and warrant each to the other that
they have respectively dealt directly as principals and that neither party has knowledge of
any brokerage commission claimed or payable as a result of the purchase contemplated
by this Agreement. The parties agree to mutually hold each other harmless from claims
for brokerage commissions asserted by any party as a result of the respective dealings by
either party to this Agreement claimed to give rise to such brokerage commissions.
Furthermore, the Buyer specifically agrees to indemnify, defend and hold the Seller
harmless of and from any commissions claimed by Casual Brokerage Company or Casual
T. Inquiry, Jr. and/or any of their respective agents, nominees, affiliates or subsidiaries.
12.
Miscellaneous. It is further agreed as follows:
12.1
Time. Time is the essence of this Agreement.
12.2
Notice. All notices required hereunder will be in writing and served by
certified mail, return receipt requested, postage prepaid, at the addresses
shown above, until notification of a change of such addresses.
12.3
Survival. All representations, covenants and warranties of the Seller and
the Buyer contained in this Agreement will terminate on the Closing Date
and will not survive the closing of this transaction, except: (a) the
provisions of paragraph 11 above; (b) the warranties of title by the Seller
expressed in the special warranty deed delivered at closing; (c) the
obligations of the Buyer set forth in the Note and Mortgage; (d) the
obligations of the Buyer set forth at paragraphs 5 and 8 of this Agreement;
and (e) any other obligations expressed in the Closing Memorandum
delivered at closing.
_______________________________________
Modern Real Estate Transactions, July 2006
- 94-
12.4
Entire Agreement. This instrument constitutes the entire agreement
between the Buyer and the Seller and there are no agreements,
understandings, warranties or representations between the Buyer and the
Seller except as set forth herein. This Agreement cannot be amended
except in writing executed by the Buyer and the Seller.
12.5
Binding Effect. This Agreement will inure to the benefit of and bind the
respective successors and permitted assigns of the parties hereto.
12.6
Expiration. This Agreement has been executed by the parties on the dates
set forth at their respective signatures. It is understood that the obligation
of the Seller under this Agreement will terminate at 5:00 p.m. local time
on the date two (2) business days after the date of the Seller's execution of
this Agreement unless the Buyer shall have duly executed and returned a
copy of this Agreement to the Seller prior to such date.
12.7
Construction of Agreement. This Agreement is intended to be interpreted
and construed under and by virtue of the internal laws of the State of
Oklahoma, regardless of the domicile and/or residence of either the Buyer
or the Seller, and will be deemed for such purposes to have been made,
executed and to be performed in Oklahoma County, Oklahoma. All
claims, disputes and other matters in question arising out of or relating to
this Agreement, or the breach thereof, will be decided by proceedings
instituted and litigated in a court of competent jurisdiction in Oklahoma
County, Oklahoma, and the parties expressly consent to the venue and
jurisdiction of any such court.
12.8
Counterparts. For the convenience of the parties, this Agreement has been
executed in several counterparts, which are in all respects identical and
each of which shall be deemed to be complete in itself so that any one may
be introduced in evidence or used for any other purpose without the
production of the other counterparts.
12.9
Litigation Expense. In the event either party hereto commences litigation
against the other to enforce its rights hereunder, the prevailing party in
such litigation shall be entitled to recover from the other its reasonable
attorney's fees and expenses incidental to such litigation.
IN WITNESS WHEREOF, this instrument has been executed and delivered on
the date hereafter indicated as of the Effective Date.
LAND INVESTMENT COMPANY,
an Oklahoma general partnership
_______________________________________
Modern Real Estate Transactions, July 2006
- 95-
By_____________________________ Partner
Date Executed: ________________
(the "Seller")
PROJECT CONSTRUCTION COMPANY,
a Delaware corporation
ATTEST:
_______________________
(SEAL)
Secretary
(
By_____________________________
) President
Date Executed: ________________
(the "Buyer")
SCHEDULE "1"
LEGAL DESCRIPTION OF LAND
SCHEDULE "2"
PROMISSORY NOTE
SCHEDULE "3"
MORTGAGE
SCHEDULE "4"
APPROVED TITLE EXCEPTIONS
SCHEDULE "5"
_______________________________________
Modern Real Estate Transactions, July 2006
- 96-
SPECIAL WARRANTY DEED
SCHEDULE "6"
DESCRIPTION OF THE PROPERTY
SCHEDULE "7"
DESCRIPTION OF RELATED PARCEL
[All schedules have been deleted for the purpose
of this publication]
RIGHT OF REFUSAL AGREEMENT
THIS AGREEMENT (the "Agreement") is made effective the _____ day
of ______________, 199__, by LAND HOLDER and HAND HOLDER, husband and
wife, having a notice address at Route 2, Box 18, Guthrie, Oklahoma 73044 (the
"Owners") in favor of HOMESTEAD DEVELOPMENT, INC., an Oklahoma corporation
(the "Developer"), having a notice address at 3000 First Oklahoma Tower, Oklahoma
City, Oklahoma 73102.
RECITALS:
A.
The Owners own approximately one hundred sixty (160) acres of real property
in Oklahoma County, Oklahoma (the "Land"), more particularly described as follows:
Lot One (1) in Block One (1), ORIGINAL PLAT OF
OKLAHOMA CITY, Oklahoma County, Oklahoma, as
shown by the plat recorded in Book 1, page 2.
B.
The Developer is interested in determining whether the Land can be
subdivided and developed;
C.
The Developer's interest is contingent on the Developer gaining access to the
_______________________________________
Modern Real Estate Transactions, July 2006
- 97-
Land to conduct feasibility studies, inspections and tests;
D.
If the Developer determines that it is feasible to subdivide and develop the
Land, the Developer intends to enter into negotiations with the Owners to purchase the
Land on terms which are mutually satisfactory to the Owners and the Developer; and
E.
The Owners are willing to grant such access to the Developer on the terms
hereinafter provided, but not otherwise.
AGREEMENTS:
In consideration of the payment to the Owners of One Hundred Dollars
($100.00) and other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the Owners and the Developer agree as follows:
[1.
Right of Refusal. If during the term of this Agreement the Owners receive a
bona fide third party offer (the "Offer") to purchase all or any part of the Land on
terms that are acceptable to the Owners in the Owners' sole discretion, within five (5)
business days after the Owners' receipt of the Offer the Owners agree to notify the
Developer in writing (the "Notice") by certified mail of the terms of the Offer. The
Developer will have thirty (30) days after the date of receipt of the Notice within which
to notify the Owners that the Developer elects to purchase the Land (or the portion
thereof which is the subject of the Offer) on the terms of the Offer as described in the
Notice. If the Developer so elects, the closing of such sale will take place at the offices
of Southwest Title Company, Oklahoma City, Oklahoma pursuant to the terms of the
Offer. If the Developer does not elect to purchase the Land (or the portion thereof
which is the subject of the Offer) within thirty (30) days after the date of the
Developer's receipt of the Notice, the Owners may sell or transfer the Land (or the
portion thereof which is the subject of the Offer) to another purchaser at the price and
on substantially the terms stated in the Offer. As used herein, the word "purchase"
will be deemed to include any transaction whereby the Owners contribute all or any
portion of the Land, or the Owners' beneficial interest therein, to a partnership,
corporation, limited liability company, trust or other entity, in exchange for an interest
in such entity.]
_______________________________________
Modern Real Estate Transactions, July 2006
- 98-
[1.
Right to Offer. Before the Owners may sell or transfer the Land to any third
party, the Owners agree to first offer the Land to the Developer by giving written notice
(the "Owners' Offer") of the terms and conditions on which the Owners are willing to
sell the Land. The Developer will have thirty (30) days after the date of receipt of the
Owners' Offer within which to notify the Owners that the Developer accepts the
Owners' Offer on the terms and conditions therein contained. If the Developer accepts
the Owner's Offer, the closing of such sale to the Developer will take place at the
offices of Southwest Title Company, Oklahoma City, Oklahoma, pursuant to the terms
of the Owners' Offer. If the Developer does not accept the Owners' Offer in writing
within thirty (30) days after the date of the Developer's receipt thereof, the Owners may
sell the Land to any other person at the price and on the terms and conditions stated in
the Owners' Offer within one hundred twenty (120) days after the date of the Owners'
Offer. At the end of such one hundred twenty (120) days, the right of the Owners to
sell the Land free from the right of first refusal hereby granted will terminate, and the
provisions of this Agreement will apply to any subsequent proposed sale or transfer of
the Land by the Owners. The right of refusal hereby granted will expire on the date
which is twenty-one (21) year after the death of the last surviving child of John D.
Hastie, unless sooner terminated by the exercise of or failure to exercise the option set
forth herein. As used herein, the word "sell" will be deemed to include any transaction
whereby the Owners contribute all or any portion of the Land, or the Owners'
beneficial interest therein, to a partnership, corporation, limited liability company,
trust or other entity, in exchange for an interest in such entity.]
2.
Term. This Agreement and the rights herein granted will expire at midnight on
the one hundred eightieth (180th) day after the date of full execution of this Agreement
by all parties.
3.
Right of Entry. During the term of this Agreement, the Developer, the
Developer's agents, employees, independent contractors and engineers will have the right
from time to time to enter on the Land at the Developer's sole risk for the purpose of
inspecting the same and conducting surveys, engineering studies, borings, soils tests,
environmental studies, investigations, feasibility studies and such other studies, tests and
inspections as the Developer deems appropriate. All such entries will be made in such a
manner as to minimize any material interference with the Owners' use of the Land. The
Developer, to the Owners' reasonable satisfaction, will restore the Land as nearly as
possible to the condition immediately preceding any exercise by the Developer of the
right of entry and inspection granted to Developer pursuant to this Agreement. The
Developer agrees to indemnify, defend and hold the Owners harmless from all liability or
claims of liability directly or indirectly arising out of any such entry; which
indemnification obligation will survive the termination of this Agreement.
4.
Application for Approvals. During the term of this Agreement, the Developer
will have the right, but not the obligation, to apply to appropriate authorities for and to
prosecute the obtaining of: (a) agreements for all improvements required by
_______________________________________
Modern Real Estate Transactions, July 2006
- 99-
governmental authorities as a condition to the development of the Land; (b) any
variances, special exceptions, uses or other approvals required under zoning or other
laws, regulations or requirements pertaining to the intended use, occupancy or
development of the Land; and (c) all other permits and approvals which, in the exercise
of Developer's reasonable judgment, are required as a prerequisite to the development of
the Land.
5.
Owners' Participation. During the term of this Agreement, the Owners, at the
Developer's expense, agree to join in the execution of such applications and other
documents and participate, to the extent not overly burdensome to the Owners, in such
proceedings, as are, in the exercise of the Developer's reasonable judgment, required to
determine the feasibility of the Land for the use intended by the Developer; provided,
however, the Owners will not be required to join or participate in any of the foregoing if
to do so would result in any liability or financial obligation being imposed on the Owners
or the Land unless the Developer agrees to bear the same. The Developer agrees to
indemnify, defend and hold the Owners harmless from any such obligation or liability,
which indemnification obligation will survive the termination of this Agreement.
6.
Binding Effect. This Agreement will inure to the benefit of and bind the
respective heirs, personal representatives, successors and assigns of the parties.
7.
Entire Agreement. This instrument constitutes the entire agreement between
the parties relating to the subject matter of this Agreement and there are no agreements,
understandings, warranties or representations between the parties except as set forth
herein.
8.
Attorneys' Fees. If either party institutes an action against the other party
relating to the provisions of this Agreement or any default hereunder, the unsuccessful
party to such action will reimburse the successful party for the reasonable attorneys' fees,
disbursements and other litigation expenses incurred by the successful party.
9.
Irrevocable. The rights granted to the Developer will be irrevocable during the
term of this Agreement.
IN WITNESS WHEREOF, the undersigned have executed this instrument
this ___ day of ___________, 199__, effective the date first above written.
LAND HOLDER
_______________________________________
Modern Real Estate Transactions, July 2006
- 100-
HAND HOLDER
(the "Owners")
HOMESTEAD DEVELOPMENT, INC., an
Oklahoma corporation
ATTEST:
(SEAL)
Secretary
By
President
(the "Developer")
ACKNOWLEDGMENTS
[INSERT APPROPRIATE ACKNOWLEDGMENTS]
RECIPROCAL EASEMENT AGREEMENT
THIS AGREEMENT is made the ___ day of __________, 19__, between
OKLAHOMA CITY REDEVELOPMENT CORPORATION, an Oklahoma not-forprofit corporation, having a notice address at 15 North Robinson Street, Oklahoma City,
Oklahoma 73102 (the "Agency") and CARROZZA PROPERTIES, LTD., an Oklahoma
limited partnership, having a notice address at 2200 One Dallas Centre, 350 North St.
Paul Street, Dallas, Texas 75201 ("Carrozza").
WITNESSETH:
WHEREAS, The Oklahoma City Urban Renewal Authority ("OCURA")
has heretofore prepared and caused to be adopted by the City of Oklahoma City an urban
renewal plan designated Central Business District No. l-A Urban Renewal Plan, Project
_______________________________________
Modern Real Estate Transactions, July 2006
- 101-
Okla. R-30 (the "Urban Renewal Plan") promulgating an urban redevelopment project
commonly known as the Galleria Development (the "Master Development") covering the
area (the "Total Site") more specifically described as follows:
A part of Blocks 34, 35, 50 and 51 and the streets and alleys therein,
Oklahoma City Original Addition, Oklahoma City, Oklahoma
County, Oklahoma more particularly described as follows:
COMMENCING at the northwest corner of Block 50, Oklahoma
City Original Addition; THENCE east along the north block line of
said Block 50 a distance of 40 feet to the POINT OR PLACE OF
BEGINNING; THENCE continuing east along the north block line
of Block 50 and continuing along the north block line of Block 35,
Oklahoma City Original Addition a distance of 469.96 feet to the
northeast corner of Lot 27, Block 35, Oklahoma City Original
Addition; THENCE south along the east lot line of Lot 27, Block
35, a distance of 160 feet to a point in the south alley line of Block
35; THENCE east along the south alley line of Block 35, a distance
of 125 feet to the northeast corner of Lot l, Block 35, Oklahoma City
Original Addition; THENCE south along the east block line of
Block 35 and continuing along the east block line of Block 34,
Oklahoma City Original Addition a distance of 441.8 feet to a point
20 feet north of the northeast corner of Lot l, Block 34; THENCE
west a distance of 140 feet along a line parallel to and 160 feet north
of the south block line of Block 34; THENCE south 160 feet to a
point on the south block line of Block 34, Oklahoma City Original
Addition said point being 10 feet east of the west lot line of Lot 6,
Block 34; THENCE west along the south block line of Block 34 and
continuing along the south block line of Block 51, Oklahoma City
Original Addition, a distance of 680.61 feet to a point 40 feet east of
the southwest corner of Block 51, Oklahoma City Original Addition;
THENCE north along a line 40 feet east and parallel to the west
block lines of Blocks 54 and 50, Oklahoma City Original Addition,
a distance of 784.56 feet to the POINT OR PLACE OF
BEGINNING, together with the appurtenances and hereditaments
thereunto belonging.
WHEREAS, the Agency and Carrozza have heretofore entered into a
certain Contract for Sale of Land and Redevelopment (the "Redevelopment Contract")
dated ____________, 19__, whereby the Agency agreed to sell the Total Site to
Downtown Galleria, Ltd., an Oklahoma limited partnership ("Downtown") affiliated with
Carrozza and Downtown agreed to redevelop the Total Site, all as more specifically
provided in the Redevelopment Contract;
_______________________________________
Modern Real Estate Transactions, July 2006
- 102-
WHEREAS, pursuant to the terms of the Redevelopment Contract,
Carrozza has heretofore submitted to OCURA and the Agency, and OCURA and the
Agency have approved a certain master plan (the "Master Plan") for redevelopment of the
Total Site dated _________, 19__, prepared by I. M. Pei and Partners, Architects;
WHEREAS, simultaneously with the execution of this Agreement, the
Agency has conveyed to Carrozza certain real property (the "One Galleria Tract")
constituting a part of the Total Site which is more specifically described as follows:
The South One Hundred Twenty (120) feet of Lots One (1) through
Seven (7) inclusive and the South One Hundred Twenty (120) feet
of the East one-half (l/2) of Lot Eight (8), all in Block Thirty-five
(35), OKLAHOMA CITY ORIGINAL TOWNSITE, and the North
Five (5) feet of Main Street located contiguous thereto, Oklahoma
City, Oklahoma County, Oklahoma; and
An easement and right of way for private roadways, walkways and
plaza areas over, through, under and across the following described
real property situated in Oklahoma County, to-wit:
The North Twenty (20) feet of Lots One (1) through Eight (8)
inclusive and the West one-half (l/2) of Lot Eight (8), and the North
Five (5) feet of Main Street located contiguous to the West one-half
(1/2) of Lot Eight (8), all in Block Thirty-five (35), OKLAHOMA
CITY ORIGINAL TOWNSITE, Oklahoma City, Oklahoma County,
Oklahoma;
on which Carrozza will construct an office building to be known as "One Galleria";
WHEREAS, by means of this Agreement, the Agency and Carrozza in
furtherance of the Urban Renewal Plan and the Master Plan desire to create certain
mutual rights to use between the One Galleria Tract, the balance of the Total Site and all
future redevelopment parcels comprising a part of the Total Site to facilitate the
development of the Master Development as an integrated office, retail, hotel and parking
redevelopment in accordance with the Master Plan as the same might be modified from
time to time by Downtown with the approval of the Agency and OCURA (the One
Galleria Tract and all other tracts comprising a portion of the Total Site which are
hereafter conveyed by OCURA or the Agency for redevelopment are hereafter singularly
called a "Development Tract" and collectively called the "Development Tracts").
NOW, THEREFORE, in consideration of the mutual agreements herein
contained and other good and valuable considerations, it is agreed as follows:
1.
Grant of Easements. The Agency and Carrozza hereby grant each to the other
_______________________________________
Modern Real Estate Transactions, July 2006
- 103-
and to each individual, partnership, joint venture, corporation, trust, unincorporated
association, governmental agency or other business entity now or hereafter holding an
ownership interest in fee in a portion of the Total Site or a Development Tract (which
persons are hereafter singularly called an "Owner" and collectively called the "Owners")
the following easements:
1.1 Pedestrian Easements. Nonexclusive easements for the purpose of
pedestrian traffic between each Development Tract and: (i) each
other Development Tract which is contiguous thereto; (ii) the
public streets and alleys now or hereafter abutting or located on
any portion of the Total Site; (iii) the public walkways, escalators,
elevators, concourses, plazas, malls, skywalks and bridges now and
hereafter abutting or located on any portion of the Total Site; and
(iv) the public parking areas now and hereafter abutting the Total
Site or constituting a Development Tract; limited however, to those
portions of each Development Tract which are improved by the
Owner thereof from time to time for pedestrian walkways and
made available by such Owner for general use, as such portions
may be reduced, increased or relocated from time to time by each
such Owner.
1.2 Vehicular Easements.
Nonexclusive easements for the purpose of
vehicular traffic between each Development Tract and the public
streets and alleys now and hereafter abutting or located on any
portion of the Total Site; limited however, to those portions of the
Development Tracts which are improved by the Owner thereof
from time to time for vehicular accessways as such portions may
be relocated from time to time by such Owner.
1.3 Common Component Easements.
Nonexclusive easements for the
purpose of furnishing connection, support and attachment to walls,
footings, foundations, slabs, roofs and other structural systems of
any improvement now and hereafter constructed on each
Development Tract, the encroachment of common components of
improvements and the maintenance, repair and replacement of the
same; limited, however, to those portions of each Development
Tract on which an improvement is contiguous to an improvement
constructed on another Development Tract. Any Owner of a
Development Tract (the "Benefited Tract") which desires to claim
the benefit of the foregoing easement for common components and
encroachments will be entitled to exercise such right on the
following conditions:
(a)
The Owner of the Benefited Tract will submit plans and
specifications showing the improvements proposed to be
_______________________________________
Modern Real Estate Transactions, July 2006
- 104-
constructed on the Benefited Tract to the Owner of the
Development Tract (the "Burdened Tract") which will be
burdened by the easements hereby created for approval of
such plans and specifications by the Owner of the
Burdened Tract.
(b)
Approval of such plans and specifications by the Owner of
the Burdened Tract will constitute a designation of the
portion(s) of the Burdened Tract to be used for the purposes
therein described.
(c)
The construction of the improvements on the Benefited
Tract will be diligently prosecuted by the Owner thereof
with due care and in accordance with sound design,
engineering and construction practices in a manner which is
customary for such improvements and which will not
unreasonably interfere with the use of the Burdened Tract
or the improvements thereon or impose an unreasonable
load on such improvements.
(d)
The Owner of the Benefited Tract will indemnify and hold
the Owner of the Burdened Tract harmless from all loss,
cost and expense arising from the construction of the
improvements on the Benefited Tract and the exercise of
the rights of the Owner of the Benefited Tract hereunder.
When the exercise of the rights hereby granted to the
Owner of the Benefited Tract requires entry upon the
Burdened Tract or the improvements thereon, the Owner of
the Benefited Tract will give due regard to the use of the
Burdened Tract and the improvements thereon in the
exercise of such rights and will promptly repair, replace or
restore any and all improvements on the Burdened Tract
which are damaged or destroyed in the exercise of such
rights.
_______________________________________
Modern Real Estate Transactions, July 2006
- 105-
(e)
Absent a definitive agreement to the contrary, subsequent
to the completion of the improvements to the Benefited
Tract, the Owner of the Burdened Tract and the Owner of
the Benefited Tract will share proportionately the cost of
maintenance, repair and replacement of any common
component constructed by either of them which provides
vertical or lateral support to contiguous improvements, in
accordance with that ratio which the load contributed by
the improvements of each Owner bears to the total load on
such common components; the cost of maintenance, repair
and replacement of any common wall, roof or structural
joinder (other than components providing support) will be
paid solely by the Owner of the Benefited Tract.
(f)
The Owner of the Burdened Tract agrees on the written
request of the Owner of the Benefited Tract, to execute and
deliver an instrument in recordable form legally sufficient
to evidence the grant of the easements herein described, the
location thereof and such other conditions affecting the
grant of such easements, as might have been approved by
such Owners.
1.4 Utility Easements. Nonexclusive easements for the installation, operation,
maintenance, repair, replacement and removal of: water lines and
systems; telephone lines and systems; gas lines and systems;
sanitary sewer lines and systems; electrical lines and systems;
storm sewers, drainage lines and systems; any other utility lines or
systems hereafter developed to serve one or more of the
Redevelopment Parcels; provided however, that all pipes, wires,
lines, conduits, mains, sewers, systems and related equipment
(hereafter called "Utility Facilities") will be installed underground
or otherwise enclosed and will be installed, operated and
maintained in a manner which will not unreasonably interfere with
the use of the Development Tract or improvements on which such
Utility Facilities are located. The Owner of any Burdened Tract
affected by any of such utility easements will have the right, at any
time, and from time to time, to relocate any Utility Facilities then
located on the Burdened Tract on the conditions that: (i) such
right of relocation will be exercisable only after thirty (30) days'
prior written notice of the intention to relocate has been given to all
Owners using the Utility Facilities to be relocated; (ii) such
relocation will not unreasonably interrupt any utility service to the
improvements then located on the Benefited Tract(s); (iii) such
relocation will not reduce or unreasonably impair the usefulness or
_______________________________________
Modern Real Estate Transactions, July 2006
- 106-
function of the Utility Facilities to be relocated; and (iv) all costs
of such relocation will be borne by the Owner relocating the Utility
Facilities.
1.5 Access Easements. Nonexclusive easements between each Development
Tract and the public streets and ways abutting or crossing any
portion of the Total Site for the purpose of providing ingress,
egress and access to the easements hereby created.
1.6 Self Help Easements. Nonexclusive rights of entry and easements over,
across and under each Development Tract for all purposes
reasonably necessary to enable any other Owner of a Development
Tract to perform any of the provisions of this Agreement which a
defaulting Owner has failed to perform.
2.
Unimpeded Access. The Owners agree that no barricade or other divider will
be constructed between the Development Tracts and the Owners will do nothing to
prohibit or discourage the free and uninterrupted flow of pedestrian traffic throughout the
Total Site in the areas designated for such purpose by the Owner of each Development
Tract; provided that each Owner will have the right to temporarily erect barriers to avoid
the possibility of dedicating such areas for public use or creating prescriptive rights
therein.
3.
Use of Easements. Subject to the reasonable rules and regulations adopted for
the use of each Development Tract by the Owner thereof, the use of all easements created
by this Agreement will, in each instance, be nonexclusive and for the use and benefit of
the Owners, their respective successors, assigns, and such agents, customers, invitees,
licensees, employees, servants, contractors, mortgagees, tenants and tenants' customers,
invitees, employees, servants, licensees, contractors and agents as might be designated by
each Owner from time to time (all of which persons are hereafter called "Permittees").
Each Owner specifically reserves the right, at any time and from time to time, to
promulgate such rules and regulations applicable to the Owner's Development Tract as
might be reasonably imposed to promote the health, safety, welfare and security of such
Development Tract, the improvements located thereon and the Permittees of such Owner.
Each Owner may, at any time and from time to time, remove, exclude and restrain any
person from the use, occupancy or enjoyment of any easement hereby created or the area
covered thereby for failure to observe the reasonable rules and regulations established as
provided herein. If unauthorized use is being made of any easement area by any of the
Owners or their respective Permittees, such unauthorized use may be restrained or
terminated by appropriate proceedings after written notice to the defaulting Owner and
failure to abate such unauthorized use within a reasonable time.
4.
Maintenance of Easement Areas. Except to the extent that such areas might be
operated and maintained by public authorities or utilities, the Owner of each Burdened
_______________________________________
Modern Real Estate Transactions, July 2006
- 107-
Tract will operate and maintain all of the areas of the Burdened Tract which are subject to
the pedestrian and vehicular easements created by paragraphs 1.1 and 1.2 of this
Agreement in sound structural and operating condition at the sole expense of the Owner
of the Burdened Tract. The operation and maintenance of the common component and
encroachment easements created by paragraph l.3 of this Agreement and the payment of
the expenses associated therewith will be governed by the terms of paragraph l.3 in the
absence of specific agreement between the Owners of the Benefited Tract(s) and the
Burdened Tract(s). The Owner of each Burdened Tract will operate and maintain all
Utility Facilities located within the boundaries of such Burdened Tract in sound structural
and operating condition (except to the extent that such operation and maintenance is
performed by public authorities or utilities) and any expenses occasioned thereby will be
borne by the Owners of the Benefited Tract(s) which are serviced by such Utility
Facilities in the ratio which the gross rentable area of the improvements located on each
Benefited Tract bears to the total gross rentable area of the improvements located on all
Benefited Tracts; provided, however, that each Owner will pay all costs associated with
the operation and maintenance of Utility Facilities and the consumption of utility services
which relate solely to the improvements located on a single Development Tract and no
other Owner will have any liability with respect thereto.
5.
Duration. This Agreement and each easement created hereunder will continue
for a term of sixty (60) years from the date of this Agreement and will thereafter continue
in full force and effect so long as any easement created hereby is used by any Owner; this
Agreement will terminate as to each easement on nonuse of such easement for a period of
six (6) consecutive months, unless simultaneously with the commencement of the period
of nonuse, notice is given by the affected Owner of an intention to resume use of such
easement within twenty-four (24) months following the date on which nonuse
commences and such resumption occurs within such period.
6.
Indemnity. Each Owner agrees to indemnify and hold harmless each other
Owner from all claims arising from the use of the easements hereby created to the extent
that such use occurs within the boundaries of the Development Tract of such Owner. The
Owner of each Development Tract on which construction is performed agrees to
indemnify, defend and hold harmless each other Owner and each other Owner's
Development Tract and the improvements located thereon from all loss, cost, damage,
liability and expense (including reasonable attorneys' fees) resulting from the assertion of
any mechanics', materialmen's or other liens. Each Owner agrees to maintain policies of
fire and extended coverage insurance and of public liability insurance issued by reputable
companies in amounts and on policy terms customary for the improvements of such
Owner. Each Owner releases each other Owner from any liability for any loss or damage
of the type provided by fire and extended coverage insurance, and grants to each other
Owner, on behalf of any insurer providing such insurance, a waiver of any right of
subrogation which any insurer of any Owner might acquire against any other Owner by
virtue of payment of any loss covered by such insurance.
_______________________________________
Modern Real Estate Transactions, July 2006
- 108-
7.
Legal Effect. Each of the easements and rights created by this Agreement are
appurtenant to the Development Tract to which they relate and may not be transferred,
assigned or encumbered except as an appurtenance to such Development Tract. For the
purpose of each such easement and right, the Benefited Tract will constitute the dominant
estate and the Burdened Tract will constitute the servient estate. Each covenant
contained in this Agreement: (a) is made for the direct, mutual and reciprocal benefit of
each other Development Tract now or hereafter constituting a part of the Total Site; (b)
creates mutual equitable servitudes on each Development Tract in favor of each other
Development Tract; (c) constitutes a covenant running with the land; (d) binds every
Owner now having or hereafter acquiring an interest in any Development Tract; and (e)
will inure to the benefit of each Owner and each Owner's successors, assigns and
mortgagees. Each Owner agrees that on conveyance of all or any part of the Total Site or
a Development Tract, the grantee, by accepting such conveyance will thereby become a
new party to and be bound by this Agreement. In each such instance the Owner
conveying an interest in the Total Site or a Development Tract agrees: (a) to require the
grantee to assume and agree to perform each of the obligations of the conveying Owner
under this Agreement with respect to the portion of the Total Site or Development Tract
conveyed to such grantee by means of a written instrument executed, acknowledged and
recorded in Oklahoma County, Oklahoma; and (b) to give notice of each such
conveyance and agreement to each other Owner within ten (10) days after the execution
thereof, which notice will be accompanied by a copy of such conveyance and agreement.
On such assumption by a grantee and the giving of notice thereof, the conveying Owner
will thereafter be released from any obligation under this Agreement arising thereafter
with respect to the portion of the Total Site or Development Tract so conveyed. Each
Owner agrees on the written request of the conveying Owner to execute and delivery any
appropriate documents or assurances to evidence such release.
8.
No Dedication. Nothing contained in this Agreement will be deemed to
constitute a gift, grant or dedication of any portion of a Development Tract to the general
public or for any public purpose whatsoever, it being the intention of the Owners that this
Agreement will be strictly limited to the private use of the Owners and their respective
Permittees. This Agreement is intended to benefit the Owners and their respective
successors, assigns and mortgagees and is not intended to constitute any person which is
not an Owner a third party beneficiary hereunder or to give any such person any rights
hereunder.
9.
Amendment. This Agreement and any provision herein contained may be
terminated, extended, modified or amended as to the Total Site or any Development
Tract, only with the express written consent of all of the Owners of the real property
included within the Total Site; provided however, the Owners of the Benefited Tract(s)
and the Burdened Tract(s) affected by the common component and encroachment
easements granted by paragraph l.3 of this Agreement will have the right to create,
terminate, extend, modify and amend any agreements relating thereto without the consent
of any other Owner. No amendment, modification, extension or termination of this
_______________________________________
Modern Real Estate Transactions, July 2006
- 109-
Agreement will affect the rights of the holder of any mortgage constituting a lien on any
portion of the Total Site or a Development Tract unless such mortgagee consents to the
same, nor will any amendment, modification, extension or termination be effective
against any mortgagee subsequent to such mortgagee's acquiring title to a portion of the
Total Site or a Development Tract by foreclosure or deed in lieu of foreclosure, unless the
mortgagee has so consented in writing. No tenant, licensee or other person having only a
possessory interest in the improvements constructed on a Development Tract will be
required to join in the execution of or consent to any action of the Owners taken pursuant
to this Agreement.
10.
Condemnation. In the event the whole, or any part, of a Development Tract is
taken for any public or quasi-public use under any governmental law, ordinance or
regulation, or by right of eminent domain, or by private purchase in lieu thereof, an
Owner benefited by an easement created by this Agreement will not share in any award,
compensation or other payment made by reason of the taking of a portion of any
Development Tract which is subject to such easement, and such award, compensation or
other payment will belong entirely to the Owner of that portion of the Development Tract
which is taken, and such Owner will have no further liability to any other Owner for the
loss of such easements, or portion thereof, located on the Development Tract so taken.
11.
Default; Remedies. The Owners agree that the provisions of this Agreement
will be enforced as follows:
11.1 Injunctive Relief. In the event of any violation or threatened violation by
any Owner of any of the provisions of this Agreement, in addition
to the right to collect damages, each Owner will have the right to
enjoin such violation or threatened violation in a court of
competent jurisdiction. Prior to the commencement of any such
action, written notice of the violation will be given to the Owner
claimed to have committed such violation.
11.2 Self Help. In the event any Owner fails to perform any of the provisions
of this Agreement, any other Owner will have the right, without
being obligated to do so, to enter upon the Development Tract and
improvements of such defaulting Owner and perform the
obligations of the defaulting Owner hereunder; provided, however,
that written notice of such intention, specifying the nature of the
alleged default and the actions to be performed, has been given to
the defaulting Owner not less than ten (10) days prior to the
commencement of such action or not less than twenty-four (24)
hours prior to such commencement if, in the reasonable judgment
of the Owner giving notice, such default is of an emergency nature.
During such ten (10) day or twenty-four (24) hour period, as the
case may be, the defaulting Owner will have the right to perform
or commence performance of action appropriate to remedy such
_______________________________________
Modern Real Estate Transactions, July 2006
- 110-
default, and provided such action is diligently carried to
completion, the right of such other Owner to perform the
obligation of the defaulting Owner will terminate. If an Owner
elects to perform the action to have been performed by a defaulting
Owner, on completion of such action, or from time to time, if the
action is of a continuing nature, an itemized statement of the cost
thereof will be submitted to the defaulting Owner and the amount
thereof will be immediately due and payable by the defaulting
Owner which amount will bear interest at the rate of fifteen percent
(15%) per annum until paid.
11.3 Force Majeure. If performance of any action by any Owner is prevented
or delayed by act of God, war, labor disputes or other cause
beyond the reasonable control of such Owner, the time for the
performance of such action will be extended for the period that
such action is delayed or prevented by such cause.
11.4 Notice of Default. An Owner will not be in default under this Agreement
unless the Owner has received written notice specifying the nature
of such default and has failed to cure or commence appropriate
action to cure such default within the times herein provided.
11.5 No Termination. No breach of this Agreement will entitle any Owner to
cancel, rescind or otherwise terminate this Agreement. The
foregoing limitation will not affect, in any manner, any other right
or remedy which any Owner might have by reason of any breach
of this Agreement.
12.
Effect of Reverters. The Owners acknowledge that the documents effecting
the initial conveyance of each Development Tract made by OCURA or the Agency as
grantor contain certain conditions subsequent, the violation of which will entitle the
beneficiaries thereof to exercise certain rights of reverter contained in such documents.
In the event of the divestiture of title of any Owner to any Development Tract by reason
of the exercise of any right of reverter by such beneficiaries, the rights, obligations and
easement of the divested Owner under this Agreement will pass to the person exercising
such right of reverter as an appurtenance to the Development Tract which is the subject
of the divestiture. The beneficiary exercising any such right of reverter will be deemed a
successor in ownership to the Development Tract which is the subject of the divestiture
and will be bound by all of the provisions of this Agreement effective on the date title to
the Development Tract vests in such beneficiary.
13.
Miscellaneous. The Owners further agree as follows:
13.1 Approvals. When approval by any Owner is required hereunder, such
_______________________________________
Modern Real Estate Transactions, July 2006
- 111-
approval will not be unreasonably withheld. Unless provision is
made for a specific period of time, the period of time in which
approval will be granted will be thirty (30) days, and if a Owner
neither approves nor disapproves a proposed action within that
period, the Owner will be deemed to have given such Owner's
approval. If an Owner disapproves any action proposed by another
Owner hereunder, such disapproval will not be effective unless the
reasons for such disapproval are stated in writing.
13.2 Notices.
All notices, statements, demands, approvals and other
communications given pursuant to this Agreement will be in
writing and will be delivered in person or by certified or registered
mail, postage prepaid to the Owners at the addresses maintained by
the Owners on file with the office of the Oklahoma County
Assessor for delivery of ad valorem tax statements relating to a
Development Tract until such addresses are changed by notice.
13.3 Attorneys' Fees. If any Owner institutes any action or proceeding against
another Owner relating to the provisions of this Agreement or any
default hereunder, the unsuccessful Owner in such action or
proceeding will reimburse the successful Owner therein for the
reasonable expenses of attorneys' fees and disbursements incurred
by the successful Owner.
13.4 Waiver of Default. No waiver of any default by any Owner will be
implied from the failure by any other Owner to take any action in
respect of such default. No express waiver of any default will
affect any default or extend any period of time for performance
other than as specified in such express waiver. One or more
waivers of any default in the performance of any provision of this
Agreement will not be deemed a waiver of any subsequent default
in the performance of the same provision or any other provision.
The consent to or approval of any act or request by any Owner will
not be deemed to waive or render unnecessary the consent to or
approval of any subsequent similar act or request. The rights and
remedies provided by this Agreement are cumulative and no right
or remedy will be exclusive of any other, or of any other right or
remedy at law or in equity which any Owner might otherwise have
by virtue of a default under this Agreement and the exercise of any
right or remedy by any Owner will not impair such Owner's
standing to exercise any other right or remedy.
13.5 No Partnership. Nothing contained in this Agreement and no action by the
Owners will be deemed or construed by the Owners or by any third
_______________________________________
Modern Real Estate Transactions, July 2006
- 112-
person to create the relationship of principal and agent, or a
partnership, or a joint venture, or any association between or
among any of the Owners.
13.6 Severability. If any provision of this Agreement is, to any extent, declared
by a court of competent jurisdiction to be invalid or unenforceable,
the remainder of this Agreement (or the application of such
provision to persons or circumstances other than those in respect of
which the determination of invalidity or unenforceability was
made) will not be affected thereby and each provision of this
Agreement will be valid and enforceable to the fullest extent
permitted by law.
13.7 Governing Law. This Agreement will be construed in accordance with the
laws of the State of Oklahoma.
13.8 Captions. The captions of the paragraphs of this Agreement are for
convenience only and are not intended to affect the interpretation
or construction of the provisions herein contained.
13.9 Time. Time is the essence of this Agreement.
13.10
Binding Effect. The provisions of this Agreement will be binding
on the Owners and their respective successors, assigns and
mortgagees to the extent herein provided.
IN WITNESS WHEREOF, this instrument has been executed effective of
the date first above written.
CARROZZA PROPERTIES, LTD.,
an Oklahoma limited partnership
By /s/
Vincent A. Carrozza
General Partner
OKLAHOMA CITY REDEVELOPMENT
CORPORATION, an Oklahoma not-for-profit
corporation
ATTEST:
_______________________________________
Modern Real Estate Transactions, July 2006
- 113-
______
(SEAL) Secretary
By /s/
President
RATIFICATION
IN CONSIDERATION of the agreements between the Agency and
Carrozza and the benefits to be realized by OCURA in connection therewith the
undersigned as the holder of record title to all portions of the Total Site other than the
One Galleria Tract hereby ratifies, confirms, approves and agrees to be bound by the
provisions of the foregoing Reciprocal Easement Agreement. OCURA agrees to execute
and deliver from time to time such instruments as might reasonably be required by the
Agency or Carrozza to create temporary easements affecting portions of the Total Site
(other than the One Galleria Tract) to implement the Master Plan (as the same might be
modified from time to time by Downtown with the consent of OCURA and the Agency)
and this Reciprocal Easement Agreement.
IN WITNESS WHEREOF this instrument has been executed effective the
___ day of ______________, 19__.
THE OKLAHOMA CITY URBAN RENEWAL
AUTHORITY
ATTEST:
______
(SEAL) Secretary
By /s/
Chairman
ACKNOWLEDGMENTS
STATE OF ______________ )
COUNTY OF _____________
)
)
SS:
This instrument was acknowledged before me on __________, 19__, by
Vincent A. Carrozza, Sole General Partner of Carrozza Properties, Ltd., an Oklahoma
limited partnership.
_______________________________________
Modern Real Estate Transactions, July 2006
- 114-
(SEAL)
____________________________
Notary Public
My Commission Expires: _____
STATE OF ______________ )
COUNTY OF _____________
)
)
SS:
This instrument was acknowledged before me on __________, 19__, by
, President of Oklahoma City Redevelopment Corporation, an Oklahoma not-for-profit
corporation.
(SEAL)
____________________________
Notary Public
My Commission Expires: _____
STATE OF ______________ )
COUNTY OF _____________
)
)
SS:
This instrument was acknowledged before me on __________, 19__, by
, Chairman of The Oklahoma City Urban Renewal Authority, a public body corporate.
(SEAL)
____________________________
Notary Public
My Commission Expires: _____
SUBORDINATE MORTGAGE PROVISIONS
Subordinate Mortgage Provisions - Default Under Prior Mortgage
__.
Prior Mortgages. The Mortgagor agrees that in the event a default occurs
under the terms of any mortgage (a "Prior Mortgage") covering the Mortgaged Premises
_______________________________________
Modern Real Estate Transactions, July 2006
- 115-
which is now or might hereafter become superior in lien to the lien of this Mortgage, or in
performance under the indebtedness secured by any such Prior Mortgage, the holder of
this Mortgage may, at its option, proceed to cure such default by the payment of all or
any part of the indebtedness secured by such Prior Mortgage and the holder hereof will
be subrogated to the lien of such Prior Mortgage to the extent of such payment or, at the
option of the Mortgagee, such default under said Prior Mortgage will be deemed to be a
default hereunder and will entitle the Mortgagee to exercise any or all of the rights
provided herein. The Mortgagor hereby waives notice of the exercise of such option. In
the event the holder of any Prior Mortgage requires the Mortgagee to subordinate the lien
of this Mortgage to a Prior Mortgage executed by the Mortgagor subsequent to the
recording of this Mortgage, the Mortgagee may from time to time and at any time release
the lien of this Mortgage of record and subsequently rerecord the same without thereby in
any way affecting the rights and obligations of the Mortgagee and the Mortgagor
hereunder, and without affecting the priority of the lien of this Mortgage except as to the
Prior Mortgage and instruments recorded prior to the original recording of this Mortgage.
Subordinate Mortgage Provisions - Subrogation to Prior Mortgage
__.
Subrogation. To the extent funds are advanced under the Note hereby secured
for the purpose of paying the indebtedness secured by any mortgage lien having priority
over the lien of this Mortgage, the Mortgagee will be subrogated to any and all rights,
superior titles, liens and equities owned or claimed by the holder of such prior mortgage.
Except with respect to the priority of any mortgage to which the Mortgagee is subrogated
pursuant to the provisions hereof, the terms and provisions of this Mortgage will govern
the rights and remedies of the Mortgagee and will supersede the rights and remedies
provided under any mortgage to which the Mortgagee is subrogated.
Subordinate Mortgage Provisions - Adverse Change
__.
Adverse Change. The indebtedness hereby secured will become immediately
due and payable, at the option of the Mortgagee, if in the reasonable opinion of the
Mortgagee there shall have occurred a material adverse change in the financial condition
of the Mortgaged Premises, the Mortgagor or any guarantor of the indebtedness hereby
secured, from the financial condition existing on the date hereof; provided that such
material adverse change is not cured within thirty (30) days after the Mortgagee gives
written notice to the Mortgagor of the Mortgagee's intent to declare the indebtedness
hereby secured due and payable by reason of such default. The Mortgagor agrees to
provide or cause to be provided current financial information relating to the Mortgaged
Premises, the Mortgagor and any guarantor of the indebtedness hereby secured on request
_______________________________________
Modern Real Estate Transactions, July 2006
- 116-
to do so by the Mortgagee.
Subordinate Mortgage Provisions - Additional Collateral; Insecurity
__.
Additional Collateral; Insecurity. The Mortgagor agrees that the Mortgagee
may from time to time call for additional security of such kind and value as might be
determined to be satisfactory by the Mortgagee, and on the failure of the Mortgagor to
comply with such request, or if in the judgment of the Mortgagee the security for
payment of the indebtedness hereby secured has depreciated in value to the extent that
such indebtedness is not regarded as adequately secured in the sole determination of the
Mortgagee, then, at the option of the Mortgagee, the indebtedness hereby secured will
become immediately due and payable.
Subordinate Mortgage Provisions - Inspection; Management
__.
Inspection; Management. The Mortgagee and any persons authorized by the
Mortgagee will have the right to enter and inspect the Mortgaged Property at all
reasonable times. If the management or maintenance of the Mortgaged Property is
determined by the Mortgagee to be unsatisfactory, the Mortgagor will employ any person
from time to time designated or approved by the Mortgagee as managing agent of the
Mortgaged Property.
Subordinate Mortgage Provisions - Alterations
__.
Alterations. No portion of the Mortgaged Property will be removed,
demolished or materially altered without the prior written consent of the Mortgagee;
except that the Mortgagor will have the right to remove such items of personal property
comprising a part of the Mortgaged Property as become worn or obsolete, provided that
such personal property is replaced with other personal property of a value at least equal to
that replaced, free from any title retention device, security interest or other encumbrance;
by such replacement, the Mortgagor will be deemed to have subjected such personal
property to the mortgage lien and security interest created by this Mortgage.
Subordinate Mortgage Provisions - Sale; Encumbrance; Use
_______________________________________
Modern Real Estate Transactions, July 2006
- 117-
__.
Sale; Encumbrance; Use. The Mortgagor will not: (a) sell, convey, or
otherwise transfer all or any part of the Mortgaged Property; (b) sell, convey, pledge or
encumber any of the stock or ownership interest in any corporation, partnership or other
entity owning all or any part of the Mortgaged Property; (c) create, assume or suffer to
exist any mortgage, lien, security interest, title retention device or other encumbrance
covering all or any part of the Mortgaged Property, excluding only encumbrances held by
the Mortgagee and liens for governmental charges which are not delinquent; or (d) permit
the Mortgaged Property to be used for any purpose other than
______________________. The occurrence of any of the foregoing events without the
Mortgagee's prior written approval, at the Mortgagee's option, will constitute an event of
default hereunder, and the Mortgagee will have the option to declare the indebtedness
hereby secured immediately due and payable and exercise any or all of the Mortgagee's
rights herein provided. The foregoing provisions will apply to each and every sale,
encumbrance, transfer and modification of use whether or not the Mortgagee has
consented to any previous sale, encumbrance, transfer or modified use.
WRAPAROUND LOAN DOCUMENTS
PURCHASE MONEY SECURED
WRAPAROUND PROMISSORY NOTE
$35,000,000.00
Oklahoma City, Oklahoma
______________, 19__
FOR VALUE RECEIVED, the undersigned DOWNTOWN OFFICE
TOWER LIMITED PARTNERSHIP, an Illinois limited partnership, having its principal
place of business as set forth in paragraph 11.1 ("Maker"), does hereby promise to pay to
DEVELOPMENT (HROB) LIMITED PARTNERSHIP, an Oklahoma limited
partnership, having its principal place of business as set forth in paragraph 10.1
("Payee"), the principal sum of THIRTY-FIVE MILLION DOLLARS ($35,000,000.00)
plus interest on the Outstanding Principal Amount (hereinafter defined) from time to time
outstanding hereunder from the date hereof until all amounts due and owing hereunder
have been paid in full, whether at stated maturity or otherwise, as hereinafter provided.
ARTICLE I: INDEBTEDNESS AND SENIOR DEBT
1.1 This Note is given to evidence indebtedness of Maker to Payee in the
amount hereof as payment for the purchase by Maker from Payee pursuant to that certain
_______________________________________
Modern Real Estate Transactions, July 2006
- 118-
Real Estate Purchase/Sale Agreement dated as of _______________, 19__, between
Payee, as seller, and Maker, as buyer (the "Contract"), of the real and personal property
located in Oklahoma City, Oklahoma, constituting the Mortgaged Property (hereinafter
defined). This Note wraps around the aggregate principal indebtedness secured by the
Senior Mortgage (hereinafter defined), and includes in the principal amount hereof the
aggregate principal indebtedness as of _______________, 19__, of THIRTY MILLION
DOLLARS ($30,000,000.00) evidenced by an Amended and Restated Promissory Note
(collectively the "Senior Note") and secured by an Amended and Restated Mortgage and
Security Agreement recorded on _______________, 19__, in Book ____, at Page ____,
in the records of the County Clerk for Oklahoma County (collectively the "Senior
Mortgage").
1.2 Maker represents and warrants to Payee that the borrowings evidenced
hereby arise pursuant to a commercial lending transaction and that the indebtedness
evidenced by this Note and the proceeds thereof were and will be used solely for the
acquisition of the Mortgaged Property pursuant to the Contract.
1.3 The Outstanding Principal Amount as of any date is the sum of THIRTYFIVE MILLION DOLLARS ($35,000,000.00), less amounts paid to Payee on account of
principal pursuant to Article IV hereof ("Outstanding Principal Amount"). The
Outstanding Principal Amount as of the date hereof is divided into two (2) components.
The first component, in the amount of THIRTY MILLION DOLLARS ($30,000,000.00)
equals the principal balance outstanding on the Senior Note and is referred to herein as
the "Senior Balance". The second component, in the amount of FIVE MILLION
DOLLARS ($5,000,000.00), is referred to herein as the "Junior Balance." The Senior
Balance shall be reduced by all amounts paid to Payee on account of principal (as
opposed to interest) pursuant to Article IV hereof. Any principal payments made to
Payee shall reduce the Outstanding Principal Amount such that the amount of the Junior
Balance shall remain unchanged.
ARTICLE II: SECURITY
2.1 This Note is secured by and entitled to the benefits of a Wraparound
Mortgage and Security Agreement (the "Mortgage") of even date herewith from Maker,
as Mortgagor, to Payee, as Mortgagee, which Mortgage encumbers, among other things,
title to that certain real property located in Oklahoma City, Oklahoma, and personal
property associated therewith, all as more particularly described in the Mortgage
(collectively the "Mortgaged Property"), and to which Mortgage reference is hereby
made for a description of the nature and extent of the security and collateral provided
thereby.
2.2 This Note is further secured by and entitled to the benefits of (i) a
Wraparound Collateral Assignment of Lessor's Interest in Leases from Maker, as
_______________________________________
Modern Real Estate Transactions, July 2006
- 119-
Assignor, to Payee, as Assignee (the "Lease Assignment"), and (ii) a Limited Guaranty
Agreement from Syndicate Sponsor, Inc. ("Sponsor"), as Guarantor, to Payee, as Lender
(the "Guaranty Agreement"); said Lease Assignment and Guaranty Agreement are
collectively referred to herein as the "Additional Collateral Instruments." Reference is
hereby made to such Additional Collateral instruments for a description of the nature and
extent of the security and collateral provided thereby.
ARTICLE III: INTEREST
3.1
The Outstanding Principal Amount of this Note from time to time
shall bear uncompounded simple interest as follows:
(a) The Senior Balance shall bear uncompounded simple interest at the rate of
thirteen and one-half percent (13 1/2%) per annum from and after the date hereof to and
including the Maturity Date (hereinafter defined), payable as hereinafter provided in this
Note; and
(b) The Junior Balance shall bear uncompounded simple interest at the rate of
twelve and one-half percent (12 1/2%) per annum from and after the date hereof to and
including the Maturity Date, payable as hereinafter provided in this Note.
3.2 Interest due hereunder shall be computed for the actual number of days
elapsed on the basis of a year consisting of 360 days.
3.3 Any sum not paid when due will bear interest at the rate of eighteen and
one-half percent (18 1/2%) per annum ("Default Rate") and will be paid at the time of
and as a condition precedent to the curing of any default hereunder, the Mortgage or the
Additional Collateral Instruments.
3.4 All agreements between Maker and Payee (including, without limitation,
this Note, the Mortgage and the Additional Collateral Instruments) are expressly limited
so that in no event whatsoever shall the amount paid or agreed to be paid to Payee exceed
the highest lawful rate of interest permissible under applicable laws. If, from any
circumstances whatsoever, fulfillment of any provision hereof or of the Mortgage or any
Additional Collateral Instrument, at the time performance of such provision shall be due,
shall involve exceeding the limit of validity prescribed by law which a court of competent
jurisdiction may deem applicable hereto, then ipso facto, the obligation to be fulfilled
shall be reduced to the highest lawful rate of interest permissible under applicable laws,
and if for any reason whatsoever, Payee shall ever receive as interest an amount which
would be deemed unlawful, such interest shall be applied to the payment of the last
maturing installments of principal indebtedness evidenced hereby (whether or not than
due and payable) and not to the payment of interest.
_______________________________________
Modern Real Estate Transactions, July 2006
- 120-
ARTICLE IV: PAYMENTS AND DEPOSITS
4.1 On or before the ____ day of __________, 19__, and on the first day of
each calendar month thereafter to and including the first day of __________, 19__,
Maker agrees to pay to Payee minimum monthly installments of interest on the Senior
Balance, as follows:
Annual
Minimum Cash
Annual
Rate
Accrual Rate
Loan Term
Total
Annual
Rate
Calendar year
19__
-
13 1/2%
13 1/2%
Calendar year
19__
3%
10 1/2%
13 1/2%
Calendar year
19__
4%
9 1/2%
13 1/2%
Calendar year
19__
5%
8 1/2%
13 1/2%
Calendar year
19__
7%
6 1/2%
13 1/2%
Calendar year
19__
9%
4 1/2%
13 1/2%
Calendar year
19__
11%
2 1/2%
13 1/2%
Calendar year
19__
11%
2 1/2%
13 1/2%
Calendar year
19__
11%
2 1/2%
13 1/2%
Calendar year
19__
11%
2 1/2%
13 1/2%
The payments of minimum monthly payments of interest at the Minimum Cash Rate are
herein sometimes called the "Minimum Payments."
_______________________________________
Modern Real Estate Transactions, July 2006
- 121-
4.2 No payments of interest on the Junior Balance shall be due and payable
until the Maturity Date, all such interest to accrue and be fully payable at the Maturity
Date.
4.3 In addition to the Minimum Payments payable pursuant to paragraph 4.1,
on or before the 31st day of March of each of the calendar years 19__ through 19__, both
inclusive, Maker agrees to pay to the order of Payee annual installments of interest for
each such calendar year in an amount equal to the lesser of (x) the aggregate amount of
accrued and unpaid interest on this Note at the Total Rate as of the date of such payment
(including any increase in the Outstanding Principal Amount pursuant to paragraph 3.4
hereof on account of prior accrued and unpaid interest) or (y) the Net Operating Income
of the Mortgaged Property (hereinafter defined) for the calendar year immediately
preceding the date on which the payment is due (or for the period from the date hereof
through December 31, 19__, in the case of the payment due March 31, 19__), less the
aggregate amount of Minimum Payments made pursuant to paragraph 4.1 of this Note
during the calendar year immediately preceding the date on which said additional interest
is due.
(a) Net Operating Income of the Mortgaged Property is the amount by which
the Gross Receipts (hereinafter defined) exceed Expenditures (hereinafter defined) for the
relevant calendar year determined on a cash (as distinguished from accrual) method of
accounting, determined as follows:
(i) "Gross Receipts" is the aggregate of all rents, income, receipts, proceeds,
reimbursements and other amounts of every kind and description
actually received by or for the account of Maker in connection
with or arising from the Mortgaged Property (or from any use,
occupancy or operation thereof or any interest therein), including,
but not limited to: (aa) rentals and other charges, fees and
payments for or relating to the rental, occupancy, use or possession
of any part of the Mortgaged Property; (bb) security deposits
forfeited by tenants and nonrefundable deposits made by tenants;
(cc) vending machine, video games, telephone, garage and parking
receipts; (dd) proceeds from rent loss or business interruption
insurance; (ee) cleaning fees, NSF check charges, late charges, and
charges for credit checks; (ff) receipts from tenants or other
occupants and users of the Mortgaged Property on account of
utility charges, taxes, assessments, insurance, maintenance, repairs
and other costs and expenses relating to the Mortgaged Property;
(gg) consideration for the cancellation, surrender, assignment or
modification of, or subletting under, any lease, contract or other
agreement relating to the Mortgaged Property or as damages or
other compensation for default thereunder; (hh) receipts for or with
_______________________________________
Modern Real Estate Transactions, July 2006
- 122-
respect to any operations or activities conducted in, on or at the
Mortgaged Property to the extent of Maker's interest therein; (ii)
receipts derived from the sale or other disposition in the ordinary
course of business of obsolete or replaced equipment, machinery,
furniture, furnishings, appliances or other personal property on or
used in connection with the ownership or operation of the
Mortgaged Property; (jj) refunds received on account of any
Expenditures; (kk) income derived from the investment or deposit
of funds of Maker; (ll) funds theretofore reserved by Maker and no
longer reasonably required for, or in excess of, the costs or
expenses for which any such reserve was created; provided that
Gross Receipts shall only include receipts by agents, employees
and contractors of Maker when and as the same are due and
payable to Maker by such agent, employee or contractor, and
provided further, there shall be no duplication of Gross Receipts.
Gross Receipts shall not include: (uu) refundable security
deposits; (vv) proceeds of insurance except as aforesaid; (ww)
condemnation awards or payments in lieu thereof arising from any
actual or threatened taking of or damage to the Mortgaged Property
under power of eminent domain; (xx) proceeds from the sale or
other disposition of the Mortgaged Property except as provided in
clause (ii) above; (yy) capital contributions and loans to Maker;
and (zz) proceeds of the revolving loan available to Maker
pursuant to that certain Revolving Loan Agreement ("Loan
Agreement") dated ____________, 19__, between Maker and
Interim Bank, N.A. providing for a revolving loan in the amount
not in excess of EIGHT MILLION DOLLARS ($8,000,000.00)
("Revolving Loan").
_______________________________________
Modern Real Estate Transactions, July 2006
- 123-
(ii) "Expenditures" is the aggregate of all cash actually expended by or for the
account of Maker in connection with or arising from the
ownership, operation, management, repair, replacement,
maintenance, use or occupancy of the Mortgaged Property or any
part thereof, including, but not limited to, expenditures for: (aa)
federal, state and municipal taxes, assessments, special
assessments, use and occupancy taxes, water and sewer charges,
federal, state and municipal income tax, gross receipts or rental
taxes, excises, levies, license and permit fees and other charges,
general and special, ordinary and extraordinary, of any kind and
nature whatsoever imposed by any governmental authority or
public utility, and deposits on account thereof under the Mortgage
or Senior Mortgage; (bb) management fees in the amount not to
exceed 3.1(a) of the Management Agreement between Maker and
Developer Management Corp. ("DMC") ("Management
Agreement") but specifically excluding the termination fees set
forth in Section 3.8 of the Management Agreement; (cc) leasing
fees in an amount not to exceed the amounts set forth in the
Renting Agency Agreement between Maker and DMC; (dd)
advertising and marketing expenses in an amount not to exceed
115% of the amount stated in the Approved Budget pursuant to the
Loan Agreement; (ee) legal, accounting, architectural, engineering
and other professional and consulting fees and disbursements,
including, but not limited to, those incurred in the defense of any
position taken by Maker in its federal income tax return in an
amount not to exceed $50,000.00; (ff) amounts paid to independent
contractors providing labor, materials, services and equipment to
the Mortgaged Property; (gg) payroll expenses in respect to all
employees employed by Maker or any agent or contractor of
Maker pursuant to a management or other agreement, including
salaries and wages, payroll and social security taxes,
unemployment taxes, vacation pay, health and welfare benefits,
pension benefits, employee insurance plans and all other employee
benefits; (hh) premiums for insurance maintained in respect to the
Mortgaged Property or the operations thereat and deposits on
account thereof under the Mortgage or Senior Mortgage; (ii)
maintenance, capital improvements in an amount not to exceed
115% of the amount stated in the Approved Budget; (jj) interest on
security deposits; (kk) any sums expended in respect to the
Mortgaged Property pursuant to or required by the Mortgage,
except principal and interest on this Note; (ll) funds reserved, in
reasonable amounts and in the reasonable discretion of Maker, for
real estate taxes, insurance premiums, and other purposes to the
extent amounts therefor are not payable on a monthly basis and for
_______________________________________
Modern Real Estate Transactions, July 2006
- 124-
security deposits, contingent and contested liabilities; (mm) funds
reserved, in reasonable amounts and in the reasonable discretion of
Maker, for working capital in an amount not to exceed two (2)
months operating expenses of the Project; (nn) equipment lease
rental payments and principal and interest payable in connection
with equipment acquisition financing secured solely by a purchase
money lien on the acquired equipment ("Permissible Equipment
Financing"); (oo) an annual partnership management fee in the
amount of FIFTEEN THOUSAND DOLLARS ($15,000.00)
payable to Sponsor, a general partner of Maker; (pp) an annual
incentive property management fee in the amount of FIFTEEN
THOUSAND DOLLARS ($15,000.00) payable to DMC under the
Management Agreement; (qq) installments of principal and interest
[not to exceed a rate of one percent (1%) in excess of the "prime
lending rate" (hereinafter defined)] on the loan from Sponsor to the
Maker in the principal amount of not to exceed FIVE HUNDRED
THOUSAND DOLLARS ($500,000.00) to pay certain operating
deficits of the Mortgaged Property; and (rr) principal and interest
payments in such order as is required thereunder on the Revolving
Loan; provided that expenditures by contractors, agents or
employees of Maker shall only be included in Expenditures when
and as the same are payable or reimbursable by Maker, and
provided further that there shall be no duplication of Expenditures.
Expenditures shall not include (ss) principal of, interest on or any
other charge or expense incurred in connection with any loan to
Maker or secured by any assets or rights of Maker including, but
not limited to, this Note, but excluding Permissible Equipment
Financing; (tt) depreciation, cost recovery, amortization or any
other non-cash expenses; (uu) expenses and costs paid or
reimbursed out of proceeds of casualty insurance or condemnation
awards or payments in lieu thereof; (vv) fees or any other
compensation or amounts payable to any Affiliate (hereafter
defined) of Maker; (ww) any costs or expense incurred by Maker
or any Affiliate of Maker in connection with its acquisition of the
Mortgaged Property or its organization or syndication; and (xx)
any Expenditure paid out of any reserve or deposit, the funding of
which was theretofore treated as an Expenditure hereunder.
(iii) For purposes of this paragraph 4.3(a) Affiliate of Maker shall mean any
general partner of Maker, any officer, director or shareholder of
any general partner of Maker or any persons, firm, corporation or
other entity, directly or indirectly, through one or more
intermediaries, controlling, controlled by or under common control
with any general partner of Maker.
_______________________________________
Modern Real Estate Transactions, July 2006
- 125-
(b) Each payment pursuant to this paragraph 4.3 shall be accompanied by a
detailed statement of Net Operating Income of the Mortgaged Property, Gross Receipts
and Expenditures for the calendar year with respect to which such payment was made.
(c) Payments of Net Operating Income shall be applied on account of accrued
and unpaid interest on the Senior Balance only and in the event that any Net Operating
Income remains after application thereof to all accrued interest, said remaining Net
Operating Income shall not be applied on account of the interest accrued on the Junior
Balance and Maker shall be entitled to retain any and all such Net Operating Income to
the extent that the same is not required to be paid to the holder of the Revolving Loan. If,
after application of any Net Operating Income as aforesaid for any calendar year, there
remains any accrued interest unpaid on the Senior Balance, said unpaid interest shall be
added to the principal balance of this Note and become a portion of the Outstanding
Principal Amount, provided, however, that any such increase in the Outstanding Principal
Amount: (i) shall not bear interest; (ii) shall be due and payable, if not sooner paid, on
the Maturity Date; (iii) shall be prepaid from the application of Net Operating Income
pursuant to paragraph 4.3; and (iv) shall not affect the amount of the Junior Balance in
any respect.
(d) As used herein, "prime rate of interest" shall mean the rate of interest
announced from time to time by Interim Bank, N.A. as its prime lending rate.
4.4 Maker shall make mandatory principal payments on account of the Senior
Balance as follows:
Date of Payment
Amount
Date of acquisition of
Mortgaged Property
$1,000,000.00
December 31, 19__
2,000,000.00
March 31, 19__
1,000,000.00
In addition, Maker shall pay to Payee, as a mandatory principal payment on account of
the Senior Balance, the excess funds remaining in that certain FOUR MILLION
DOLLARS ($4,000,000.00) Capital Leasing Reserve Fund established under the Loan
Agreement after payment of all tenant improvement costs and leasing commissions
relating to the Mortgaged Premises.
4.5 The entire Outstanding Principal Amount of this Note and all accrued an
unpaid interest hereon shall be due and payable on January 1, 19__ (the "Maturity Date")
or such earlier date on which the same may be declared to be due in accordance with the
_______________________________________
Modern Real Estate Transactions, July 2006
- 126-
terms hereof.
4.6 In addition to all other payments required hereunder, Maker agrees to pay
to Payee deposits on account of real estate taxes, insurance premiums and other similar
deposits, subject to and in accordance with the terms and conditions of the Mortgage.
ARTICLE V: WRAPAROUND PROVISIONS
5.1 Maker and Payee recognize that the Mortgage is subject to the Senior
Mortgage which, as of the date hereof, secures an aggregate outstanding principal balance
equal to the Senior Balance. Provided that Maker has paid to Payee the monthly
installments of interest theretofore required by paragraph 4.1 hereof, and, if required, the
insurance premiums, tax reserve and other similar payments provided for in the
Mortgage, and no Event of Default (as defined in this Note, the Mortgage or in any
Additional Collateral Instrument) is then continuing, Payee shall, prior to the Maturity
Date, pay when due all monthly payments due and owing under the Senior Note and
Senior Mortgage. Payee shall have no obligation to make the foregoing payments with
respect to the Senior Note or the Senior Mortgage upon the acceleration by the holder of
the Senior Note of the maturity date of the indebtedness evidenced thereby (other than an
acceleration of the maturity date arising out of a failure by Payee to make the payments
hereunder required with respect to the Senior Note and the Senior Mortgage). Without
limitation of Payee's undertakings pursuant to this paragraph 5.1, in no event shall Payee
be deemed to have assumed any indebtedness under or obligations with respect to the
Senior Note or Senior Mortgage. Any failure of Payee to make such payments, however,
shall not, as long as Maker is not in default hereunder, be deemed a default hereunder by
Maker. If, in any month, Payee shall receive Maker's payment due and owing hereunder
in a timely manner and Payee shall thereafter fail to make the monthly payments due and
owing under the Senior Note and Senior Mortgage, Maker shall be entitled to remit the
required payment due and owing under the Senior Note and Senior Mortgage and Maker
shall thereupon have the right to offset an amount equal to the amount of the payments so
remitted by Maker directly to the holder of the Senior Note against the amounts thereafter
payable to Payee with respect to the Senior Balance hereunder.
5.2 In the event the aggregate unpaid principal balance of the Senior Note is
reduced by the holder thereof by reason of the application of any insurance proceeds or
condemnation awards thereto, then, Maker agrees that Payee's obligation under paragraph
5.1 hereof to make payments of principal due under the Senior Note shall be reduced pro
tanto in the same manner and amount as the obligation to make any such payments of
principal is reduced by said holder and Payee agrees that the Senior Balance shall be
likewise reduced as of the date of such application of insurance proceeds or
condemnation awards by an amount equivalent to the amount by which the aggregate
principal indebtedness evidenced by the Senior Note is so reduced. In the event that
Payee receives and retains condemnation or insurance proceeds which are not applied in
_______________________________________
Modern Real Estate Transactions, July 2006
- 127-
reduction of the aggregate indebtedness evidenced by the Senior Note, the same shall be
applied in reduction of the Outstanding Principal Amount of this Note except to the
extent the same are used to rebuild, repair or restore the Mortgaged Property, or any part
thereof, or for other purposes permitted by the Mortgage. Notwithstanding the foregoing,
there shall be no reduction in the amount of the Minimum Payments payable pursuant to
paragraph 4.1 hereof on account of such reduction of the Outstanding Principal Amount
of this Note and said payments shall continue at the same level as preceding such
reduction in the Outstanding Principal Amount of this Note, unless a holder of a Senior
Note shall reduce the fixed monthly payments on account of such application of
insurance or condemnation proceeds, in which event, the Minimum Payments shall be
reduced by the same amount as the monthly debt service on the Senior Note is reduced.
5.3 Provided that Maker has paid to Payee the mandatory principal payments
required under paragraph 4.4 and no Event of Default is then continuing hereunder,
Payee shall pay all such principal payments to the holder of the Senior Note to reduce the
principal balance thereof.
5.4 Maker and Payee each covenant and agree not to agree or consent to any
modification, renewal, refinancing, amendment or other alteration of the Senior Note or
Senior Mortgage without the prior written consent of Maker and Payee on each occasion.
Anything in this paragraph 5.4 to the contrary notwithstanding, the Payee has the right, at
the request of the holder of the Senior Note, to obtain replacement financing equal to the
outstanding principal amount of the Senior Note, together with all interest accrued and
unpaid thereunder and the Maker agrees that it shall at the request of Payee consent to
such a modification, renewal, replacement, amendment or other alteration of the Senior
Note to effect such refinancing provided, however, that Maker shall have no obligation to
consent unless: (a) the annual Net Operating Income from the Mortgaged Property will
equal not less than one hundred twenty-five percent (125%) of the annual debt service
requirement of the refinancing loan; (b) the term of the refinancing loan will be no
shorter than the unexpired term of the Senior Note; (c) no balloon payment becomes due
under the refinancing loan during the remaining term of this Note; (d) the nonrefundable
fees payable by reason of the refinancing loan will not exceed two percent (2%) of the
amount refinanced and will be payable from Net Operating Income of the Mortgaged
Property or from a source other than Maker; and (e) the refinancing loan will be made
without recourse to Maker, Payee or any other person. Any such refinancing shall not
affect, modify, alter or amend the terms of repayment of the Junior Balance as provided
herein.
5.5 Upon the Maturity Date, Payee shall be released and discharged from any
and all obligations hereunder thereafter arising. Nothing contained herein, in the
Mortgage or in any Additional Collateral Instrument shall obligate Payee to perform or
comply with the terms, provisions or conditions of the Senior Note or the Senior
Mortgage other than the remittance of the payments required under the Senior Note upon
Payee's timely receipt of the payments required hereunder, if any. Payee and Maker
_______________________________________
Modern Real Estate Transactions, July 2006
- 128-
agree that nothing herein, in the Mortgage or in any Additional Collateral Instrument
contained shall be construed to create any third party beneficiary rights in any person not
a party hereto and, without limiting the generality of the foregoing, that the obligations of
Payee hereunder, under the Mortgage and under any Additional Collateral Instrument
shall be personal to Maker and shall not create or be the basis for any claims against
Payee by the holder of the Senior Note and the Senior Mortgage.
5.6 Payee may, in its sole discretion, perform or observe any or all terms,
conditions, provisions or agreements, or pay any or all payments and do and make any
and all such acts, things and payments required to prevent or cure any default under the
Senior Note or Senior Mortgage upon failure of Maker to do so and any monies so
advanced or expended by payee in this regard shall be added to the indebtedness
evidenced hereby and shall be immediately due and payable, together with interest at the
Default Rate from the date expended to the date Payee is repaid.
5.7 Payee and Maker, at the option of either party, shall have the right to
appoint Interim Bank, N.A. to act as escrow agent on behalf of both parties to receive,
hold and disburse all payments made by Maker hereunder in accordance with the terms of
this Note.
5.8 Maker agrees to forthwith transmit to Payee and Payee agrees to forthwith
transmit to Maker copies of all notices, demands and other substantive written
communications received from or sent to the holder of the Senior Note and the Senior
Mortgage with respect to the Senior Note and the Senior Mortgage.
ARTICLE VI: PREPAYMENT
6.1 Provided that no Event of Default exists hereunder, under the Mortgage or
under any Additional Collateral Instrument, Maker shall have the right, at any time upon
at least thirty (30) days advance written notice to Payee, to prepay all or any portion of
the Outstanding Principal Amount, together with accrued interest thereon, if any, upon
the following terms and conditions:
(a) If Maker desires to prepay the aggregate indebtedness secured by the
Senior Mortgage, Maker shall be required to pay to Payee all accrued and unpaid interest
thereon plus all other amounts due and owing under the Mortgage to Payee, in which
event and upon the payment of the required amount to Payee, (i) Maker and Payee shall
give the holder of the Senior Note appropriate notice of prepayment, (ii) Payee shall
deliver to Maker an appropriate instrument of satisfaction or assignment (at the election
of Maker) without recourse of the Mortgage, this Note and the Additional Collateral
Instruments, and (iii) Payee shall prepay and discharge the Senior Mortgage and all
related collateral instruments of record, it being understood and acknowledged that the
foregoing provisions of this paragraph 6.1(a) are in any event subject to acceptance by
_______________________________________
Modern Real Estate Transactions, July 2006
- 129-
the holder of the Senior Mortgage of such prepayments.
(b) If Maker desires to make a partial prepayment on account of the
Outstanding Principal Amount, said prepayment shall be first applied against the
aggregate indebtedness secured by the Senior Mortgage. Any such prepayment shall
include any and all accrued and unpaid interest on the portion of said indebtedness so
prepaid.
(c) If Maker desires to make a partial prepayment on account of the
Outstanding Principal Amount in excess of the aggregate indebtedness secured by the
Senior Mortgage, the portion of the prepayment equal to the aggregate indebtedness
secured by the Senior Mortgage shall be made in compliance with Paragraph 6.1(a)
above. The balance of such prepayment shall be applied on the Junior Balance and in
connection therewith, Maker shall be required to include in any such partial prepayment
any and all accrued and unpaid interest on the portion of the Junior Balance so prepaid.
ARTICLE VII: PAYEE'S ADDITIONAL RIGHTS TO CALL
7.1 Anything in this Note to the contrary notwithstanding and without
limitation of any similar provision of the Mortgage, in the event of a Sale (hereinafter
defined) or Encumbrance (hereinafter defined) of the Mortgaged property without the
prior written consent of Payee, Payee shall have the right and option to accelerate the
Maturity Date to any date on or after the date of such Sale or Encumbrance and upon
exercise of such right and option, the entire Outstanding Principal Amount of this Note
together with all accrued and unpaid interest due thereon and all other amounts owed
under the Mortgage to Payee shall immediately become due and payable in full.
(a) A Sale of the Mortgaged Property shall include any one or more of the
following: (a) except with respect to dispositions of personal property in the ordinary
course of business, the conveyance of title to the Mortgaged Property or any part thereof
or any interest therein, whether by operation of law or otherwise; (b) the transfer of
possession of the Mortgaged Property or any part thereof or any interest therein under a
contract of sale; or (c) the transfer of the risks and benefits of ownership of the
Mortgaged Property under a contract of sale.
(b) An Encumbrance of the Mortgaged Property shall include any one or more
of the following: (a) the granting of a mortgage, deed of trust, or other encumbrance
upon the Mortgaged Property or any part thereof or any interest therein; (b) the
assignment of rents or other income or proceeds of the Mortgaged Property or any part
thereof; or (c) the granting of a security interest or the creation of a lien on any fixtures,
furnishings, equipment and/or personal property located on or used in connection with
the Mortgaged property or any part thereof, except in all cases for Permissible Equipment
Financing and encumbrances in existence on the date hereof. The granting of a mortgage
and other security interests in connection with the Revolving Loan shall not be deemed
_______________________________________
Modern Real Estate Transactions, July 2006
- 130-
an Encumbrance for purposes of this Article VI.
ARTICLE VIII: MANNER AND PLACE OF PAYMENT
8.1 All payments to be made to Payee hereunder shall be paid to it at its
address set forth in paragraph 11.1 or to such other address as Payee or the legal holder
hereof may from time to time designate in writing.
8.2 All payments hereunder shall be payable in such coin or currency of the
United States of America as at the time shall be legal tender for the payment of public or
private debts or by check or checks payable to the order of Payee, subject to collection;
provided, however, that upon the prepayment hereof or final payment hereunder, the
Outstanding Principal Amount and all accrued and unpaid interest thereon shall be
payable in immediately available funds.
8.3 Whenever any payment to be made under this Note shall be due on a
Saturday, a Sunday or a public holiday on which National Banks are closed for business,
such payment shall be made on the immediately succeeding business day.
ARTICLE IX: DEFAULT
9.1 Upon the occurrence of one or more of the following events (hereinafter
referred to as "Events of Default"):
(a) If a default be made for fifteen (15) business days after notice in the
payment of any sum required to be paid hereunder; or
(b) If a default shall be made for thirty (30) days after notice in the due and
punctual performance or observance of any other agreement or condition herein
contained; provided, however, that if said default cannot by its nature be cured within
said thirty (30) day period, Maker shall be allowed such additional time as might be
determined from time to time by the Payee to be reasonable under the circumstances; or
(c) If an event of default shall occur under the Mortgage or under any of the
Additional Collateral Instruments; or
(d) If any event of default shall occur under the Senior Note or Senior
Mortgage, other than a failure of Payee to remit the required payments due under the
Senior Note to the holder thereof in a timely manner, providing that Maker has remitted
the required payments hereunder to Payee, that shall not be cured by Maker within the
applicable grace or cure period thereunder; then, at the election of Payee and without
further notice, the entire Outstanding Principal Amount of this Note and all unpaid
accrued interest thereon, together with all other amounts owed under the Mortgage and
(to the extent permitted under applicable law) all other costs and expenses, including,
_______________________________________
Modern Real Estate Transactions, July 2006
- 131-
without limitation, reasonable attorneys' fees, incurred by the Payee in collecting or
enforcing payment thereof, shall thereupon become immediately due and payable at the
option of Payee. Failure to exercise this option shall not constitute a waiver of the right
to exercise the same at any time the same Event of Default is then continuing or in the
event of any subsequent Event of Default whether or not of a similar nature.
9.2 By accepting this Note, Payee agrees that the sole recourse of Payee for
the collection of the indebtedness evidenced hereby shall be against the Mortgaged
Property and the security set forth in the Mortgage and Additional Collateral Instruments
and that neither the Maker nor any successor or assign of Maker shall be liable personally
for the payment of the indebtedness evidenced hereby or for the payment of any
deficiency established upon foreclosure under a sale of the Mortgaged Property. Payee
hereby further acknowledges that no partner of Maker, general or limited, shall be held to
any personal liability hereunder and none of the property of any of said partners of Maker
is given or intended to be given as security for the satisfaction of any claim or obligation
arising out of this Note, it being expressly agreed and understood that the liability of the
Maker and said partners shall be limited solely to the property owned by Maker (other
than any right of contribution Maker may have against such partners) and the security
described in the Mortgage and the Additional Collateral Instruments. It is agreed by
Payee that negative capital accounts, if any, of the partners of Maker shall not constitute
property of the Maker for purposes of this Note.
ARTICLE X: MISCELLANEOUS
10.1 Any notice required or permitted hereunder, under the Mortgage or under
the Additional Collateral Instruments shall be in writing and shall be personally served or
sent by United States registered or certified mail, postage prepaid, and addressed to the
parties at their addresses set forth below or to such other address as either party may
designate for itself by notice in accordance herewith.
If to Maker:
If to Payee:
Any notice mailed as aforesaid shall be deemed to have been received by the addressee
on the second business day following the date it is deposited in the mail.
10.2
As to this Note, the Mortgage, the Additional Collateral
_______________________________________
Modern Real Estate Transactions, July 2006
- 132-
Instruments and any other instrument held as security for this Note, and to the extent
permitted by law, Maker wholly waives valuation and appraisement, presentment for
payment, protest and demand, notice of protest and demand and dishonor of this Note.
10.3 If any term or provision of this Note or application thereof to any person
or circumstance shall, to any extent, be invalid or unenforceable, the remainder of this
Note, or the application of such term or provision to persons or circumstances other than
those as to which it is held invalid or unenforceable, shall not be affected thereby, and
shall be valid and enforced to the fullest extent permitted by law.
10.4 The terms of this Note have been negotiated and this Note has been
executed and delivered in Oklahoma City, Oklahoma. This Note shall be governed and
controlled as to validity, enforcement, interpretation, construction, effect and in all other
respects by the laws of the State of Oklahoma. The parties hereby consent to the
jurisdiction of and to service of process within the State of Oklahoma and agree that any
court of competent jurisdiction (including a Federal court) sitting in Oklahoma County,
State of Oklahoma shall be an appropriate and convenient place to resolve any disputes
relating to this Note.
10.5 Maker and Payee hereby agree that none of the terms or provisions of this
Note may be waived, altered, modified or amended except by a written instrument
executed by Maker and Payee.
10.6 No failure or delay on the part of Payee or Maker in exercising any power
or right under this Note shall operate as a waiver thereof, nor shall any single or partial
exercise of any right or power preclude any other or further exercise thereof or the
exercise of any other right or power hereunder or thereunder. No modification or waiver
of any provision of this Note nor any consent to any departure by Maker or Payee
therefrom shall in any event be effective unless the same shall be in writing and signed by
Payee and solely in the specific instance and for the purpose for which given. No notice
to or demand on Maker or Payee in any case shall entitle Maker or Payee to any other or
further notice or demand in similar or other circumstances unless otherwise specifically
required hereby.
10.7 Without limitation of any other provisions hereof, of the Mortgage or of
the Additional Collateral Instruments, this Note shall be binding upon and inure to the
benefit of and be enforceable by the respective successors and assigns of the parties
hereto.
10.8 By acceptance of this Note, Payee agrees to perform and discharge all
obligations of Payee contained herein, subject to and in accordance with the terms and
conditions hereof.
10.9 Payee agrees that it will not transfer, assign, sell, negotiate, grant
_______________________________________
Modern Real Estate Transactions, July 2006
- 133-
participations in, pledge or otherwise hypothecate all or any portion of this Note, the
Mortgage or any Additional Collateral Instruments, without the prior written consent of
Maker (other than to the holder of the Senior Note), and any such transaction in violation
hereof shall be null and void and of no force or effect.
IN WITNESS WHEREOF, Maker has caused this Note to be executed and
delivered by its duly authorized representatives this ____ day of __________, 19__,
effective the date and year first above written.
DOWNTOWN OFFICE TOWER LIMITED
PARTNERSHIP, an Illinois limited partnership
By Syndicate Sponsor, Inc.,
a Delaware corporation,
its sole General Partner
ATTEST:
_________________________
(SEAL)
Secretary
By_______________________
Vice President
Wraparound Mortgage Provisions - Future Advancements
__.
Future Advancements. This Mortgage will secure payment of the Note,
including any and all advancements made by the Mortgagee thereunder, and any and all
additional indebtedness owing by the Mortgagor to the Mortgagee incurred in connection
with the Mortgaged Property or any improvements now or hereafter located thereon,
whether or not incurred or becoming payable under the provisions hereof and whether as
future advancements or otherwise, together with any renewals, modifications,
rearrangements, consolidations or extensions of the Note or other indebtedness.
Wraparound Mortgage Provisions - Wraparound Of Prior Debt
__.
Wraparound Provisions. It is understood that the Mortgaged Property is
subject to a prior mortgage and security interest (the "Prior Mortgage"), held by Alligator
Life Insurance Company in the original principal amount of _________________
DOLLARS ($
) dated
, 19 , recorded
, 19__, in book ____, page
_______________________________________
Modern Real Estate Transactions, July 2006
- 134-
____ of the records of Oklahoma County, Oklahoma.
Mortgage, the Mortgagor agrees as follows:
With respect to the Prior
a.
No Default. The Mortgagor warrants and represents that there exists no
default or any event which, with the passage of time or giving of notice or
both, would constitute a default under the Prior Mortgage.
b.
Relation of Prior Mortgage. The Mortgagor will pay directly to the
Mortgagee, its successors and assigns, the installments of principal and
interest required by the Prior Mortgage in accordance with the terms of the
note thereby secured and will not make any payment whatsoever directly
to the holder of the Prior Mortgage or request any release, partial release,
amendment or other modification of the Prior Mortgage without the prior
written consent of the Mortgagee, its successors and assigns.
c.
Notice to Prior Mortgagee. The Mortgagor will do all things necessary
and proper to advise the holder of the Prior Mortgage that payments of
principal and interest and other items required by the Prior Mortgage will
be furnished by the Mortgagee, its successors and assigns, and that copies
of all notices and correspondence concerning the Prior Mortgage be
directed to the Mortgagee.
d.
Performance of Prior Mortgage. The Mortgagor will render such
performance to the Mortgagee as may be required of the Mortgagor by the
terms of the Prior Mortgage notwithstanding any contrary term herein
contained.
e.
Option to Cure. If an event of default shall have occurred hereunder or
under the Prior Mortgage, in addition to any other rights and remedies
available to the Mortgagee, the Mortgagee may, but need not, make any
payment or perform any act required under the Prior Mortgage, in any
form and manner deemed expedient by the Mortgagee, and may, but need
not, make full or partial payments of principal or interest on the Prior
Mortgage and purchase, discharge, compromise or settle the Prior
Mortgage and the Mortgagee will be subrogated to the rights of the holder
of the Prior Mortgage against the Mortgagor and the property which is
subject to the Prior Mortgage.
f.
Indemnity. If for any reason, other than the Mortgagee's failure to make
payments of installments of principal or interest on the Prior Mortgage, as
hereafter provided, the indebtedness secured by the Prior Mortgage is
accelerated or the Mortgaged Property or any part thereof is sold, or
attempted to be sold, pursuant to such Prior Mortgage, whether by power
of sale, judicial action or otherwise, or any other remedial action or
_______________________________________
Modern Real Estate Transactions, July 2006
- 135-
proceeding is taken or instituted in respect of the Mortgaged Property or
any part thereof under the Prior Mortgage, the Mortgagor will indemnify
and hold the Mortgagee harmless from any loss, cost or expense incurred
by the Mortgagee, including attorney's fees, in contesting any such action
taken or instituted or in attempting to reinstate such Prior Mortgage, or
incurred by the Mortgagee on account of the acceleration of the Prior
Mortgage, the sale of the Mortgaged Property pursuant thereto or the
Mortgagee's purchase or payment of the Prior Mortgage.
g.
Payment of Prior Mortgage. In consideration of the execution and
delivery of the Note, the Mortgagee agrees with the Mortgagor to pay the
installments of principal and interest as the same become due under the
Prior Mortgage, but only from, and to the extent of, the payments of
principal and interest received by the Mortgagee under the Note hereby
secured. The foregoing obligation will in no event include with respect to
the Prior Mortgage any penalty or premium, or any amounts required to be
paid in addition to principal or interest or any installments of principal or
interest which become due by acceleration; except any such penalty,
premium or amounts required to be paid as a direct result of the
Mortgagee's failure to perform its obligations hereunder. If an event of
default shall have occurred in the performance of any term or provision
contained in this Mortgage or the Note hereby secured, the Mortgagee will
in no event be obligated to pay any principal or interest under the Prior
Mortgage.
h.
Modification of Certain Terms. Notwithstanding any other provisions in
this Mortgage, if pursuant to the Prior Mortgage, insurance proceeds with
respect to any damage or destruction or any award or payment applicable
to a taking by eminent domain is applied against the obligation secured by
the Prior Mortgage, the Mortgagee may forthwith declare the Note hereby
secured due and payable at any time thereafter unless the Mortgaged
Property remaining after any such taking or damage or destruction is
sufficient in the Mortgagee's sole judgment to adequately secure the
payment of the Note hereby secured.
i.
No Liability. The references contained in this Mortgage to the obligations
of the Mortgagor or the Mortgagee (now existing or hereafter arising) to
pay any sum or sums owing on the Prior Mortgage will not constitute an
assumption of personal liability for any such payment or the agreement by
the Mortgagor or the Mortgagee as between the Mortgagor or the
Mortgagee and any holder of the Prior Mortgage to make payment of any
such sums. The sole purpose for such provisions in this Mortgage and the
sole benefits and burdens derived hereunder will be as between the
Mortgagor and the Mortgagee only, and will not in any way modify the
_______________________________________
Modern Real Estate Transactions, July 2006
- 136-
obligations of the Mortgagor or the Mortgagee under any written or oral
agreement with the holder of the Prior Mortgage.
PARTIAL RELEASE AND SUBSTITUTE COLLATERAL PROVISIONS
Mortgage Provision - Partial Release
__. Partial Release. On the payment by the Mortgagor to the Mortgagee of each annual
principal installment plus all accrued interest thereon owing pursuant to the terms of the
Note, the Mortgagor will be entitled to obtain on the Mortgagor's written request a partial
release of this Mortgage of not to exceed six and eight-tenths (6 8/10) acres of the
Mortgaged Premises per annual installment; provided that on the payment of each such
annual installment the Mortgagor will only be entitled to a partial release of full lots
contained within the Mortgaged Premises as more particularly described in
_____________, a Planned Unit Development filed of record with the County Clerk of
Oklahoma County, Oklahoma, which lots will be designated by the Mortgagee in the
Mortgagee's sole discretion, notwithstanding the fact that the aggregate acreage in such
full lots might be less than six and eight-tenths (6 8/10) acres. In the event the Mortgagor
prepays any principal amount owing under the Note plus all accrued interest thereon, the
Mortgagor will be entitled to obtain on the Mortgagor's written request a partial release of
this Mortgage of the number of unreleased acres contained within the Mortgaged
Premises which is equal to (a) the amount of principal prepaid divided by Three and
85/100 Dollars ($3.85), multiplied by (b) one forty-three thousand five hundred sixtieth
(1/43,560) (the "Affected Acres"); provided that the Mortgagor will only be entitled to a
partial release to the extent that the Affected Acres cover full lots contained within the
Mortgaged Premises as more particularly described in _________________, a Planned
Unit Development filed of record with the County Clerk of Oklahoma County,
Oklahoma, which lots will be designated by the Mortgagee in the Mortgagee's sole
discretion.
__.
Partial Releases. The Lender agrees to release from the lien of the Mortgage
certain property comprising a part of the Collateral, on the written request of the
Borrower and the satisfaction of the following conditions.
__.1 Conditions Precedent. To obtain a partial release, the Borrower must: (a)
pay the Lender the following sums: (i) Out Parcel 1 (as identified
by the Site Plan)--Five Hundred Thousand Dollars ($500,000.00);
and (ii) Out Parcel 2 (as identified by the Site Plan)--Two
Hundred Fifty Thousand Dollars ($250,000.00) [where a site plan
has not been approved, the foregoing provisions usually provide
for a "front-loaded" per acre or per square foot price and
_______________________________________
Modern Real Estate Transactions, July 2006
- 137-
require the unreleased land to be a contiguous tract with
appropriate dedicated accessways]; (b) at the option of the Lender,
the Title Insurer must, at the Borrower's cost, issue an endorsement
to the Title Policy in form satisfactory to the Lender insuring that
the release will not affect the priority or validity of the Mortgage as
to any unreleased property; (c) no Event of Default shall have
occurred and be continuing on the date the partial release is
requested or granted; (d) if requested by the Lender, provide a
Reciprocal Easement Agreement in form and substance
satisfactory to the Lender executed by parties designated by the
Lender; and (e) the release must not result in the violation of any
applicable law, order, rule or regulation.
__.2 Release Procedure. The following procedures will be used for all releases:
(a) at least five (5) business days prior to the scheduled funding of
the release price, the Borrower will deliver a written request for the
release to the Lender containing a description of the property to be
released and will request the Lender to deposit the Lender's partial
release with the Title Insurer; (b) at least one (1) business day prior
to the scheduled funding of the release price, the Lender will
deposit with the Title Insurer the Lender's partial release and
instructions authorizing the Title Insurer to issue the release
endorsement and to disburse the release price to the Lender; and
(c) the Borrower will pay all costs and expenses incurred in
connection with each release including, without implied limitation,
recording fees, premiums for title insurance endorsements and
escrow and closing fees. No release by the Lender will affect any
of the Borrower's obligations under any of the Loan Documents
except to the extent that payment of the Note is actually received
by the Lender. Any payments made by the Borrower to the Lender
for the release will be credited against the Loan only on the actual
receipt of the funds by the Lender; checks received by the Lender
will not be considered as payment until collected.
Loan Agreement Provision - Partial - Releases of Collateral
1.
Partial Releases of Collateral. Provided that no event of Default has occurred
and is continuing, from time to time during the loan term, the Borrower will be entitled to
request and receive partial releases of the liens created by the Loan Documents on the
terms set forth in this paragraph. Such partial releases may be obtained by the Borrower
by reason of (i) Qualified Sales (as hereafter defined) of a portion of the Collateral or (ii)
an accumulation of Qualified Payments (as hereafter defined) made by the Borrower.
_______________________________________
Modern Real Estate Transactions, July 2006
- 138-
1.1 Schedule of Release Prices. The parties have caused the Preliminary Plat
to be divided into certain tracts of land and have assigned to such
tracts minimum release prices which vary depending on whether
the release is requested by reason of Qualified Sales or Qualified
Payments. Except as hereafter provided with respect to Tract S,
the Borrower will not be entitled to a partial release of the land
included within a tract (as the tracts are defined by the Preliminary
Plat). The schedule of release prices designated by tracts is as
follows:
Tract No.
Release Price
for
Qualified Sales
Release Price
for
Qualified Payments
C
The greater of
80% of the gross
sales price of
Tract C or
$15,000 times the
number of acres
contained in
Tract C
$30,000 times the
number of acres
contained in Tract
C
M
The greater of
80% of the gross
sales price of
Tract M or
$10,000 times the
number of acres
contained in Tract M
$15,000 times the
number of acres
contained in Tract
M
S
The greater of
80% of the gross
sales price of
Tract S or
$4,000 times the
number of acres
contained in Tract S
$6,000 times the
number of acres
contained in Tract
S
The greater of
80% of the gross
sales price or
$20,000 per lot
No partial releases
will be granted for
Qualified Payments
Developed
Lots
_______________________________________
Modern Real Estate Transactions, July 2006
- 139-
to be released
With respect to Tract S, partial releases will be made in parcels containing
not less than seventy (70) acres each with the first such parcel to be
located in the Northeast quadrant of Tract S. Each release of a parcel
contained in Tract S thereafter granted will be in minimum acreages of
seventy (70) acres each, will be contiguous to parcels previously released
and will be subject to such additional requirements as the Bank might
reasonably impose to insure orderly development of Tract S and to protect
the value of the unreleased portion of Tract S.
1.2 Moratorium. The Borrower will have no right to receive any partial
release of the Collateral for Qualified Payments made by the
Borrower during the first eighteen (18) months of the loan term,
but the Borrower will be entitled to partial releases of the
Collateral for Qualified Sales during such eighteen (18) month
period.
1.3 Procedure for Partial Release. Partial releases of the liens created by the
Loan Documents will be granted by the Bank on the written
request of the Borrower. Each such request shall be accompanied
by (i) payment to the Bank of the release price required by
paragraph 1.1 above, (ii) two (2) copies of a legal description and a
survey of the land to be released prepared by a registered land
surveyor satisfactory to the Bank, (iii) releases of mortgage and
other documents required to effect the partial release of the Loan
Documents in form and substance satisfactory to the Bank, and (iv)
such information with respect to any sale of the Collateral as might
reasonably be required in order to determine the exact release price
for Qualified Sales.
1.4 Definition of Qualified Sales. As used in this paragraph 12, the term
"Qualified Sales" shall mean bona fide cash sales of a portion of
the Premises comprising a tract (as described by the Preliminary
Plat) or one or more developed lots to a party not affiliated with
the Borrower.
1.5 Definition of Qualified Payments. As used in this paragraph 1, the term
"Qualified Payments" shall mean principal payments of the
Borrower's Note made from sources other than Qualified Sales and
that portion of the principal payment made by the Borrower by
reason of Qualified Sales which is in excess of the per acre release
price for Qualified Sales specified at paragraph 1.1 above. The
amount of the Borrower's Qualified Payments shall be computed
_______________________________________
Modern Real Estate Transactions, July 2006
- 140-
on a cumulative basis and, after expiration of the eighteen (18)
month moratorium described above, the Borrower shall be entitled
to demand and receive releases of the tracts described at paragraph
1.1 above to the extent that the release price of the tract is equal to
or less than the cumulative amount of the Borrower's Qualified
Payments. To the extent that the Bank releases a portion of the
Collateral by reason of Qualified Payments, the cumulative
balance of the Borrower's Qualified Payments shall be reduced by
the amount attributable to such partial release and the Borrower
shall not again be entitled to any partial release of Collateral until
such time as the cumulative amount of the Borrower's Qualified
Payments is again equal to or greater than the amount required to
release any tract according to the schedule set forth at paragraph
1.1.
1.6 Substitution of Collateral. The release prices accorded to the Borrower for
Qualified Sales described at paragraph 1.1 contemplate cash sales
by the Borrower to purchasers of the tract to be released. In lieu of
such cash sales, the Borrower shall have the option to extend credit
to any purchaser of any tract and the Bank agrees to deliver a
partial release of the tract which is the subject of the sale and
accept as a substitute for that portion of the Collateral to be
released a secured promissory note receivable arising from such
sale, provided that the following requirements are satisfied:
1.6.1
The purchaser shall be creditworthy in the opinion of the Bank;
1.6.2
The Borrower shall have received and paid to the Bank a down
payment in an amount not less than twenty percent (20%)
of the total sale price of the tract which is the subject of the
sale;
1.6.3
Payment of the purchaser's promissory note shall be secured by a
first mortgage covering all of the tract which is the subject
of the sale;
1.6.4
Any partial release provisions contained in the agreement between
the Borrower and the purchaser shall provide per acre
release prices at not less than the per acre release prices
specified for Qualified Sales at paragraph 1.1 of this
Agreement;
1.6.5
The maturity of the promissory note of the purchaser to the
Borrower shall not exceed the final maturity of the
_______________________________________
Modern Real Estate Transactions, July 2006
- 141-
Borrower's Note unless otherwise approved in writing by
the Bank;
1.6.6
The form and substance of the purchaser's promissory note and the
instruments securing payment thereof shall be acceptable to
the Bank;
1.6.7
The purchaser's promissory note and all security for payment
thereof shall be collaterally assigned to the Bank to secure
payment of the Borrower's Note; and
1.6.8
The Bank shall have full recourse against the Borrower in the
event of any default in payment by the purchaser, it being
specifically understood that the Bank shall have no
obligation to proceed against the purchaser prior to
proceeding directly against the Borrower. The Bank agrees
to cooperate with the Borrower in all efforts undertaken by
the Borrower to obtain payment by any such purchaser.
1.7 Optional Release. From time to time, the Bank, at its option, may release
all or any portion of the Premises from the liens created by the
Loan Documents on terms more favorable to the Borrower and on
payment of such lesser sums as the Bank in its absolute discretion
shall determine. The fact that the Bank may from time to time
approve partial release prices less than those specified in paragraph
1.1 above, shall not be deemed a waiver or modification of such
provisions as to any subsequent request for partial release.
SUBORDINATION AGREEMENTS
Abbrevoated Mortgage Provision
___. Agreement to Subordinate. The Mortgagee, by the acceptance of this Mortgage,
agrees to subordinate the lien hereby created to the lien of construction and long term
first mortgage loans to be obtained by the Mortgagor covering the Mortgaged Premises.
It is understood that such subordination of the mortgage lien hereby created will be
effected by the Mortgagee within ten (10) days after each written request therefor by the
Mortgagor and that the Mortgagee will execute such documents as might be reasonably
required by the Mortgagor or the holder of such construction or long term mortgage to
effect such subordination.
_______________________________________
Modern Real Estate Transactions, July 2006
- 142-
_______________________________________________________
Although the foregoing provision is extracted from a completed transaction, the clause is
dangerously inadequate from the standpoint of both the purchase money mortgagee and
the developer. Similar clauses have generally been held to be unenforceable, but the
purchase money mortgagee is assuming a significant risk of litigation. The better
practice is to be as specific as possible in describing the future financing: e.g. identity of
the lender or a limitation to "institutional lenders"; specification of an approved
maximum loan amount, interest rate, term and amortization; requirements for notice and
opportunity to cure; limitations on use of the future loan proceeds; etc. See McNamara,
Subordination Agreements As Viewed By Sellers, Purchasers, Construction Lenders and
Title Companies, 12 Real Estate L. J. 347 (Spring 1984); Korngold, Construction Loan
Advances and the Subordination Purchase Money Mortgagee: an Appraisal, a Suggested
Approach and the U.L.T.A. Perspective, 50 Fordham L. Rev. 313 (1981); Miller,
Subordination Agreements in California, 3 UCLA L. Rev. 1298 (1966).
Ground Lease Agreement - Subordination of Landlord's Interest to Future
Financing
1.
With respect to the improvements to be erected on the Leased Premises, or any
part thereof, the Tenant will have the right to finance the cost of the same by placing one
or more first mortgages on the Leased Premises with a reputable and financially
responsible lending institution. The Tenant will have the right to place an interim
construction loan or loans secured by a first mortgage. The Tenant will further have the
right to refinance, extend, or consolidate to the extent of the amount then owing on the
debt secured by the permanent mortgages at any time during the Lease Term and the
Landlord agrees that the Landlord's interest in the Leased Premises will be subordinate to
the lien of any first mortgage and agrees to join in said mortgage in order to convey the
fee simple title to the mortgagee, but by joining therein, the Landlord will not become
and will not be liable for the payment of the indebtedness secured by said mortgage or for
discharging any obligations imposed on the maker of such mortgage, it being understood
and agreed that insofar as the Landlord is concerned, in the event said mortgage is
foreclosed, the holder thereof will look solely to the real estate and improvements
conveyed thereby.
2.
The Tenant covenants that the Tenant will cause to be inserted in said
mortgage a provision to the effect that in the event of a default under the terms of said
mortgage and if such default continues for a period of thirty (30) days, the mortgagee
shall within ten (10) days thereafter, notify the Landlord in writing of such default and
will afford the Landlord a reasonable opportunity to cure such default before instituting
any enforcement proceedings with respect to such default.
3.
The Landlord hereby covenants and agrees that during the Lease Term, except
_______________________________________
Modern Real Estate Transactions, July 2006
- 143-
as permitted by paragraph 1 hereof, the Landlord will not have the right or power to
mortgage or otherwise create any security or other liens or encumbrances upon or
affecting the fee interest in the Leased Premises or improvements thereon, or any part
thereof, and the Landlord will not have the right or power to modify, extend, refinance or
otherwise change or affect any mortgage created by the Tenant pursuant to this Lease.
4.
The Landlord agrees, at or prior to the closing of such permitted mortgage or
refinancing, to execute, acknowledge and deliver the mortgage and such other reasonable
instruments and documents as might be required and in form satisfactory to, the lending
institution in order to effect such permitted mortgage or refinancing, subject, however, to
the terms and provisions of paragraph 1 hereof. The Landlord may join in the execution
of the note evidencing any such indebtedness, but will have no obligation to perform any
covenants of or discharge any obligations imposed on the maker of any such note or
mortgagor under any mortgage, and will have no personal liability with respect to any
default under any such instrument. The Landlord covenants and agrees that the Tenant
alone will be entitled to the proceeds from permitted mortgages and refinancing thereof at
any time and from time to time effected pursuant to paragraph 1 hereof, and subject to all
of the provisions of said paragraph, and the Landlord will not be entitled to, and will not
receive such proceeds or any part thereof.
5.
The Tenant and every successor and assign of the Tenant is hereby given the
right by the Landlord without the Landlord's prior written consent to mortgage its interest
in this Lease and all subleases under a first leasehold mortgage, and assign the Tenant's
interest in this Lease and all such subleases as collateral security for such mortgage, upon
condition that all rights acquired under such leasehold mortgage shall be subject to and
inferior to the provisions of this Lease, and to all rights and interests of the Landlord
herein, but this right shall not be deemed a waiver by the Tenant to mortgage the entire
fee in the Leased Premises and require the Landlord to join therein, all as provided in
paragraph 1 hereof.
6.
Notwithstanding anything to the contrary elsewhere set forth in this Lease, the
parties expressly agree that the obligation of the Landlord to subject the fee simple title to
the Leased Premises or any part thereof to each such mortgage and to join in the
execution thereof is hereby expressly made subject to the following conditions: (a) the
loan which such mortgage secures must be made by a reputable and financially
responsible lending institution regularly engaged in the business of lending funds or
extending credit to others; (b) the final installment of principal and interest on any such
loan will be due not later than fifteen years prior to the expiration of the term of this
Lease; and (c) with respect to any permanent loan, said loan will be payable in regular
monthly installments of principal and interest and none of said installments will be more
than twice as large as the regular installments.
_______________________________________________________
_______________________________________
Modern Real Estate Transactions, July 2006
- 144-
The foregoing provision is adapted from Patterson, Drafting the Long Term Ground
Lease, Frontiers of Real Estate, Mississippi Law Institute (1973). See McNamara,
Subordination as Viewed by Sellers, Purchasers, Construction Lenders and Title
Companies, 12 Real Estate L.J. 347 (1984); Miller, Subordination Agreements in
California, 3 UCLA L. Rev. 1298 (1966).
Subordination Agreement
THIS AGREEMENT is made this ___ day of _______, 19__, by LAND
HOLDER and HAND HOLDER, husband and wife (the "Sellers"), in favor of INTERIM
BANK, N.A., a national banking association ("IB").
WITNESSETH:
WHEREAS, the Sellers have recorded at Book ____, Page ____, of the
records of Oklahoma County, Oklahoma, a certain Mortgage (the "Seller Mortgage")
securing payment of the sum of $_______________ executed by Homestead
Development Corporation, an Oklahoma corporation ("Homestead"), as mortgagor, and
covering the real property described at Schedule "1" attached as a part hereof (the
"Land");
WHEREAS, Homestead has mortgaged the Land to IB pursuant to a
certain Mortgage and Security Agreement (the "IB Mortgage") securing payment of the
sum of $_________ recorded in Book ____ at Page ____, of the records of Oklahoma
County, Oklahoma; and
WHEREAS, IB has requested that the Sellers subordinate the lien of the
Seller Mortgage to the lien of the IB Mortgage by means of this Agreement.
NOW, THEREFORE, in consideration of Ten Dollars ($10.00) and other
good and valuable consideration, the receipt of which is hereby acknowledged, it is
agreed as follows:
1.
The Sellers hereby agree and covenant with IB and IB's successors and assigns
that the lien granted by the Seller Mortgage will be in all respects subordinate, junior and
inferior to the IB Mortgage.
2.
Except for the agreements herein contained, the Seller Mortgage will continue
in full force and effect.
IN WITNESS WHEREOF, the undersigned have executed this instrument
_______________________________________
Modern Real Estate Transactions, July 2006
- 145-
as of the date first above written.
LAND HOLDER
HAND HOLDER
ACKNOWLEDGMENT
STATE OF __________
COUNTY OF _________
)
)
)
SS:
This instrument was acknowledged before me on
Holder and Hand Holder, husband and wife.
(SEAL)
______________________________
Notary Public
My Commission Expires: ______
SCHEDULE "1"
Legal Description
[Deleted for the purpose of this publication]
SALE LEASEBACK DOCUMENTS
LAND SALE AGREEMENT
_______________________________________
Modern Real Estate Transactions, July 2006
- 146-
, 19__, by Land
THIS AGREEMENT is made effective the ____ day of ___________,
19__, between DEVELOPMENT (HROB) LIMITED PARTNERSHIP, an Oklahoma
limited partnership, having a notice address at 3200 First Office Tower, Oklahoma City,
Oklahoma 73102 (the "Seller") and LAND INVESTMENT CORPORATION, a
Delaware corporation, having a notice address at One Mid-America Center, Oklahoma
City, Oklahoma 73102 (the "Buyer").
WITNESSETH:
WHEREAS, the Seller is the owner of a certain parcel of land in
Oklahoma City, Oklahoma, more particularly described as follows:
[deleted for the purpose of this publication]
(which parcel together with the easements, rights and appurtenances relating thereto is
hereafter called the "Land") on which the Seller has constructed an office building and
related facilities ("Downtown Office Tower").
WHEREAS, the Seller desires to sell the Land to the Buyer (reserving,
however, to the Seller the ownership of Downtown Office Tower and all other
improvements now existing and hereafter constructed on the Land) and to simultaneously
lease back the Land from the Buyer and the Buyer desires to purchase and lease back the
Land pursuant to the terms of this Agreement;
NOW, THEREFORE, in consideration of the mutual agreements herein
contained it is agreed as follows:
1.
Land Sale and Leaseback. The Seller hereby agrees to sell the Land to the
Buyer and the Buyer hereby agrees to purchase the same subject to the terms of this
Agreement. It is understood that the Buyer will purchase only the Land and that
Downtown Office Tower, all other buildings, structures, improvements, fixtures and
personal property now or hereafter located on, over or beneath the Land will be retained
by the Seller and the same are not intended to be sold by the Seller or acquired by the
Buyer under the terms of this Agreement. Simultaneously with such purchase of the
Land the Buyer as landlord and the Seller as tenant will execute and deliver a ground
lease agreement covering the Land (the "Ground Lease") on the terms and in substantially
the form set forth at Schedule "A" attached as a part hereof.
2.
Purchase Price. The total purchase price to be paid by the Buyer to the Seller
for the purchase of the Land is the sum of FOUR MILLION DOLLARS ($4,000,000.00).
The Purchase Price will be paid in current funds on the Closing Date (as hereafter
defined) without deductions, offsets or prorations.
_______________________________________
Modern Real Estate Transactions, July 2006
- 147-
3.
Title. The Seller will deliver the following items to the Buyer at the times
hereafter specified:
3.1 Title Policy. On the Closing Date the Seller will furnish to the Buyer, at
the Seller's expense, an ALTA Form 1970 policy of owners title
insurance (the "Title Policy") issued by American-First Land Title
Insurance Company, 133 West Main Street, Oklahoma City,
Oklahoma 73102 (the "Title Company"), in the amount of the
purchase price for the Land insuring that the Buyer has
merchantable fee simple title to the Land subject only to the
exceptions (the "Approved Title Exceptions") stated at Schedule
"B" attached as a part hereof.
3.2 Survey. On the Closing Date the Seller will furnish to the Buyer a current
"as-built" survey (the "Survey") covering the Land certified by a
Registered Land Surveyor acceptable to the Buyer. Such survey
will be in form sufficient to allow the Title Company to delete the
standard printed survey exception in the Title Policy and will show
the following: (i) the location of the improvements located on the
Land and all streets and easements on or contiguous to the Land;
(ii) the points of access to all public streets and any limitations to
such access; (iii) any encroachments on any of the Land by
adjoining property owners or any protrusions of the improvements
located on the Land on adjoining property; and (iv) any applicable
building setback lines and a certificate by the surveyor that no
portion(s) of the improvements located on the Land protrude
beyond any building setback lines.
3.3 Unrecorded Claims. On the Closing Date, the Seller will deliver to the
Buyer an affidavit of the Seller in form satisfactory to the Buyer
and the Title Insurer certifying that as of the Closing Date there are
no rights which could give rise to laborers', mechanics' or
materialmen's liens or other unrecorded claims against any portion
of the Land.
4.
Seller's Representations. The Seller hereby represents and warrants to the
Buyer as of the date hereof and as of the Closing Date, as follows:
4.1 Partnership Existence. The Seller is a limited partnership duly organized,
existing, in good standing and qualified to do business under the
laws of the State of Oklahoma, and the Seller has full power and
authority to own and improve the Land and to comply with the
terms of this Agreement;
_______________________________________
Modern Real Estate Transactions, July 2006
- 148-
4.2 Authority. The execution and delivery of this Agreement by the Seller
and the consummation by the Seller of the transaction
contemplated hereby are within the Seller's capacity and all
requisite action has been taken to make this Agreement valid and
binding on the Seller in accordance with its terms;
4.3 No Legal Bar. The execution by the Seller of this Agreement and the
consummation by the Seller of the transaction contemplated hereby
does not, and on the Closing Date will not: (i) result in a breach of
any of the provisions of, or constitute a default or a condition
which on giving of notice or lapse of time or both would ripen into
a default under any indenture, agreement, instrument or obligation
to which the Seller is a party or by which any portion of the Land
is bound; or (ii) constitute a violation of any order, rule or
regulation applicable to the Seller or any portion of the Land of
any court or any administrative agency or other governmental body
having jurisdiction over the Seller or any portion of the Land;
4.4 No Default. The Seller is not in default under any indenture, mortgage,
deed of trust, loan agreement, or other agreement to which the
Seller is a party or by which the Seller or any portion of the Land
is bound; the Seller and the Land are not subject to any agreement,
restriction, requirement, regulation or any order or decree of any
court or governmental agency which might to a material degree
adversely affect any portion of the Land;
4.5 Title. The Seller is the owner of good and marketable title to the Land,
free and clear of all liens, encumbrances and restrictions of any
kind, except the Approved Title Exceptions;
4.6 Litigation. There are no actions, suits, proceedings or investigations
pending or, to the knowledge of the Seller, threatened against the
Seller affecting any portion of the Land, at law or in equity before
or by any federal, state, municipal or other governmental agency;
and
5.
4.7 Permits; Restrictions. Occupancy permits have been issued by all
governmental agencies having jurisdiction over the Land or
Downtown Office Tower and the Seller has received no notice of
any claimed failure to comply with any applicable building code,
health or use regulation affecting the Land or Downtown Office
Tower.
Closing. The sale hereby contemplated will be consummated as follows:
_______________________________________
Modern Real Estate Transactions, July 2006
- 149-
5.1 Closing Date. The Closing Date will be ____________, 19__ (or such
later or earlier date as the Buyer and the Seller might approve in
writing), at 10:00 a.m. Central Standard Time, at the offices of
Hastie and Kirschner, Suite 3000 First Oklahoma Tower,
Oklahoma City, Oklahoma.
5.2 Seller's Instruments. On the Closing Date, the Seller will deliver or cause
to be delivered to the Buyer the following items, all of which will
be duly executed and acknowledged (where appropriate):
5.2.1
A general warranty deed in substantially the form of Schedule "C"
attached as a part hereof;
5.2.2
The Survey, Title Policy and such certificates, affidavits and other
items as might be reasonably required to confirm or satisfy
the items specified at paragraphs 3 and 4 hereof;
5.2.3
A memorandum setting forth the items delivered as a result of the
closing; and
5.2.4
Such additional documents as might be reasonably required by the
Buyer to consummate the purchase of the Land by the
Buyer.
5.3 Buyer's Instruments. On the Closing Date, the Buyer will deliver to the
Seller the following items:
5.3.1
Current funds in the amount of FOUR MILLION
DOLLARS ($4,000,000.00) representing the full
payment of the purchase price for the Land;
5.3.2
A memorandum setting forth the items delivered as a result
of the closing; and
5.3.3
Such additional documents as might be reasonably required
by the Seller to consummate the sale of the Land to
the Buyer.
5.4 Possession. Possession of the Land will be delivered to the Buyer on the
Closing Date subject to the rights of the Seller under the Ground
Lease and third parties holding possessory rights under the
documents described in the Approved Title Exceptions.
5.5 Closing Costs.
The Buyer will pay any attorney's fees and charges
_______________________________________
Modern Real Estate Transactions, July 2006
- 150-
incurred in the representation of the Buyer. The Seller will pay all
other closing costs, including, without limitation: the Seller's
attorney's fees, all abstracting and surveying costs, the cost of
documentary stamps to be affixed to the deed conveying the Land
to the Buyer, all expenses for issuance of the Title Policy and all
recording costs.
6.
Conditions Precedent. The obligation of the Buyer to consummate the
transactions contemplated by this Agreement are subject to satisfaction of each of the
following conditions, and if any condition is not satisfied by the Closing Date, the Buyer
will be entitled to waive the satisfaction of any such condition in writing, or to terminate
the Buyer's obligation to purchase the Land pursuant to paragraph 8 of this Agreement.
6.1 Representations. The representations and warranties made by the Seller
herein shall be true and correct on the Closing Date;
6.2 Seller's Obligations. The Seller shall have performed all covenants,
agreements and obligations and complied with all conditions
required by this Agreement to be performed or complied with by
the Seller prior to the Closing Date;
6.3 Condemnation. No action for condemnation or other exercise of rights of
eminent domain shall be pending or threatened against any part of
the Land; and
6.4 Legal Proceedings. The sale of the Land shall not have been restrained or
prohibited by any injunction or order rendered by any court or
other governmental agency of competent jurisdiction, and no
proceeding shall have been instituted and be pending in which any
person seeks to restrain such transaction or otherwise to attach all
or any portion of the Land.
7.
Brokerage Fees. The parties represent and warrant each to the other that the
sale hereby contemplated is made without liability for any realtor's, broker's, finder's,
agent's or other similar commission. The parties mutually agree to indemnify and hold
each other harmless from claims for commissions asserted by any party as a result of
dealings claimed to give rise to such commissions.
8.
Default; Remedies. In the event that either party fails to perform such party's
respective obligations hereunder, the party claiming default will make written demand for
performance. If the Seller fails to comply with such written demand within ten (10) days
after receipt thereof, the Buyer will have the option to waive such default, demand
specific performance or terminate this Agreement and, on such termination, the parties
will be discharged from any further obligations and liabilities hereunder. If the Buyer
fails to comply with such written demand within ten (10) days after receipt thereof, the
_______________________________________
Modern Real Estate Transactions, July 2006
- 151-
Seller will have the option to waive such default, demand specific performance or
terminate this Agreement and on such termination, the parties will be discharged from
any further obligations and liabilities hereunder.
9.
Assignment. The interest of the Buyer under this Agreement may not be
assigned in whole or in part by the Buyer without the prior written consent of the Seller
which consent may be withheld in the absolute discretion of the Seller.
10.
Miscellaneous. It is further agreed as follows:
10.1 Time. Time is the essence of this Agreement.
10.2 Notice. All notices required hereunder will be in writing and served by
certified mail, return receipt requested, postage prepaid, at the
addresses shown above until notification of a change of such
addresses.
10.3 Survival of Representations. All representations and warranties of the
Seller and the Buyer contained in this Agreement will terminate on
and as of the Closing Date and will not survive the closing of this
transaction, except for the warranties of title of the Seller
expressed in documents delivered at Closing, the agreements of the
Buyer and the Seller contained in the Ground Lease and the
agreements regarding commissions set forth at paragraph 7 above.
10.4 Entire Agreement. This instrument constitutes the entire agreement
between the Buyer and the Seller with respect to the sale and
leaseback of the Land and there are no agreements,
understandings, warranties or representations between the Buyer
and the Seller except as set forth herein. This Agreement cannot
be amended except in writing executed by the Buyer and the
Seller.
10.5 Binding Effect. This Agreement will inure to the benefit of and bind the
respective successors and permitted assigns of the parties hereto.
10.6 Attorney's Fees. In any action brought by either party to enforce the
obligations of the other party under this Agreement, the prevailing
party will be entitled to collect such party's reasonable attorney's
fees, court costs and expenses in such action.
10.7 Headings. Paragraph or other headings contained in this Agreement are
for reference purposes only and are not intended to affect in any
way the meaning or interpretation of this Agreement.
_______________________________________
Modern Real Estate Transactions, July 2006
- 152-
10.8 Applicable Law. This Agreement is intended to be construed and
enforced in accordance with the internal laws of the State of
Oklahoma.
10.9 Counterpart Execution. This Agreement may be executed in two or more
counterparts, each of which will be deemed an original but all of
which together will constitute but one and the same instrument.
IN WITNESS WHEREOF, the parties have executed this instrument as of
the date first above written.
DEVELOPMENT (HROB) LIMITED
PARTNERSHIP, an Oklahoma limited
partnership
By
DEVELOPER NOMINEE
LIMITED PARTNERSHIP,
an Oklahoma limited
partnership, Sole General
Partner
By_________________________
Morton A. Developer,
Sole General Partner
(the "Seller")
LAND INVESTMENT CORPORATION,
a Delaware corporation
By______________________________
President
(the "Buyer")
SCHEDULE "A": GROUND LEASE AGREEMENT
THIS AGREEMENT is made effective the ____ day of __________,
19__, between LAND INVESTMENT CORPORATION, a Delaware corporation, and
DEVELOPMENT (HROB) LIMITED PARTNERSHIP, an Oklahoma limited
_______________________________________
Modern Real Estate Transactions, July 2006
- 153-
partnership.
WITNESSETH:
In consideration of the agreements hereinafter contained, the parties agree
as follows (the capitalized terms used in this Agreement are defined at Section 20 and are
intended to have the meanings therein indicated):
SECTION 1 - PREMISES
1.1 Land. Subject to the terms of this Agreement, the Landlord hereby
demises and lets to the Tenant and the Tenant hereby leases from the Landlord, all of the
Landlord's right, title and interest in and to certain real property situated in Oklahoma
City, Oklahoma County, Oklahoma, more particularly described as follows:
[Deleted for the purpose of this publication]
1.2 Improvements.
The Tenant has heretofore constructed certain
Improvements on the Land and, in accordance with a certain Warranty Deed from the
Tenant as grantor to the Landlord as grantee bearing even date, the Tenant has reserved
title to the Improvements and severed ownership of the Improvements from the Land.
Notwithstanding such reservation and severance, the terms of this Agreement will govern
the use, operation and transfer of the Improvements and the exercise of the Tenant's
rights with respect thereto. On termination of the Lease Term, whether by expiration of
time or as otherwise herein provided, title to all Improvements will pass in fee simple
absolute from the Tenant to the Landlord without compensation to the Tenant or the
requirement of any additional action by the Landlord or the Tenant. The Landlord and
the Tenant intend the Improvements to constitute real property for all purposes and do not
intend to characterize the Improvements as personal property for any purpose.
1.3 Title Exceptions. The Tenant accepts title to the Land subject to the
following items: [Deleted for the purpose of this publication.]
1.4 Physical Condition. The Tenant accepts the Land in its present condition
and without any representation or warranty of any kind by the Landlord, except that the
Landlord hereby represents and warrants that the leasehold estate created by this
Agreement is not subordinate or subject to the lien of any mortgage, assignment,
encumbrance or other claim affecting all or any part of the Land created by or resulting
from any action or failure to act by the Landlord other than liens for ad valorem taxes and
other similar claims arising by operation of law. The parties intend that the Landlord
transfer and the Tenant accept the Land in an "AS IS" condition "WITH ALL FAULTS."
_______________________________________
Modern Real Estate Transactions, July 2006
- 154-
SECTION 2 - TERM
2.1 Lease Term. The term of this Agreement is ninety-nine (99) years and
will commence at 12:01 a.m. on _____________, 19__, and terminate at 12:00 midnight
on _____________, ____, unless sooner terminated as herein provided.
2.2 Nonterminability. Except as expressly provided in Section 14 of this
Agreement, the Tenant will have no right to terminate this Agreement or to quit, abandon
or surrender the leasehold estate hereby created or all or any part of the Land or to be
released, relieved or discharged from any obligation or liability hereunder for any reason,
including, without limitation, any damage to or destruction of all or any part of the
Improvements, any interference with the use or possession of all or any part of the Land
or Improvements, any acquisition by the Tenant of ownership of any reversionary estate
or remainder interest covering all or any part of the Land, any default or other breach by
the Landlord of the terms of this Agreement, the occurrence of any act which renders the
performance by the Landlord or the Tenant of this Agreement impossible or frustrates the
use of the Land or Improvements for any purpose, any force majeure or any action or
threatened action of any court, administrative agency or other governmental authority.
2.3 Prorations. If the commencement date or the expiration date of the Lease
Term is a date other than the first day of a month, the installment of Rent for the month in
which such date occurs will be prorated based on a thirty (30) day month. If any charge
comprising Additional Rent is computed for a term beginning before the commencement
date or extending beyond the expiration date of the Lease Term, the charge will be
prorated between the Landlord and the Tenant based on a three hundred sixty (360) day
year.
SECTION 3 - RENT
3.1 Minimum Rent. The Tenant agrees to pay to the Landlord throughout the
Lease Term as Minimum Rent the sum of FOUR HUNDRED EIGHTY THOUSAND
DOLLARS ($480,000.00) per annum. Minimum Rent will be paid in monthly
installments of FORTY THOUSAND DOLLARS ($40,000.00) each, payable in advance,
commencing on _____________, 19__, and on the first day of each month thereafter and
ending on _______________, ____.
3.2 Adjusted Rent. Effective on each Reappraisal Date, the value of the Land
will be determined by the agreement of the Landlord and the Tenant (or, failing such
agreement, by appraisal as hereafter provided) and the Minimum Rent payable hereunder
will be adjusted to that amount which is equal to twelve percent (12%) per annum times
the fair market value of the Land so determined; provided that in no event will the
Minimum Rent payable hereunder be less than the amount specified at Section 3.1 of this
Agreement.
_______________________________________
Modern Real Estate Transactions, July 2006
- 155-
3.2.1 One Appraiser. Not earlier than six (6) months nor later than sixty
(60) days prior to each Reappraisal Date, the Landlord and the Tenant will
attempt to agree on the fair market value of the Land or, failing such
agreement, will attempt to select a single Appraiser to determine the fair
market value of the Land as of the next succeeding Reappraisal Date. The fees
and expenses of any Appraiser so selected will be shared equally by the
Landlord and the Tenant.
3.2.2 Two Appraisers. If the Landlord and the Tenant fail to agree on
the fair market value of the Land and fail to select a single Appraiser before the
sixtieth (60th) day prior to the applicable Reappraisal Date, each party will
within ten (10) days thereafter appoint an Appraiser and serve written notice of
the appointment to the other party. The Appraisers so appointed by the
Landlord and the Tenant will promptly meet and attempt to reach agreement as
to the fair market value of the Land. The fees and expenses of any Appraisers
so selected will be paid by the party selecting each Appraiser.
3.2.3 Three Appraisers. If the Appraisers appointed by the Landlord and
the Tenant cannot reach agreement as to the fair market value of the Land by
the thirtieth (30th) day prior to the Reappraisal Date, the two Appraisers will
appoint a third Appraiser and a majority of the Appraisers so appointed will
make a determination of the fair market value of the Land. The fees and
expenses of any third Appraiser will be shared equally by the Landlord and the
Tenant.
3.2.4 Binding Effect. If the Landlord and the Tenant agree on the fair
market value of the Land, such agreement will be reduced to a written form
and when executed and delivered by both parties will be binding on the
Landlord and the Tenant until the next Reappraisal Date. The Appraiser or
Appraisers selected pursuant to this Section 3.2 will render a written report to
the Landlord and the Tenant stating the fair market value of the Land
determined by the Appraiser(s) and such determination will be conclusive and
binding on the Landlord and the Tenant until the next Reappraisal Date. If the
parties or any Appraiser(s) appointed by the parties fail to determine the fair
market value of the Land or if the parties or any Appraiser(s) fail to appoint
any Appraiser as contemplated by this Section 3.2, each party will have the
right to require that the valuation of the Land be determined by binding
arbitration performed by Appraisers appointed pursuant to an action filed
under the Oklahoma Uniform Arbitration Act.
3.2.5 Appraisal Basis. In determining the fair market value of the Land,
the Landlord, the Tenant and the Appraisers will be bound by the following
guidelines: (a) the value of the Improvements (or any other improvements
_______________________________________
Modern Real Estate Transactions, July 2006
- 156-
which might exist on the Land on a Reappraisal Date) will not be included in
the determination of the fair market value of the Land; (b) the fair market value
of the Land will be based on the use of the Land on the applicable Reappraisal
Date, whether or not such use constitutes the highest and best use to which the
Land might be put; (c) the fair market value of the Land will be determined as
if this Agreement and the leasehold estate hereby created did not exist; and (d)
the multiplier of twelve percent (12%) per annum will not be adjusted whether
or not such percentage rate reflects a market rate of return for similar
investments on any Reappraisal Date.
3.3 Additional Rent. All other amounts, liabilities and obligations which the
Tenant agrees to pay or cause to be paid pursuant to this Agreement (as between the
Landlord and the Tenant), will constitute rent payable hereunder in addition to the
Minimum Rent specified at Section 3.1 of this Agreement (as the same might be
increased pursuant to Section 3.2 of this Agreement). If the Tenant fails to pay
Additional Rent, the Landlord will be entitled to exercise the rights, powers and remedies
provided in this Agreement or by law to the same extent as if the Tenant had failed to pay
the Minimum Rent specified by this Agreement.
3.4 Net Rent. The Rent payable by the Tenant hereunder will be absolutely
net to the Landlord throughout the Lease Term. Rent will be paid by the Tenant to the
Landlord without prior notice, demand, setoff, counterclaim, abatement, deduction,
defense or deferment and, except as otherwise provided in Section 14, the Tenant will
have no right to reduce, abate or defer the Rent payable hereunder for any reason
whatsoever.
SECTION 4 - USE
4.1 Use. The Tenant is hereby granted the right to occupy and use the Land
for any lawful purpose, subject only to such restrictions as are contained in the Approved
Title Exceptions or are imposed by Legal Requirements.
4.2 Quiet Enjoyment. So long as the Tenant observes and performs all of the
terms of this Agreement, the Landlord warrants the peaceful and quiet occupation and
enjoyment of the Land by the Tenant free and clear of interference by any Person
claiming under the Landlord. The Tenant hereby grants to the Landlord, its agents and
representatives, the right to enter and inspect the Land and Improvements at reasonable
times with prior reasonable notice. It is understood that the Landlord will have no duty to
make any such inspection and will not incur any liability or obligation with respect to any
state of facts which are or might have been discovered by reason of any such inspection.
4.3 Easements. The Tenant will have the right from time to time to enter into
agreements with utility companies and the owners of adjacent properties creating such
_______________________________________
Modern Real Estate Transactions, July 2006
- 157-
easements as are reasonably required to service and provide access to the Land and
Improvements. The Landlord agrees to consent thereto and to execute such documents
and to take such other action as might be reasonably required to effectuate such
agreements provided that the Tenant pays all expenses relating thereto.
SECTION 5 - IMPOSITIONS
5.1 Payment. Throughout the Lease Term, the Tenant will pay or cause to be
paid all Impositions directly to the charging authority promptly as the same become due,
prior to the time penalties or interest attach thereto and before nonpayment gives rise to a
lien on the Land or the Improvements. The Landlord will have no responsibility of any
kind with respect to any Imposition.
5.2 Conversion to Installments. If permitted by law, the Tenant will have the
right to apply for conversion of Impositions to installment payments. The Landlord
agrees to permit the application for such conversion to be filed in the Landlord's name, if
necessary, and agrees to execute all documents reasonably requested by the Tenant in
connection therewith.
5.3 Proration. All Impositions (excluding Impositions which have been
converted to installment payments during the Lease Term), which are payable during the
final year of the Lease Term will be apportioned pro rata between the Landlord and the
Tenant. Impositions which have been assessed during the Lease Term and converted to
installment payments will be paid in full by the Tenant on the termination of the Lease
Term.
5.4 Right to Contest. The Tenant will have the right to contest the validity,
amount or application of any Imposition by diligent pursuit of appropriate legal
proceedings conducted at the Tenant's expense. If required by applicable law, the
Landlord agrees that such proceedings may be conducted in the name of the Landlord,
and the Landlord agrees to execute and deliver all documents which are reasonably
requested by the Tenant in connection therewith. If at any time the Land, the
Improvements or any part thereof becomes subject to forfeiture, or the Landlord becomes
subject to liability arising from nonpayment of any Imposition, the Tenant will promptly
pay the disputed Imposition or deposit with the Landlord such collateral or other
assurances as might be reasonably required by the Landlord to protect the Land, the
Improvements and the Landlord from liability or forfeiture by reason of nonpayment.
5.5 Refunds. The Landlord agrees that any refunds or rebates of Impositions
previously paid by the Tenant pursuant to the provisions of this Agreement will belong
to the Tenant. The Landlord agrees to sign such receipts and other documents as might
be reasonably requested by the Tenant to obtain payment of such refunds.
5.6 Evidence of Payment.
The Tenant agrees to furnish to the Landlord
_______________________________________
Modern Real Estate Transactions, July 2006
- 158-
within ten (10) days after the date when any Imposition would have become delinquent,
receipts or other appropriate evidence of payment of such Imposition.
SECTION 6 - REPAIRS, ALTERATIONS, ADDITIONS
6.1 Maintenance and Repair. Throughout the Lease Term the Tenant will
maintain the Land and Improvements in good and clean order and condition, ordinary
wear and tear excepted, and will promptly make all necessary or appropriate repairs,
renewals and replacements, whether interior or exterior, structural or nonstructural,
ordinary or extraordinary, foreseen or unforeseen. All repairs, replacements and renewals
will be reasonably equal in quality to the original Improvements. The Tenant will do or
cause others to do all shoring of the Land or of the property adjoining thereto, or of
foundations and walls of the Improvements and every other act necessary or appropriate
for the preservation and safety thereof by reason of or in connection with any excavation
or other building operation on any of the Land or any adjoining property, whether or not
the Tenant or the Landlord is subject to any Legal Requirement to take such action or
might be liable for failure to do so. All such actions will be performed at the expense of
the Tenant and the Landlord will not be required to maintain, alter, repair, rebuild or
replace all or any part of the Land or the Improvements in any way. The Tenant
expressly waives any right to make repairs at the expense of the Landlord which might be
provided for in any law now or hereafter in effect.
6.2 Alterations and Additions. If no Event of Default has occurred and is
continuing, the Tenant may make additions to and alterations of the Improvements (and
may totally or partially demolish the Improvements); provided that any such additions
and alterations; (a) will not weaken or impair the structural strength of the Improvements
(except in the event of demolition and replacement) or reduce the fair market value of the
Land and Improvements below the fair market value which existed immediately before
such alteration or addition, or impair the usefulness of the Land and Improvements; (b)
are effected with due diligence, in a good and workmanlike manner and in compliance
with all Legal Requirements; and (c) are promptly and fully paid for by the Tenant. Title
to all such additions and alterations and to all new Improvements constructed on the Land
will vest in the Landlord on the expiration or sooner termination of the Lease Term.
6.3 Utility Charges. Throughout the Lease Term the Tenant will pay all
Utility Charges before the same become delinquent and the Landlord will have no
obligation with respect thereto.
SECTION 7 - LEGAL REQUIREMENTS
7.1 Compliance. The Tenant agrees to comply with all Legal Requirements
throughout the Lease Term at the Tenant's expense. The Landlord will have no
_______________________________________
Modern Real Estate Transactions, July 2006
- 159-
responsibility of any kind with respect to any Legal Requirement.
7.2 Permitted Contest. The Tenant will have the right to contest the validity
or application of any Legal Requirement by diligent pursuit of appropriate legal
proceedings conducted at the Tenant's expense. Any such contest may be brought in the
name of the Landlord if required by law, and the Landlord agrees to execute and deliver
such instruments as are reasonably requested by the Tenant to facilitate such contest. If
allowed by law, the Tenant may delay compliance with the contested Legal Requirement
until final determination of the contest; provided, that if the failure of the Tenant to
comply with the disputed Legal Requirement will subject the Land, the Improvements or
any part thereof to forfeiture or the Landlord to liability arising from such
noncompliance, the Tenant will promptly comply with the Legal Requirement or deposit
with the Landlord such collateral or other assurance as might be reasonably required by
the Landlord to protect the Land, the Improvements and the Landlord from liability or
forfeiture by reason of such noncompliance.
7.3 Evidence of Compliance. The Tenant agrees to furnish to the Landlord
within ten (10) days after the Landlord's written request therefor such permits, orders,
certificates or other documents as might be reasonably requested by the Landlord to
evidence compliance with Legal Requirements applicable to the Land, the Improvements
or the Landlord.
SECTION 8 - LIENS; FIRST MORTGAGE
8.1 Liens. The Tenant will not directly or indirectly create or permit to be
created or to remain any lien, encumbrance or claim affecting the Land or the Landlord's
interest under this Agreement other than: (a) the leasehold estate created by this
Agreement and the rights, if any, of the present and future subtenants of the Tenant
hereunder; (b) liens for Impositions not yet due or payable or which are the subject of a
contest as permitted by Section 5.4; and (c) the Approved Title Exceptions. In the event
of the filing of any such claim against the Landlord, the Land or the Landlord's interest
hereunder, the Tenant will cause the same to be discharged of record at the Tenant's
expense within ninety (90) days after written notice from the Landlord. The Tenant will
have the right to contest any such claim by diligent pursuit of appropriate legal
proceedings which may be conducted by the Tenant at the Tenant's expense in the name
of the Landlord, if legally required. If at any time during the contest of such claim the
Land, or the Landlord's interest hereunder becomes subject to forfeiture, or if the
Landlord becomes subject to liability arising from nonpayment of the same, the Tenant
will promptly pay the disputed claim or will deposit with the Landlord such collateral or
other assurances as might be reasonably required by the Landlord to protect the Land, the
Landlord's interest hereunder and the Landlord from liability or forfeiture by reason of
such claim.
_______________________________________
Modern Real Estate Transactions, July 2006
- 160-
8.2 First Mortgage. The parties acknowledge that the rights of the Landlord
and the Tenant under this Agreement and the respective ownership estates of the parties
in the Land and the Improvements are subject and subordinate to the First Mortgage and
the rights of the First Mortgagee thereunder. The Tenant agrees that the Tenant will
promptly perform and observe or cause to be performed and observed all of the terms,
covenants and conditions required to be performed and observed by the Tenant as the
mortgagor under the First Mortgage and will do or cause to be done all things necessary
to preserve and keep unimpaired the Tenant's rights as mortgagor under the First
Mortgage. The Tenant will promptly [and in any event within ten (10) days after the
occurrence thereof] notify the Landlord of the receipt of any notice from the First
Mortgagee claiming that the Tenant is in default in the performance or observance of any
of the terms, covenants or conditions of the First Mortgage and will cause a copy of each
such notice from the First Mortgagee to be promptly delivered to the Landlord. On
receipt by the Landlord from the Tenant or the First Mortgagee of any written notice
claiming a default by the Tenant under the First Mortgage, the Landlord is authorized to
rely thereon and the Tenant authorizes the Landlord, at the Landlord's option, to pay such
sums and to take such action as the Landlord deems necessary or desirable to cure such
default under the First Mortgage, even though the existence of such default or the nature
thereof is questioned or denied by the Tenant or by any party on behalf of the Tenant.
The Tenant hereby expressly grants to the Landlord the immediate and absolute right to
enter upon the Land and the Improvements or any part thereof to such extent and as often
as the Landlord, in the Landlord's sole discretion, deems necessary or desirable in an
effort to prevent or cure any such default under the First Mortgage. To the extent that the
Landlord elects to cure any default under the First Mortgage, the Landlord will be
subrogated to all liens held by the First Mortgagee to the extent of any payment or
performance rendered by the Land under the First Mortgage. All costs incurred by the
Landlord in curing any actual or claimed default under the First Mortgage will be
reimbursed by the Tenant to the Landlord and will constitute Additional Rent payable
hereunder. Notwithstanding any action taken by the Landlord to cure any default by the
Tenant under the First Mortgage, at the option of the Landlord, such default under the
First Mortgage will be deemed to be a Default hereunder which will entitle the Landlord
to exercise any and all of the rights provided herein.
SECTION 9 - SUBLETTING
9.1 Tenant's Right to Sublet. The Tenant will have the right to sublet all or
any portion of the Land and/or the Improvements from time to time during the Lease
Term without obtaining the consent of the Landlord.
9.2 Attornment of Subtenants. The Tenant agrees that each sublease entered
into by the Tenant during the Lease Term will contain a provision whereby the subtenant
agrees to attorn to the Landlord in the event of the termination of this Agreement. Within
thirty (30) days after written demand, but not more often than once each year, the Tenant
_______________________________________
Modern Real Estate Transactions, July 2006
- 161-
will furnish to the Landlord a schedule, certified as correct by the Tenant, setting forth all
subleases then in effect including the names of the subtenants thereunder, a description of
the demised premises and the amount of annual rent payable by each subtenant.
9.3 Nondisturbance Agreements. The Landlord agrees that the Landlord will
execute and deliver from time to time within ten (10) days after each written request by
the Tenant, agreements among the Tenant, the Landlord and any subtenant to the effect
that a termination of this Agreement and the leasehold estate hereby created will not
terminate the sublease between the Tenant and the subtenant provided that: (a) the terms
of the sublease between the Tenant and the subtenant represent a good faith effort by the
Tenant to lease the demised premises at rental rates and on terms prevailing in the
Oklahoma City market at the time of execution of such sublease; (b) all expenses of
preparing any such nondisturbance agreement will be paid by the Tenant or the
subtenant; and (c) the Landlord will incur no obligations to the subtenant under the terms
of the nondisturbance agreement other than the terms hereafter set forth in this Section
9.3. To the extent that the Landlord has entered into such nondisturbance agreements
with any subtenant, the sublease which the subtenant holds on the termination of this
Agreement will be deemed to constitute a direct lease between the Landlord and the
subtenant and will have the same force and effect as if the Landlord had originally
entered into the sublease as the landlord thereunder. The Landlord further agrees that the
Landlord will not name any subtenant holding a nondisturbance agreement executed by
the Landlord in any action to terminate this Agreement or to exercise any other relief to
which the Landlord might be entitled hereunder.
SECTION 10 - TENANT'S TRANSFER
10.1 Right to Assign. The Landlord hereby grants to the Tenant the full and
complete right at any time, and from time to time, without the consent of the Landlord, to
assign in whole or in part the rights of the Tenant under this Agreement, the leasehold
estate hereby created and all or any portion of the Tenant's interest in the Land and the
Improvements; provided, however, that each such assignment will be subject to the terms
of this Agreement. In the event the Tenant elects to enter into one or more such
assignments, the Tenant agrees to deliver to the Landlord true and complete copies of the
instrument or instruments effecting each such assignment within thirty (30) days after the
effective date of such assignment.
10.2 Assumption. The Landlord will have the right to require that any assignee
of all or any part of the interest of the Tenant under this Agreement, the leasehold estate
hereby created or all or any portion of the Tenant's interest in the Land or the
Improvements deliver to the Landlord an agreement in writing whereby such assignee
assumes the full performance of all of the Tenant's obligations under this Agreement for
so long as such assignee is the holder of all or any portion of the Tenant's interest
hereunder.
_______________________________________
Modern Real Estate Transactions, July 2006
- 162-
10.3 Attornment. Any assignee of the Tenant will have the right to pay Rent
hereunder and to perform any other obligation of the Tenant under this Agreement and
the Landlord agrees to accept such payment and performance from the assignee as if
performance had been rendered by the party originally named as Tenant in this
Agreement.
SECTION 11 - LANDLORD'S TRANSFER
11.1 Right to Transfer. Subject to the terms of Section 11.2 below, the
Landlord will have the right at any time and from time to time during the Lease Term to
sell, convey, transfer and assign all or any portion of the Landlord's interest in this
Agreement, the Land or the Improvements; provided, however, the Landlord agrees that
such right will not be exercised in violation of any applicable provision of the First
Mortgage. In the event the Landlord elects to enter into one or more such transfers, the
Landlord agrees to deliver to the Tenant true and complete copies of the instrument or
instruments effecting each such transfer within thirty (30) days after the effective date of
such transfer.
11.2 Right of Refusal. As a condition precedent to the Landlord's right to
transfer the Landlord's interest in this Agreement, the Land or the Improvements, the
Landlord agrees that the Landlord will first offer to the Tenant in writing the opportunity
to purchase the interest proposed to be transferred by the Landlord on the same terms as
the Landlord is willing to accept from a prospective transferee. The Tenant will have
thirty (30) days after receipt of the Landlord's offer in which to deliver to the Landlord
the written acceptance of the offer on the terms stated therein. If the Tenant does not
accept the Landlord's offer within such thirty (30) day period, the Landlord will thereafter
be authorized to convey the interest which is the subject of the offer to a transferee other
than the Tenant on the terms stated in the offer for a period of six (6) months after the end
of such thirty (30) day period. If a transfer of the interest of the Landlord which was the
subject of the offer is consummated within such six (6) month period, the Tenant's
preferential right to purchase such interest will terminate and the transferee of the
Landlord's interest and any subsequent transferee of such interest will not be further
bound by the provisions of this Section 11.2. If the transfer of the Landlord's interest
which is the subject of the offer is not consummated during such six (6) month period,
the Landlord's right to transfer the interest which is the subject of the Landlord's offer
will terminate and the Tenant's preferential right to purchase the interest of the Landlord
which is the subject of the offer will apply to any transfer subsequently proposed by the
Landlord.
11.3 Attornment. Provided that the Landlord shall have complied with the
terms of Section 11.2, the Tenant agrees to accept and attorn to the transferee of the
Landlord's interest hereunder as if such transferee had been the party named as the
_______________________________________
Modern Real Estate Transactions, July 2006
- 163-
original Landlord in this Agreement.
SECTION 12 - INDEMNITY; INSURANCE
12.1 Indemnity. The Tenant agrees to protect, indemnify and hold harmless
the Landlord against all liabilities, obligations, claims, damages, penalties, causes of
action, judgments, costs and expenses (including, without limitation, reasonable
attorney's fees and expenses) incurred by the Landlord or asserted against the interest of
the Landlord in the Land, the Improvements or this Agreement which do not result from
the willful act or gross negligence of the Landlord, its agents, contractors, employees,
licensees and invitees and which arise by reason of: (a) any injury to or death of any
person or any damage to property located in or on the Land or Improvements; (b) any
use, condition or state of repair of all of any part of the Land or Improvements; (c) any
failure by the Tenant to perform the obligations of the Tenant under this Agreement; or
(d) any negligence or willful act on the part of the Tenant or any of the Tenant's agents,
contractors, employees, licensees or subtenants. If any action, suit or proceeding is
brought against the Landlord by reason of any such occurrence, the Tenant, promptly
after the written request of the Landlord, will defend such action, suit or proceeding at the
Tenant's expense with legal counsel designated by the Tenant which is reasonably
acceptable to the Landlord.
12.2 Insured Risks. Throughout the Lease Term at the Tenant's expense, the
Tenant will maintain: (a) insurance against loss or damage to the Improvements by fire,
lightening, windstorm, hail, explosion, riot, aircraft, vehicles, smoke and other risks
commonly included in extended coverage policies written in Oklahoma City, Oklahoma,
in an amount not less than eighty percent (80%) of the full insurable value of the
Improvements or in such greater amount as is required to comply with the coinsurance
provision of any insurance policy maintained by the Tenant; (b) public liability and
property damage insurance applicable to the Land and Improvements in an amount no
less than Five Million Dollars ($5,000,000.00); (c) appropriate workmen's compensation
insurance; and (d) all other forms of insurance imposed by Legal Requirements or
customarily maintained by owners of like properties.
12.3 Policy Provisions. All insurance maintained by the Tenant pursuant to
Section 12.2 will: (a) name the Landlord and the Tenant as insureds as their respective
interests appear; (b) include an effective waiver by the insurer of all rights of subrogation
against any named insured; (c) provide that the coverage afforded by such policies will
not be cancelled by the insurer without prior written notice to the Landlord; and (d) be
issued by companies and in forms reasonably satisfactory to the Landlord in all other
respects.
12.4 Delivery of Policies. Promptly after the execution of this Lease and
continuously thereafter during the Lease Term, the Tenant will deliver to the Landlord
_______________________________________
Modern Real Estate Transactions, July 2006
- 164-
true and correct copies of all insurance policies required by this Lease together with
appropriate evidence of payment of the premiums therefor.
SECTION 13 - DAMAGE AND DESTRUCTION
13.1 Notice. In case of damage to the Improvements in excess of One
Hundred Thousand Dollars ($100,000.00), the Tenant will promptly give written notice
thereof to the Landlord describing the nature and extent of the casualty.
13.2 Restoration. If the Improvements are damaged or destroyed during the
Lease Term, the Tenant will as soon as practicable after the casualty restore the
Improvements as nearly as possible to the condition which existed immediately prior to
such damage or destruction. The Tenant will not be entitled to any offset or abatement in
Rent or to any termination or extension of the Lease Term as a result of deprivation or
limitation of use of the Improvements occasioned by any casualty, or by repairs or
replacements required by this Section 13.2.
13.3 Insurance Proceeds. Subject to the requirements of the First Mortgagee,
insurance proceeds will be applied by the Tenant to the payment of the costs of
restoration as such costs are incurred. After full payment of all costs of restoring the
Improvements, any balance of insurance proceeds will be paid to the Tenant.
SECTION 14 - EMINENT DOMAIN
14.1 Total Taking. If, during the Lease Term, all of the Land and the
Improvements are taken as a result of the exercise of the power of eminent domain or by
purchase in lieu thereof, or if less than all of the Land and the Improvements are taken,
but the Improvements cannot be restored to an economically useful unit, this Agreement
will terminate on the date of vesting of title to the Land and Improvements in the
condemnor. The rights of the Landlord and the Tenant to the award or awards arising
from any such taking will be determined in accordance with Section 14.6 of this
Agreement.
14.2 Partial Taking. If less than all of the Land and the Improvements are
taken as a result of the exercise of the power of eminent domain or by purchase in lieu
thereof, and the Improvements can be restored to an economically useful unit, this
Agreement will not terminate but will continue in full force and effect for the remainder
of the Lease Term with respect to that portion of the Land and the Improvements which is
not the subject of the taking. The rights of the Landlord and the Tenant to the award or
awards arising from any such taking will be determined in accordance with Section 14.6
of this Agreement. In such event, the Tenant agrees, at Tenant's expense, to restore that
portion of the Improvements not so taken to a complete architectural unit of substantially
_______________________________________
Modern Real Estate Transactions, July 2006
- 165-
the same usefulness, design, construction and character as the Improvements existing
before such taking. For the balance of the Lease Term, a just and appropriate part of the
Rent, according to the nature and extent of the taking, will be abated.
14.3 Temporary Taking. If all or any portion of the Land or the Improvements
is taken by the exercise of the right of eminent domain for governmental occupancy for a
limited period, this Agreement will not terminate and the Tenant will continue to perform
all of the Tenant's obligations hereunder as though such taking had not occurred (except
to the extent that the Tenant is prevented from doing so by reason of such taking;
provided, in no event will the Tenant be excused from the payment of Rent and all other
charges required to be paid by the Tenant under this Agreement). In the event of such
taking, the Tenant will be entitled to receive the entire amount of any award made for
such taking (whether paid by way of damages, rent or otherwise) and the Landlord
hereby assigns such award to the Tenant, unless the period of governmental occupancy
extends beyond the termination of the Lease Term, in which case the award will be
apportioned between the Landlord and the Tenant. The Tenant agrees to restore the
Improvements to the condition which existed prior to such taking at the Tenant's expense
at the termination of any such governmental occupancy.
14.4 Minor Taking. A taking of any bridge, vault, easement or portion of the
Improvements projecting into any public way will not be deemed a taking of any part of
the Land or the Improvements for the purposes of this Section 14, and this Agreement
will not be affected by any such taking. The Tenant will be entitled to receive any award
made for any such taking and will make any alteration to the Improvements required by
such taking at the Tenant's expense.
14.5 Abatement of Rent. In the event of the termination of this Agreement as a
result of any total or partial taking of the Land, the Rent payable by the Tenant with
respect to that portion of the Land so taken will terminate on the date title to that portion
of the Land and Improvements which is the subject of the taking vests in the condemnor
and Rent will be apportioned as of the date of such vesting. The obligation of the Tenant
to pay Rent during the remainder of the Lease Term will abate and, if the Landlord and
the Tenant are unable to agree as to the amount and terms of such abatement arising from
a partial taking as contemplated by Section 14.2, the same will be determined by
arbitration in accordance with Section 14.7.
14.6 Apportionment of Award. If all or a portion of the Land and/or the
Improvements are taken as contemplated by Sections 14.1 or 14.2, the Landlord and the
Tenant agree to request the court conducting any proceeding in connection therewith to
make separate awards to the Landlord and the Tenant as to their respective interests in the
Land and the Improvements. If for any reason the court is unwilling or unable to make
such separate awards, the Landlord and the Tenant agree that the single award for any
such taking will be apportioned in the following manner and paid in the following order:
_______________________________________
Modern Real Estate Transactions, July 2006
- 166-
14.6.1 Expenses. The award will first be applied to reimburse the
Landlord and the Tenant for reasonable expenses (including, without
limitation, attorneys' fees) incurred in connection with obtaining the award.
14.6.2 First Mortgagee. To the extent required by the First Mortgagee,
the award will next be applied in payment of principal and interest owing on
the First Mortgage.
14.6.3 Restoration Costs. To the extent that the Tenant is obligated or
elects to restore the Improvements, the award will next be applied to payment
of the costs reasonably incurred by the Tenant in effecting such restoration.
14.6.4 Landlord's Cost. Any balance of the award remaining after the
foregoing application will be allocated to the Landlord until the Landlord shall
have received the sum of Four Million Dollars ($4,000,000.00).
14.6.5 Remainder. The remaining portion of the award will be allocated
between the Landlord and the Tenant on the following basis: the Landlord will
receive that amount which is equal to the fair market value of the Land
determined in accordance with Section 3.2.5(a) through (c) of this Agreement
less the sum of Four Million Dollars ($4,000,000.00) and the balance of the
award, if any, will be allocated to the Tenant.
14.7 Arbitration. In the event the Landlord and the Tenant are unable to agree
as to the amount of any abatement of Rent to which the Tenant might be entitled or the
division of any award arising from a taking of all or a portion of the Land or the
Improvements, on the written demand of either the Landlord or the Tenant, such
abatement and/or division will be determined by arbitration to be held in accordance with
the provisions of Section 3.2 of this Agreement.
14.8 Participation in Proceedings. The Landlord, the Tenant, the First
Mortgagee and the holder(s) of any Fee Mortgage or Leasehold Mortgage will each have
the right at their respective expense to participate in any proceeding seeking to take all or
any portion of the Land or the Improvements and any appeals which might be taken
therefrom.
SECTION 15 - FEE MORTGAGES
15.1 Landlord's Mortgage. From time to time during the Lease Term, the
Landlord will have the right to execute one or more Fee Mortgages, subject to the
following limitations:
15.1.1 Tenant's Rights. All rights acquired under any Fee Mortgage will
_______________________________________
Modern Real Estate Transactions, July 2006
- 167-
be subject and subordinate to the rights of the Tenant under this Agreement
and the holder of any Fee Mortgage will have no right to disturb the Tenant in
the Tenant's possession of the Land and Improvements or to deprive the Tenant
of any other right created for the benefit of the Tenant under this Agreement,
except by reason of the Tenant's Default hereunder.
15.1.2 Nondisturbance. In the event of default under a Fee Mortgage, the
Tenant will not be made a party in any proceeding to enforce any of the
holder's rights thereunder and, on the succession of the holder of a Fee
Mortgage to the rights of the Landlord, this Agreement will continue in force
and effect as a direct lease from such holder to the Tenant.
15.1.3 Notices. Each Fee Mortgage will provide that the holder thereof,
on serving the Landlord with any notice claiming a default in performance by
the Landlord under the Fee Mortgage, will simultaneously serve a copy of such
notice to the Tenant.
15.1.4 Confirmation. If so requested by the Tenant, the Landlord will
cause to be executed and delivered to the Tenant at the Landlord's expense an
instrument whereby the Landlord and the holder of the Fee Mortgage agree to
be bound by the provisions of this Section 15.1.
15.2 Right of Refusal. To the extent that the preferential right to purchase any
interest transferred by the Landlord created by Section 11.2 of this Agreement is in effect,
the foreclosing holder of a Fee Mortgage will be deemed to be a transferee of an interest
of the Landlord and will be bound to comply with the terms of Section 11.2.
SECTION 16 - LEASEHOLD MORTGAGES
16.1 Tenant's Mortgages. From time to time during the Lease Term, the
Tenant will have the right to execute one or more Leasehold Mortgages without the
Landlord's consent, provided that all rights of any Leasehold Mortgagee will be subject to
all of the terms of this Agreement and inferior to all rights of the Landlord hereunder.
16.2 Rights of the Mortgagee. If within thirty (30) days after the execution of a
Leasehold Mortgage the Leasehold Mortgagee notifies the Landlord in writing of the
name and address of the Leasehold Mortgagee and provides to the Landlord a true and
correct copy of the Leasehold Mortgage, then so long as the Leasehold Mortgage remains
of record the following provisions will apply:
16.2.1 No Cancellation. The Landlord and the Tenant agree not to cancel,
surrender or modify this Agreement without the prior written consent of the
Leasehold Mortgagee.
_______________________________________
Modern Real Estate Transactions, July 2006
- 168-
16.2.2 Mortgagee's Time to Cure. The Landlord will, simultaneously
with serving the Tenant with notice of Default, serve a copy of such notice to
the Leasehold Mortgagee. If the Leasehold Mortgagee remedies the Default
within ten (10) days after the time has elapsed for the Tenant to cure such
Default, the Landlord will accept such performance as if the same had been
rendered by the Tenant within the time provided to cure such Default.
16.2.3 Postponement of Termination. In the event of prospective
termination of this Agreement by reason of the Tenant's Default, the Leasehold
Mortgagee will have the right to postpone such prospective termination by
taking immediate and successful action to acquire the entire Tenant's interest
hereunder by foreclosure of the Leasehold Mortgage, provided that the
Leasehold Mortgagee: (a) gives written notice of intent to exercise its rights
hereunder to the Landlord within ten (10) days after receipt of notice of
termination of this Agreement; and (b) cures all monetary Defaults by the
Tenant within such ten (10) day period. If the Leasehold Mortgagee so cures
the Tenant's Defaults and subsequently acquires all of the Tenant's interest
under this Agreement, the Landlord agrees that the Leasehold Mortgagee may
be substituted as the Tenant under this Agreement. The Landlord and the
Leasehold Mortgagee will then be bound by the terms of this Agreement as if
they had been, respectively, the original parties named as Landlord and Tenant
in this Agreement.
16.2.4 New Lease. The Landlord agrees that in the event of termination
of this Agreement by reason of the Tenant's Default, the Landlord will enter
into a new lease with the Leasehold Mortgagee for the remainder of the Lease
Term, effective on the date of such termination, provided: (a) the Leasehold
Mortgagee makes written request of the Landlord for such new lease within ten
(10) days after the date of termination and such written request is accompanied
by payment to the Landlord of all sums then due to the Landlord under this
Agreement; (b) the Leasehold Mortgagee pays to the Landlord at the time of
execution and delivery of the new lease all sums which would be due at the
time of execution and delivery thereof pursuant to this Agreement but for such
termination; (c) the Leasehold Mortgagee reimburses the Landlord for any
expenses (including reasonable attorney fees) incurred by the Landlord by
reason of the Tenant's Default; and (d) the Leasehold Mortgagee acts to
remedy any other failure of the Tenant to perform the terms of this Agreement.
16.2.5 Confirmation. Within ten (10) days after the Tenant's request, the
Landlord will execute and deliver to each Leasehold Mortgagee an instrument
reflecting the agreement of the Landlord, the Tenant and the Leasehold
Mortgagee to comply with the terms of this Section 16.2. The Tenant will bear
the expense of preparation of any such instrument.
_______________________________________
Modern Real Estate Transactions, July 2006
- 169-
SECTION 17 - DEFAULT; REMEDIES
17.1 Events of Default. The following events will be deemed to be Events of
Default by the Tenant under this Agreement: (a) failure to pay any Rent or other sums
payable by the Tenant hereunder when such sums become due; (b) failure to comply with
any term of this Agreement to be observed by the Tenant; (c) abandonment of any
portion of the Land or the Improvements; (d) the filing by or against the Tenant of any
proceeding under the Federal Bankruptcy Act or any similar law; (e) the adjudication of
the Tenant as bankrupt or insolvent in proceedings filed under the Federal Bankruptcy
Act or any similar law; (f) the making by the Tenant of an assignment for the benefit of
creditors; or (g) the appointment of a receiver or trustee for the Tenant or any of the
assets of the Tenant.
17.2 Notice; Opportunity to Cure. On the occurrence of any Event of Default,
the Landlord will have the option to declare the same to be a Default hereunder by
written notice to the Tenant specifying the nature of such Default. In the event the
Tenant, to the reasonable satisfaction of the Landlord, cures a Default arising from the
events specified at Section 17.1(a) within ten (10) days after receipt of such notice, or
cures a Default arising from the events specified at Sections 17.1(b) or (c) within thirty
(30) days after receipt of such notice, or cures a Default arising from the events specified
at Sections 17.1(d) through (g) within ninety (90) days after receipt of such notice, the
Landlord and the Tenant will be restored to their respective rights and obligations under
this Agreement as if no Event of Default had occurred.
17.3 Remedies. On the failure of the Tenant to cure a Default within the time
provided, the Landlord will have the option to do any one or more of the following
without any further notice or demand, in addition to and not in limitation of any other
remedy permitted by law or by this Agreement:
17.3.1 Termination. The Landlord may terminate this Agreement, in
which event the Tenant will immediately surrender the Land and the
Improvements to the Landlord, but if the Tenant fails to do so, the Landlord
may, to the maximum extent permitted by law, without notice and without
prejudice to any other remedy the Landlord might have, enter and take
possession of the Land and the Improvements and remove the Tenant and the
Tenant's property therefrom.
17.3.2 Reletting. The Landlord may enter and take possession of the
Land and the Improvements as the agent of the Tenant without terminating this
Agreement and the Landlord may relet the Land and the Improvements as the
agent of the Tenant and receive the rent therefor, in which event the Tenant
will pay to the Landlord, on demand, any deficiency that might arise by reason
_______________________________________
Modern Real Estate Transactions, July 2006
- 170-
of such reletting; provided, however, the Landlord will have no duty to relet
the Land or the Improvements and the failure of the Landlord to relet the same
will not release or affect the Tenant's liability for Rent or for damages.
17.3.3 Option to Perform. The Landlord may perform or cause to be
performed the obligations of the Tenant under this Agreement and may enter
the Land and the Improvements to accomplish such purpose. The Tenant
agrees to reimburse the Landlord on demand for any expense which the
Landlord might incur in effecting compliance with the terms of this Agreement
on behalf of the Tenant.
17.4 No Waiver. No action by the Landlord during the Lease Term will be
deemed an acceptance by the Landlord of an attempted surrender of the Land or the
Improvements. No re-entry or taking possession of the Land or the Improvements by the
Landlord will be construed as an election by the Landlord to terminate this Agreement,
unless a written notice of termination is signed by the Landlord. Notwithstanding any
such reletting, re-entry or taking possession, the Landlord may at any time thereafter elect
to terminate this Agreement for a previous Default. The acceptance by the Landlord or
payment by the Tenant of Rent following the occurrence of an Event of Default will not
be construed as the waiver of such Event of Default. No waiver of any Event of Default
by the Landlord will be deemed to constitute a waiver of any other or future Event of
Default hereunder. Forbearance by the Landlord to enforce one or more of the remedies
herein provided will not be deemed to constitute a waiver of any Default. No provision
of this Agreement will be deemed to have been waived by the Landlord unless such
waiver is in writing signed by the Landlord. The rights and remedies granted to the
Landlord in this Agreement are cumulative of every other right or remedy which the
Landlord might otherwise have at law or in equity and the exercise of one or more rights
or remedies will not prejudice the concurrent or subsequent exercise of other rights or
remedies. If the Landlord brings any action for enforcement of any right under this
Agreement or if the Landlord places any amount payable by the Tenant hereunder with
an attorney for collection, the party against whom any final judgment is rendered agrees
to pay the reasonable attorney's fees and other expenses incurred by the prevailing party
in connection therewith.
17.5 Surrender. On the expiration or sooner termination of the Lease Term, the
Tenant will quit and surrender the Land and the Improvements to the Landlord in good
order and condition, ordinary wear and tear excepted. The Tenant may remove or cause
to be removed from the Improvements any personal property, trade fixtures, furniture and
equipment which can be removed without material damage to the Land or the
Improvements. Any such property not so removed by the Tenant within ten (10) days
after the termination of the Lease Term will become the property of the Landlord and the
Landlord is hereby authorized to dispose of any such property free and clear of any claim
by the Tenant thereto.
_______________________________________
Modern Real Estate Transactions, July 2006
- 171-
17.6 Holding Over. If the Tenant continues to occupy the Land or the
Improvements after the expiration or other termination of the Lease Term, such holding
over will, unless otherwise agreed by the Landlord in writing, constitute a tenancy at will
at a daily rental equal to one-thirtieth (1/30th) of that amount which is equal to twice the
amount of the Rent payable during the last month prior to the termination of the Lease
Term and such holding over will be subject to all of the other provisions of this
Agreement.
SECTION 18 - LIMITATION OF LIABILITY
18.1 Exculpation. Notwithstanding anything to the contrary herein contained,
the Landlord agrees to look solely to the Tenant's interest in the Land and the
Improvements for payment of Rent and for the performance of the other provisions of
this Agreement. Nothing in this Agreement will impose any personal obligation or
liability on the Tenant or any Person comprising the Tenant. On Default, no deficiency
or other money judgment will be sought or obtained against the Tenant or any Person
comprising the Tenant.
18.2 Landlord's Remedies. Nothing herein contained will impair any remedy
or otherwise limit or restrict the rights of the Landlord with respect to the Land, the
Improvements or this Agreement arising from any Default by the Tenant hereunder.
SECTION 19 - MISCELLANEOUS
19.1 Force Majeure. If either the Landlord or the Tenant is delayed or
prevented from performing any term of this Agreement by reason of strikes, walkouts,
inability to procure materials, failure of power, restrictive laws or regulations, riots, war
or other reason beyond the party's control, then performance will be excused for the
period of delay and the time for performance will be extended for a period equal to the
period of such delay.
19.2 Notices. Any notice, payment, demand or communication required or
permitted to be given by any provision of this Agreement will be deemed to have been
given when delivered personally to the party or, when actually received if sent by
registered or certified mail, postage and charges prepaid, addressed as follows:
To the Landlord: Land Investment Corporation
One Mid-America Center
Oklahoma City, Oklahoma 73102
Attention: President
_______________________________________
Modern Real Estate Transactions, July 2006
- 172-
With a copy to:
Land Investment Corporation
One Mid-America Center
Oklahoma City, Oklahoma 73125
Attention: General Counsel
To the Tenant:
Development (HROB) Limited
Partnership
3200 First Office Tower
Oklahoma City, Oklahoma 73102
Attn: Mr. Morton A. Developer
With a copy to:
Hastie and Kirschner
3000 Oklahoma Tower
210 West Park Avenue
Oklahoma City, Oklahoma 73102
Attn: John D. Hastie, Esquire
19.3 Certificates. Either party will at any time and without charge, within ten
(10) days after written request by the other, certify by written instrument as to: whether
this Agreement has been supplemented or amended, and if so, in what manner; the
validity of the Agreement as of the time the request is received; the existence of any
Default by either party and any offsets, counterclaims or defenses on the part of the other
party; the commencement and termination dates of the Lease Term; and such other
matters as might be reasonably requested. Such certification may be delivered to any
mortgagee or purchaser, or prospective mortgagee or prospective purchaser, or to any
other Person specified in the certificate. Information so communicated will be binding on
the executing party and may be relied on by the party requesting the same and by the
Person to whom the certificate is delivered.
19.4 Governing Law. This Agreement is being executed, delivered and is
intended to be performed in Oklahoma City, Oklahoma, and the substantive laws of the
State of Oklahoma will govern the validity, construction and enforcement of this
Agreement.
19.5 Approvals. When approval by either the Tenant or the Landlord is
required hereunder, such approval will not be unreasonably withheld. Unless provision is
made for a specific period of time, the period of time in which the right of approval will
be exercised will be thirty (30) days after receipt of a written notice requesting such
approval. If the party whose approval is required neither approves nor disapproves a
proposed action within the applicable period, the party will be deemed to have given
approval of such action. If a party disapproves any action proposed by the other party
hereunder, such disapproval will not be effective unless the reasons for such disapproval
are stated in writing and provided to the party proposing the action.
19.6 Binding Effect. This instrument constitutes the entire agreement between
_______________________________________
Modern Real Estate Transactions, July 2006
- 173-
the parties and may not be changed, modified, amended or supplemented except in
writing, signed by both the Landlord and the Tenant. This Agreement is intended to
supersede and replace in all respects a certain letter dated _______________, 19__,
executed by the Landlord and the nominee of the Tenant. All other oral or written
agreements, promises and arrangements in relation to the subject matter of this
Agreement are hereby rescinded. This Agreement will be binding on each of the parties
and their respective successors and permitted assigns. All Persons to whom any interest
in this Agreement, the leasehold estate hereby created, the Land or the Improvements
might be transferred in accordance with the terms of this Agreement will, by accepting
such transfer, be bound by this Agreement to the same extent as if such transferee had
been an original party hereto. This Agreement is intended to create rights between the
Landlord and the Tenant and is not intended to confer rights on any other Person or to
constitute such Person a third party beneficiary hereunder. If at any time the Landlord or
the Tenant is comprised of more than one Person, this Agreement will be jointly and
severally binding on each Person comprising the Landlord and the Tenant.
19.7 Execution. This Agreement may be executed in multiple counterparts
with the same effect as if both parties had signed the same document. All counterparts
will be construed together and will constitute one agreement. This Agreement will not be
binding on or constitute evidence of an agreement until both parties affix their signature
to a counterpart of this document.
19.8 Time. Time is the essence of this Agreement.
19.9 Merger. This Agreement and the leasehold estate hereby created will not
merge with any other estate or interest in the Land or the Improvements by reason of the
fact that the same Person might own or hold directly or indirectly: (a) the rights of the
Tenant under this Agreement or the leasehold estate hereby created or any interest
therein; and (b) any other estate or interest in all or any part of the Land or
Improvements. No such merger will occur until such time as all Persons holding an
interest in this Agreement and the leasehold estate hereby created and any such other
estate or interest in the Land or Improvements or any part thereof join in a written
instrument effecting such merger and duly record the same.
19.10
Limit of Arbitration. Arbitration may be required only for the
determination of the fair market value of the Land described at Section 3.2 and
apportionment of Rent and condemnation awards described at Section 14 of this
Agreement. All other matters will be determined by a court of competent jurisdiction and
the party served with notice of arbitration for any matter other than those governed by
Sections 3.2 and 14, may reject such notice by failure to respond thereto, by giving notice
of rejection or by taking action which is inconsistent with arbitration.
19.11
Severability. If any clause or provision of this Lease is illegal,
invalid or unenforceable under any present or future law, the remainder of this
_______________________________________
Modern Real Estate Transactions, July 2006
- 174-
Agreement will not be affected thereby. It is the intention of the parties that if any such
provision is held to be illegal, invalid or unenforceable, there will be added in lieu thereof
a provision as similar in terms to such provision as is possible and be legal, valid and
enforceable.
19.12
Recording.
The Landlord and the Tenant agree that this
Agreement will not be recorded, but that a memorandum hereof in substantially the form
set forth at Schedule "1" attached as a part hereof will be executed and delivered within
ten (10) days after the written request of either party, which memorandum may be
recorded in Oklahoma County, Oklahoma.
SECTION 20 - DEFINITIONS
20.1 Defined Terms. The words defined in this Section are intended to have
the following meanings when used in this Agreement:
20.1.1 Additional Rent. The Impositions, insurance premiums, costs of
document preparation, Appraisers' fees, attorneys' fees, maintenance expenses
and other charges and expenses to be paid by the Tenant under the terms of this
Agreement.
20.1.2 Agreement. This Ground Lease Agreement and all modifications
and amendments thereto bearing the written approval of both the Landlord and
the Tenant.
20.1.3 Appraiser(s). An independent real estate appraiser who is a
member of the American Institute of Real Estate Appraisers doing business in
Oklahoma City, Oklahoma, who has not less than five (5) years of active
experience.
20.1.4 Approved Title Exception(s). The liens, restrictions and other
items which affect title to the Land which are more particularly described at
Section 1.3 of this Agreement.
20.1.5 Default. The occurrence of an Event of Default, the election by the
Landlord to exercise the Landlord's remedies by reason thereof and the failure
of the Tenant to cure or cause to be cured such occurrence within the time
specified in Section 17 of this Agreement.
20.1.6 Event(s) of Default. The actions or inactions of the Tenant
specified at Section 17.1 of this Agreement.
20.1.7 Fee Mortgage.
A mortgage, security agreement, collateral
assignment or other instrument creating a lien, security interest or other
_______________________________________
Modern Real Estate Transactions, July 2006
- 175-
encumbrance covering all or any part of the Landlord's interest in this
Agreement, the Land or the Improvements and all increases, renewals,
modifications, consolidations, replacements and extensions thereof.
20.1.8 First Mortgage.
The Mortgage and Security Agreement,
Assignment of Lessor's Interest in Leases and other security documents held
by Alligator Life Insurance Company, a New York corporation, 730 Park
Avenue, New York, New York 10017, as more particularly described as a
portion of the Approved Title Exceptions and all extensions, renewals,
modifications and amendments thereof.
20.1.9 First Mortgagee. Alligator Life Insurance Company, a New York
corporation, 730 Park Avenue, New York, New York 10017, its successors and
assigns in the capacity as the holder of the First Mortgage.
20.1.10
Imposition(s). All taxes (including, without limitation,
sales and use taxes), assessments (including, without limitation, all
assessments for public improvements or benefits, whether or not commenced
or completed prior to the date hereof and whether or not to be completed
during the Lease Term), water, sewer and other rents, rates and charges,
excises, levies, license fees, permit fees, inspection fees and other
authorization fees and other charges, whether general or special, ordinary or
extraordinary, foreseen or unforeseen, of every character (including all interest
and penalties thereon), which at any time during the Lease Term may be
assessed, levied, confirmed or imposed on the Land, the Improvements or any
interest therein or against the Tenant or the Landlord in connection therewith.
The term "Impositions" specifically excludes all income, estate, succession,
inheritance, transfer or franchise taxes imposed against the Landlord, the Rent
paid to the Landlord or the Landlord's interest in the Land; provided, that if
during the Lease Term, taxes in the nature of real or personal property ad
valorem taxes are levied on the Rent paid hereunder in lieu of all or any
portion of the Impositions which the Tenant would otherwise be obligated to
pay, such taxes will be included in the meaning of the term "Impositions."
20.1.11
Improvements. The office building and related facilities
now located on the Land and all other structures, fixtures, equipment and other
items of tangible property now or hereafter owned by the Tenant and located
on the Land. The term "Improvements" specifically excludes trade fixtures,
furniture and furnishings owned by the Tenant and subtenants occupying the
Improvements.
20.1.12
Land. The real property more particularly described at
Section 1.1 of this Agreement and the appurtenances relating thereto.
_______________________________________
Modern Real Estate Transactions, July 2006
- 176-
20.1.13
Landlord. Land Investment Corporation, having a notice
address at One Mid-America Center, Oklahoma City, Oklahoma 73102, and its
successors and permitted assigns.
20.1.14
Leasehold Mortgage. A mortgage, security agreement,
collateral assignment or other instrument creating a lien, security interest or
other encumbrance covering all or any part of the Tenant's interest in this
Agreement, the leasehold estate hereby created, the Land or the Improvements
and all increases, renewals, modifications, consolidations, replacements and
extensions thereof.
20.1.15
Leasehold Mortgagee. The Person designated as the holder
of any Leasehold Mortgage and such Person's successors and assigns of record.
20.1.16
Lease Term. The ninety-nine (99) year period identified at
Section 2.1 of this Agreement.
20.1.17
Legal Requirement(s).
All laws, statutes, codes,
ordinances, orders, judgments, decrees, injunctions, rules, regulations, permits,
licenses, authorizations, directions and requirements of and agreements with all
federal, state and local governments, agencies and officials, foreseen and
unforeseen, ordinary or extraordinary, which now or at any time hereafter may
be applicable to all or any part of the Land or the Improvements or to any use
or condition of all or any part of the Land or the Improvements or to the
Landlord or the Tenant.
20.1.18
Minimum Rent. The payments specified at Section 3.1 of
this Agreement as the same might be adjusted from time to time pursuant to
Section 3.2 of this Agreement.
20.1.19
Person(s). Any individual, corporation, association, trust,
partnership, joint venture or any government or agency or political subdivision
thereof.
20.1.20
Reappraisal Date(s). January 1, ____, January 1, ____,
January 1, ____, January 1, ____, January 1, ____, January 1, ____, January 1,
____ and January 1, ____, being the dates on which adjustments of the
Minimum Rent will be affected in accordance with Section 3.2 of this
Agreement.
20.1.21
Rent.
Rent. The sum of the Minimum Rent and the Additional
20.1.22
Tenant. Development (HROB) Limited Partnership, an
Oklahoma limited partnership, having a notice address at 3200 First Office
_______________________________________
Modern Real Estate Transactions, July 2006
- 177-
Tower, Oklahoma City, Oklahoma 73102, and its successors and permitted
assigns.
20.1.23
Utilities Charge(s). All charges for water, sewer, gas, heat,
light, power, telephone service, electricity, refuse collection and other utility
and communication services rendered or used on or about all or any part of the
Land or the Improvements and all other similar costs and expenses relating to
the use, operation and maintenance of the Land or the Improvements.
20.2 Construction. Except for the terms defined in this Section 20, the
descriptive headings contained elsewhere in this Agreement are for convenience only and
are not intended to define the subject matter of the provisions of this Agreement.
IN WITNESS WHEREOF, the parties have executed this instrument this
_____ day of _______________, 19__, effective the date first above written.
DEVELOPMENT (HROB) LIMITED
PARTNERSHIP, an Oklahoma limited
partnership
By DEVELOPER NOMINEE LIMITED
PARTNERSHIP, an Oklahoma
limited partnership,
Sole General Partner
By_____________________
Morton A. Developer,
Sole General Partner
(the "Tenant")
LAND INVESTMENT CORPORATION,
a Delaware corporation
By_____________________________ President
(the "Landlord")
SCHEDULE "1" TO GROUND LEASE AGREEMENT
MEMORANDUM OF LEASE
_______________________________________
Modern Real Estate Transactions, July 2006
- 178-
KNOW ALL MEN BY THESE PRESENTS:
THAT LAND INVESTMENT CORPORATION, a Delaware corporation,
having a notice address at One Mid-America Center, Oklahoma City, Oklahoma 73102
(the "Landlord") hereby leases to DEVELOPMENT (HROB) LIMITED
PARTNERSHIP, an Oklahoma limited partnership, having a notice address at 3200 First
Office Tower, Oklahoma City, Oklahoma 73102 (the "Tenant") pursuant to the terms of a
certain Ground Lease Agreement (the "Ground Lease") dated effective
_______________, 19__, the following described real property situated in Oklahoma
City, Oklahoma, more particularly defined as follows:
[Deleted for the purpose of this publication]
TO HAVE AND TO HOLD such real property for a term of ninety-nine
(99) years having a commencement date of ________, 19__, and a termination date of
___________, ____.
This Memorandum is subject to all of the conditions, terms and provisions
of the Ground Lease, all of which are by this reference incorporated as a part hereof to
the same extent as if all of the provisions of the Ground Lease were copied in full herein.
The Landlord and the Tenant acknowledge that the Ground Lease contains provisions
restricting the sale, encumbrance, assignment and other transfer of the respective estates
of the parties in the above described real property. It is understood that the Ground Lease
constitutes the complete agreement between the Landlord and the Tenant and that this
Memorandum will not be construed to modify or amend the Ground Lease in any respect.
IN WITNESS WHEREOF, the parties have executed this Memorandum
this _____ day of __________, 19__, effective _______________, 19__.
_______________________________________
Modern Real Estate Transactions, July 2006
- 179-
LAND INVESTMENT CORPORATION,
a Delaware corporation
By____________________________
President
(the "Landlord")
DEVELOPMENT (HROB) LIMITED
PARTNERSHIP, an Oklahoma limited
partnership
By
DEVELOPER NOMINEE LIMITED
PARTNERSHIP, an Oklahoma
limited partnership,
Sole General Partner
By_______________________
Morton A. Developer,
Sole General Partner
(the "Tenant")
ACKNOWLEDGEMENTS
STATE OF OKLAHOMA
)
)
COUNTY OF OKLAHOMA )
by
(SEAL)
SS:
This instrument was acknowledged before me on ______________, 19__,
, as President of Land Investment Corporation, a Delaware corporation.
______________________________
Notary Public
My Commission Expires: _______
_______________________________________
Modern Real Estate Transactions, July 2006
- 180-
STATE OF OKLAHOMA
)
)
COUNTY OF OKLAHOMA )
SS:
This instrument was acknowledged before me on ________________,
19__, by Morton A. Developer, Sole General Partner of Developer Nominee Limited
Partnership, an Oklahoma limited partnership, as Sole General Partner of Development
(HROB) Limited Partnership, an Oklahoma limited partnership.
(SEAL)
______________________________
Notary Public
My Commission Expires: _______
SCHEDULE "B": APPROVED TITLE EXCEPTIONS
[Deleted for the purpose of this publication]
SCHEDULE "C": GENERAL WARRANTY DEED
KNOW ALL MEN BY THESE PRESENTS:
THAT DEVELOPMENT (HROB) LIMITED PARTNERSHIP, an
Oklahoma limited partnership (the "Grantor") in consideration of the sum of Ten Dollars
($10.00) and other valuable consideration in hand paid, the receipt of which is hereby
acknowledged, does hereby grant, bargain, sell and convey unto LAND INVESTMENT
CORPORATION, a Delaware corporation (the "Grantee"), all of the Grantor's right, title
and interest in and to the following described real property and premises, and warrants
title to the same, situate in Oklahoma County, State of Oklahoma, to-wit:
[Deleted for the purpose of this publication]
_______________________________________
Modern Real Estate Transactions, July 2006
- 181-
EXCEPT THERE IS HEREBY RESERVED unto Grantor, its successors
and assigns, all of the buildings, structures, improvements and fixtures (which buildings,
structures, improvements and fixtures will remain real property notwithstanding such
reservation) now existing or located on, over or beneath the above described real property
or hereafter erected or placed on, over or beneath the above described real property by the
Grantor, its successors and assigns, it being the intention of the Grantor to convey to the
Grantee only the land underlying such buildings and other improvements. Provided, the
foregoing reservation is subject to the terms of a certain Ground Lease Agreement of
even date between the Grantee as lessor and the Grantor as lessee and the rights of the
Grantor so reserved will terminate on the termination of the lease term thereby created,
whether by expiration of time or otherwise and such buildings, improvements and certain
personal property (as defined in the Ground Lease Agreement) will thereupon become the
full and absolute property of the Grantee.
TO HAVE AND TO HOLD said described premises unto the Grantee, its
successors and assigns, forever free, clear and discharged of and from all former grants,
charges, taxes, judgments, mortgages, liens and encumbrances of whatsoever nature;
EXCEPT the following items:
[Deleted for the purpose of this publication]
IN WITNESS WHEREOF, the Grantor has executed this instrument this
_____ day of _______________, 19__, effective _______________, 19__.
DEVELOPMENT (HROB) LIMITED
PARTNERSHIP, an Oklahoma limited
partnership
By
DEVELOPER NOMINEE LIMITED
PARTNERSHIP, an Oklahoma
limited partnership,
Sole General Partner
By_________________________
Morton A. Developer,
Sole General Partner
(the
_______________________________________
Modern Real Estate Transactions, July 2006
- 182-
"Grantor")
ACKNOWLEDGMENT
STATE OF OKLAHOMA
)
)
COUNTY OF OKLAHOMA )
SS:
This instrument was acknowledged before me on ________________,
19__, by Morton A. Developer, Sole General Partner of Developer Nominee Limited
Partnership, an Oklahoma limited partnership, as Sole General Partner of Development
(HROB) Limited Partnership, an Oklahoma limited partnership.
(SEAL)
______________________________
Notary Public
My Commission Expires: _______
LEASEHOLD MORTGAGE PROVISIONS
Real Estate Mortgage - Description of Mortgaged Premises and Title
Exception
The leasehold estate created by that certain Ground Lease Agreement dated
_______________, 19__, between
, as Lessor and
, as Lessee, recorded on _______________, 19__, in Book ____, page ____, of the
records of Oklahoma County, Oklahoma, affecting the following real property:
[insert legal description]
Terms and conditions of Ground Lease Agreement dated __________, 19__, recorded on
_______________, 19__, in Book ____, page ____, of the records of Oklahoma County,
Oklahoma.
Real Estate Mortgage - Leasehold Provisions
__.
Leasehold Mortgage.
With respect to those portions of the Mortgaged
_______________________________________
Modern Real Estate Transactions, July 2006
- 183-
Premises which are the subject of the lease agreements described as __________ and
__________ (the "Ground Leases") the Mortgagor agrees as follows:
__.1 Performance of Ground Leases. To promptly perform or cause to be
performed all of the terms required to be performed by the
Mortgagor under the Ground Leases and to do or cause to be done
all things necessary to preserve and keep unimpaired the
Mortgagor's rights under the Ground Leases; to promptly (in any
event within ten (10) days after the occurrence thereof) notify the
Mortgagee of the receipt of any notice from any lessor under the
Ground Leases claiming that the Mortgagor is in default in the
performance of any of the terms thereof; to cause a copy of each
such notice to be promptly delivered to the Mortgagee; to correct
or cause to be corrected any such claimed default within one-half
(1/2) of the time provided in the Ground Leases for correction
thereof by the Mortgagor.
__.2 Mortgagor's Estate. In the event the Mortgagor acquires the fee simple
title or any other estate or interest in the real property subject to the
Ground Leases, such acquisition will not merge the leasehold
estate created by the Ground Leases, but such other estate or
interest will immediately become subject to the lien of this
Mortgage, and the Mortgagor agrees to execute, acknowledge and
deliver any instruments which the Mortgagee might reasonably
request for accomplishing the purposes hereof immediately on the
request of the Mortgagee therefor.
__.3 Option to Cure Default. On receipt by the Mortgagee from any lessor
under the Ground Leases of any written notice of default by the
Mortgagor thereunder, the Mortgagee may rely thereon and take
such action as the Mortgagee deems necessary or desirable to cure
such default, even though the existence of such default or the
nature thereof is denied by the Mortgagor or by any other person.
The Mortgagor hereby expressly grants to the Mortgagee the
absolute and immediate right to enter upon the Mortgaged
Premises to such extent and as often as the Mortgagee in its sole
discretion deems necessary or desirable to prevent or cure any such
default by the Mortgagor.
__.4 No Modification. The Mortgagor will not surrender the leasehold estates
created by the Ground Leases nor terminate nor cancel the Ground
Leases and the Mortgagor will not, without the express written
consent of the Mortgagee, modify, change, supplement, alter or
amend the Ground Leases, either orally or in writing, and the
_______________________________________
Modern Real Estate Transactions, July 2006
- 184-
Mortgagor hereby assigns to the Mortgagee all of the Mortgagor's
rights and privileges as lessee under the Ground Leases to
terminate, cancel, modify, change, supplement, alter, amend or
extend the Ground Leases. Any such termination, cancellation,
modification, change, supplement, alteration, amendment or
extension of the Ground Leases without the prior written consent
thereto by the Mortgagee will be void and of no force or effect.
__.5 No Release. No release or forbearance of any of the Mortgagor's
obligations under the Ground Leases, pursuant to the Ground
Leases or otherwise, will release the Mortgagor from any of the
Mortgagor's obligations under this Mortgage, including the
Mortgagor's obligations with respect to the payment of rent as
provided in the Ground Leases and the performance of all of the
terms, provisions, covenants, conditions and agreements contained
in the Ground Leases to be performed by the Mortgagor
thereunder.
__.6 No Merger. Anything herein contained to the contrary notwithstanding, it
is agreed that the leasehold estate of the Mortgagor created by the
Ground Leases and the estate of the fee owner and lessor under the
Ground Lease will at all times remain separate and apart and retain
their separate identities, and no merger of the leasehold estate of
the Mortgagor with the estate in fee of the owner and lessor will
result with respect to the Mortgagee or with respect to any
purchaser acquiring the Mortgaged Premises at any sale on
foreclosure of the leasehold estate encumbered by this Mortgage
without the written consent of the Mortgagee.
Real Estate Mortgage - Joinder of Fee Owner
1.
Ground Lease. The parties acknowledge that the Mortgaged Premises are the
subject of a certain Ground Lease Agreement (the"Ground Lease") dated __________,
19___, between the Borrower as lessee and the Landlord as lessor, a memorandum of
which was recorded on __________, 19__, in book _____ at page _____ of the records of
Oklahoma County, Oklahoma, and a certified copy of which has been provided to the
Mortgagee.
1.1 Ground Lease Subordination. This Mortgage is executed and delivered by
the Borrower for the purpose of agreeing to perform or cause to be
performed each of the covenants herein contained and for the
_______________________________________
Modern Real Estate Transactions, July 2006
- 185-
further purpose of subordinating all of the right, title and interest of
the Borrower as lessee under the Lease to the lien hereby created.
The Borrower specifically agrees with the Mortgagee that until the
indebtedness hereby secured is fully paid, the rights of the
Borrower as lessee under the Ground Lease and the leasehold
estate thereby created will be in all respects subordinate, junior and
inferior to the rights of the Mortgagee under this Mortgage to the
same extent as if this Mortgage had been executed, delivered and
recorded prior to and without notice of the execution of the Ground
Lease. In the event of the foreclosure or other exercise of a
remedy held by the Mortgagee which results in transfer of title to
the Mortgaged Premises, the Mortgagee will have the right to
enforce the lien created by this Mortgage against the Mortgaged
Premises and all of the rights of the Borrower therein, including,
without limitation, all rights in the improvements constituting a
part thereof, free and clear of all claims by the Borrower under the
Ground Lease.
1.2 Landlord Agreements. This Mortgage is executed and delivered by the
Landlord for the purpose of subjecting the fee simple title to the
Mortgaged Premises to the lien of this Mortgage, and to that end
the Landlord does hereby grant, bargain, sell and mortgage all of
the Landlord's right, title and interest in the Mortgaged Premises to
the Mortgagee. The Landlord hereby approves the subordination
of the Lease and all of the Landlord's rights thereunder to the lien
of the Mortgage and agrees that a default under this Mortgage by
the Borrower will entitle the Mortgagee and its successors and
assigns to foreclose the fee interest of the Landlord in the
Mortgaged Premises subject to the performance by the Mortgagee
of the following conditions:
1.2.1 Exculpation. The Landlord will not be personally liable for any
obligation secured by this Mortgage or for the performance of any
covenants herein contained. In the event of foreclosure of this Mortgage
no personal or deficiency judgment will be sought or obtained against the
Landlord and the Landlord will not be liable for any costs, attorney's fees
or expenses incurred or arising from the execution of this Mortgage or the
enforcement of the Mortgagee's rights hereunder. Nothing herein
contained will impair any mortgage lien or security interest securing
payment of the indebtedness owing to the Mortgagee by the Borrower or
otherwise limit or restrict the rights of the Mortgagee with respect to the
Mortgaged Premises.
1.2.2
Reinstatement. The Mortgagee agrees to provide to the Landlord a
_______________________________________
Modern Real Estate Transactions, July 2006
- 186-
copy of each notice of default given by the Mortgagee to the Borrower.
The Landlord will have the option, but not the obligation, to pay the
installment or installments in default under the note hereby secured and to
cure any other event of default under this Mortgage and the note hereby
secured within thirty (30) days after receipt of such notice of default. If
the Landlord elects to cure such default, the Landlord or the Landlord's
nominee or successor in interest will have the right to reinstate the
indebtedness hereby secured and pay the balance due on the note secured
by this Mortgage in installments as therein provided notwithstanding any
prior acceleration of the maturity of the note by reason of any default by
the Borrower. At any time after curing such default, the Landlord will
have the option, but not the obligation, to terminate the Ground Lease and
the rights of the Borrower as lessee thereunder and to reenter and take
possession of the Mortgaged Premises pursuant to the terms of the Ground
Lease or otherwise. Notwithstanding any other provision of this
Mortgage, such termination and reentry by the Landlord or the Landlord's
nominee or successor in interest will not constitute an event of default
hereunder and the Mortgagee hereby consents to the acquisition of the
Borrower's interest in the Mortgaged Premises subject to the indebtedness
hereby secured.
CONSTRUCTION LOAN COMMITMENT
_______________, 199__
Re:
$_________
Acquisition
, _______________, Oklahoma
and
Construction
Loan;
[Dear ___________/Gentlemen:]
(the "Lender") is pleased to advise you of our approval
of an extension of credit (the "Loan") for the acquisition of
(the "Project Site") in
, and the construction thereon of
, consisting of approximately
(______) square feet of [retail] [office]
_______________________________________
Modern Real Estate Transactions, July 2006
- 187-
space (the "Improvements"). For ease in reference, the Project Site, the Improvements
and all other property associated with the development of the Project Site and the
construction, equipping, occupancy and operation of the Improvements are hereafter
described as the "Project."
Our commitment to make the Loan is subject to your compliance with and
acceptance of the following terms and conditions:
1.
Borrower. The borrower will be
(the "Borrower").
, [a/an]
2.
Loan Amount.
The principal amount of the Loan will not exceed
Dollars ($__________). If the cost of acquiring the Project Site and constructing the
Improvements is less than the respective line item amounts specified in the Project
Budget (as hereafter defined), the amount of the Loan will be reduced accordingly.
3.
Loan Terms. The Loan will be payable as follows:
3.1 Interest Rate. During the [Loan Term] [Construction Term] (as hereafter
defined), the outstanding principal balance of the Loan will bear
interest at _____ percent (__%) in excess of the Prime Rate (as
hereafter defined) as the Prime Rate fluctuates. Interest will be
calculated on the daily outstanding balance for the previous period
using a 360-day year basis. The term "Prime Rate" means the base
interest rate per annum on corporate loans posted by at least
seventy-five percent (75%) of the United States thirty (30) largest
banks as published from time to time in the "Money Rates" column
of The Wall Street Journal or, if such publication ceases, an
alternative similar index designated by the Lender.
3.2 Prepayment. The Loan will be prepayable in whole or in part without
premium or penalty with all prepayments applied first to accrued
and unpaid interest and then to reduction of principal.
[3.3 Term. The Loan will have a term (the "Loan Term") commencing on
the date of initial closing (the "Closing Date") and maturing on
____________, 199__, during which accrued interest will be
payable monthly. If not sooner prepaid, the Loan will be payable
without demand on __________________, 199__.]
[3.3 Construction Term.
The Loan will have an initial term (the
"Construction Term") of ____________ (___) months after the
date of initial closing (the "Closing Date") during which accrued
interest will be payable monthly. If not sooner prepaid or
_______________________________________
Modern Real Estate Transactions, July 2006
- 188-
extended in accordance with paragraph 3.4, the Loan will be
payable without demand _____________ (___) months after the
Closing Date.]
[3.4 Extended Term. Provided that the Loan is not then in default and
construction of the Project has been completed to the satisfaction
of the Lender in substantial compliance with the plans and
specifications approved by the Lender, at the election of the
Borrower, the maturity of the Loan will be extended for an
additional
(___) months (the "Extended Term") after
the expiration of the Construction Term. The Borrower may
exercise the Borrower's option to enter the Extended Term by
giving written notice thereof to the Lender no less than [thirty
(30)] days prior to the expiration of the Construction Term and
by the payment simultaneously with such notice of the
commitment fee described in paragraph 4(b). During the
Extended Term, the Borrower will make monthly payments of
principal and interest based on an amortization schedule of equal
monthly payments of principal and interest necessary to fully
amortize the outstanding principal balance of the Loan at the
beginning of the Extended Term and interest thereon at the then
current Prime Rate over an assumed term of ______________
(___) years.]
[3.5 Payment Adjustments. On each anniversary date of the commencement
of the Extended Term (the "Adjustment Date"), the Lender may,
at the Lender's option, elect to recalculate the monthly payment
based on the Prime Rate in effect on the Adjustment Date and the
remaining years in the assumed term. On the Adjustment Date,
the Lender will compare the actual outstanding principal balance
of the Loan to the correct amortized principal balance based on
the interest rate utilized to calculate the preceding year's
payments. If the actual outstanding principal balance is greater
than the correct amortized principal balance, the Borrower will
pay the amount of principal necessary to decrease the principal
balance to the correct amortized principal balance and will pay
any amount of accrued interest which remains unpaid on the
Adjustment Date. If during the year the interest rate decreases
below the interest rate at which that year's monthly payments
were calculated, the monthly payments of interest will be applied
as a reduction to the principal balance of the Loan.]
[3.6 Final Maturity. If not sooner prepaid, the Loan will be payable without
demand ___________ (___) months after the date of
_______________________________________
Modern Real Estate Transactions, July 2006
- 189-
commencement of the Extended Term.]
4.
Fees. The Borrower will pay to the Lender: (a) a commitment fee of
Dollars ($________) simultaneously with the acceptance of this commitment, which fee
will be earned by the Lender for issuance of this commitment and will be nonrefundable;
and [(b) an additional fee of
Dollars ($_______) on the Closing
Date (as hereafter defined), which fee will be earned by the Lender on the Closing Date
and
thereafter
be
nonrefundable.]
[(b)
an
additional
fee
of
Dollars ($________) on the date the Borrower elects to enter the Extended Term,
which fee will be earned by the Lender at the time of payment and thereafter be
nonrefundable.]
5.
Collateral. The Loan will be secured by: (a) a first mortgage lien and a first
priority security interest covering all items of real and personal property comprising the
Project; (b) an assignment of all leases, rents and other revenues from the Project; (c) an
unlimited,
joint
and
several
guaranty
of
payment
executed
by
(the "Guarantors"); (d) a
Dollar ($_________) irrevocable
letter of credit in a form acceptable to the Lender; and (e) unlimited recourse against the
Borrower.
[__.
Collateral. The Loan will be secured by a first mortgage lien and a first
priority security interest covering all items of real and personal property comprising the
Project, all equipment, fixtures and building materials owned by the Borrower and to
be used in the construction of the Project, by an assignment of all leases, rents and
other revenues from the Project and unlimited recourse against the Borrower.
6.
Advances. The Loan proceeds will be advanced to the Borrower in a series of
monthly advances subject to the following limitations:
6.1 Project Budget. The proceeds of the Loan will be used to pay a portion of
the costs incurred by the Borrower in acquiring the Project Site and
constructing the Improvements in accordance with the following
estimates (the "Project Budget") prepared by the Borrower:
Project Budget
Line Item:
Land Costs
Maximum Loan
Proceeds:
Cost:
$_________
Building Construction
Site Work
_______________________________________
Modern Real Estate Transactions, July 2006
- 190-
$___________
Demolition
Tenant Construction
Architectural and Engineering
Testing and Survey
Loan Fee (Construction)
Loan Fee (Extended Term)
Interest
Title Insurance and Appraisal
Legal and Accounting
Commissions
Marketing
Contingencies
Taxes
Development Fee
Leasing Fee
Overhead
Total Project Cost
$
6.2 Draw Requests. The Lender will not be obligated to advance funds
without first having received and approved: (a) any proposed
change in the Project Budget; (b) draw request forms acceptable to
the Lender with certification by the Borrower that the draw request
is for reimbursement of actual costs incurred for the construction
of the Project within the estimates established by the Project
Budget and certification by the Borrower's architect and general
_______________________________________
Modern Real Estate Transactions, July 2006
- 191-
$
contractor that the construction of the Improvements in place is in
substantial compliance with plans and specifications approved by
the Lender; and (c) if requested by the Lender, lien waivers for all
preceding draws.
6.3 Maximum Advances. The Lender will not be required to fund more than:
(a) the total of nonconstruction expenses actually incurred within
the amount indicated by the Project Budget; plus (b) the lesser of
the cost or the value of completed construction of the
Improvements, as reasonably determined by the Lender, less
unpaid retainage. The Lender will be entitled to retain at all times
as undisbursed Loan proceeds an amount sufficient to pay all costs
of acquiring, constructing, occupying, financing and operating the
Project, as reasonably estimated by the Lender.
7.
Equity Contribution. At least ten (10) days prior to the Closing Date, the
Borrower will provide the Lender with satisfactory evidence of the Borrower's ability to
fund a
Dollar ($________) equity contribution, which will be
applied to the purchase price of the Project Site on the Closing Date.
8.
Purchase Agreement. At least ten (10) days prior to the Closing Date, the
Borrower will provide to the Lender true, correct and complete copies of all agreements
relating to the purchase of the Project Site [(including, without implied limitation, all
agreements relating to asbestos removal and any other required environmental
remediation)], which agreements will in all respects be subject to the Lender's approval.
9.
Appraisals. At the Borrower's expense, the Lender will select and engage an
appraiser to provide a valuation of the completed Project satisfactory to the Lender. To
the extent that the appraiser's determination of value of the completed Project is less than
Dollars ($________), the Lender reserves the right to: (a) terminate this commitment and
retain all commitment fees paid as of the date of termination; or (b) reduce the amount of
the Loan to [eighty percent (80%)] of the value determined by the appraiser. The Lender
may have the Project reappraised at the Borrower's expense at any time while the Loan
remains outstanding.
[10.
Financial Statements. At least ten (10) days prior to the Closing Date, the
Borrower and each Guarantor will furnish to the Lender current financial statements
of the Borrower and each Guarantor in such form and detail as the Lender reasonably
requests, which financial statements will be subject to the Lender's approval. After the
Closing Date, the Borrower and each Guarantor will furnish to the Lender: (a) annual
financial statements of the Borrower, each Guarantor and the Project; and (b) if
requested by the Lender, monthly financial statements of the Project.]
[10.
Financial Statements. Prior to the Closing Date, the Borrower will furnish
_______________________________________
Modern Real Estate Transactions, July 2006
- 192-
to the Lender financial statements of the Borrower in such form and detail as the
Lender reasonably requests, which financial statements will be subject to the Lender's
approval. After the Closing Date, the Borrower will furnish to the Lender: (a) annual
financial statements of the Borrower and the Project; (b) if requested by the Lender,
monthly financial statements of the Project.]
11.
Title Insurance. The Borrower will provide to the Lender a commitment to
issue a mortgagee's title insurance policy in the full amount of the Loan in form and
substance acceptable to the Lender and containing such endorsements as are requested by
the Lender.
The title insurance commitment will be issued by
through
(or another title insurer approved by the Lender)
and all title exceptions will be subject to the Lender's approval. On the Closing Date, the
Borrower will provide to the Lender a title insurance policy issued pursuant to the
commitment.
12.
Plans and Specifications. At least ten (10) days prior to the Closing Date, the
Borrower will provide two (2) complete sets of the final plans and specifications for the
Project for approval by the Lender.
13.
Survey. At least ten (10) days prior to the Closing Date, the Borrower will
provide the Lender for the Lender's approval two (2) copies of an ALTA/ACSM Survey
of the Project Site prepared by a registered land surveyor or professional engineer
acceptable to the Lender. If requested by the Lender, the Borrower will, following
completion of the foundations and following completion of the Project, furnish the
Lender with later dated ALTA/ACSM Surveys.
14.
Construction Contract; Bonds. The Borrower will provide the Lender with a
guaranteed maximum price general construction contract in an amount no greater than the
amount indicated by the Project Budget, together with payment and performance bonds
with a dual obligee rider in favor of the Lender. The general contractor, the form and
content of the general contract and the form and content of the bonds must be acceptable
to the Lender. The Lender reserves the right to approve changes in the general contract.
The general contractor must subordinate any lien the general contractor has or might
acquire to the interest of the Lender and agree that the general contract may be
collaterally assigned to the Lender to secure payment of the Loan. The Project must be
substantially completed within the earlier of [twelve (12)] months after the Closing Date
or the date required by any tenant lease, and the general contract will obligate the general
contractor to timely complete the Project within such period.
_______________________________________
Modern Real Estate Transactions, July 2006
- 193-
15.
Engineering Reports. At least ten (10) days prior to the Closing Date, the
Borrower will furnish to the Lender a copy of a soils report covering the Project Site
addressed to the Lender and a letter from the Borrower's architect in form and content
satisfactory to the Lender stating that the foundations and structural members of the
Project have been adequately designed considering soil conditions at the Project Site,
permitting assignment of the plans and specifications to the Lender for the Lender's use
in the event of default and certifying as to compliance of the plans and specifications with
applicable laws, ordinances and regulations and such other matters as the Lender
reasonably requests.
16.
Environmental Audit. At least ten (10) days prior to the Closing Date, the
Borrower will provide to the Lender an environmental audit and report of the Project in
form and substance satisfactory to the Lender prepared by an environmental engineer or
other environmental consultant approved by the Lender. The environmental report and
audit will: (a) certify to the Lender that the Project Site is free from any solid or
hazardous wastes, substances or toxins, [except for asbestos,] which would require
remediation under current or proposed federal or state environmental laws, rules or
regulations; [and (b) identify all Superfund or leaking underground storage tanks
located within one (1) mile of the Project Site; and (c) propose a plan for removing all
asbestos from the Project Site.] If the environmental audit, report [or the remediation
plan] is not satisfactory to the Lender in all respects, the Lender may terminate this
commitment and retain all commitment fees paid through the date of termination. The
Borrower and each Guarantor will indemnify, defend and hold the Lender harmless
against all violations of any environmental laws, rules or regulations.
17.
Building Permits; Zoning; Utilities. At least ten (10) days prior to the Closing
Date, the Borrower will provide to the Lender a copy of all building and environmental
permits required for construction of the Project, evidence satisfactory to the Lender of
compliance with applicable zoning and use limitations and evidence satisfactory to the
Lender that all utilities, sanitary and storm sewers, streets and other accessways are
available and adequate to serve the Project. If requested by the Lender, the Borrower will
provide evidence of compliance with any statute, ordinance or regulation applicable to
the Project.
18.
Tenant Leases. At least ten (10) days prior to the Closing Date, the Borrower
will provide to the Lender: (a) a copy of the executed lease between the Borrower and
which must: (i) cover no less than
(______) gross square feet of
leasable area; (ii) have a term of not less than [twenty (20)] years; and (iii) have a base
minimum rent of not less than
Dollars ($_____) per square foot; (b)
copies of all leases executed by prospective tenants of the Project which must cover no
less than [eighty percent (80%)] of the balance of gross leasable area of the Project under
lease terms of not less than [five (5)] years; and (c) letters from other prospective tenants
confirming their intent to lease space in the Project of not less than [twenty percent
(20%)] of the balance of gross leasable area of the Project. All leases must be with
_______________________________________
Modern Real Estate Transactions, July 2006
- 194-
tenants who are acceptable to the Lender and must not violate any exclusive use or other
provision of any lease held by another tenant of the Project. [All leases must be with
tenants who are [true factory-owned or sponsored outlet stores, and not merely
liquidators or "off-price" retailers] or with tenants which are otherwise acceptable to
the Lender and must not violate any exclusive or other provision of any lease held by
another tenant of the Project.] All tenant leases will be subject to approval by the
Lender and the Borrower will provide such supplementary agreements from the tenants
as the Lender reasonably requests including, without implied limitation, estoppel letters
and subordination and attornment agreements in forms which are acceptable to the
Lender.
19.
Insurance. The Borrower will provide: (a) builder's risk insurance coverage of
the Project during the construction period; and (b) on the earlier of completion of
construction or occupancy of the Project, all-risk insurance coverage on all improvements
and contents of the Project owned by the Borrower, in each case containing a
replacement cost endorsement. Following completion of construction, the Borrower will
also provide business interruption insurance in the amount of twelve (12) months' gross
revenues. The Borrower will also maintain at all times and provide the Lender with
evidence of liability insurance satisfactory to the Lender. In the event the survey
indicates that the Project lies within a flood hazard area, the Borrower agrees to furnish
flood insurance as required by the Lender. All policies will name the Lender as a loss
payee and provide that the Lender will receive not less than thirty (30) days' written
notice prior to cancellation. The issuer and form of all policies will be subject to the
Lender's reasonable approval.
[20.
Reciprocal Easement Agreement. If requested by the Lender, the Borrower
will duly execute and unconditionally deliver to the Lender a reciprocal easement
agreement conditionally establishing rights to ingress, egress, common parking, shared
expenses
and
common
maintenance
between
__________________,
________________ and one or more of the _______________ of the Project. The
reciprocal easement agreement will become effective at the time: (a) legal title to the
project or any portion thereof is held by a person or entity other than the Borrower; or
(b) a mortgage on any portion of the Project is held by an entity other than the Lender.
To the extent required by the Lender, the reciprocal easement agreement will be
approved by the holder of the permanent mortgage commitment affecting the Project
and tenants of the Project as designated by the Lender.]
[21.
Permanent Commitment. The Lender's obligation to close and fund the
Loan is contingent on the Borrower obtaining a long term loan commitment in an
amount not less than
Dollars ($________) prior to the
Closing Date. The form and substance of the long term commitment and the identity
of the long term mortgage lender will be subject to the approval of the Lender. If a
long term commitment is not obtained, the Lender may terminate this commitment and
retain all commitment fees paid through the date of termination.]
_______________________________________
Modern Real Estate Transactions, July 2006
- 195-
22.
Loan Documents. The Borrower and such other persons as are designated by
the Lender will duly execute, acknowledge (where appropriate) and unconditionally
deliver to the Lender all documents required to evidence and secure payment of the Loan,
which documents will be in form and substance satisfactory to the Lender and the
Lender's legal counsel and will include, without implied limitation, a construction loan
agreement, promissory note, mortgage, security agreement and financing statement,
assignment of leases[, guaranty of payment] and such additional documents as the
Lender might request (collectively, the "Loan Documents"). The Loan Documents will
incorporate the applicable terms of this commitment and will contain such additional
terms as the Lender determines to be reasonable in relation to the Loan. The Loan
Documents will contain the following specific provisions:
22.1 Transfer of Project. The Lender will have the option to declare an event
of default under the Loan Documents if, without the Lender's prior
written consent, the Project or any part thereof, or any interest
therein, or any ownership interest in the Borrower is transferred or
encumbered in any way.
22.2 Accounts of the Borrower. The bank accounts of the Borrower, including
the operating account for the Project and tenant escrow accounts,
will be established and maintained by the Borrower with the
Lender throughout the Loan Term.
[22.3
Partial Releases. The Borrower may obtain the release of Out
Parcel ___ and Out Parcel ___ as shown on Exhibit "A" to this
commitment by paying the following principal amount, together
with all accrued and unpaid interest on the unpaid principal
balance of the Loan:
(a)
:
$___________
(b)
:
$___________
The Lender will not be required to give either release if the Borrower is
in default either on the date the release is requested or on the date the
release is to become effective.]
23.
Expenses. Whether the Loan is closed, all expenses incurred by the Lender in
connection with the Loan including, without implied limitation, recording fees, title
insurance premiums, travel and inspection expenses and reasonable fees and expenses of
the Lender's legal counsel, will be paid by the Borrower. The Lender will not be required
to pay any brokerage fee, commission or similar charge and the Borrower agrees to
defend, indemnify and hold the Lender harmless against all claims for any fee,
commission or similar charge in connection with the Loan or in any way connected
therewith.
_______________________________________
Modern Real Estate Transactions, July 2006
- 196-
24.
Adverse Change. If any information which has been or is hereafter supplied to
the Lender in connection with the Loan or the Project becomes inaccurate or incomplete
in any material respect, the Borrower will immediately notify the Lender in writing prior
to the Closing Date. The Lender's obligation to close the Loan is conditioned on the
absence of any material adverse change in the financial condition or prospects of the
Borrower[, any Guarantor] or any tenant whose lease is reasonably deemed by the
Lender to be material, from the date of the last financial information provided to the
Lender.
25.
Expiration Date. This commitment will expire unless previously accepted by
the Borrower in accordance with its terms on or before __________________,
___________________, 199__.
26.
Closing Date.
The Loan must be closed on or before _________,
______________, 199__, or such later date as is mutually approved by the Lender and
the Borrower. If the Closing Date does not occur prior to such date, the Lender's
obligations under this commitment will terminate automatically and without notice.
27.
Construction. This commitment constitutes the full agreement between the
Lender and the Borrower and no prior discussions, correspondence or documents will be
considered to vary or explain the terms of this commitment. All conditions and
requirements set forth in this commitment are material to the Lender and, except as
specified herein, must be satisfied by the Borrower prior to the Closing Date.
28.
Assignment; Amendment. Neither this commitment nor the Loan proceeds
may be assigned without the Lender's prior written consent and without such consent
there will be no right to designate a payee of the Loan proceeds. Any attempt at
assignment without such consent will be void. This commitment cannot be amended
orally, but only by an instrument in writing signed by the party against whom
enforcement of any change is sought.
29.
Default. Failure by the Borrower to fully comply with all of the commitment
conditions within the times herein required will constitute a default by the Borrower
hereunder and, unless waived by the Lender in writing, will automatically cause this
commitment to terminate. In no event will inaction by the Lender be deemed a waiver of
any requirement hereunder or of any default by the Borrower. The Lender reserves the
right to cancel this commitment in the event of any material misrepresentation made in
any information furnished to the Lender by the Borrower [or the Guarantor] or on the
Borrower's [or Guarantors'] behalf.
The Lender acknowledges that the financial statements and tenant leases
provided to the Lender by the Borrower in connection with the Loan might reveal
proprietary information. The Lender agrees to protect and maintain the confidentiality of
_______________________________________
Modern Real Estate Transactions, July 2006
- 197-
such information except disclosure as required by any bank regulatory agency or law
applicable to the Lender or to the extent necessary to enforce the Lender's rights under
the documents evidencing or securing payment of the Loan.
Please acknowledge your acceptance of the foregoing commitment by
signing and returning the enclosed copy of this letter to us, together with the
nonrefundable commitment fee in the amount of
Dollars
($_________).
Yours very truly,
Accepted this _____ day of _________________, 199__.
[INSERT APPROPRIATE SIGNATURE BLOCK FOR BORROWER]
CONSTRUCTION LOAN AGREEMENT
Introduction
The documents which follow are adapted from a heavily negotiated
construction loan agreement between an interim lending bank and a borrowing joint
venture composed of a developer and an institutional investor for the financing of a high
rise office building to be constructed as part of an urban redevelopment project. Under
the terms of the proposed transaction a conventional first mortgage loan commitment was
obtained in the maximum amount of $50,000,000 with a floor disbursement in the
amount of $40,000,000. The 600,000 square foot project is preleased to the extent of
250,000 square feet in satisfaction of the permanent lender's requirement with respect to
initial funding.
In addition to the first mortgage loan commitment, a standby or gap
commitment in the amount of $10,000,000 was obtained. In addition to escalating
interest payments and commitment fees, the gap lender received an ownership interest in
the project for issuing the commitment and is entitled to receive increased ownership
based on the funding level of the gap commitment. An additional $4,000,000 is provided
_______________________________________
Modern Real Estate Transactions, July 2006
- 198-
by reason of the subordinated sale and leaseback of the land subsequent to the closing of
the first mortgage loan (and the gap loan if required).
The dollar amounts and certain terms of the actual documents have been
significantly modified in an effort to achieve as much simplicity as possible while
producing documents which are representative of the transaction. Because of the
modifications and because many of the terms of the documents were negotiated at great
length, the documents should be used as specimens and adapted to the client which the
attorney is representing. The attachments are intended to reflect "fair" agreements from
the standpoint of all of the parties who were involved in the actual transaction.
CONSTRUCTION LOAN AGREEMENT
THIS AGREEMENT is made this _____ day of ___________, 19___, at
Oklahoma City, Oklahoma, between DEVELOPMENT (HROB) LIMITED
PARTNERSHIP, an Oklahoma limited partnership, and INTERIM BANK, N.A., a
national banking association.
WITNESSETH:
1.
Definition of Terms. As used in this Agreement, the following terms will have
the meanings hereafter indicated:
1.1 Affidavit of Nonforeign Status. The instrument to be executed by the
Borrower and delivered to the Lender to satisfy the requirements of
Section 1455 of the Internal Revenue Code.
1.2 Agreement. This Construction Loan Agreement including Schedules "1"
through "14" inclusive which are attached as a part hereof and all
extensions, renewals and modifications hereof.
1.3 Appraisal. The report or reports prepared by an appraiser or appraisers
engaged by the Lender estimating the fair market value of the
completed Project.
1.4 Architect. Lines, Angles & Specs, AIA, an Oklahoma general partnership,
320 Fairy Tale Lane, Norman, Oklahoma 73069, its successors and
_______________________________________
Modern Real Estate Transactions, July 2006
- 199-
permitted assigns.
1.5 Architectural Contract. The agreement between the Borrower and the
Architect and all modifications thereof approved by the Lender.
1.6 Assignment of Architectural Contract. The agreement to be executed by
the Borrower and the Architect and delivered to the Lender in
substantially the form and containing the terms which appear as
Schedule "10," and all extensions, renewals and modifications
thereof.
1.7 Assignment of Gap Commitment. The agreement to be executed by the
Borrower and the Gap Lender and delivered to the Lender in
substantially the form and containing the terms which appear as
Schedule "12," and all extensions, renewals and modifications
thereof.
1.8 Assignment of General Contract. The agreement to be executed by the
Borrower and the General Contractor and delivered to the Lender
in substantially the form and containing the terms which appear as
Schedule "9," and all extensions, renewals and modifications
thereof.
1.9 Assignment(s) of Leases. The instruments to be executed and delivered
by the Borrower to the Lender in substantially the form and
containing the terms which appear as Schedule "7" (the "First
Lease Assignment) and Schedule "8" (the "Second Lease
Assignment") and all extensions, modifications and renewals
thereof.
1.10 Assignment of Sale-Leaseback Agreement. The agreement to be executed
by the Borrower and the Land Purchaser and delivered to the
Lender in substantially the form and containing the terms which
appear as Schedule "11," and all extensions, renewals and
modifications thereof.
1.11 Base Rate. The rate of interest per annum announced by the Lender from
time to time for the guidance of the Lender's lending officers as the
lowest rate of interest regularly charged by the Lender to large
commercial customers for ninety (90) day unsecured loans.
1.12 Borrower. Development (HROB) Limited Partnership, an Oklahoma
limited partnership, its successors and permitted assigns.
_______________________________________
Modern Real Estate Transactions, July 2006
- 200-
1.13 Budget. The estimate of the cost of constructing, financing and occupying
the Project prepared by the Borrower, a copy of which is set forth
at Schedule "3" and all amendments thereto approved by the
Lender.
1.14 Collateral. The property described in the Loan Documents and all other
property which is the subject of a mortgage lien, security interest,
collateral assignment or other encumbrance now held or hereafter
granted by the Borrower to the Lender to secure payment of the
Loans and all increases, replacements and substitutions therefor,
additions and accessions thereto and proceeds and products
thereof.
1.15 Commitment. The letter of commitment issued by the Term Lender, a
copy of which appears as Schedule "4" attached as a part hereof
and all extensions, renewals and modifications thereof approved by
the Lender.
1.16 Commitment Fee. Those sums deposited by the Borrower with the Term
Lender in connection with the issuance of the Commitment
consisting of a cash payment in the amount of Two Hundred Fifty
Thousand Dollars ($250,000.00), a letter of credit in the amount of
Two Hundred Fifty Thousand Dollars ($250,000.00) and a letter of
credit in the amount of Five Hundred Thousand Dollars
($500,000.00).
1.17 Construction Contracts. The General Contract and all other contracts and
subcontracts for labor, material and supplies issued or caused to be
issued by the Borrower or the General Contractor for the
construction or purchase of items used in the construction of the
Improvements and all modifications thereof approved by the
Lender.
1.18 Default. The occurrence of any of the Events of Default and the
determination by the Lender that the Lender will exercise the
remedies available to the Lender by reason thereof.
_______________________________________
Modern Real Estate Transactions, July 2006
- 201-
1.19 Environmental Law(s). Any federal, state or local law, statute, ordinance,
code, rule, regulation, order or decree now or hereafter in effect
pertaining to health, air pollution, water pollution, noise control,
waste transportation or disposal, Hazardous Substances, industrial
hygiene or the environment, including without implied limitation,
the Comprehensive Environmental Response, Compensation and
Liability Act of 1980, as amended by the Superfund Amendment
and Reauthorization Act of 1986, 42 U.S.C. §§ 9601, et seq., the
Resource Conservation and Recovery Act of 1976, as amended by
the Hazardous and Solid Waste Amendment Act of 1984, 42
U.S.C. §§ 6901 et seq., the Clean Air Act, 42 U.S.C. § 7401, et
seq., the Clean Water Act of 1977, 33 U.S.C. §§ 1251, et seq., the
Toxic Substances Control Act, 15 U.S.C. §§ 2501, et seq., the
Hazardous Materials Transportation Act, 49 U.S.C. §§ 1801, et
seq., the National Environmental Policy Act, 42 U.S.C. §§ 4321, et
seq., the Rivers and Harbors Act of 1899, as amended, 33 U.S.C.
§§ 401, et seq., the Oklahoma Pollution Control Coordinating Act,
82 O.S. §§ 931, et seq., the Oklahoma Pollution Remedies Act, 82
O.S. §§ 926.1, the Oklahoma Controlled Industrial Waste Disposal
Act, 63 O.S. §§ 1-2001.1, et seq., the Oklahoma Solid Waste
Management Act, 63 O.S. §§ 1-2300, et seq., the Controlled
Industrial Waste Fund Act, 63 O.S. §§ 1-2015, et seq., the
Oklahoma Underground Storage Tank Regulation Act, 17 O.S.
§§ 301, et seq., and the Oklahoma Aboveground Tank Regulation
Act, 17 O.S. §§ 401, et seq.
1.20 Event(s) of Default. The occurrence of an event specified in paragraph 10
of this Agreement.
1.21 Financing Statement(s). UCC financing statements to be executed from
time to time by the Borrower at the request of the Lender and all
continuation statements and amendments thereof.
1.22 Gap Commitment. The commitment from the Gap Lender to the
Borrower and all extensions, renewals and modifications thereof
approved by the Lender.
1.23 Gap Lender. Risk Investment Company, 2000 Risk Tower, Houston,
Texas 77027, its successors and assigns.
1.24 General Contract. The contract executed by the Borrower and the General
Contractor and all extensions, renewals and modifications thereof
approved by the Lender.
_______________________________________
Modern Real Estate Transactions, July 2006
- 202-
1.25 General Contractor.
Project Construction Company, a Delaware
corporation, 1908 Allowance Boulevard, Oklahoma City,
Oklahoma 73105, its successors and permitted assigns.
1.26 Guarantor. Morton A. Developer, an individual, his heirs, personal
representatives, successors and permitted assigns.
1.27 Guaranty Agreement. The instrument to be executed by the Guarantor in
favor of the Lender in substantially the form attached hereto as
Schedule "13," and all extensions, renewals and modifications
thereof.
1.28 Hazardous Substance(s). Those substances in quantities which are
included within the definition of "hazardous substances,"
"hazardous materials," "toxic substances" or "solid waste" in the
Comprehensive Environmental Response, Compensation and
Liability Act of 1980, as amended, the Resource Conservation and
Recovery Act of 1976, as amended, the Hazardous Materials
Transportation Act, 49 U.S.C. §§ 1801 et seq. and in the
regulations promulgated thereunder; those substances in quantities
which are listed in the United States Department of Transportation
Table (49 CFR 172.101, as amended) or by the Environmental
Protection Agency (or any successor agency) as hazardous
substances (40 CFR Part 302, as amended); those substances in
quantities which are designated as a "hazardous substance"
pursuant to Section 311 of the Clean Water Act, as amended, or
listed pursuant to the Clean Water Act; such other substances,
materials and wastes which are or become regulated under
applicable federal, state or local law, statute, ordinance or
regulation now or hereafter enacted which are or become classified
as hazardous or toxic; and any material, waste or substance in any
significant quantity which is a petroleum product, asbestos,
polychlorinated biphenyl, flammable material, explosive or
radioactive material.
1.29 Improvements. The thirty-two (32) story office building to be constructed
by the Borrower on the Site in substantial compliance with the
Plans and Specifications.
1.30 Land Purchaser. Land Investment Corporation, a Delaware corporation,
One Mid-America Center, Oklahoma City, Oklahoma 73102, its
successors and permitted assigns.
1.31 Lease(s).
The agreement to be executed between the Borrower, as
_______________________________________
Modern Real Estate Transactions, July 2006
- 203-
landlord, and Major User, Inc., as tenant, and all other agreements
to be executed between the Borrower, as landlord, and other
parties, as tenants, for occupancy of the Project and all extensions,
modifications and renewals thereof approved by the Term Lender.
1.32 Lender.
Interim Bank, N.A., a national banking association, its
successors, assigns and participating lenders.
1.33 Loan(s). The extensions of credit having an outstanding principal amount
not to exceed Fifty-Four Million Dollars ($54,000,000.00) to be
made by the Lender to the Borrower pursuant to the terms of this
Agreement and all extensions, renewals, increases, consolidations
and modifications hereof.
1.34 Loan Documents. This Agreement, the Notes, the Guaranty Agreement,
the Mortgages, the Financing Statements, the Assignment of
Leases, the Assignment of General Contract, the Assignment of
Architectural Contract, the Assignment of Sale-Leaseback
Agreement, the Assignment of Gap Commitment, the Take Out
Agreement, the Affidavit of Nonforeign Status, the Tenant
Agreements all other instruments executed and delivered by the
Borrower or any other person in connection with the Loans, all
instruments issued pursuant to the foregoing documents and all
extensions, renewals and modifications thereof.
1.35 Mortgage(s). The instruments to be executed and delivered by the
Borrower to the Lender to secure payment of the Notes in
substantially the forms and containing the terms which appear as
Schedule "5" (the "First Mortgage") and Schedule "6" (the "Second
Mortgage") and all extensions, renewals and modifications thereof.
1.36 Notes. The two (2) promissory notes bearing the date of this Agreement
and all extensions, renewals, modifications, consolidations and
increases thereof executed by the Borrower and delivered to the
Lender to evidence the Loans and all advances thereunder in the
face amounts of Fifty Million Dollars ($50,000,000.00) (the "First
Note"), and Fourteen Million Dollars ($14,000,000.00) (the
"Second Note"). The Notes will be payable on the terms stated at
paragraph 3 and will be in substantially the forms of Schedules "3"
and "4" attached as a part hereof.
1.37 OCURA. The Oklahoma City Urban Renewal Authority, an Oklahoma
nonprofit corporation, its successors and assigns.
_______________________________________
Modern Real Estate Transactions, July 2006
- 204-
1.38 OCURA Requirements. All requirements, covenants and conditions of
OCURA imposed on the Borrower or the Project.
1.39 Partnership Agreements. The agreements between Developer Nominee
Limited Partnership and Institutional Nominee Corporation which
creates the Borrower and the agreements between the Guarantor
and Oklahoma Trust Company, as trustee of the Developer Trusts,
which creates the general partner of the Borrower and all
modifications thereof approved by the Lender.
1.40 Permitted Title Exceptions. The matters affecting title to the Collateral
which are described at Schedule "2" and such other exceptions to
title to the Collateral as the Lender might approve from time to
time.
1.41 Plans and Specifications. The plans, drawings and specifications for
construction of the Improvements prepared by the Architect and
approved by the Lender, the General Contractor, the Term Lender,
the Gap Lender, the Land Purchaser and OCURA, and all
modifications thereof which are approved by the Lender.
1.42 Project. The Site, the Improvements and all other real or personal
property interests commonly known as Oklahoma Tower, 210
West Park Avenue, Oklahoma City, Oklahoma 73102.
1.43 Redevelopment Contract.
The Contract for Sale of Land and
Redevelopment between the Borrower and OCURA, providing for
the sale and purchase of the Site.
1.44 Sale-Leaseback Agreement. The agreement between the Borrower and the
Land Purchaser under which the Borrower agrees to sell fee title to
the Site to the Land Purchaser for the sum of Four Million Dollars
($4,000,000.00) and the Land Purchaser agrees to lease the Site
back to the Borrower under a long-term ground lease.
1.45 Site. The land and appurtenances more particularly described at Schedule
"1."
1.46 Take Out Agreement. The agreement to be executed among the Lender,
the Term Lender and the Borrower whereby the Lender agrees to
transfer certain of the Loan Documents to the Term Lender on
satisfaction of the terms of the Commitment.
1.47 Term Lender. Alligator Life Insurance Company, 730 Park Avenue, New
_______________________________________
Modern Real Estate Transactions, July 2006
- 205-
York, New York 10017, its successors and permitted assigns.
1.48 Tenant Agreements. The instruments to be executed by the Borrower and
the tenants of the Project designated by the Lender and delivered to
the Lender in substantially the form and containing the terms
which appear as Schedule "14" and all extensions, renewals and
modifications thereof.
2.
Lending Agreement. Subject to the Borrower's performance of the terms of
the Loan Documents, the Lender agrees to lend to the Borrower and the Borrower agrees
to borrow from the Lender an aggregate amount not to exceed Fifty Four Million Dollars
($54,000,000.00) on the following terms:
2.1 Amount. The Loans will be evidenced by the Notes in the aggregate face
amount of Sixty-Four Million Dollars ($64,000,000.00).
2.2 Interest. The Notes will bear interest on the unpaid principal balance
accrued from each date of disbursement at that rate which is equal
to one percent (1%) per annum in excess of the Base Rate
calculated on the basis of the actual number of days elapsed based
on a per diem charge computed over a year composed of three
hundred sixty (360) days. The rate of interest will be adjusted
during the term of the Notes on the date of each change in the Base
Rate. Interest on the amounts disbursed under the Notes will be
accrued through the last day of each month and will be paid
monthly not later than the fifteenth (15th) day of each month.
2.3 Maturity. Unless the Lender exercises a right to accelerate the maturity of
the First Note, the First Note will be payable on the date of
assignment of the First Note to the Term Lender, but not later than
fourteen (14) months after the date of this Agreement, or such later
date as the Borrower, the Lender and the Term Lender might
approve as the date for assignment of the First Note to the Term
Lender. Unless the Lender exercises a right to accelerate the
maturity of the Second Note pursuant to the terms of the Loan
Documents, the entire unpaid balance of the principal and accrued
but unpaid interest owing under the Second Note will be due and
payable on the earliest of the dates of: (a) the final additional
funding by the Term Lender in accordance with the provisions of
the Commitment; (b) thirty (30) days prior to the date for funding
of the Gap Commitment; (c) thirty (30) days prior to the date for
funding under the Sale-Leaseback Agreement; or (d) the date
which is twelve (12) months after the assignment of the First Note
to the Term Lender.
_______________________________________
Modern Real Estate Transactions, July 2006
- 206-
3. Collateral. Payment of the Notes and performance of all of the Borrower's other
obligations under the Loan Documents will be secured by the following collateral:
3.1 First Note. Payment of the First Note will be secured by: (a) a duly
perfected first priority mortgage lien covering that portion of the
Collateral which constitutes real property; (b) a duly perfected first
priority security interest covering that portion of the Collateral
which constitutes personal property; and (c) a duly perfected first
priority collateral assignment of the Leases subject only to the
Permitted Title Exceptions.
3.2 Second Note. Payment of the Second Note will be secured by: (a) a duly
perfected mortgage lien covering that portion of the Collateral
which constitutes real property, subject only to the First Mortgage
and the Permitted Title Exceptions; (b) a duly perfected security
interest covering that portion of the Collateral which constitutes
personal property, subject only to the First Mortgage and the
Permitted Title Exceptions; and (c) a duly perfected collateral
assignment of the Leases subject only to the First Lease
Assignment and the Permitted Title Exceptions.
3.3 Collateral for Notes. Prior to the transfer of certain of the Loan
Documents to the Term Lender as provided in the Take Out
Agreement, the Notes will be ratably secured by the First
Mortgage, the First Lease Assignment, the Second Mortgage, the
Second Lease Assignment, the Guaranty Agreement, the
Assignment of General Contract, the Assignment of Architectural
Contract, the Assignment of Sale-Leaseback Agreement, the
Collateral Assignment of the Gap Commitment and the Tenant
Agreements; after assignment of certain of the Loan Documents to
the Term Lender, the Loan Documents thereafter held by the
Lender will secure payment of the Second Note only.
3.4 Recourse. The unlimited joint and several liability of the Borrower and
the Guarantor.
4.
Advances. Notwithstanding the fact that the Notes are in the total face amount
of Sixty-Four Million Dollars ($64,000,000.00), aggregate advances thereunder will not
exceed Fifty-Four Million Dollars ($54,000,000.00) and will be made by the Lender from
time to time on the written request of the Borrower for the following purposes, subject to
the following specific limitations and subject to the other provisions of this Agreement:
4.1 Advances Under First Note. The amount of the Loans which will be
_______________________________________
Modern Real Estate Transactions, July 2006
- 207-
disbursed by the Lender under the First Note will not exceed the
sum of Forty Million Dollars ($40,000,000.00) until such time as
the Term Lender has advised the Lender in writing that the
Borrower has effected the leasing achievement necessary to qualify
for disbursement of funds under the First Note in excess of Forty
Million Dollars ($40,000,000.00). On receipt by the Lender of
such advice from the Term Lender, the Lender will disburse such
additional amounts under the First Note as the Term Lender
confirms will be funded under the First Note pursuant to the terms
of the Commitment.
4.2 Advances Under Second Note. The Lender will make periodic advances
under the Second Note in amounts the sum of which will not
exceed Fourteen Million Dollars ($14,000,000.00). To the extent
that the Lender advances funds under the First Note in excess of
Forty Million Dollars ($40,000,000.00) the amount which the
Lender is obligated to advance under the Second Note will be
reduced by the amount of such excess.
_______________________________________
Modern Real Estate Transactions, July 2006
- 208-
4.3 Use of Proceeds. The proceeds of each advance under the Notes will be
used for: (a) payment of the cost of acquiring the Site; (b)
payment of costs incurred under the Construction Contracts which
are within the line item costs prescribed by the Budget; (c)
payment of amounts advanced by the Lender, if any, under the
letters of credit held by the Term Lender as a portion of the
Commitment Fee; (d) payment of an existing promissory note
owing to the Lender by the Guarantor in the principal amount of
Two Hundred Fifty Thousand Dollars ($250,000.00) plus accrued
interest, the proceeds of which were used to pay the cash portion of
the Commitment Fee held by the Term Lender; (e) payment of fees
owing to the Architect; (f) payment of fees owing to the title
insurer; (g) payment of development fees owing to the Guarantor,
provided such development fees do not exceed three percent (3%)
of Total Project Cost (as defined in the Partnership Agreement
creating the Borrower) and are payable one fourth (1/4) at the
inception of the Project with the balance being payable in equal
monthly installments during the construction of the Project; (h)
payment of expenses and fees of legal counsel for the Borrower
incurred in connection with the Project; (i) payment of costs
incurred by the Borrower as an inducement to tenants executing
Leases, provided such costs are approved by the Lender; (j)
payment of interest on the Notes; (k) payment of the fees owing to
the Gap Lender under the Gap Commitment; (l) payment of any
fee owing to the Lender; (m) payment to reimburse the Lender for
out-of-pocket expenses incurred by the Lender in connection with
the preparation, administration or enforcement of the Loan
Documents; and (n) payment of other costs incurred by the
Borrower in connection with the Project, provided that such
payment is approved by the Lender.
4.4 Maximum Advances. Notwithstanding the aggregate face amount of
Notes, the Lender will not be required to fund more than the lesser
of: (a) Fifty-Four Million Dollars ($54,000,000.00); (b) seventyfive percent (75%) of the market value of the completed Project as
determined by the Appraisal; (c) seventy-five percent (75%) of the
cost of each line item amount to be paid based on the Budget; (d)
the total of nonconstruction expenses actually incurred within the
line item amount indicated by the Budget; or (e) the lesser of the
cost or the value of completed construction of the Project, as
reasonably determined by the Lender, less unpaid retainage. The
Lender will be entitled to reserve and hold undisbursed Loan
proceeds in an amount sufficient at all times to pay the total costs
of acquiring, constructing, occupying, financing and operating the
_______________________________________
Modern Real Estate Transactions, July 2006
- 209-
Project, as reasonably estimated by the Lender.
4.5 Draw Requests. The Lender will not be obligated to advance funds
without first having received from the Borrower and approved: (a)
any change in the Budget proposed by the Borrower or
confirmation that the Budget remains unchanged; (b) draw request
forms acceptable to the Lender with certification by the Borrower
that the draw request is for reimbursement of actual costs incurred
within the line item estimates established by the Budget; (c)
certification by the Architect and the General Contractor that the
construction of the Project in place is in substantial compliance
with the Plans and Specifications; (d) certification by the General
Contractor that all amounts except retainage owing to the General
Contractor through the certification date will be paid as a result of
funding the draw request; and (e) if requested by the Lender, lien
waivers for all preceding draw requests.
4.6 Manner of Payment. On the Borrower's satisfaction of the requirements of
this Agreement, the Lender will disburse the approved amount to
the Borrower's account on deposit with the Lender or, at the option
of the Lender, will pay the approved amount directly to the
requested payee for the account of the Borrower.
4.7 Termination of Advances. The Lender will have no obligation to make
any advance under the Notes so long as an Event of Default has
occurred and is continuing.
4.8 Further Assurances. To the extent that any advance is made to acquire any
asset, the Borrower will execute and deliver to the Lender such
mortgages, security agreements, financing statements and other
instruments as might be reasonably requested by the Lender to
subject such asset to the liens created by the Loan Documents.
4.9 Optional Advances. Notwithstanding the limitations set forth in this
paragraph 4, the Lender expressly reserves the right to waive the
requirements herein contained from time to time and to permit the
Borrower, in the Lender's absolute discretion, to obtain
disbursements under the Note in such amounts and on such terms
as the Lender might approve.
5.
Conditions of Lending. The obligations of the Lender to perform the Loan
Documents and to make the initial and each subsequent advance under the Notes are
subject to the performance by the Borrower of the following conditions precedent:
_______________________________________
Modern Real Estate Transactions, July 2006
- 210-
5.1 Loan Documents. The Loan Documents shall have been duly executed,
acknowledged (where appropriate) and unconditionally delivered
to the Lender by the Borrower and all other persons designated by
the Lender, all in form and substance satisfactory to the Lender.
5.2 Lender's Fee. The Lender shall have received the nonrefundable fee from
the Borrower in the amount of Fifty-Four Thousand Dollars
($54,000.00).
5.3 Take Out Agreement. The Take Out Agreement in form and substance
satisfactory to the Lender shall have been executed and delivered
by the Borrower, the Term Lender and the Lender.
5.4 Budget. The Lender shall have approved the Budget and shall have
received such supporting data as the Lender might reasonably
request.
5.5 Appraisal. The Lender shall have received the Appraisal prepared at the
Borrower's expense by an appraiser in form, using valuation
methods, discount rates and assumptions acceptable to the Lender.
To the extent that the value determined by the Appraisal is less
than Seventy-Two Million Dollars ($72,000,000.00), the Lender
reserves the right to reduce the amount of the Loans to seventyfive percent (75%) of the value determined by the Appraisal. The
Lender may, at any time while either of the Loans remain
outstanding, have the Project reappraised at the Borrower's
expense.
5.6 Financial Information. The Lender shall have received current financial
statements of the Borrower and the Guarantor prepared in form
acceptable to the Lender and which disclose financial conditions
acceptable to the Lender.
5.7 Insurance. The Lender shall have received certificates or policies of
builder's risk, all risk casualty and public liability insurance
insuring the Collateral issued in amounts, by companies and
against such risks as are reasonably satisfactory to the Lender,
naming the Lender as an additional insured or loss payee as the
Lender might require, together with evidence of premium payment.
5.8 General Contract. The Lender shall have received and approved the
General Contract which will provide a guaranteed maximum price
or stipulated sum in an amount no greater than the amount
indicated by the Budget. The General Contract will be the subject
_______________________________________
Modern Real Estate Transactions, July 2006
- 211-
of payment and performance bonds with a dual obligee rider in
favor of the Lender in form and substance acceptable to the
Lender. The General Contract will require ten percent (10%)
retainage through final completion of construction of the Project
and require substantial completion of construction of the Project no
later than ten (10) months after the date of this Agreement, or such
earlier date as is required by any Lease. The Lender reserves the
right to approve changes in the General Contract.
5.9 Other Documents. The Lender shall have received executed copies of the
Architectural Contract, the Sale-Leaseback Agreement, the
Commitment and the Gap Commitment which shall be certified as
correct by the Borrower.
5.10 OCURA Requirements. The Lender shall have received evidence
satisfactory to the Lender that all OCURA Requirements have
been satisfied.
5.11 Parking Facility. The Lender shall have received evidence satisfactory to
the Lender that parking facilities satisfactory to the Term Lender
will be timely constructed, operated and maintained by parties
acceptable to the Term Lender.
5.12 Engineering Reports. The Lender shall have received and approved a soil
report of the Site addressed to the Lender and a letter from the
Architect in form and content satisfactory to the Lender certifying
that the foundations and structural members of the Improvements
have been adequately designed considering soil conditions at the
Site, that the Plans and Specifications comply with all applicable
laws, ordinances and regulations and such other matters as the
Lender reasonably requests.
5.13 Environmental Audit. The Lender shall have received an environmental
audit in form and substance and prepared by an environmental
engineer satisfactory to the Lender finding that the Site is not
contaminated by any Hazardous Substance.
_______________________________________
Modern Real Estate Transactions, July 2006
- 212-
5.14 Title Policy. The Lender shall have received an ALTA Loan Policy issued
by a title insurer acceptable to the Lender in form and substance
satisfactory to the Lender insuring that each disbursement under
the Notes will be secured by the liens of the Mortgages. The title
policy will contain no exception based on mechanics' and
materialmen's liens or any exceptions based on discrepancies,
conflicts in boundary lines, shortages in area or other facts which
would be disclosed by a proper survey and any "pending
disbursement" language contained in the title policy must be
satisfactory to the Lender, in the Lender's absolute discretion.
5.15 Title Evidence. The Lender shall have received evidence satisfactory to
the Lender that the Notes will be secured by perfected security
interests covering the personal property Collateral subject only to
the Permitted Title Exceptions.
5.16 Plans and Specifications. The Lender shall have received a set of the
Plans and Specifications to the extent that the same have been
completed to the date of this Agreement. As the Plans and
Specifications are completed in final form, one copy of the same
bearing the approval of the Borrower, the General Contractor, the
Term Lender, the Gap Lender, the Land Purchaser and OCURA
will be promptly provided by the Borrower to the Lender.
5.17 Surveys. The Lender shall have received an ALTA/ACSM Land Title
Survey of the Site prepared by a registered land surveyor or
engineer in form and substance satisfactory to the Lender and the
title insurer.
At any time after the foundations of the
Improvements have been completed, the Lender will have the
option to require an updated ALTA/ACSM Land Title Survey of
the Project showing no encroachments or violations of building
lines, easements or property lines for approval by the Lender.
5.18 Flood Plain. The Lender shall have received satisfactory evidence that the
Project is not in an area identified by the Secretary of Housing and
Urban Development or any other governmental authority as an
area having special flood or mudslide hazards. If the Project lies in
a flood hazard area, the Borrower agrees to provide such flood
insurance as the Lender might require.
5.19 Use Limitations. The Lender shall have received all building and
environmental permits required for construction of the
Improvements, evidence satisfactory to the Lender of compliance
with applicable zoning and use limitations and evidence
_______________________________________
Modern Real Estate Transactions, July 2006
- 213-
satisfactory to the Lender that all utilities, sanitary and storm
sewers, streets and other accessways are available and adequate to
serve the Project.
5.20 Authority. The Lender shall have received and approved certified copies
of the Partnership Agreements and resolutions and other
documents reasonably required to authorize the execution, delivery
and performance of the Loan Documents by the parties thereto, all
in form and substance acceptable to the Lender.
5.21 Opinion of Counsel. The Lender shall have received the opinion of legal
counsel to the Borrower to the effect that:
5.21.1 Authority. The Borrower is a limited partnership duly organized
and validly existing under the laws of the State of
Oklahoma; the Borrower has adequate power, authority and
legal right to develop, own and operate the Project; the
Borrower is duly authorized, qualified and licensed under
all applicable laws, regulations, ordinances or orders of
public authorities to carry on the Borrower's business in the
development, ownership and operation of the Project; the
Borrower has adequate authority, power and legal right to
enter into and carry out the provisions of the Loan
Documents, to borrow money and to give security for
borrowings as required by this Agreement and to
consummate the transactions contemplated hereby; the
persons executing the Loan Documents on behalf of the
Borrower have the authority and capacity to bind the
Borrower as contemplated by the Loan Documents.
5.21.2 Validity. The Loan Documents constitute valid and legally
binding obligations of the Borrower and the Guarantor.
5.21.3 Violation. Compliance by the Borrower with the Loan Documents
will not violate any law which is applicable to the Borrower
or the Guarantor or, to the best of counsel's knowledge after
appropriate inquiry, any instrument or agreement binding
on the Borrower, the Guarantor or the Collateral.
5.21.4 Action.
To the best of counsel's knowledge after appropriate
inquiry, no action of any governmental authority or other
person is required in connection with the Borrower's or the
Guarantor's execution, delivery or performance of the Loan
Documents.
_______________________________________
Modern Real Estate Transactions, July 2006
- 214-
5.21.5 Enforceability. The Loan Documents are entitled to the benefit of
the Collateral therein described and are enforceable in
accordance with their respective terms against the
Collateral to which they relate, except as limited by
bankruptcy, insolvency and other laws of general
application relating to the enforcement of creditors' rights.
5.22 No Default. The representations and warranties set forth in paragraph 6
will be true and correct as of the date of the initial and each
subsequent disbursement under the Notes and there shall have
occurred and be continuing no Event of Default.
5.23 Nonwaiver. The failure of the Lender to demand the satisfaction of any
one or more of the foregoing conditions precedent to the initial or
any subsequent advance under the Notes will not constitute a
waiver of such condition as to any future advance or in any manner
prejudice the rights of the Lender to thereafter require full
compliance with the terms of this Agreement.
6.
Representations; Warranties. The Borrower represents and warrants to the
Lender that the following circumstances exist on the date of this Agreement and will
continually exist throughout the term of the Loans:
6.1 Partnership Existence. The Borrower is and will continue to be a limited
partnership duly organized and validly existing under the laws of
the State of Oklahoma; the Borrower has adequate power,
authority and legal right to develop, own, manage and hold the
Project; the Borrower is duly authorized, qualified and licensed
under all applicable laws, regulations, ordinances or orders of
public authorities to carry on the Borrower's business in the
development, management and ownership of the Project; the
Borrower has adequate authority, power and legal right to enter
into and perform the Loan Documents, to borrower money and to
give security for borrowings as required by this Agreement and to
consummate the transactions hereby contemplated.
6.2 Litigation. There is no action, suit, proceeding or investigation pending
or, to the best of the Borrower's knowledge after appropriate
inquiry, threatened against the Borrower, the Guarantor or the
Collateral which might materially and adversely affect the
Borrower, the Guarantor or the Collateral or result in any
substantial liability not adequately covered by insurance or impair
the ability of the Borrower to develop the Project and carry on the
Borrower's business as the same is conducted on the date of this
_______________________________________
Modern Real Estate Transactions, July 2006
- 215-
Agreement.
6.3 No Default. The making and performance of this Agreement by the
Borrower and the Guarantor will not violate any provision or
constitute a default under any indenture, agreement or instrument
to which the Borrower or the Guarantor is a party or by which the
Borrower, the Guarantor or the Collateral is bound or affected.
6.4 Ownership. The Borrower now has or will hereafter acquire absolute
ownership of the Collateral free and clear of all prior claims, liens,
encumbrances and title retention devices, subject only to the
Permitted Title Exceptions.
6.5 Agreements Effective. True, correct and complete copies of the
Commitment, the Gap Commitment, the General Contract, the
Architectural Contract, the Sale-Leaseback Agreement and the
Take Out Agreement have been delivered to the Lender and each
of such agreements will be maintained in full force and effect.
6.6 OCURA Requirements. The Borrower has fully complied with all
OCURA Requirements, except the obligations owing by the
Borrower to obtain the periodic approval by OCURA of the Plans
and Specifications as the same are delivered by the Architect.
6.7 Financial Information. The financial information delivered to the Lender
relating to the Borrower, the Guarantor and the Collateral is
correct, complete and fairly represents the financial condition and
the results of operations of the Borrower, the Guarantor and the
value of the Collateral as of the dates of such financial information
and there has occurred no material adverse change in such
financial information.
6.8 Enforceability. The Loan Documents constitute the legal, valid and
binding obligations of the Borrower and the Guarantor enforceable
against the Borrower and the Guarantor in accordance with their
respective terms.
6.9 Environmental Liability. Neither the Borrower nor any prior owner or
occupant of the Project is in violation of any Environmental Law
or subject to any claim for remediation of Hazardous Substances
with respect to the Project.
_______________________________________
Modern Real Estate Transactions, July 2006
- 216-
6.10 Taxes. The Borrower and the Guarantor have filed all federal, state and
local tax returns which are required to be filed for the current and
prior tax years and have paid or made provision for payment of all
taxes which have or may become due, except such taxes as are
being contested in good faith and as to which adequate reserves
have been provided. The Borrower knows of no basis for the
assessment of any tax deficiency.
6.11 Future Operations. The Borrower does not intend to hinder, delay or
defraud any existing or future creditor of the Borrower or to use
the funds to be advanced by the Lender to the Borrower to create
any preferential treatment of any creditor of the Borrower in
anticipation of seeking relief under the Bankruptcy Code or any
similar law.
6.12 Compliance With Laws. The Borrower is in compliance in all material
respects with all laws, rules, regulations, orders and decrees which
are applicable to the Borrower or the Collateral including, without
implied limitation, all state and federal securities laws, the
Employee Retirement Income Security Act of 1974, as amended,
the Fair Labor Standards Act, Regulations G, T, U and X of the
Board of Governors of the Federal Reserve System and all
environmental, health and safety laws.
6.13 Disclosure. No representation or warranty made by the Borrower in the
Loan Documents contains any untrue statement of a material fact
or omits to state any material fact necessary to make the statements
therein not misleading. There is no fact known to the Borrower
which has or might reasonably be anticipated to have a material
adverse effect on the business, assets, financial condition or
operations of the Borrower, the Guarantor or the value of the
Collateral which has not been disclosed to the Lender in writing.
7.
Affirmative Covenants. Until the expiration of the Lender's obligation to
advance funds under this Agreement and payment in full of the Notes, unless the Lender
otherwise consents in writing, the Borrower will perform or cause to be performed the
following agreements:
7.1 Construction. The Borrower will complete construction of all footings
and foundations of the Improvements not later than sixty (60) days
after the date of this Agreement, and will expeditiously complete
construction of the Improvements on or before ten (10) months
after the date of this Agreement (or such later date as the
Borrower, the Lender, the Term Lender, the Gap Lender and the
_______________________________________
Modern Real Estate Transactions, July 2006
- 217-
Land Purchaser might approve), in accordance with the Plans and
Specifications, in compliance with all applicable building codes,
zoning, use and environmental restrictions and in satisfaction of all
of the requirements of the Leases.
7.2 Change Orders. The Borrower will submit to the Lender (and to the Term
Lender, the Gap Lender and the Land Purchaser, if requested by
the Lender) for prior approval any proposed modification in the
work covered by the General Contract which: (a) will result in an
increase or decrease in excess of Fifty Thousand Dollars
($50,000.00) in the guaranteed maximum price set forth in the
General Contract; (b) is issued subsequent to the time that all
change orders theretofore issued result in an aggregate increase or
decrease in the guaranteed maximum price in excess of Two
Hundred Fifty Thousand Dollars ($250,000.00); or (c) which
materially alters the size, quality, configuration or anticipated use
of the Project or otherwise requires the approval of the Term
Lender under the terms of the Commitment, the approval of the
Gap Lender under the terms of the Gap Commitment or the
approval of the Land Purchaser under the Sale-Leaseback
Agreement, all as determined in the reasonable judgment of the
Lender. The Lender agrees to review such change orders in a
timely manner which will not impede the progress of constructing
the Improvements.
7.3 Loan Balance. If, in the reasonable judgment of the Lender (based on the
Budget, the cost of construction incurred to the date of the
determination and the available contingency reserves, savings and
undisbursed proceeds of the Loans), the cost of completing
construction of the Improvements and satisfying the terms of the
Loan Documents will exceed the amounts then remaining to be
advanced under the Notes, the Borrower, on the written request of
the Lender, will promptly deposit with the Lender funds sufficient
to pay such excess costs. Any funds so deposited will be held by
the Lender without interest and disbursed prior to any additional
advances under the Notes.
7.4 Performance of Obligations. The Borrower will pay and perform all of the
Borrower's obligations relating to the Project when due, provided
that the foregoing will not prohibit the Borrower from contesting
such obligations in good faith by appropriate proceedings. The
Borrower will perform all of the Borrower's obligations under
the Take Out Agreement, the Commitment, the Gap Commitment,
the Architectural Contract, the Construction Contracts, the Sale_______________________________________
Modern Real Estate Transactions, July 2006
- 218-
Leaseback Agreement, the Leases and the Redevelopment Contract
and will enforce the performance of the obligations of the other
parties thereto.
7.5 Notice of Change. The Borrower will give prompt written notice to the
Lender of the occurrence of: (a) any Event of Default; (b) any
nonperformance of the terms of the Commitment, the Gap
Commitment, the Sale-Leaseback Agreement, the Take Out
Agreement, the General Contract or the Architectural Contract; (c)
changes of management of the Borrower; (d) all litigation against
the Borrower or the Guarantor where the amount claimed exceeds
Two Hundred Thousand Dollars ($200,000.00); or (e) any other
matter which has resulted in, or might be reasonably anticipated to
result in, the occurrence of an Event of Default or a material
adverse change in the financial condition of the Borrower or the
Guarantor or a material delay in the completion of construction or
occupancy of the Project, or funding under the Commitment, the
Gap Commitment or the Sale-Leaseback Agreement or a material
decrease in the value of the Project.
7.6 Records; Inspections. The Borrower will maintain full and accurate
accounts and records of the Borrower's operations on a basis
consistent with prior periods. The Borrower will permit the
Lender's designated representatives to have access to the Project
and the Borrower's records and accounts relating to the Project at
all reasonable times to perform such inspections, audits and
examinations as the Lender might reasonably request from time to
time. The Lender's designated representatives will have the right
to discuss the business activities and finances of the Borrower and
the Guarantor and to be informed of the same by the Borrower as
the Lender might reasonably request.
7.7 Financial Information. The Borrower agrees to furnish or cause to be
furnished to the Lender the following information:
7.7.1
Financial Statements. The Borrower will deliver to the Lender the
following financial statements: (a) as soon as available, but
no later than ninety (90) days after the end of each fiscal
year of the Borrower, annual financial statements of the
Borrower certified to have been prepared in accordance
with generally accepted accounting principles by the
unqualified opinion of the Borrower's independent certified
public accountants; (b) within thirty (30) days after the end
of each fiscal quarter of the Borrower, unaudited financial
statements of the Borrower; (c) within fifteen (15) days
_______________________________________
Modern Real Estate Transactions, July 2006
- 219-
after the each of each month, monthly operating statements
of the Borrower in such form and detail as the Lender
might reasonably request.
7.7.2
Guarantor's Statements. No later than sixty (60) days after the end
of each calendar year, the Borrower will cause to be
delivered to the Lender a statement of the assets and
liabilities (both direct and contingent) and the amount and
source of the annual income of the Guarantor as of
December 31 of the preceding calendar year in such form
and detail as the Lender might reasonably request, certified
as accurate by the Guarantor.
7.8 Bank Accounts. The Borrower will maintain the Borrower's primary
accounts relating to the Project on deposit with the Lender, will
make payment of all expenses incurred in connection with the
Project from an account designated for such purpose without
commingling other funds in such account and will establish such
control accounts and other administrative devices as the Lender
might reasonably request in connection with the Loans.
7.9 Additional Documents. The Borrower will promptly, on request by the
Lender, perform or cause to be performed such actions and execute
or cause to be executed all such additional agreements, documents
and instruments as might be reasonably requested by the Lender,
the Term Lender, the Gap Lender or the Land Purchaser to obtain
satisfaction of the requirements of the Commitment, the Gap
Commitment and the Sale-Leaseback Agreement and the
disbursement of funds thereunder or to enable the Lender to
comply with any federal or state law applicable to the Lender or to
obtain the benefits intended to be conferred on the Lender by the
Loan Documents.
7.10 Governmental Approvals. The Borrower will obtain all permits, licenses,
easements and rights-of-way from governmental authorities and
abutting landowners which are considered necessary by the
Lender, the Term Lender or the Land Purchaser to provide
adequate vehicular and pedestrian access to the Project from public
ways and abutting properties.
7.11 Tenant Occupancy. On the date which is three hundred (300) calendar
days after the date of this Agreement, or such later date as the
Borrower, the Lender and the Term Lender might approve, the
Borrower will have leased and be collecting rents from not less
_______________________________________
Modern Real Estate Transactions, July 2006
- 220-
than Two Hundred Fifty Thousand (250,000) square feet of net
rentable office area in the Improvements on the terms specified by
the Commitment.
7.12 Leases. From time to time during the term of the Loans, as the Leases are
approved by the Term Lender, the Borrower will provide to the
Lender copies of such Leases, along with satisfactory evidence of
such approval by the Term Lender.
7.13 Architect's Reports. The Borrower will promptly deliver to the Lender a
copy of all inspection reports delivered to the Borrower by the
Architect pursuant to the terms of the Architectural Contract.
7.14 Other Information. The Borrower agrees to furnish to the Lender such
other information concerning the Project and the business activities
of the Borrower and the Guarantor as the Lender might reasonably
request.
7.15 Insurance. The Borrower agrees to maintain policies of: (a) builder's risk
insurance coverage of the Project during the construction period;
(b) all risk insurance coverage of the Project commencing on the
earlier of completion of construction or occupancy of the Project;
(c) business interruption insurance in the amount of twelve (12)
months' gross revenues commencing on the earlier of completion
of construction or occupancy of the Project; (d) public liability
insurance; and (e) workers' compensation and other insurance
coverage required under applicable law. All insurance policies
will name the Lender as an additional insured or loss payee as the
Lender might require and will provide that the Lender will receive
no less than thirty (30) days' written notice prior to cancellation of
the applicable policy. All insurance policies will be issued in
amounts, by companies and against such risks as are reasonably
satisfactory to the Lender. The Borrower agrees to provide
certificates or policies to the Lender evidencing all required
insurance coverage together with evidence that all insurance
premiums have been paid.
7.16 Expenses. The Borrower agrees to pay all fees, expenses and charges
reasonably incurred by the Lender with respect to the Loan
including, without implied limitation, fees and expenses of legal
counsel for the Lender, appraiser's fees, survey expenses,
environmental and other engineering charges, fees and expenses of
the title insurer, insurance premiums, filing fees and all other
expenses involved in the closing of the Loan and in the
_______________________________________
Modern Real Estate Transactions, July 2006
- 221-
preparation, administration or enforcement of any of the Loan
Documents.
8.
Negative Covenants. The Borrower agrees that until the expiration of the
obligation of the Lender to advance funds under this Agreement and payment in full of
the Notes, unless the Lender waives compliance in writing:
8.1 Modification of Agreements. The Borrower will not extend the times for
performance or otherwise modify, amend or release the
Commitment, the Gap Commitment, the Leases (after the same
have been approved by the Term Lender), the Construction
Contracts, the Architectural Contract, the Plans and Specifications
(after the same have been approved by OCURA and the Term
Lender), the Partnership Agreements, the Redevelopment Contract,
the Take Out Agreement or the Sale Leaseback Agreement.
8.2 Creation of Liens. The Borrower will not create, assume or suffer to exist
any trust deed, mortgage, pledge, security interest, encumbrance or
other lien (including the lien of an attachment, judgment or
execution) securing a charge or obligation affecting any or all of
the Collateral, excluding only: (a) liens for governmental charges
which are not delinquent or the validity of which is being contested
in good faith by appropriate proceedings; (b) deposits made to
secure statutory and other obligations incurred in the ordinary
course of the Borrower's business; (c) liens to the Lender created
by the Loan Documents; (d) the subordinate long-term ground
lease contemplated by the Sale-Leaseback Agreement; (e) liens
contemplated by the Gap Commitment; (f) the Permitted Title
Exceptions; and (g) liens specifically approved by the Lender.
8.3 Liquidation or Merger. The Borrower will not liquidate, dissolve or enter
into any consolidation, merger, partnership, joint venture,
syndicate, pool, operating agreement or other combination, or
convey, sell or assign any substantial part of the Borrower's assets.
8.4 Creation of Debt. The Borrower will not incur, create or suffer to exist
any indebtedness for borrowed money, or issue, discount or sell
any obligation of the Borrower, excluding only: (a) the Loans; (b)
current accounts payable arising in the ordinary course of the
Borrower's business; (c) the indebtedness contemplated by the
Commitment, the Gap Commitment and the Sale-Leaseback
Agreement; and (d) such other indebtedness as the Lender might
approve, which approval will not be unreasonably withheld or
delayed.
_______________________________________
Modern Real Estate Transactions, July 2006
- 222-
8.5 Loans; Guaranties. The Borrower will not make any loans, advances or
extensions of credit to any person, firm or corporation or become a
guarantor or surety, directly or indirectly.
8.6 Transfers. The Borrower will not transfer or permit to be transferred
voluntarily or by operation of law any interest in the Project (other
than rights granted to tenants under the Leases), the Borrower or
the entity constituting the general partner comprising the Borrower
without the prior written consent of the Lender, which consent will
not be unreasonably withheld or delayed.
_______________________________________
Modern Real Estate Transactions, July 2006
- 223-
9.
Environmental Compliance. The Borrower agrees that the Borrower will not
use, generate, manufacture, produce, store, release, discharge or dispose of any
Hazardous Substance or allow any other person to do so in violation of any
Environmental Law. The Borrower agrees to give prompt written notice to the Lender
of: (a) any proceeding or inquiry by any governmental authority (including, without
implied limitation, the Oklahoma State Department of Health, the Oklahoma Department
of Pollution Control, the Oklahoma Water Resources Board, the Oklahoma Corporation
Commission, the Oklahoma Department of Environmental Quality and the United States
Environmental Protection Agency) with respect to the presence of any Hazardous
Substance on the Project; (b) all claims made or threatened by any third party against the
Borrower relating to any loss or injury resulting from any Hazardous Substance; and (c)
the discovery by the Borrower of any occurrence or condition that could cause the
Borrower to be subject to any restrictions on the ownership, occupancy, transferability or
use of any property of the Borrower under any Environmental Law. The Borrower
agrees to protect, indemnify and hold harmless the Lender, the Lender's directors,
officers, employees, agents, successors and assigns against all loss, damage, cost,
expense or liability (including reasonable attorneys' fees and costs) directly or indirectly
arising out of or attributable to the use, generation, manufacture, production, storage,
release, threatened release, discharge, disposal or presence of a Hazardous Substance
including, without implied limitation: (i) all foreseeable consequential damages; and (ii)
the costs of any required or necessary repair, cleanup or detoxification and the
preparation and implementation of any closure, remedial or other required plan. The
foregoing indemnity agreement will survive the payment of the Loans and the release or
other termination of the Loan Documents. In the event that any investigation, site
monitoring, containment, cleanup, removal, restoration or other remedial work of any
kind or nature is reasonably necessary or desirable under any applicable Environmental
Law or by any governmental or nongovernmental entity or person because of, or in
connection with, the current or future presence, suspected presence, release or suspected
release of a Hazardous Substance on or into the air, soil, groundwater, surface water or
soil vapor by the Borrower, the Borrower agrees within thirty (30) days after written
demand for performance thereof by the Lender (or such shorter period of time as might
be required under any applicable Environmental Law) to commence, or cause to be
commenced, and thereafter diligently prosecute or cause to be prosecuted to completion,
all such remedial work. All remedial work will be performed by one or more contractors
approved by the Lender under the supervision of a consulting engineer approved by the
Lender. All costs and expenses of such remedial work will be paid by the Borrower
including, without implied limitation, the charges of such contractor(s) and consulting
engineer(s), and the Lender's reasonable attorneys' fees and costs incurred in connection
with monitoring or review of such remedial work.
10.
Events of Default. The Lender may terminate all obligations of the Lender to
make further disbursements under the Notes and the Lender may declare the Notes, or
either of them, and all other indebtedness and obligations of the Borrower owing to the
Lender to be due and payable if any of the following events occur and are not remedied
_______________________________________
Modern Real Estate Transactions, July 2006
- 224-
by the Borrower or waived by the Lender:
10.1 Nonpayment of Notes. A failure to pay when due any interest on or
principal of the Notes, or either of them; or
10.2 Other Nonpayment. A failure to pay when due any other amount payable
to the Lender under the terms of the Loan Documents; or
10.3 Breach of Agreement. A failure by the Borrower to perform or observe
any representation, warranty or agreement contained in the Loan
Documents or any other instrument delivered to the Lender in
connection with the Loans; or
10.4 Death. The death of the Guarantor; or
10.5 Lien Filings. The existence for a period of thirty (30) days of any lien
other than the Permitted Title Exceptions and liens created by the
Loan Documents covering all or any portion of the Collateral; or
10.6 Work Stoppage. Cessation of construction of the Improvements for a
period of fifteen (15) successive business days unless such work
stoppage is caused by strike, act of God or other event beyond the
control of the Borrower or the General Contractor; or
10.7 Casualty Loss. Substantial damage to or destruction of the Improvements
or any total or partial taking of the Collateral by rights of eminent
domain; or
10.8 Other Agreements. The rescission, abandonment or disclaimer of the
Commitment, the Gap Commitment, the Architectural Contract,
the General Contract, the SaleLeaseback Agreement, the
Redevelopment Contract, the Take Out Agreement or the Guaranty
Agreement; or
10.9 Representations; Warranties. Any representation, statement, certificate,
schedule or report made or furnished to the Lender by the
Borrower or the Guarantor proves to be false or erroneous in any
material respect at the time of the making thereof or any
representation or warranty ceases to be complied with in any
material respect; or
10.10
Insolvency; Bankruptcy. The insolvency (meaning an inability to
pay debts as the same become due or the existence of liabilities in
excess of assets) of the Borrower, the Guarantor, the General
_______________________________________
Modern Real Estate Transactions, July 2006
- 225-
Contractor, the Term Lender, the Gap Lender or the Land
Purchaser; or if the Borrower, the Guarantor, the General
Contractor, the Term Lender, the Gap Lender or the Land
Purchaser applies for or consents to the appointment of a trustee,
receiver, conservator or liquidator or authorizes such application or
consent, or if proceedings seeking such appointment are
commenced against the Borrower, the Guarantor, the General
Contractor, the Term Lender, the Gap Lender or the Land
Purchaser; or if the Borrower, the Guarantor, the General
Contractor, the Term Lender, the Gap Lender or the Land
Purchaser makes a general assignment for the benefit of creditors
or authorizes or files a voluntary petition in bankruptcy or applies
for or consents to the application of any bankruptcy,
reorganization, readjustment of debt, insolvency, dissolution,
liquidation or other similar law of any jurisdiction; or
10.11
Judgment. Entry by any court of final judgment (and expiration of
all appeals) against the Borrower or the Guarantor in excess of
Fifty Thousand Dollars ($50,000.00) which is not adequately
covered by insurance, or any attachment of any of the Collateral
which is not discharged to the satisfaction of the Lender within
thirty (30) days thereof; or
10.12
Maturity of Other Debt. The acceleration of the maturity of the
indebtedness of the Borrower to any other person which in the
reasonable opinion of the Lender will materially and adversely
affect the ability of the Borrower to perform the Loan Documents.
11.
Remedies. On the occurrence of an Event of Default, in addition to any other
rights and remedies which the Lender might hold under the terms of any one or more of
the Loan Documents, the Lender will have the option to declare a Default and exercise
one or more of the following remedies:
11.1 Acceleration of Maturities. The Lender may, at the Lender's option,
terminate all obligations of the Lender to make further advances
under the Notes, or either of them, declare the Notes, or either of
them, and all other amounts owing by the Borrower to the Lender
to be immediately due and payable, demand performance of all
other obligations of the Borrower under the Loan Documents and
the Guarantor under the Guaranty Agreement and, on the failure of
the Borrower to cure any Event of Default in the time provided, the
Lender will be entitled to proceed to selectively and successively
enforce any one or more of the Lender's rights under the Loan
Documents.
_______________________________________
Modern Real Estate Transactions, July 2006
- 226-
11.2 Selective Enforcement. In the event the Lender elects to selectively and
successively enforce the Lender's rights under any one or more of
the Loan Documents, such action will not be deemed a waiver or
discharge of any other right, lien or encumbrance securing
payment of the Notes or either of them.
11.3 Performance by Lender. In the event the Borrower fails to cure or cause to
be cured any Event of Default in the time provided, the Lender will
at any time thereafter have the right (but not the obligation) to: (a)
take possession of the Project and complete construction thereof in
such manner as the Lender determines; (b) take possession of all
materials, equipment, tools and inventory on the Project or stored
elsewhere for use on the Project for use in such completion; (c)
make payments of the costs of completion directly to the Architect,
the General Contractor and other persons engaged by the Borrower
or the Lender; (d) make such payments and perform such acts as
might be determined by the Lender to be necessary or appropriate
to perform or to cure any nonperformance by the Borrower under
the Commitment, the Gap Commitment, the Take Out Agreement,
the Sale-Leaseback Agreement, the Architectural Contract, the
Construction Contracts, the Leases, the Redevelopment Contract,
the Partnership Agreements and all other agreements affecting the
Project; and (e) make advances under the Notes without the
consent of the Borrower to pay interest accrued thereon and all
costs of such completion. If the Lender exercises such option to
complete construction, all costs of completion will be paid to the
Lender by the Borrower. The Borrower hereby authorizes the
Lender to increase the indebtedness owing by the Borrower to the
Lender by the cost of completion and agrees that the Loan
Documents will evidence and secure payment of such completion
costs whether or not the total funds advanced exceed the face
amount of the Loan Documents.
11.4 Waiver. The Lender may, by an instrument in writing signed by the
Lender, waive any Event of Default which has occurred and any of
the consequences of such Event of Default and, in such event, the
Lender, the Guarantor and the Borrower will be restored to their
respective former positions, rights and obligations hereunder. Any
Event of Default so waived will, for the purposes of the Loan
Documents, be deemed to have been cured and not to be
continuing, but no such waiver will extend to any subsequent or
other Event of Default or impair any consequences of such
_______________________________________
Modern Real Estate Transactions, July 2006
- 227-
subsequent or other Event of Default. No waiver of any Event of
Default by the Lender will be implied from the failure or delay by
the Lender to take any action in respect of the Event of Default.
No express waiver of any condition precedent or Event of Default
will affect any other Event of Default or extend any period of time
for performance other than as specified in such express waiver.
One or more waivers of any Event of Default will not be deemed a
waiver of any subsequent failure to perform the same provision or
any other provision. The consent to or approval of any act or
request by the Lender will not be deemed to waive or render
unnecessary the consent to or approval of any subsequent similar
act or request. The partial exercise of any right or remedy under
any Loan Document will not preclude any other or further exercise
thereof or the exercise of any other right or remedy. No advance
of the proceeds of the Loans will constitute a waiver of any of the
representations, warranties, conditions or agreements contained in
the Loan Documents. If the Lender elects to advance proceeds of
the Loans to the Borrower notwithstanding the failure to satisfy
any condition precedent to such advance, the advancement of
funds will not preclude the Lender from thereafter declaring the
failure to satisfy such condition precedent to be an Event of
Default. No course of dealing between the Borrower or the
Guarantor and the Lender will be deemed to amend the terms of
the Loan Documents or to preclude the Lender from exercising the
rights and remedies therein contained notwithstanding such course
of dealing.
11.5 Deposits; Setoff. Regardless of the adequacy of the Collateral, any
deposits or other sums credited by or due from the Lender to the
Borrower or the Guarantor will at all times constitute collateral
security for all indebtedness and obligations of the Borrower to the
Lender and may be set off against any and all liabilities, direct or
indirect, absolute or contingent, now existing or hereafter arising,
of the Borrower or the Guarantor to the Lender. The rights granted
by this paragraph are in addition to the rights of the Lender under
any statutory banker's lien now or hereafter in effect.
11.6 Cumulative Remedies. No failure on the part of the Lender to exercise
and no delay in exercising any right hereunder will operate as a
waiver thereof, nor will any single or partial exercise by the Lender
of any right hereunder preclude any other or further right of
exercise thereof or the exercise of any other right.
11.7 Opportunity to Cure. Any provision of this Agreement or the other Loan
_______________________________________
Modern Real Estate Transactions, July 2006
- 228-
Documents to the contrary notwithstanding, if any Event of
Default occurs and the Lender desires to exercise any remedy or
take any other action by reason thereof, the Lender agrees to serve
written notice of such Event of Default to the Borrower. The
Lender will not exercise any remedy arising from any Event of
Default (other than accelerating the maturity of the Notes and
providing the notices required by the Loan Documents or
applicable law) if the Borrower cures or causes to be cured the
Event of Default within the time periods hereafter provided: (a)
with respect to a failure which can be cured by the payment of
money, the Borrower will have the opportunity to cure the same
for ten (10) days after receipt of notice thereof; and (b) with
respect to a failure which cannot be cured by the payment of
money, the Borrower will have the opportunity to cure the same
for thirty (30) days after receipt of notice thereof and, to the extent
that such failure cannot be cured within such thirty (30) day period,
the Borrower will be afforded such additional time as might be
determined by the Lender from time to time to be reasonable under
the circumstances. The fact that the Borrower is proceeding to
cure an Event of Default will not suspend such Event of Default or
delay any acceleration of the maturity of the Notes and the notice
periods herein provided will run concurrently with any other notice
periods to which the Borrower might be entitled as a matter of law
or otherwise. If such Event of Default is cured by the Borrower to
the reasonable satisfaction of the Lender within the time provided,
the Lender, the Borrower and all other parties to the Loan
Documents will be restored to their respective former positions,
rights and obligations as if no Event of Default had occurred.
12.
Miscellaneous. It is further agreed as follows:
12.1 Participating Lenders. The Borrower agrees that although the Loan
Documents name the Lender as the holder thereof, the Lender is
authorized to sell participation interests in the Loans to any other
financial institution. The Borrower agrees that: (a) each holder of
a participation interest will be entitled to rely on the terms of the
Loan Documents as if such holder had been named as an original
party to the Loan Documents; and (b) the Lender is authorized to
provide all information furnished to the Lender by the Borrower to
each holder of a participation interest.
12.2 Survival of Representations. All representations and warranties made
herein will survive the making of the Loans hereunder and the
delivery of the Loan Documents.
_______________________________________
Modern Real Estate Transactions, July 2006
- 229-
12.3 Notices. Any notice, demand or communication required or permitted to
be given by any provision of the Loan Documents will be in
writing and will be deemed to have been given when delivered
personally or by telefacsimile, receipt confirmed (with a hard copy
sent within one [1] business day by any other means described in
this paragraph), to the party designated to receive such notice or on
the date following the day sent by a nationally recognized
overnight courier or on the third (3rd) business day after the same
is sent by United States certified mail, postage and charges
prepaid, directed to the following addresses or to such other or
additional addresses as any party might designate by written notice
to the other party:
Borrower:
Development (HROB) Limited
Limited Partnership
3200 First Office Tower
Oklahoma City, OK 73102
Attn: Morton A. Developer
Telefacsimile: (405) 270-1234
Lender:
Interim Lender, N.A.
One Interim Plaza
Oklahoma City, OK 73102
Telefacsimile: (405) 232-6789
Copy To:
Hastie and Kirschner
3000 Oklahoma Tower
210 West Park Avenue
Oklahoma City, OK 73102
Attn: John D. Hastie, Esquire
Telefacsimile: (405) 239-6403
12.4 Construction. Nothing in the Loan Documents will be construed to
constitute the Lender as a joint venturer with the Borrower or to
constitute a partnership.
The descriptive headings of the
paragraphs of this Agreement (except the terms defined at
paragraph 1) are for convenience in reference and are not intended
to be used in the construction of the content of this Agreement.
This Agreement may be executed in multiple counterparts, all of
which will constitute one agreement. The parties acknowledge that
each party and each party's counsel have reviewed and revised the
Loan Documents and the normal rule of construction that
ambiguities are to be resolved against the drafting party will not be
_______________________________________
Modern Real Estate Transactions, July 2006
- 230-
employed in the interpretation of the Loan Documents.
12.5 Binding Effect. This Agreement will be binding on the Borrower and the
Borrower's successors and permitted assigns and will inure to the
benefit of the Lender and the Lender's successors and assigns.
12.6 No Third Party Beneficiaries. Nothing in this Agreement, express or
implied, is intended to confer on any person, other than the parties
hereto and their respective successors an assigns, any rights or
remedies under or by reason of this Agreement or to constitute
such person a third party beneficiary of this Agreement.
12.7 Expiration of Agreement. If the conditions precedent stated at paragraph 5
of this Agreement have not been satisfied and the initial
disbursement of the proceeds of the Loans has not been made by
_____________, __________, 19__, the obligations of the Lender
under this Agreement will, at the option of the Lender, terminate
on such date.
12.8 Extension of Term. It is understood that the Lender is under no obligation
to extend the term of this Agreement beyond the maturity of the
Notes and that any such extension will be made in the Lender's
sole discretion and on such terms as the Lender might determine.
12.9 Governing Law. The Loan Documents are executed and delivered
pursuant to a lending transaction negotiated and to be performed in
Oklahoma City, Oklahoma County, Oklahoma, and are to be
construed according to the internal laws of the State of Oklahoma.
All actions with respect to the Loan Documents may be instituted
in the courts of the State of Oklahoma sitting in Oklahoma County,
Oklahoma or the United States District Court sitting in Oklahoma
City, Oklahoma, as the Lender might elect from time to time. By
the execution and delivery of this Agreement, the Borrower and
the Guarantor irrevocably and unconditionally submit to the
jurisdiction (both subject matter and personal) of each such court
and irrevocably and unconditionally waive: (a) any objection the
Borrower or the Guarantor might now or hereafter have to the
venue in any such court; and (b) any claim that any action or
proceeding brought in any such court has been brought in an
inconvenient forum.
12.10
Confidentiality. The Lender acknowledges that the financial
statements, Leases and other information provided to the Lender
by the Borrower in connection with the Loans might reveal
_______________________________________
Modern Real Estate Transactions, July 2006
- 231-
proprietary information. The Lender agrees to protect and
maintain the confidentiality of such information and to make only
such disclosures as might be required by any bank regulatory
agency, participating lender or law applicable to the Lender or to
the extent necessary to enforce the Lender's rights under the Loan
Documents.
12.11
Amendment. Neither this Agreement nor any of the provisions
hereof can be changed, waived, discharged or terminated, except
by an instrument in writing signed by the party against whom
enforcement of the change, waiver, discharge or termination is
sought.
12.12
Time. Time is the essence of each provision of the Loan
Documents.
IN WITNESS WHEREOF, the parties have caused this instrument to be
duly executed and delivered this _____ day of __________, 19___, effective the date first
above written.
DEVELOPMENT (HROB) LIMITED
PARTNERSHIP, an Oklahoma
limited partnership
By
DEVELOPER NOMINEE
LIMITED PARTNERSHIP, an
Oklahoma limited partnership,
Sole General Partner
By_______________________
Morton A. Developer,
Sole General Partner
(the "Borrower")
INTERIM Lender, N.A., a
national banking association
By__________________________
Senior Vice President
_______________________________________
Modern Real Estate Transactions, July 2006
- 232-
(the "Lender")
RATIFICATION
THIS ADDENDUM is executed by MORTON A. DEVELOPER, an
individual (the "Guarantor"), as an integral part of a certain agreement (the "Loan
Agreement") of even date executed by DEVELOPMENT (HR0B) LIMITED
PARTNERSHIP, an Oklahoma limited partnership (the "Borrower") and INTERIM
BANK, N.A., a national banking association (the "Lender"). Unless otherwise defined
herein, the words bearing initial capital letters will have the meanings defined in the Loan
Agreement.
WITNESSETH:
IN CONSIDERATION of the agreement by the Lender to extend credit to
the Borrower as described in the Loan Agreement, the benefits to be derived by the
Guarantor therefrom and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Guarantor hereby represents to and
agrees with the Lender as follows:
1.
Approval. The Guarantor has examined the Loan Agreement together with the
schedules thereto and hereby approves and agrees to be bound by the terms, conditions
and covenants therein.
2.
Guaranty. Simultaneously with the closing of the Loans contemplated by the
Loan Agreement, the Guarantor will execute and deliver to the Lender the Guaranty
Agreement described in the Loan Agreement.
3.
Representations; Warranties. The Guarantor has specifically reviewed the
representations and warranties set forth at paragraph __ of the Loan Agreement and finds
the same to be true and correct.
IN WITNESS WHEREOF, the Guarantor has executed this instrument
effective the ____ day of ___________, 199__.
MORTON A. DEVELOPER, an
individual
_______________________________________
Modern Real Estate Transactions, July 2006
- 233-
(the "Guarantor")
Schedule "1" Schedule "2" Schedule "3" Schedule "4" Schedule "5" Schedule "6" Schedule "7" Schedule "8" Schedule "9" Schedule "10" Schedule "11" Schedule "12" Schedule "13" Schedule "14" -
Legal Description
Permitted Title Exceptions
Budget
Commitment
First Mortgage
Second Mortgage
First Lease Assignment
Second Lease Assignment
Assignment of Contraction Contract
Assignment of Architectural Contract
Assignment of Sale-Leaseback Agreement
Assignment of Gap Commitment
Guaranty Agreement
Tenant Agreements
[All schedules have been deleted for the purpose of this
publication.]
MANAGEMENT AGREEMENT
THIS AGREEMENT is made effective
, 19__ (the "Effective
Date"), between FEDERAL SAVINGS AND LOAN ASSOCIATION, a federally
chartered savings and loan association (the "Owner"), and
,a
____________________ (the "Manager").
RECITALS:
A.
The Owner is the owner of
" (the "Project");
_______________________________________
Modern Real Estate Transactions, July 2006
- 234-
,"
B.
The Owner desires to engage the Manager to manage the Project on the terms
and conditions set forth in this Agreement and the Manager desires to accept such
engagement.
AGREEMENTS:
In consideration of the mutual promises herein contained, the Owner and
the Manager agree as follows:
1.
Representations by the Owner. The Owner represents and warrants to the
Manager that the Owner holds legal title to the Project and has full right, power and
authority to execute, deliver and perform this Agreement.
2.
Representations by the Manager. The Manager represents and warrants to the
Owner as follows:
2.1 Expertise. The Manager is experienced in the operation, management and
leasing of properties similar to the Project and has the staff,
expertise and capability to perform the terms of this Agreement.
2.2 Qualification. The Manager and the Manager's employees to be assigned
to the Project are duly licensed to perform the duties of the
Manager under this Agreement in full compliance with the laws of
the state in which the Project is located and hold all required real
estate brokerage licenses and other qualifications to perform the
duties of the Manager under this Agreement.
2.3 Authorization. The Manager has full right, power and authority to
execute, deliver and perform this Agreement.
2.4 Employment. The Manager will not discriminate against any employee or
applicant for employment because of race, color, creed, religion,
sex, age or national origin and the Manager is an Equal
Opportunity Employer.
2.5 Competing Interest. The Manager does not own, manage or serve as the
leasing agent for any property similar to the Project which is
located within a radius of two (2) miles from the Project.
3.
Engagement of Manager. The Owner hereby engages the Manager and the
Manager hereby accepts such engagement as the manager of the Project and hereby
authorizes the Manager to perform the actions herein described on behalf of the Owner.
_______________________________________
Modern Real Estate Transactions, July 2006
- 235-
In addition, the Owner hereby engages the Manager and the Manager hereby accepts such
engagement to lease space in the Project; the Owner agrees that the Owner will not
employ any other broker during the term of this Agreement so that during such period the
Manager will be afforded the opportunity to market space in the Project on an exclusive
agency basis. The Manager will be deemed to be an independent contractor within the
meaning of the Internal Revenue Code of 1986, as amended, and will not be deemed to
be the employee of the Owner.
4.
Term. The term of this Agreement will commence on ____________, 19__
and terminate on _____________, 19__; provided, however, the Owner and the Manager
will have the mutual option to terminate this Agreement with or without cause by giving
the other party thirty (30) days' prior written notice of termination. Notwithstanding such
thirty (30) day notice period, at the option of the Owner, the Manager will immediately
deliver possession of the Project to the Owner and perform the other actions required of
the Manager under paragraph 10 of this Agreement, on payment to the Manager of the
estimated Management Fee (as hereafter defined) which would have accrued to the
Manager during such thirty (30) day period.
5.
Compensation of Manager. As compensation for all services to be rendered by
the Manager during the term of this Agreement, the Owner agrees to pay the following
sums to the Manager:
5.1 Management Fee. The Owner agrees to pay to the Manager a fee (the
"Management Fee") equal to [the greater of
Dollars
($________) per month or] _______________ percent (____%) of the
Gross Revenues (as hereafter defined) of the Project. The
Management Fee will be payable in monthly installments on the
first (1st) day of each calendar month during the term of this
Agreement. If the term of this Agreement commences or
terminates on other than the first day of any month, the
Management Fee for the month in which the commencement or
termination date occurs will be prorated. The term "Gross
Revenues" for any period means the gross cash received by the
Owner as rent from the Project calculated on a cash basis. Gross
Revenues will specifically exclude: (a) payments received by the
Owner which are separately billed to tenants and constitute
reimbursement for utility charges, common area maintenance
charges, insurance premiums, real estate taxes, construction costs,
telephone installation charges, maintenance charges, security
service charges and other charges for services provided by the
Owner or any person under contract with the Owner; (b) amounts
received as tenant security, cleaning, decorating or other deposits
(whether the same are forfeited or not); (c) receipts arising from
vending machines or other concessions; (d) awards or payments
_______________________________________
Modern Real Estate Transactions, July 2006
- 236-
made in, or in lieu of, any condemnation proceeding; (e) insurance
proceeds; (f) proceeds of the sale of the Project or any part thereof;
(g) proceeds of any financing of the Project; (h) interest earned on
deposits relating to the Project; and (i) any amount advanced to the
Project by the Owner.
5.2 Leasing Commission. The Owner agrees to pay the Manager a
commission (the "Leasing Commission") for any lease with a
prospective tenant ("Prospect[s]") which occupies the Project or
for the releasing of space by existing tenants of the Project on the
following terms and subject to the following limitations.
5.2.1
Commission Amount. The Leasing Commission will be an
amount equal to ______ percent (____%) of the
base or minimum rent payable: (a) during the
primary term of the lease; (b) during all extensions
or renewals of the primary term of the lease; and (c)
with respect to any space actually occupied by the
tenant during the primary term or any extension or
renewal term of the lease pursuant to an expansion
option contained in the lease.
5.2.2
Time of Payment. The Leasing Commission for the
primary term and any expansion option of each
lease will be paid to the Manager on the date on
which the tenant has finally accepted and occupied
the space and is paying rent.
The Leasing
Commission for any extension or renewal of the
primary term of the lease will be paid at the time the
renewal or extended term commences and the
tenant is paying rent with respect thereto.
5.2.3
Cooperating Brokers. The Manager will have the right to
share the Leasing Commission or to pay a
commission to cooperating broker(s) in connection
with the negotiation of any lease. Under such
circumstances the total amount to be paid by the
Owner as a Leasing Commission may exceed the
amount stated at paragraph 5.2.1 of this Agreement,
but in no event will the Owner be required to pay
any commission, brokerage fee, finders fee or
similar charge (a "Brokerage Fee[s]") in excess of
the lesser of: (a) the commission as agreed between
the Manager and the cooperating broker; or (b) the
_______________________________________
Modern Real Estate Transactions, July 2006
- 237-
total commission which would have been payable
by the Owner to independent brokers in arms-length
market transactions arising in the city in which the
Project is located. Promptly after the request of the
Owner, the Manager agrees to deliver to the Owner
a written agreement between the Manager and the
cooperating broker(s) specifying the amounts of the
Leasing Commission payable to the parties thereto
and otherwise confirming the terms of payment
contained in this Agreement.
5.2.4
Single Commission. The Leasing Commission is the only
Brokerage Fee which the Owner will incur with
respect to the leasing of space in the Project and the
payment of the Leasing Commission to the
Manager in accordance with the terms of this
Agreement is intended to be payment in satisfaction
of all Brokerage Fees which might otherwise be
claimed to be owing with respect thereto. On
receipt of the Leasing Commission, the Manager
agrees to indemnify, defend and hold the Owner
harmless from any Brokerage Fee claimed by any
other person with respect to the lease for which the
Leasing Commission was paid.
5.2.5
Exempt Payments. No Leasing Commission will be
payable by the Owner with respect to any payment
received by the Owner from the tenant (whether
characterized as rent or not) which represents: (a)
reimbursement for utility charges, common area
maintenance charges, insurance premiums, real
estate taxes, construction costs, telephone
installation charges, maintenance charges, security
service charges or other charges for services
provided by the Owner or any person under contract
with the Owner; (b) amounts received as tenant
security, cleaning, decorating or other deposits; or
(c) rent which would have been paid under the
lease, but which has been abated as a tenant
concession.
5.2.6
Exempt Transactions.
No Leasing Commission or
Brokerage Fee will be payable by the Owner to the
Manager or any other person for: (a) the exercise of
_______________________________________
Modern Real Estate Transactions, July 2006
- 238-
any option to renew or extend the primary term of a
lease or the exercise of an option to expand the
leased premises by a tenant pursuant to the terms of
a lease which was in effect on the Effective Date;
(b) any offer to lease which is rejected by the
Owner in the exercise of the Owner's absolute
discretion, whether or not the terms of the proposed
lease were in compliance with the leasing
guidelines contained in the Approved Plan; or (c)
any lease executed by the Owner under which the
tenant does not occupy the leased premises and
commence the payment of rent.
5.2.7
Procedure on Termination. Within ten (10) days after the
termination of this Agreement the Manager will
deliver to the Owner a listing of all Prospects with
whom the Manager has negotiated for leases of
space in the Project within the sixty (60) days
preceding the date of termination of this Agreement.
Such listing will clearly identify the name and
address of the Prospect, the space in the Project
which was proposed to the Prospect, the dates of
contact with the Prospect by the Manager, any
cooperating broker and will attach copies of any
lease proposal prepared by the Manager for delivery
to the Prospect.
In the event the Owner
consummates a lease with any Prospect properly
registered by the Manager within ninety (90) days
after the date of termination of this Agreement, the
Owner agrees to pay to the Manager the Leasing
Commission in the amount and at the times
specified in this Agreement. The failure by the
Manager to register any Prospect in accordance
with this paragraph 5.2.7 will release the Owner
from all obligations to pay any Leasing
Commission to the Manager with respect to any
Prospect on the date which is ten (10) days after the
date this Agreement is terminated. Notwithstanding
the foregoing, the Owner will continue to be
obligated to pay to the Manager any Leasing
Commissions earned by the Manager pursuant to
this Agreement prior to the date this Agreement is
terminated.
_______________________________________
Modern Real Estate Transactions, July 2006
- 239-
5.3 Other Fees. No construction management, supervision or other fee will be
paid to the Manager by reason of the performance of any
additional services by the Manager on behalf of the Owner. In the
event the Owner requests that the Manager perform services which
the Manager believes are beyond the scope of this Agreement, the
Manager agrees to so advise the Owner and to propose a basis on
which the Manager will be compensated for such services. Unless
the Owner specifically agrees in writing to the payment of such
additional compensation, the Owner will have no obligation to
compensate the manager therefor, whether or not such additional
services are performed by the Manager.
6.
Manager's Duties. Throughout the term of this Agreement, the Manager will
use the Manager's best efforts and due diligence to manage and lease the Project in
accordance with policies recommended from time to time by the Manager and approved
by the Owner. The services to be provided by the Manager under this Agreement are to
be of a scope and quality not less than those generally performed by professional
managers of other similar properties in the city in which the Project is located. The
Manager will make available to the Owner the full benefit of the judgment, experience
and advice of the members of the Manager's organization with respect to the policies to
be pursued by the Owner in operating the Project and will perform such services as might
be reasonably requested by the Owner in operating, maintaining, servicing, improving
and leasing the Project. The Manager will perform the following specific services:
6.1 Manager Orientation. The Manager acknowledges that the Manager has
taken physical possession of the Project and is familiar with: (a)
the physical properties comprising the Project; (b) the operation
and maintenance of all mechanical systems located on the Project;
(c) all policies of insurance providing coverage of the Project; (d)
the occupancy of the Project and the terms and status of
performance of the tenants under leases affecting the Project; (e)
the service contracts relating to the Project; (f) the rental market in
the area in which the Project is located; (g) the operating expenses
of the Project; (h) the taxes and other impositions relating to the
Project; (i) all zoning and use restrictions, fire codes, building
codes and other requirements issued by any governmental
authority, board of fire underwriters or other similar authority
having jurisdiction over the Project; and (j) the general operations
of the Project. Within thirty (30) days after the Effective Date, the
Manager will provide to the Owner an inventory of all personal
property located on the Project, a listing of all books and records of
the Owner to be maintained by the Manager, a listing of all service
contracts relating to the Project, confirmation that the Manager has
obtained all keys, combinations to locks and other security devices
_______________________________________
Modern Real Estate Transactions, July 2006
- 240-
located on the Project, a current rent roll of the Project indicating
those tenants with current leases in force and the amount of the
security deposits, if any, paid by tenants of the Project, copies of
all tenant leases complete with all amendments and guarantys
relating thereto, the written recommendations of the Manager with
respect to repairs to the Project indicating the estimated cost
thereof and such additional information as the Owner might
reasonably request.
6.2 Business Plan. Within thirty (30) days after the Effective Date and on
each November 1 thereafter, the Manager will provide to the
Owner a forecast (the "Proposed Plan") reflecting: (a) an
itemization of the estimated receipts, disbursements, operational
expenditures and capital expenditures for the ensuing calendar
year; (b) a summary of the terms under which space in the Project
will be leased to tenants, including, without implied limitation, the
rental rates to be charged, the lease term to be proposed, the basis
on which tax, insurance and operating expense increases will be
paid by tenants, proposed common area maintenance, advertising
and merchant association charges (if applicable), billing of utility
and fuel costs to tenants, tenant security deposit requirements,
standard leasehold improvement allowances, proposed rent
concessions (to include rent abatements, excess leasehold
improvement allowances, moving expense reimbursements,
assumption of existing leases and any other contemplated tenant
inducement); (c) a copy of the forms of lease, notices, invoices and
other documents proposed to be provided by the Manager to
tenants in the course of managing and leasing the Project; (d) a
staffing plan for the Project indicating the number of employees,
the salaries and fringe benefits applicable to each employee and a
description of the fidelity bond and workers' compensation
coverage maintained by the Manager with respect to each
employee; (e) a schedule of any charges other than rent which the
Manager proposes to make to tenants of the Project; (f) a listing of
the service contracts executed or proposed to be executed by the
Manager in the course of managing the Project identifying the
contract vendor, the services to be provided, the contract amount
and the term of the service contract; (g) a listing of any affiliates
(meaning any person or entity over which the Manager has the
ability to control policy determinations, whether by ownership, by
contract or otherwise) of the Manager which will provide services
to the Project; (h) a report of any anticipated changes in any
requirements of law affecting the Project and the status of any
_______________________________________
Modern Real Estate Transactions, July 2006
- 241-
license or permit necessary to the operation of the Project; (i) a
listing of the leases which will expire during the period and the
Manager's forecast of the space which can be leased during the
period covered by the Proposed Plan; and (j) a listing of all
properties similar to the Project located within a two (2) mile
radius of the Project which are owned, managed or leased by the
Manager, if any. The Proposed Plan will be submitted to the
Owner for approval and the Owner will have the right to make any
changes thereto and finalize the Proposed Plan in form satisfactory
to the Owner in the Owner's sole discretion. The Owner will
inform the Manager of approval of or any change to the Proposed
Plan prior to commencement of the period covered by the
Proposed Plan and, when approved by the Owner, the same will
constitute the business plan (the "Approved Plan") pursuant to
which the Manager will manage and lease the Project during the
ensuing calendar year. The Manager will thereafter prepare and
deliver to the Owner prior to the beginning of each quarter during
the ensuing year any changes in the information contained in the
Approved Plan necessary to reflect current conditions. At the sole
option of the Owner, the Approved Plan may be revised at any
time by delivery of written notice to the Manager and the
Approved Plan, as amended, will thereafter constitute the standard
pursuant to which the Manager will manage and lease the Project.
The Manager will authorize no expense in the operation, leasing,
marketing or management of the Project in excess of the amount
allocated to the various classifications of expense in the Approved
Plan without the prior consent of the Owner; provided, however,
the Manager may expend sums without the prior approval of the
Owner under emergency circumstances requiring expenditures
which are immediately necessary for the preservation or safety of
the Project or to avoid danger to life or property. The Owner
acknowledges that the financial forecasts contained in the
Approved Plan will represent the Manager's good faith estimate of
the anticipated operating results and are not intended to constitute a
guarantee that such financial results will in fact be achieved.
6.3 Collections. The Manager will collect all rent and other payments due the
Owner with respect to the Project. The Owner authorizes the
Manager to request, demand, collect, receive and receipt for all
such rent and other payments. On the written request of the
Owner, the Manager will institute legal proceedings in the name of
the Manager, or, if required by applicable law, in the name of the
Owner for the collection of rent and other payments owing to the
Owner and for the dispossession of tenants and other persons from
_______________________________________
Modern Real Estate Transactions, July 2006
- 242-
the Project. In the event the Manager is required to engage legal
counsel in connection with any collection or other matter relating
to the Project, such counsel will in each instance be subject to the
prior approval of the Owner.
_______________________________________
Modern Real Estate Transactions, July 2006
- 243-
6.4 Operating Expenses. Subject to the limitations established by the
Approved Plan, the Manager will: (a) pay all expenses of
operating the Project from funds on deposit in the Operating
Account (as hereafter defined); (b) negotiate and enter into
contracts for janitorial, maintenance, water, electricity, gas, fuel,
telephone, vermin extermination, trash removal and other services
required to operate the Project; (c) purchase supplies, equipment
and materials which are required to lease, operate and maintain the
Project; (d) maintain the buildings, appurtenances and grounds of
the Project in a manner which maximizes the appearance and
operation of the Project to the Project's potential, including within
such maintenance, without implied limitation, interior and exterior
cleaning, painting and decorating, plumbing, carpentry and such
other normal maintenance and repair work as might be desirable;
(e) negotiate and enter into contracts to provide space planning and
other design services to Prospects; and (f) negotiate and enter into
contracts for the advertisement of space in the Project to Prospects.
The Manager will at all times act in the best interests of the Owner
and will secure for the benefit of the Owner any discounts,
commissions or rebates obtainable as a result of purchases and
service contracts. All service contracts will be executed in the
name of the Manager, will be assignable at the Manager's option to
the Owner or the Owner's designee, will be terminable on thirty
(30) days' prior notice by the Manager, will require that the
contractor provide evidence of appropriate insurance coverage and
will be for amounts not in excess of the amounts reflected in the
Approved Plan. Unless otherwise approved by the Owner, the
Manager will solicit competitive bids for each purchase and
service contract having an annual cost in excess of Two Thousand
Five Hundred Dollars ($2,500.00). All operating expenses of the
Project which are incurred by the Manager in accordance with the
Approved Plan and the terms of this Agreement will be incurred
for the account of the Owner and the Owner agrees to cause such
expenses to be paid and to indemnify, defend and hold the
Manager harmless from all loss, cost and expense related thereto.
The following expenses of the Manager will not be reimbursed by
the Owner: any wages, payroll taxes, insurance, workers'
compensation and other benefits of the Manager's home office
personnel; costs relating to accounting, data processing and
reporting services; costs of forms, ledgers and other supplies and
equipment used in the Manager's home office; political or
charitable contributions; food or lodging for the Manager's
employees; entertainment expenses; automobile allowances or
automobile mileage; training expenses; and employment fees.
_______________________________________
Modern Real Estate Transactions, July 2006
- 244-
Unless otherwise approved by the Owner, the Manager will pay
rent for any office located on the Project at the rates stated in the
Approved Plan.
6.5 Monthly Reports. The Manager will keep full and adequate books of
account and such other records as might be appropriate to reflect
the results of operation of the Project at a place approved by the
Owner and in a manner reasonably acceptable to the Owner. All
such books and records will be the property of the Owner and the
Owner (and any person designated by the Owner) will have access
thereto at all reasonable times. Within fifteen (15) days after the
end of each month, the Manager will provide the Owner with the
following information for the preceding month:
6.5.1
Financial Statements. A statement in form acceptable to
the Owner indicating the receipts, disbursements,
delinquencies and uncollected items arising from
the operation of the Project which will include a
comparison of monthly and year-to-date actual
receipts and disbursements with the Approved Plan;
6.5.2
Supporting Data. At the Owner's request, copies of the
following: (a) all checks, bank statements, bank
deposit slips and bank reconciliations; (b) detailed
cash receipts and disbursement records; (c) copies
of all invoices; (d) supporting documentation for
payroll, payroll taxes and employee benefits; and
(e) such other information as the Owner might
reasonably request;
6.5.3
Leasing Reports. A rent roll for the Project current as of
the last day of the month and a summary of the
Manager's leasing activity during the preceding
month which will include, without implied
limitation: (a) a listing of all Prospects which
contacted or were contacted by the Manager; (b) a
listing of all brokers and their identifiable clients
which contacted or were contacted by the Manager;
(c) a copy of all leasing proposals submitted by the
Manager to Prospects; and (d) a status report on all
outstanding lease proposals and executed leases
where the tenant is not yet in occupancy;
6.5.4
Construction. A description of any work performed on the
_______________________________________
Modern Real Estate Transactions, July 2006
- 245-
Project; and
6.5.5
Other Reports. Such other reports and documents as might
be reasonably requested by the Owner from time to
time (including, without implied limitation,
certificates of compliance and other instruments
required in connection with any bond financing
relating to the Project).
6.6 Accounts; Disbursements. The Manager will establish and maintain on
behalf of the Owner two (2) separate bank accounts in a manner to
indicate the custodial nature thereof on deposit with the Owner or a
financial institution designated by the Owner. Each such account
will provide for duplicate monthly account statements (one of
which will be provided directly to the Owner) at the last day of
each month and will authorize withdrawals therefrom on the
signature of the Manager or the Owner.
6.6.1
Operating Account. One such account (the "Operating
Account") will be styled "operating account." The
Manager will deposit into the Operating Account
and hold in a fiduciary capacity all monies
furnished by the Owner and all funds received from
the operation of the Project. The Manager will pay
from the Operating Account all amounts authorized
by the Approved Plan. On the commencement of
this Agreement the Owner will provide to the
Manager an initial deposit in an amount sufficient to
pay the first month's operating expenses of the
Project. To the extent the receipts of the Project are
insufficient to pay operating expenses of the Project
as the same become due, the Owner will provide
such funds as are reasonably requested by the
Manager by deposit to the Operating Account
within two (2) business days after each request
therefor. On the ninth (9th) day of every month, the
Manager will remit by wire transfer to the Owner an
amount equal to eighty percent (80%) of the funds
on deposit in the Operating Account. On the
twenty-seventh (27th) day of every month the
Manager will remit to the Owner by wire transfer
all funds in excess of One Hundred Dollars
($100.00) on deposit in the Operating Account.
_______________________________________
Modern Real Estate Transactions, July 2006
- 246-
6.6.2
Security Deposit Account.
The other account (the
"Security Deposit Account") will be styled "security
deposit account." The Manager will deposit into the
Security Deposit Account and hold in a fiduciary
capacity all funds received by the Manager as
security deposits from tenants of the Project. The
Manager will pay from the Security Deposit
Account all refunds owing to tenants of the Project
and transfer from the Security Deposit Account to
the Operating Account all forfeitures of tenant
security deposits.
6.7 Personnel. On the basis of the staffing plan contained in the Approved
Plan, the Manager will hire, pay, supervise and discharge the
personnel necessary to lease, maintain and operate the Project.
Such personnel will, in every instance, be employees of the
Manager and not the Owner. The Manager will have the right to
supervise or direct such employees in the conduct of their duties,
but the Owner may at any time require the Manager to remove
from employment at the Project such employees as the Owner, in
the Owner's discretion, deems unsatisfactory. The Manager and all
personnel of the Manager who handle money will be bonded in
favor of the Owner by a fidelity bond acceptable to the Owner.
The Manager will be responsible for the timely deposit of all
payroll taxes and preparation of all payroll tax returns and, on the
Owner's request, will provide the Owner with satisfactory evidence
that payroll tax deposits have been made and payroll tax returns
have been filed. The Manager will maintain such workers'
compensation insurance coverage for the Manager's employees as
might be required under applicable law.
6.8 Leases. Throughout the term of this Agreement, the Manager will use the
Manager's best efforts and due diligence to keep space in the
Project fully rented to desirable tenants. The Manager agrees to
identify and discuss with Prospects the feasibility of leasing space
in the Project and to use all reasonable efforts to consummate
leases with Prospects.
6.8.1
Lease Negotiation. The Manager will promptly submit for
review by the Owner all written proposals and other
communications submitted by the Manager to any
Prospect or received by the Manager from any
Prospect and will keep the Owner informed with
respect to the status of negotiations with each
_______________________________________
Modern Real Estate Transactions, July 2006
- 247-
6.8.2
6.8.3
Prospect.
Lease Approval. With respect to each proposed lease the
Manager will prepare and submit to the Owner for
approval: (a) a summary of the lease terms; (b) the
form of lease proposed to be executed by the
Prospect; (c) a current financial statement and credit
report with respect to the Prospect and each
guarantor of the lease; and (d) the Manager's
recommendation as to whether the lease should be
approved by the Owner. All offers to lease space in
the Project will be accepted or rejected in the
absolute discretion of the Owner. All leases of
space in the Project will be executed by the Owner
and the Manager will not, without the prior
approval of the Owner, modify the lease forms or
exceed the leasing guidelines established by the
Approved Plan.
Broker Solicitation.
The Manager agrees to solicit
Prospects from other reputable brokers which are
active in the Project market and to prepare and
distribute nonexclusive space availability listings to
such brokers. The Manager will encourage and
cooperate with all such brokers in leasing space in
the Project.
6.9 Tenant Relations. The Manager will maintain businesslike relations with
tenants of the Project and all tenant requests will be received,
logged and resolved in a systematic fashion. Complaints of a
serious nature will be reported to the Owner with appropriate
recommendations. Throughout the term of this Agreement and for
a period ending three (3) years after the date this Agreement is
terminated, the Manager agrees not to solicit or encourage the
tenants of the Project or any Prospect to lease space in any other
property or to attempt to relocate tenants of the Project to any other
property owned or managed by the Manager without the prior
written permission of the Owner.
6.10 Compliance. The Manager will cause the Project to comply with all of the
terms, conditions and obligations contained in any agreement
executed by or on behalf of the Owner which relates to the Project.
The Manager will execute and punctually file all reports and
returns required by law relating to the operation of the Project,
including, without implied limitation, license renewals and
_______________________________________
Modern Real Estate Transactions, July 2006
- 248-
occupancy permits. The Manager will take such action as might be
necessary to comply with any orders or requirements issued by any
governmental authority, board of fire underwriters or other similar
body having jurisdiction over the Project including, without
implied limitation, all laws relating to equal employment
opportunity, fair credit reporting, environmental protection and
workers' compensation insurance coverage. The Manager will
immediately forward to the Owner all summonses, subpoenas and
other documents served on the Manager relating to actual or
alleged liability of the Owner, the Manager or the Project, together
with the Manager's recommendations relating thereto.
6.11 Taxes.
The Owner will receive and verify statements for taxes and
impositions against the Project. On the Owner's request, the
Manager will advise the Owner as to whether the amount thereof
should be challenged and as to any means available for the
reduction of the same. If the Owner so requests, the Manager will
make protests or challenges and take other appropriate action to
have such taxes or impositions reduced.
7.
Insurance. The Owner will, at the Owner's expense, maintain insurance
against physical damage and against liability for loss, damage or injury to property or
persons which might arise out of the occupancy, management, operation or maintenance
of the Project. The Owner agrees to indemnify, defend and hold the Manager harmless
from any liability on account of such insured loss, damage or injury provided the
Manager: (a) notifies the Owner within twenty-four (24) hours after the Manager
receives notice of any such loss, damage or injury; and (b) takes no action (such as an
admission of liability) which might bar the Owner from obtaining any protection afforded
by any insurance policy the Owner holds or which might prejudice the Owner in the
defense of a claim based on such loss, damage or injury. The Manager agrees that the
Owner will have the exclusive right to conduct the defense of any claim, demand or suit
within the limits prescribed by each policy of insurance. The Manager will furnish such
information as might reasonably be requested by the Owner for the purpose of
establishing insurance coverage and will aid and cooperate in every reasonable way with
respect to such insurance and any loss thereunder. The Owner and the Manager hereby
waive in favor of the other any cause of action which either might have against the other
on account of any loss or damage which is insured against, to the extent of such
insurance, under any insurance policy which names either the Manager or the Owner as a
named insured. The Manager agrees not to knowingly permit the use of the Project for
any purpose which might void any policy of insurance covering the Project or any part
thereof, which might render any loss thereunder uncollectible or which might increase the
premium expense therefor.
8.
Owner's Access. The Owner and the Owner's representatives will have the
_______________________________________
Modern Real Estate Transactions, July 2006
- 249-
right to enter the Project at any reasonable time for the purpose of inspecting the same,
examining the books and records relating to the Project or for any other purpose which
the Owner deems advisable.
9.
Indemnification. Subject to the provisions of paragraph 7 of this Agreement,
the Owner agrees to indemnify, defend and hold the Manager harmless from any action,
suit, debt, expense, claim, demand, judgment and settlement (including reasonable
attorneys' fees and litigation expenses) arising from the proper performance by the
Manager of the Manager's obligations under this Agreement; provided such
indemnification will not be applicable to any negligent act or to the willful misconduct of
the Manager or any agent or employee of the Manager and will not extend to any action
taken by the Manager beyond the scope of the Manager's authority as set forth in this
Agreement or to any claim or action for which there is adequate insurance coverage in
effect whether provided pursuant to this Agreement or otherwise. The Manager agrees to
indemnify, defend and hold the Owner harmless from any action, suit, debt, expense,
claim, demand, judgment and settlement (including reasonable attorneys' fees and
litigation expenses) arising from any negligent act or willful misconduct of the Manager
or any agent or employee of the Manager or any action taken by the Manager beyond the
scope of the Manager's authority as set forth in this Agreement; provided such
indemnification will not be applicable to any claim or action for which there is adequate
insurance coverage in effect whether provided pursuant to this Agreement or otherwise.
10.
Termination. Immediately after the termination of this Agreement, the
Manager will: (a) deliver to the Owner all funds of the Owner held by the Manager; (b)
deliver to the Owner or the Owner's designee all books, records and files in the
possession of the Manager pertaining to the management, maintenance, operation,
leasing, marketing and use of the Project; (c) deliver to the Owner or the Owner's
designee all keys, combinations to locks, and other security devices on the Project; (d)
deliver to the Owner or the Owner's designee all equipment, furniture, furnishings, tools,
supplies, inventory and other property of the Owner in the possession of the Manager; (e)
render final reports to the Owner in accordance with paragraph 6.5 of this Agreement; (f)
furnish to the Owner or the Owner's designee a complete inventory of all tangible
personal property on site at the Project on the termination date, together with an
explanation, in reasonable detail, of any deficiencies; (g) assign all existing contracts
relating to the operation, maintenance, leasing and marketing of the Project to such
parties as the Owner directs in writing; (h) remove all signs indicating the Manager's
management of the Project and repair any damage resulting therefrom; and (i) render
such assistance as the Owner might reasonably request to facilitate an orderly transition
in the management of the Project.
11.
Miscellaneous. The Owner and the Manager further agree as follows:
11.1 Time. Time is the essence of this Agreement and each provision of this
Agreement.
_______________________________________
Modern Real Estate Transactions, July 2006
- 250-
11.2 Manager's Interest. The Project will be operated solely for the benefit of
the Owner and this Agreement will not be deemed at any time to
be or to create an interest in real property or a lien of any nature
against the Project.
11.3 Notices. Any notice, payment, demand or communication required or
permitted to be given by any provision of this Agreement will be
deemed to have been given when delivered personally to the party
designated to receive such notice, or on the date following the day
the notice is sent by overnight courier, or on the third (3rd)
business day after the notice is sent by certified mail, postage and
charges prepaid, directed to the following addresses or to such
other or additional addresses as any party might designate by
written notice to the other party:
Owner:Savings and Loan Association
Attention:
Manager:
Attention:
11.4 Assignment. Neither this Agreement nor any of the Manager's rights or
obligations hereunder can be transferred voluntarily, by operation
of law or otherwise. It is specifically understood that the Owner
has placed great reliance on the experience, skill and abilities of
the Manager in the execution of this Agreement and the same is
intended to be a contract for the personal services of the Manager.
11.5 Entire Agreement. This instrument constitutes the entire agreement
between the Owner and the Manager relating to the subject matter
hereof and there are no agreements, understandings, warranties or
representations between the Owner and the Manager except as set
forth herein.
11.6 Binding Effect. This Agreement will inure to the benefit of and bind the
respective successors and permitted assigns of the parties hereto.
11.7 Attorneys' Fees. If either party institutes an action or proceeding against
_______________________________________
Modern Real Estate Transactions, July 2006
- 251-
the other relating to the provisions of this Agreement or any
default hereunder, the unsuccessful party to such action or
proceeding will reimburse the successful party therein for the
reasonable expenses of attorneys' fees and disbursements incurred
by the successful party.
11.8 Severability. If any clause or provision of this Agreement is illegal,
invalid or unenforceable under any present or future law, the
remainder of this Agreement will not be affected thereby. It is the
intention of the parties that if any such provision is held to be
illegal, invalid or unenforceable, there will be added in lieu thereof
a provision as similar in terms to such provision as is possible and
be legal, valid and enforceable.
11.9 Amendment. Neither this Agreement nor any of the provisions hereof can
be changed, waived, discharged or terminated, except by an
instrument in writing signed by the party against whom
enforcement of the change, waiver, discharge or termination is
sought.
11.10
Governing Law. This Agreement has been negotiated, executed,
delivered and is intended to be performed in the judicial district in
which the Project is located and the substantive laws of the state in
which the Project is located will govern the validity, construction
and enforcement of this Agreement. The parties consent to the
venue and jurisdiction of any state or federal court of general
jurisdiction sitting in the judicial district in which the Project is
located in any action brought to enforce the terms of this
Agreement.
IN WITNESS WHEREOF, the undersigned have executed and delivered
this Agreement on the dates hereafter indicated effective the date first above written.
SAVINGS AND LOAN ASSOCIATION,
a federally chartered savings
and loan association
_______________________________________
Modern Real Estate Transactions, July 2006
- 252-
By
Name: _____________________
Title: _____________________
Date Executed: ______________
(the "Owner")
,
a
By
Name: _____________________
Title: _____________________
Date Executed: ______________
(the "Manager")
SALE AGREEMENT
(Washington Park Apartments,
Oklahoma City, Oklahoma)
THIS AGREEMENT is made effective the 16th day of June, 1993,
between WASHINGTON PARK APARTMENTS LIMITED PARTNERSHIP, an
Oklahoma limited partnership (the "Seller"), and INVESTMENT ASSOCIATES, INC.,
an Oklahoma corporation (the "Buyer").
WITNESSETH:
1.
Sale of Project. The Seller agrees to sell and the Buyer agrees to purchase on
the terms hereafter stated all of the Seller's right, title and interest in and to the following
described property (the "Project"):
1.1 Land. All of the following described land situated in Oklahoma County,
_______________________________________
Modern Real Estate Transactions, July 2006
- 253-
Oklahoma:
Block One (1), WASHINGTON PARK ADDITION to
the City of Oklahoma City, Oklahoma County,
Oklahoma, according to the recorded plat thereof,
together with all easements, rights of way, licenses, privileges,
hereditaments and appurtenances, if any, inuring to the benefit of
such land, including, without implied limitation, all abutter's rights
and title to all land underlying roadways adjacent to such land;
1.2 Improvements. All buildings, improvements and fixtures situated on the
above-described land;
1.3 Tangible Personal Property. All tangible personal property owned by the
Seller and used in the ownership, operation and maintenance of the
aforesaid land and improvements, including, without implied
limitation, all furniture, furnishings, ranges, refrigerators,
equipment, tools, inventory, supplies, signs, draperies and
carpeting; and
1.4 Intangible Personal Property. All intangible personal property owned by
the Seller and used in the ownership, operation and maintenance of
the aforesaid land, buildings and improvements, including, without
implied limitation, the nonexclusive right to use the trade name
"Washington Park Apartments," all contract rights, instruments,
documents of title, general intangibles, transferable licenses and
goodwill pertaining to the ownership, operation and management
of the aforesaid land, buildings, improvements and personal
property, EXCLUDING ONLY cash on hand and in bank
accounts.
2.
Purchase Price. Subject to the adjustments and prorations hereafter described,
the purchase price to be paid by the Buyer to the Seller for the purchase of the Project is
the sum of FIVE MILLION FIVE HUNDRED THOUSAND DOLLARS
($5,500,000.00). The purchase price will be paid in the following manner:
2.1 Earnest Money. The sum of Twenty-Five Thousand Dollars ($25,000.00)
in immediately available funds (the "Earnest Money Deposit") is
herewith deposited by the Buyer with the Seller as earnest money
to be held by the Seller without interest and applied in partial
payment of the total purchase price on the Closing Date (as
hereafter defined).
_______________________________________
Modern Real Estate Transactions, July 2006
- 254-
2.2 Cash at Closing. On the Closing Date, the Buyer will pay to the Seller the
further sum of Five Million Four Hundred Seventy-Five Thousand
Dollars ($5,475,000.00) in immediately available funds.
3.
Title. The Buyer acknowledges receipt from the Seller of the following, each
of which is hereby approved by the Buyer: (a) a preliminary binder (the "Title
Commitment") numbered LN547525, dated effective June 1, 1993, bearing a latest
revision date of June 10, 1993, providing for issuance of an ALTA owner's title insurance
policy (the "Title Policy") issued by Title Insurance Company by and through its agent,
Capitol Abstract & Title Co. (the "Title Insurer"), having an address of 4141 Northwest
Expressway, Oklahoma City, Oklahoma 73116, showing title to the Project to be in the
Seller and containing the following exceptions to coverage which are hereby approved by
the Buyer (the "Approved Title Exceptions"): (i) mineral interests, mining claims, water
rights, claims of title to water and riparian rights arising as a matter of law or previously
reserved or conveyed of record; (ii) rights or claims of parties in possession as tenants of
the Project; (iii) taxes, assessments and other governmental impositions not yet due or
payable; (b) a copy of all instruments (the "Exception Documents") creating each
Approved Title Exception; and (c) a copy of a survey (the "Survey") of the Project
numbered E0536410 prepared by Site Surveyors, Inc. bearing a latest revision date of
May 19, 1993. The Seller will proceed to seek satisfaction of the requirements (the "Title
Requirements") set forth in Schedule B of the Title Commitment. In the event the Seller
is unable to satisfy the Title Requirements by the Closing Date, the Seller will have the
option to either: (a) extend the Closing Date by that period of time which is reasonably
required to enable the Seller to satisfy the Title Requirements; or (b) terminate this
Agreement by written notice to the Buyer accompanied by a refund of the Earnest Money
Deposit.
4.
Closing. The Buyer and the Seller agree that the purchase of the Project will
be consummated as follows:
4.1 Closing Date. The sale of the Project will close on Wednesday, August
18, 1993 (the "Closing Date"). The closing will take place at the
offices of Capitol Abstract & Title Co., 4141 Northwest
Expressway, Oklahoma City, Oklahoma 73116, with the exact
time for closing to be designated by the Seller by written notice to
the Buyer.
4.2 Seller's Instruments. On the Closing Date the Seller will deliver or cause
to be delivered to the Buyer the following items (all documents
will be duly executed and acknowledged where required):
4.2.1
Special Warranty Deed. A special warranty deed in substantially
the form of Schedule "A" attached as a part hereof executed
by the Seller conveying all of the Seller's right, title and
_______________________________________
Modern Real Estate Transactions, July 2006
- 255-
interest to all of the real property comprising a portion of
the Project to the Buyer;
4.2.2
Bill of Sale. A special warranty bill of sale in substantially the
form of Schedule "B" attached as a part hereof conveying
all of the Seller's right, title and interest in any tangible
personal property comprising a portion of the Project to the
Buyer;
4.2.3
Assignment and Assumption Agreement. An assignment and
assumption agreement in substantially the form of Schedule
"C" attached as a part hereof assigning to the Buyer all of
the Seller's obligations and duties under the leases,
contracts and other intangible personal property comprising
a portion of the Project.
4.2.4
Title Insurance. Subject to the Buyer's payment of the premium
therefor, the Title Policy in the amount of the purchase
price containing the Approved Title Exceptions and any
other exceptions to coverage approved by the Buyer;
4.2.5
Title Affidavits. Such affidavits and other documents as might be
reasonably requested by the Title Insurer to issue the Title
Policy in accordance with the terms of the Title
Commitment;
4.2.6
Documents; Keys. The originals of all leases and other contracts
to be assumed by the Buyer or by which the Project is
otherwise bound, all keys and combinations to locks and
other security devices located on the Project and all other
items reasonably requested by the Buyer relating to the
Project to the extent that the foregoing items are in the
possession of the Seller or the Seller's agents;
4.2.7
Evidence of Authority. A certificate of authority executed on
behalf of the Seller authorizing the sale of the Project to the
Buyer, together with such other evidence of the authority of
the person or persons executing the documents
contemplated by this Agreement on behalf of the Seller as
the title Insurer might reasonably request;
4.2.8
Nonforeign Affidavit. An affidavit executed by the Seller in
substantially the form and containing the terms of Schedule
"D" attached as a part hereof confirming that the Seller is
_______________________________________
Modern Real Estate Transactions, July 2006
- 256-
not a foreign person within the purview of 26 U.S.C. §1445
and the regulations issued thereunder; and
4.2.9
Additional Documents. Such additional documents as might be
reasonably requested by the Buyer to consummate the sale
of the Project to the Buyer.
4.3 Buyer's Instruments. On the Closing Date the Buyer will deliver to the
Seller the following items:
4.3.1
Payment. The payment required by paragraph 2.2 of this
Agreement;
4.3.2
Taxes. Copies of any tax returns required to be filed by the Buyer
together with evidence of payment of any sales or transfer
tax payable by reason of the sale of the Project to the
Buyer;
4.3.3
Title Affidavits. Such affidavits and other documents as might be
reasonably requested by the Title Insurer to issue the Title
Policy in accordance with the terms of the Title
Commitment;
4.3.4
Evidence of Authority. Such resolutions, certificates of good
standing and incumbency certificates and other evidence of
authority with respect to the Buyer, any nominee of the
Buyer acting under this Agreement and the person or
persons acting on behalf of the Buyer or the Buyer's
nominee as might be reasonably requested by the Seller or
the Title Insurer; and
4.3.5
Additional Documents. Such additional documents as might be
reasonably requested by the Seller to consummate the sale
of the Project to the Buyer.
4.4 Possession. Possession of the Project will be delivered by the Seller to the
Buyer on or before the close of business on the Closing Date, free
from all parties claiming rights to possession of or having claims
against the Project other than as tenants in possession or pursuant
to contractual obligations approved or to be assumed by the Buyer.
Effective on the delivery of the deed conveying title to the Project
by the Seller to the Buyer, beneficial ownership and the risk of loss
of the Project will pass from the Seller to the Buyer.
_______________________________________
Modern Real Estate Transactions, July 2006
- 257-
4.5 Project Management; Employees. On the Closing Date the Seller will
deliver evidence reasonably satisfactory to the Buyer that the
manager and all leasing agents employed by the Seller with respect
to the Project have been paid all compensation due for services
rendered and that all agreements with respect to management and
leasing of the Project have been terminated. At the Buyer's option,
the Seller will also terminate and satisfy all obligations to any
personnel employed by the Seller in the operation of the Project
and provide the Buyer with evidence thereof satisfactory to the
Buyer on the Closing Date.
4.6 Costs. The Seller will pay the following closing costs: The Seller's
attorneys' fees; all costs of providing the Survey; and all
abstracting, title examination and other costs relating to the
issuance of the Title Commitment. The Buyer will pay the
following closing costs: The Buyer's attorneys' fees; the cost of
any documentary stamps or other tax relating to the documents
conveying title to the Project to the Buyer; the costs of recording
all documents; all premium expense, closing fees and other charges
related to the issuance of the Title Policy; all sales and transfer
taxes imposed by the jurisdiction in which the Project is located, if
any; and any other charge imposed in connection with the transfer
of ownership of any item comprising the Project.
5.
Project Condition. The Buyer acknowledges that the Buyer and the Buyer's
representatives have been afforded the opportunity to inspect the Project, to conduct such
environmental and engineering studies as the Buyer has deemed appropriate and to verify
all information furnished by the Seller. Without reliance on any information provided by
the Seller, the Buyer has determined that the physical properties, structures, title,
contracts, leases, accounts and all other matters relating to the Project are satisfactory to
the Buyer in all respects. It is understood that the Seller has made no representation as to
the condition or state of repair of the Project, including, without implied limitation, any
condition arising in connection with the use, storage or disposal of hazardous substances
on or in the vicinity of the Project or compliance of the Project with any governmental
regulation applicable thereto, and has made no agreement to alter, repair or improve the
Project. The sole obligation of the Seller will be to deliver possession of the Project to
the Buyer on the Closing Date in substantially the same condition (normal wear and tear
and casualty loss excepted) as existed on the date of this Agreement and the Buyer agrees
to accept possession of the Project on the Closing Date in an AS IS condition WITH ALL
FAULTS and WITHOUT EXPRESS OR IMPLIED WARRANTY AS TO FITNESS
FOR ANY PARTICULAR PURPOSE.
6.
Buyer's Representations and Warranties. The Buyer represents and warrants to
the Seller that: (a) the Buyer and any entity to which the Buyer assigns this Agreement
_______________________________________
Modern Real Estate Transactions, July 2006
- 258-
pursuant to paragraph 12.9 have, and as of the Closing Date will have, full power and
authority to perform the terms of this Agreement and all documents which are
contemplated by this Agreement; and (b) all actions necessary to confer such authority on
the individuals executing this Agreement and all documents which are contemplated by
this Agreement have been taken.
7.
Adjustments; Prorations. All receipts and disbursements of the Project will be
prorated on the Closing Date as of 12:00 midnight on the day preceding the Closing Date
and the purchase price will be adjusted on the following basis:
7.1 Receipts. All rents and other sums receivable from tenants of the Project
earned and attributable to the period prior to the Closing Date will
be paid to the Seller; rents earned and attributable to the period
beginning on the Closing Date and thereafter will be paid to the
Buyer. Any rent collected by the Buyer after the Closing Date will
be applied first to pay any rent then owing to the Seller, and the
Buyer will remit such amounts immediately on receipt to the
Seller, and then apply the remainder to any rent owing to the
Buyer. The Buyer will use the Buyer's best efforts to collect and
assist the Seller in collecting any revenue which is owed to the
Seller on the Closing Date.
7.2 Tenant Deposits. On the Closing Date, the Seller will deliver to the Buyer
an amount of money equal to all refundable deposits theretofore
paid to the Seller by tenants occupying the Project and a listing of
the tenants to which such deposits are owing.
7.3 Deposits. The Seller will retain any refundable deposits or bonds held by
any utility, governmental agency or service contractor with respect
to the Project.
7.4 Disbursements. All sums due for accounts payable which were owing or
incurred in connection with the Project prior to the Closing Date
will be paid by the Seller and the Seller agrees to defend,
indemnify and hold the Buyer harmless with respect thereto. The
Buyer will furnish to the Seller any bills for such period received
after the Closing Date for payment and the Buyer will have no
further obligation with respect thereto.
7.5 Property Taxes. All real and personal property ad valorem taxes and
installments of special assessments, if any, for the calendar years
preceding the year in which the Closing Date occurs will be paid
by the Seller. All real and personal property ad valorem taxes and
special assessments, if any, whether payable in installments or not,
_______________________________________
Modern Real Estate Transactions, July 2006
- 259-
for the calendar year in which the Closing Date occurs will be
prorated to the Closing Date, based on the latest available tax rate
and assessed valuation.
7.6 Utility Charges. All utility charges will be prorated to the Closing Date
and the Buyer will obtain a final billing therefor.
7.7 Project Employees. To the extent the Buyer elects to employ any
personnel of the Seller engaged in the operation of the Project
subsequent to the Closing Date, all compensation payable to such
employees (including the cost of fringe benefits and accrued
vacation pay) which accrued prior to the Closing Date will be paid
by the Seller. All compensation payable to such employees which
accrues subsequent to the Closing Date will be paid by the Buyer.
7.8 Insurance. The Seller will terminate all existing insurance policies on the
Closing Date and the Buyer will be responsible for placing all
insurance coverage desired by the Buyer. Any prepaid insurance
premiums will be retained by the Seller.
8.
Covenant to Operate. Prior to the Closing Date the Seller agrees to maintain,
repair, manage and operate the Project in accordance with the Seller's prior practices and
agrees that the Seller will not dissipate the Project or remove any property therefrom.
9.
Other Actions. The Buyer and the Seller agree to perform or cause to be
performed the following:
9.1 Information Releases. The Buyer and the Seller will jointly prepare and
issue all releases of information relating to the sale of the Project.
If inquiries are made by any person with respect to any transaction
contemplated by this Agreement, each party will consult with the
other prior to responding to such inquiries.
9.2 Cooperation. After the Closing Date, the Seller will assist the Buyer in an
orderly transfer of the Project so that the change of ownership can
be accomplished with minimum interference to the efficient
operation of the Project. The Seller will, on the request of the
Buyer, provide such information with respect to the Project as
might be reasonably requested by the Buyer.
9.3 Notice to Tenants. On the Closing Date the Buyer and the Seller will
execute a notice letter addressed to each tenant of the Project in
form approved by the Buyer and the Seller advising the tenants of:
(a) the transfer of the Project; (b) the Buyer's assumption of any
_______________________________________
Modern Real Estate Transactions, July 2006
- 260-
liability for refundable security deposits; and (c) specifying the
manner in which rent is to be paid subsequent to the Closing Date.
9.4 Buyer's Indemnification. After the Closing Date, the Buyer agrees to
defend, indemnify and hold the Seller harmless from all damages,
liabilities, costs and expenses (including attorneys' fees and other
litigation expenses) arising from: (a) accounts payable and other
claims relating to the Project which are incurred or which accrued
after the Closing Date or which are specifically assumed by the
Buyer; (b) claims made by tenants of the Project for refundable
deposits transferred to the Buyer or arising from circumstances
which occur after the Closing Date; and (c) claims by former
employees of the Seller whose employment is continued by the
Buyer to the extent that such claims arise after the Closing Date.
10.
Condemnation; Casualty. In the event of actual or threatened condemnation or
damage to or destruction of all or any part of the Project prior to the Closing Date, it is
agreed as follows:
10.1 Minor Loss. If the amount of the condemnation or insured casualty loss is
not more than Fifty Thousand Dollars ($50,000.00), this
Agreement will continue, all condemnation or insurance proceeds
collectible by reason of such taking or damage will be absolutely
payable to the Buyer, the purchase price will be reduced by any
deductible amount under any insurance claim and the sale of the
Project will be otherwise closed in accordance with this
Agreement. Notwithstanding anything in this Agreement to the
contrary, the insurance proceeds to be credited or delivered to the
Buyer pursuant to this paragraph will exclude business interruption
or rental loss insurance proceeds, if any, allocable to the period
through the Closing Date, which proceeds will be retained by the
Seller.
10.2 Major Loss. If the amount of the condemnation or casualty loss is more
than Fifty Thousand Dollars ($50,000.00) or the casualty loss is
not insured, the Buyer and the Seller will have the mutual option
for ten (10) days after receipt of written notice of such taking or
destruction to cancel this Agreement by service of written notice of
cancellation. On the exercise of such option, this Agreement will
become null and void, and the Earnest Money Deposit will be
returned to the Buyer. If, in such event, neither party affirmatively
exercises the option to cancel this Agreement, such option will
lapse, the Buyer will be entitled to receive all condemnation or
insurance proceeds collectible by reason of such taking or
_______________________________________
Modern Real Estate Transactions, July 2006
- 261-
destruction, the purchase price will be reduced by any deductible
amount under any insurance claim and the sale of the Project will
be otherwise closed in accordance with this Agreement.
11.
Default; Remedy. In the event that either party fails to perform such party's
obligations hereunder (except as excused by the other party's default), the party claiming
default will make written demand for performance. If the Seller fails to comply with
such written demand within ten (10) days after receipt thereof, the Buyer will have the
option to waive such default, to demand specific performance or to terminate this
Agreement; and on such termination, the Earnest Money Deposit will be returned to the
Buyer. If the Buyer fails to comply with such written demand within ten (10) days after
receipt thereof, the Seller will have the option to waive such default or to terminate this
Agreement; and on such termination, the Seller will be entitled to retain the Earnest
Money Deposit as liquidated damages arising from such default. The parties agree that
the amount of actual damages which the Seller would suffer as a result of the Buyer's
default would be extremely difficult to determine and have agreed, after specific
negotiation relating thereto, that the amount of the Earnest Money Deposit is a reasonable
estimate of the Seller's damages and is intended to constitute a fixed amount of liquidated
damages in lieu of other remedies available to the Seller and is not intended to constitute
a penalty. On such termination and return or payment of the Earnest Money Deposit, the
parties will be discharged from any further obligations and liabilities under this
Agreement. The Buyer agrees that any liability of the Seller under any claim brought
prior to the Closing Date pursuant to this Agreement or any document or instrument
delivered in connection with this Agreement will be limited solely to the Project, and no
other assets of the Seller will be subject to levy or execution. With respect to any such
claim brought after the Closing Date, any liability of the Seller will be limited solely to
the assets of the Seller. In no event will the Buyer seek satisfaction for any such
obligation from any of the general or limited partners, representatives, employees or
agents of the Seller.
12.
Miscellaneous. It is further agreed as follows:
12.1 Time. Time is the essence of each provision of this Agreement.
12.2 Notices. Any notice, demand or communication required or permitted to
be given by any provision of this Agreement will be in writing and
will be deemed to have been given when delivered personally or
by telefacsimile (with a hard copy sent within one [1] business day
by any other means described in this paragraph) to the party
designated to receive such notice, or on the date following the day
sent by a nationally recognized overnight courier, or on the third
(3rd) business day after the same is sent by United States certified
mail, postage and charges prepaid, directed to the following
addresses or to such other or additional addresses as any party
_______________________________________
Modern Real Estate Transactions, July 2006
- 262-
might designate by written notice to the other part[ies]:
To the
Seller:
Washington Park Apartments
Limited Partnership
1000 Main Street
Oklahoma City, OK 73102
Attn: Mr. Robert P. Legg
Telefacsimile: (405) 239-1000
With Copy
To:
Hastie and Kirschner
3000 Oklahoma Tower
210 West Park Avenue
Oklahoma City, Oklahoma 73102
Attn: John D. Hastie, Esquire
Telefacsimile: (405) 239-6404
To the
Buyer:
Investment Associates, Inc.
3000 Robinson Avenue
Oklahoma City, Oklahoma 73102
Attn: Mr. Chris R. Graves
Telefacsimile: (405) 239-3000
12.3 Survival. All representations and warranties of the Seller and the Buyer
contained in this Agreement will terminate on and as of the
Closing Date and will not survive the closing of this transaction,
except for: (a) the warranties of title of the Seller expressed in the
conveyance documents delivered on the Closing Date; (b) the
agreement of the Buyer with respect to rents collected after the
Closing Date set forth at paragraph 7.1; (c) the agreement of the
Buyer with respect to payment of accounts set forth at paragraph
7.4; (d) the agreements of the Buyer and the Seller set forth at
paragraph 9; and (e) the agreement regarding brokerage fees set
forth at paragraph 12.12. The provisions of paragraph 11, limiting
the remedies of the Seller will not apply to any action brought by
the Seller after the Closing Date to enforce any covenant or
representation described in this paragraph 12.3.
_______________________________________
Modern Real Estate Transactions, July 2006
- 263-
12.4 Entire Agreement. This Agreement constitutes the entire agreement
between the Buyer and the Seller relating to the sale of the Project.
This Agreement supersedes, in all respects, all prior written or oral
agreements, if any, between the parties relating to the sale of the
Project and there are no agreements, understandings, warranties or
representations between the Buyer and the Seller except as set
forth herein.
12.5 Binding Effect. This Agreement will inure to the benefit of and bind the
respective successors and permitted assigns of the parties hereto.
12.6 Attorneys' Fees. If either party institutes an action or proceeding against
the other relating to the provisions of this Agreement or any
default hereunder, the unsuccessful party to such action or
proceeding will reimburse the successful party therein for the
reasonable expenses of attorneys' fees and disbursements and
litigation expenses incurred by the successful party.
12.7 Severability. If any clause or provision of this Agreement is illegal,
invalid or unenforceable under any present or future law, the
remainder of this Agreement will not be affected thereby. It is the
intention of the parties that if any such provision is held to be
illegal, invalid or unenforceable, there will be added in lieu thereof
a provision as similar in terms to such provision as is possible and
be legal, valid and enforceable.
12.8 Counterpart Execution. This Agreement may be executed in counterparts,
each of which will be deemed an original document, but all of
which will constitute a single document. This document will not
be binding on or constitute evidence of a contract between the
parties until such time as a counterpart of this document has been
executed by each party and a copy thereof delivered to the other
party to this Agreement.
12.9 Assignment. The rights of the Buyer under this Agreement may not be
assigned in whole or in part without the prior written consent of the
Seller, which consent will not be unreasonably withheld.
12.10
Amendment. Neither this Agreement nor any of the provisions
hereof can be changed, waived, discharged or terminated, except
by an instrument in writing signed by the party against whom
enforcement of the change, waiver, discharge or termination is
sought.
_______________________________________
Modern Real Estate Transactions, July 2006
- 264-
12.11
Governing Law. This Agreement is being executed, delivered and
is intended to be performed in Oklahoma County, Oklahoma, and
the substantive laws of Oklahoma will govern the validity,
construction and enforcement of this Agreement. The parties
consent to the venue and jurisdiction of any federal or state court
sitting in Oklahoma County, Oklahoma in any action brought to
enforce the terms of this Agreement. The parties irrevocably and
unconditionally submit to the jurisdiction (both subject matter and
personal) of any such court and irrevocably and unconditionally
waive: (a) any objection any party might now or hereafter have to
the venue in any such court; and (b) any claim that any action or
proceeding brought in any such court has been brought in an
inconvenient forum.
12.12
Brokerage. The Buyer represents to the Seller that the sale hereby
contemplated was brought about by the efforts of Push E.
Promoters & Associates, 1900 Hardsel Avenue, Oklahoma City,
Oklahoma 73118 (the "Procuring Broker") and that the Buyer has
dealt with no other broker in connection with the Project. The
Seller agrees to pay the brokerage commission, if any, earned by
the Procuring Broker as a result of the consummation of the sale of
the Project to the Buyer and the Buyer agrees to defend, indemnify
and hold the Seller harmless from any claim for real estate
brokerage commissions asserted by any other party as a result of
dealings claimed to have been conducted with the Buyer.
12.13
Expiration. The dates of execution of this Agreement are set forth
below the parties' respective signatures. It is understood that all
obligations of the parties, if any, under this Agreement will
terminate on Friday, June 25, 1993, unless: (a) both parties have
duly executed and delivered a copy of this Agreement to the other
party; and (b) the Earnest Money Deposit has been received by the
Seller.
12.14
Headings. The headings used in this Agreement are for ease in
reference only and are not intended to affect the interpretation of
this Agreement in any way.
12.15
Construction. The parties acknowledge that each party and each
party's 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 will not be employed
in the interpretation of this Agreement or any amendments or
schedules hereto.
_______________________________________
Modern Real Estate Transactions, July 2006
- 265-
12.16
Indemnification. As to any offering circular, prospectus, report,
advertisement, correspondence or other document which names or
refers in any manner, directly or indirectly, to the Seller or any
partner, agents, representatives or employees of the Seller, the
Buyer will indemnify and hold harmless the Seller, and all
partners, agents, representatives or employees of the Seller against
and from any and all liability, losses, damages, costs and
obligations whatsoever (including, without implied limitation,
attorneys' fees and costs).
IN WITNESS WHEREOF, this instrument has been executed by the
parties on the dates hereafter indicated to be effective Friday, June 25, 1993.
WASHINGTON PARK APARTMENTS
LIMITED PARTNERSHIP, an Oklahoma
limited partnership
By
Robert P. Legg,
Sole General Partner
Date Executed: ________________
(the "Seller")
INVESTMENT ASSOCIATES, INC., an
Oklahoma corporation
By
Chris R. Graves, President
Date Executed: ________________
(the "Buyer")
SCHEDULE "A"
Special Warranty Deed
_______________________________________
Modern Real Estate Transactions, July 2006
- 266-
[Deleted for purposes of this publication]
SCHEDULE "B"
Bill of Sale
[Deleted for purposes of this publication]
SCHEDULE "C"
Assignment and Assumption Agreement
[Deleted for purposes of this publication]
SCHEDULE "D"
Affidavit of Nonforeign Status
[Deleted for purposes of this publication]
BUYER FORM SALE AGREEMENT PROVISIONS
PROJECT DESCRIPTION
__.
Sale of Project. The Seller agrees to sell and the Buyer agrees to purchase on
the terms hereafter stated all of the Seller's right, title and interest in and to the following
described property (the "Project"):
__._ Real Estate: Fee simple title to the following described real property
located in Oklahoma City, Oklahoma County, Oklahoma:
[Deleted for purposes of this publication]
together with all privileges, rights, easements, hereditaments and
appurtenances thereunto belonging; all right, title and interest of
the Seller in and to any streets, alleys, ramps, passages, abutter's
_______________________________________
Modern Real Estate Transactions, July 2006
- 267-
rights and other rights-of-way included therein or adjacent thereto;
and all water, mineral and other subsurface rights owned by the
Seller.
__._ Improvements: All buildings, improvements and related facilities,
together with all systems, facilities, fixtures, machinery, equipment
and conduits to provide fire protection, security, heat, exhaust,
ventilation, air conditioning, electrical power, light, plumbing,
refrigeration, gas, sewer, water and other services thereto
(including all replacements or additions thereto).
__._ Tangible Personal Property: All goods, chattels, goods to become
fixtures, mobile goods, machinery, equipment, tools, appliances,
fixtures, furniture, furnishings, trade fixtures, window treatments,
floor coverings, certificates of title, documents, books, business
records, customer lists, files, correspondence, manuals, software,
computer disks and programs, appraisal reports, drawings, plans,
specifications, diagrams, soil reports, environmental reports, other
architectural or engineering work product and other tangible
personal property used or useable in the construction, renovation,
ownership, management, marketing or operation of the above
described real estate and improvements or any part thereof, and all
replacements, additions or accessions thereto.
_______________________________________
Modern Real Estate Transactions, July 2006
- 268-
__._ Intangible Personal Property: All intangible personal property used or
useable in the construction, renovation, ownership, management,
marketing or operation of the above described real estate and
improvements or any part thereof, and all replacements, additions
or accessions thereto, including without implied limitation: all of
the Seller's right, title and interest in all logos, designs, trade
names, trademarks, service marks, copyrights and other intellectual
property; all licenses, franchises, certifications, authorizations,
approvals and permits issued or approved by any governmental
authority or other person, including, without implied limitation,
certificates of occupancy, occupancy permits, building permits,
sign permits, environmental permits, elevator permits, machinery
permits, business licenses, ingress and egress permits; all rent,
deposits and other sums paid for the use or occupancy of the
property herein described; all insurance policies, proceeds, prepaid
premiums, uncollected claims and all rights relating thereto; all
utility, security and other deposits and reserve accounts made as
security for the fulfillment of any obligation of the Seller or any
affiliate of the Seller in connection with the property herein
described; all accounts, deposit accounts, escrow accounts,
accounts receivable, matured and unmatured claims, chattel paper,
royalties, causes of action and condemnation awards; all written or
oral: (a) service, maintenance, operating, repair and other contract
rights and commitments; (b) equipment leases, conditional sale
contracts and all rights and options of the Seller thereunder,
including, without implied limitation, rights to renew or extend the
term or purchase the leased equipment; and (c) guaranties and
warranties and other assurances of performance; and all written or
oral: (a) agreements with contractors, materialmen, laborers,
managers and other persons providing for the construction,
renovation or installation of all or portions of the property herein
described, together with all payment and/or performance bonds,
insurance policies, certificates and other assurances relating
thereto; (b) agreements with architects and engineers for
architectural and engineering design and supervision services; and
(c) agreements with all other contractors, engineers, architects,
property managers, brokers, professionals and consultants entered
into by the Seller or any predecessor in title to the Seller.
__._ Leases. All agreements in the nature of leases, subleases, rental contracts,
licenses, permits, franchises, concessions and other agreements
relating to the use or occupancy of the property herein described;
all rents, receipts, revenues, deposits, income, issues and profits;
all guaranties of the performance of the tenants thereunder; all
_______________________________________
Modern Real Estate Transactions, July 2006
- 269-
proceeds payable under any policy of insurance against loss of
rents or business interruption; all rights, claims, causes of action
and demands which the Seller might now or hereafter have against
any tenant, subtenant, assignee or other occupant of the property
herein described; and all records and pertinent correspondence
relating thereto.
EARNEST MONEY
__._ Earnest Money. The sum of
Dollars ($_______) which
is herewith paid to a bank or trust company (the "Escrow Agent")
as Escrow Agent (which Escrow Agent will be acceptable to the
Buyer and the Seller and will be designated by the Buyer within
ten (10) days after execution of this Agreement) as earnest money
to be applied against the purchase price at the time of closing.
__._ Cash on Closing. On the Closing Date, the Escrow Agent will pay the
Dollars ($________) escrow deposit to the Seller and the Buyer
will
pay
to
the
Seller
the
further
sum
of
Dollars ($________).
SELLER FINANCING
__._ Seller Financing. On the Closing Date the Buyer will execute and deliver
to the Seller a promissory note secured by a mortgage, security
agreement and financing statement, an assignment of leases, and
financing statements (collectively the "Purchase Money Loan
Documents").
The Purchase Money Loan Documents will
evidence and secure payment of a nonrecourse loan in the principal
amount of
Dollars
($_______) bearing interest at the rate of _______ percent (___%)
per
annum
payable
in
monthly
installments
of
Dollars ($________) commencing on ___________, 19__, and
monthly thereafter until _____________, 19__, on which date the
entire unpaid principal balance will be payable unless the Buyer
exercises the option to extend such maturity date until _________,
19__.
The Purchase Money Loan Documents will be in
_______________________________________
Modern Real Estate Transactions, July 2006
- 270-
substantially the forms set forth at Schedule "__" attached as a part
hereof.
EXISTING DEBT
__._ Existing Debt. The Buyer agrees that effective on the Closing Date, the
Buyer will assume liability for payment of the indebtedness
secured by the mortgages described at Schedule "__," to the extent
the Seller is directly or contingently liable therefor. At the request
of the Seller on or after the Closing Date, the Buyer agrees to
execute and deliver a separate written undertaking evidencing such
assumption of indebtedness.
__._ Existing Debt. If the Buyer does not elect to pay the total purchase price
in cash on closing, the balance of the purchase price will be paid
by the Buyer's accepting title to the Project subject to an existing
first mortgage having an unpaid principal balance of not more than
Dollars ($________). If the unpaid principal balance of such
mortgage exceeds
Dollars ($________), the
down payment will be reduced in an amount equal to such excess;
if the unpaid principal balance of such mortgage is less than
Dollars ($_______) the difference will be added to the down
payment payable to the Seller in cash on closing.
__._ Existing Debt. In payment of the balance of the purchase price, the Buyer
agrees to accept title to the Project subject to a first mortgage
having
an
unpaid
principal
balance
of
Dollars ($________).
ALLOCATION OF PRICE
__._ Price Allocation. The Seller agrees that the Buyer may allocate the
purchase price among the various items comprising the Project
according to sound accounting practices and that such allocation,
on the written request of the Seller, will be incorporated into a
supplemental instrument to be executed at closing.
__._ Price Allocation. It is understood that the purchase price has been
allocated between the Buyer and the Seller on the following basis:
__._._ Commitment
Fee.
The
_______________________________________
Modern Real Estate Transactions, July 2006
- 271-
sum
of
Dollars ($______) will be paid to the Seller in cash
on closing as a nonrefundable commitment fee for
placement of the mortgage loan evidenced and
secured by the Wraparound Documents.
__._._ Covenant.
A
sum
not
to
exceed
Dollars ($_______) will be paid to the Seller on
closing in consideration of the execution and
delivery by the Seller of an agreement not to
compete with the Buyer for a period of five (5)
years in Oklahoma County.
__._._ Balance of Price. The Seller agrees that the Buyer may
allocate the balance of the purchase price among the
items comprising the Project and that such
allocation will be incorporated into a supplemental
instrument to be executed by the Buyer and the
Seller at closing.
PRORATIONS; MORTGAGE PAYMENTS
__._ Mortgage Payments. Interest on the first mortgage covering the Project
will be prorated to the Closing Date. If the Seller makes additional
principal payments under such first mortgage prior to the Closing
Date, the amount of the Buyer's promissory note described at
paragraph [2.3] will be increased by the amount of such principal
payments.
__._ Mortgage Payments. The Seller will pay all installments of principal and
interest maturing on the first mortgage indebtedness maturing prior
to ________, 19__. The ____________, 19__, installment of
interest and principal owing under such indebtedness and all
installments maturing thereafter will be paid by the Buyer.
PRORATIONS; PROPERTY TAXES
__._ Property Taxes. All special assessments and all real and personal property
ad valorem taxes for the calendar year preceding the year of
closing will be paid by the Seller. Ad valorem taxes for the
calendar year of closing will be prorated to the Closing Date based
on the latest available tax rate and assessed valuation.
_______________________________________
Modern Real Estate Transactions, July 2006
- 272-
PRORATIONS; INSURANCE
__._ Insurance. The Seller, at the Buyer's option, will assign all existing
insurance policies to the Buyer and all insurance carriers will be
notified of the change in ownership of the Project. If the Buyer
elects to accept an assignment of the existing policies, the
premiums thereon will be prorated to the Closing Date.
GENERAL PRORATIONS
__.
Prorations. Whether or not the Closing Date occurs on ____________, 19___,
the receipts and disbursements of the Project will be prorated as of 12:00 midnight on
___________, 19___ (the "Proration Time") and the cash portion of the purchase price
will be adjusted on the following basis:
__._ Accounts Receivable. All rents and other sums due with respect to the
Project earned and attributable to the period prior to the Proration
Time will be paid to the Seller to the extent that funds have been
collected on or before the Closing Date; rents and other sums
earned and attributable to the period subsequent to the Proration
Time will be paid to the Buyer. On receipt after the Closing Date
by the Buyer of rents and other sums earned by the Project prior to
the Proration Time, the same will be paid by the Buyer to the
Seller; provided, that the Buyer will have no obligations to enforce
the collection of such rents or other sums.
__._ Security Deposits. At closing, the Seller will deliver to the Buyer an
amount of money equal to all refundable security deposits
theretofore paid to the Seller by tenants occupying the Project.
__._ Accounts Payable. All sums due for accounts payable which were owing
or incurred by the Project prior to the Proration Time will be paid
by the Seller. The Buyer will furnish to the Seller any bills for
such period received after the Closing Date for payment, and the
Buyer will have no further obligation with respect thereto. All
accounts payable incurred after the Proration Time will be paid by
the Buyer.
__._ Property Taxes. All real and personal property ad valorem taxes and
_______________________________________
Modern Real Estate Transactions, July 2006
- 273-
installments of special assessments, if any, for the calendar year
1993 and all preceding years will be paid by the Seller. Ad
valorem taxes and installments of special assessments, if any, for
calendar year 1994 and all subsequent years will be paid by the
Buyer.
__._ Utility Charges. All utility charges accruing prior to the Proration Time
will be paid by the Seller. All utility charges accruing after the
Proration Time will be paid by the Buyer.
__._ Insurance. The Seller will assign all existing insurance policies relating to
the Project to the Buyer and all insurance carriers will be notified
of the change of ownership of the Project. The cost of insurance
premiums will be prorated to the Proration Time and the Buyer
will reimburse the Seller for the prepaid portion thereof.
__._ Project Employees. To the extent the Buyer elects to employ any
personnel of the Seller engaged in the operation of the Project
subsequent to the Closing Date, all compensation payable to such
employees (including the cost of fringe benefits and accrued
vacation pay) which accrued prior to the Proration Time will be
paid by the Seller. All compensation payable to such employees
which accrues subsequent to the Proration Time will be paid by the
Buyer.
DEFAULT; REMEDIES
__.
Default; Remedy. In the event that either party fails to perform such party's
respective obligations hereunder (except as excused by the other's default) the party
claiming default will make written demand for performance. If the Seller fails to comply
with such written demand within ten (10) days after receipt thereof, the Buyer will have
the option to waive such default, demand specific performance, or terminate this
Agreement and, on such termination, the Earnest Money Deposit will be returned to the
Buyer. If the Buyer fails to comply with such written demand within ten (10) days after
receipt thereof, the Seller will have the option to waive such default or to terminate this
Agreement and, on such termination, the Seller will be paid the Earnest Money Deposit
as liquidated damages (and not as a penalty). On such return or payment of the Earnest
Money Deposit, the parties will be discharged from any further obligations and liabilities
hereunder. It is specifically acknowledged that the Seller waives all rights to claim or
demand specific performance of this Agreement.
__.
Default; Remedy. In the event that either party fails to perform its respective
_______________________________________
Modern Real Estate Transactions, July 2006
- 274-
obligations hereunder (except as excused by the other's default), the party claiming
default will make written demand for performance. If the Seller fails to comply with
such written demand within ten (10) days after receipt thereof, the Buyer will have the
option to waive such default or to terminate this Agreement; and on such termination, the
Earnest Money Deposit will be returned to the Buyer. If the Buyer fails to comply with
such written demand within ten (10) days after receipt thereof, the Seller will have the
option to waive such default or to terminate this Agreement; and on such termination, the
Seller will be entitled to retain the Earnest Money Deposit as liquidated damages arising
from such default. In the event that the Seller wrongfully refuses to close the sale of the
Project to the Buyer or if the Seller elects to accept another offer for purchase of the
Project, the Seller will pay to the Buyer the sum of
Dollars
($______) as liquidated damages, and no other damages, rights or remedies will in any
event be collectible, enforceable or available to the Buyer by reason of such wrongful or
willful refusal by the Seller to close hereunder. On such return or payment of the Earnest
Money Deposit or payment of liquidated damages, the parties will be discharged from
any further obligations and liabilities hereunder. The Seller and the Buyer hereby
specifically waive any right to specific performance of this Agreement or to maintain any
cause of action for an amount in excess of
Dollars ($_______) by
reason of any default by the Buyer or the Seller hereunder.
__.
Waiver. The Buyer will have the option to waive any requirements to be
performed by the Seller hereunder; provided that such waiver will not be binding unless
reduced to writing. The Buyer will have the option to cure any default by the Seller
hereunder, and to pay such sum or sums as might be reasonably required to procure
performance of any act agreed to be done by the Seller and to deduct the cost of such
performance from the purchase price on closing.
MISCELLANEOUS
__._ Survival. The covenants, representations and warranties of the Buyer and
the Seller herein contained will be effective on the date hereof, on
the Closing Date and will survive closing.
__._ Brokerage. It is understood that the Seller and the Buyer have dealt
directly as principals and that neither party has knowledge of any
brokerage commission claimed or payable as a result of the
purchase contemplated by this Agreement. The parties agree to
mutually hold each other harmless from claims for brokerage
commissions asserted by any party as a result of dealings by either
party to this Agreement claimed to give rise to such brokerage
commissions.
_______________________________________
Modern Real Estate Transactions, July 2006
- 275-
__._ Assignment. The rights of the Seller under this Agreement cannot be
assigned in whole or in part without the prior written consent of the
Buyer. The rights of the Buyer under this Agreement may be
assigned in full or in part to any partnership, corporation or joint
venture of which the Buyer is a member or stockholder.
__._ Assignment. The rights of the Buyer under this Agreement cannot be
assigned in whole or in part without the prior written consent of the
Seller; provided that the Seller hereby consents to the assignment
of this Agreement to any partnership, corporation or joint venture
of which the Buyer is a managing member or majority stockholder.
CONDITIONS PRECEDENT
__.
Conditions Precedent. If certain conditions precedent to closing have not been
satisfied on or before the Closing Date, the Buyer will have the unilateral option to
terminate this Agreement and, on such termination, the Earnest Money Deposit will be
returned to the Buyer and the parties will be released from further performance
hereunder. Unless waived by the Buyer in writing, the following are conditions
precedent to the Buyer's obligation to close this transaction:
__._ Loan Documents. Approval by the Buyer of the documents evidencing
and securing payment of all indebtedness relating to the Project
(the "Indebtedness").
__._ Consent to Transfer. Approval by the holder of the Indebtedness of the
transfer of the Project to the Buyer;
__._ Rent Roll. Approval by the Buyer of a rent roll of the Project showing the
name of the tenant, apartment number, security or cleaning deposit,
rent paid and date to which rent is collected;
__._ Inventory. Approval by the Buyer of the inventory of the furniture,
furnishings, equipment and other personal property owned by the
Seller and associated with the Project;
__._ Obligations. Approval by the Buyer of each obligation by which the
Project (or any part thereof) or the Buyer might be bound;
__._ Title. Approval by the Buyer of title to the Project; and
__._ Financing. The issuance of commitments for financing to the Buyer on
terms satisfactory to the Buyer in an amount not less than
_______________________________________
Modern Real Estate Transactions, July 2006
- 276-
Dollars ($_______).
__.
Buyer's Financing. The Buyer will have the unilateral right to terminate this
Agreement and all of the Buyer's obligations hereunder if the Buyer is unable to obtain
long term mortgage financing covering the Project prior to _______________, 19__. On
such termination, the Earnest Money Deposit will be returned by the Seller to the Buyer.
The Buyer agrees to promptly file and diligently pursue applications for such financing
and to pay all costs and provide all information which might be required by any
institutional mortgage lender considering such applications. If the Buyer is unable to
provide evidence of such financing in form satisfactory to the Seller on ____________,
19__, the Buyer hereby grants the option to and authorizes the Seller to file such
applications on behalf of the Buyer at the Buyer's expense. The Buyer agrees that the
Buyer will accept a mortgage loan offered by an institutional lender on terms no less
favorable to the borrower than the following: (a) loan amount Dollars
($______) with the sum of
Dollars ($________) to be disbursed at the
initial loan closing and the balance of the principal amount to be disbursed no later than
one year after the initial closing contingent on the borrower's ability to achieve rental
income satisfactory to the lender; (b) loan term (___) year amortization with a
____________ (___) year maturity; (c) interest rate - _____ percent (___%) per annum;
(d) prepayment - prohibited for ten (10) years, with a five percent (5%) penalty in the
eleventh year, declining one percent (1%) per year thereafter with a minimum of one
percent (l%); (e) liability - full liability of the Project but without recourse against the
borrower; (f) collateral - first liens covering the Project; (g) commitment and brokerage
fees - two percent (2%) of the maximum loan amount; (h) loan documents - those
customarily used by the lender issuing the commitment; (i) closing costs - those
customarily paid by borrowers in Oklahoma City for similar lending transactions. If the
Buyer fails to obtain and accept a written commitment for long term financing by
__________, 19__, the Seller will have the option to terminate this Agreement by service
of written notice of termination and return of the Earnest Money Deposit or to attempt to
effect such financing on behalf of the Buyer. If neither the Buyer nor the Seller shall
have obtained a written commitment for a long term mortgage financing on __________,
19__, the parties will have the mutual option to terminate this Agreement by service of
written notice of termination. On such termination, the Earnest Money Deposit will be
returned by the Seller to the Buyer; provided that the Buyer will reimburse the Seller for
all out-of-pocket expenses of the Seller in attempting to effect long term mortgage
financing on the Buyer's behalf. If the Buyer fails to pursue such financing or fails to
accept a commitment for financing which complies with the terms of this paragraph, such
failure will constitute a default by the Buyer hereunder and the Seller will thereupon have
the right to exercise the remedies herein provided. The Buyer agrees to provide such
information with respect to the Buyer's financing efforts as the Seller might reasonably
request from time to time and to keep the Seller fully advised as to the progress of the
Buyer in obtaining such financing.
_______________________________________
Modern Real Estate Transactions, July 2006
- 277-
SELLER'S REPRESENTATIONS
__.
Disclosure. The Seller represents and warrants to the Buyer as follows: The
Seller has the authority to make and perform this Agreement; the Project and the use
thereof comply with all applicable public and private restrictions, regulations, ordinances
and laws; there are no actions, suits, or other legal proceedings presently pending or to
the knowledge of Seller threatened against the Project; the Seller's performance of this
Agreement will not constitute a default under any agreement by which the Project might
be bound; the plumbing, heating, water heaters, air conditioning units, pipes, water and
sewage systems are all in good working order; the Project is free from termites and any
other type of structural damage and damage from pests or insects; the Project is free from
any latent defects known to the Seller; the Project was constructed in accordance with
and now conforms to all applicable building codes, environmental regulations, zoning
ordinances and other restrictions governing the use of the Project; the Seller has disclosed
to the Buyer all matters which might have a material adverse effect on the ownership,
operation or maintenance of the Project.
__.
Seller's Representations and Warranties. The Seller hereby represents and
warrants to the Buyer as follows:
__._ Project Systems. To the best of the Seller's knowledge, there are not now,
and on the Closing Date there will not be, any material physical or
mechanical defects of the Project, including, without limitation, the
plumbing, heating, air conditioning and electrical systems, and to
the best of the Seller's knowledge, all such items are in good
operating condition and repair and in compliance with all
applicable governmental laws or regulations.
__._ Compliance. To the best of the Seller's knowledge, the use and operation
of the Project is now, and on the Closing Date will be, in full
compliance with applicable building codes, zoning and land use
laws, and other local, state or federal laws and regulations.
__._ Seller's Documentation. The survey, mechanical and structural plans and
specifications, soil reports, leases, certificates of occupancy,
warranties, operating statements, rent roll and income and expense
reports, and all other contracts or documents delivered to the Buyer
pursuant to this Agreement or in connection with the execution
hereof are and on the Closing Date will be true and correct copies,
and, to the best of the Seller's knowledge, are and on the Closing
Date will be in full force and effect, without default by any party.
__._ Regulation Proceedings. Except as disclosed to the Buyer in writing, the
Seller does not have knowledge of any condemnation, zoning or
_______________________________________
Modern Real Estate Transactions, July 2006
- 278-
other land-use regulation proceedings, either instituted or planned
to be instituted, which would detrimentally affect the use and
operation of the Project for the Buyer's intended purpose, nor has
the Seller received notice of any special assessment proceedings.
__._ Utilities. All water, sewer, gas, electric, telephone, and drainage facilities
and all other utilities required by law or by the normal use and
operation of the Project are and on the Closing Date will be
installed to the property lines of the Project, are and on the Closing
Date will all be connected with valid permits, and are and on the
Closing Date will be adequate to service the Project and to permit
full compliance with all requirements of law and normal usage of
the Project by the tenants thereof and their licensees and invitees.
__._ Licenses and Rights of Way. The Seller has obtained all licenses, permits,
easements and rights of way, including proof of dedication,
required from all governmental authorities having jurisdiction over
the Project or from private parties for the normal use and operation
of the Project and to ensure vehicular and pedestrian ingress to and
egress from the Project.
__._ Seller's Authority. All the documents executed by the Seller which are to
be delivered to the Buyer on the Closing Date are and on the
Closing Date will be duly authorized, executed, and delivered by
the Seller, are and on the Closing Date will be legal, valid, and
binding obligations of the Seller, are and on the Closing Date will
be sufficient to convey title (if they purport to do so), and do not
and on the Closing Date will not violate any provisions of any
agreement to which the Seller is a party or to which the Seller is
subject.
__._ Mechanics' and Materialmen's Claims. On the Closing Date there will be
no outstanding contracts made by the Seller for any improvements
to the Project which have not been fully paid for and the Seller will
cause to be discharged all mechanics' or materialmen's liens arising
from any labor or materials furnished to the Project prior to the
Closing Date.
__._ Full Disclosure. The Seller knows of no facts nor has the Seller
misrepresented or failed to disclose any fact which would prevent
the Buyer from using and operating the Project after the Closing
Date in the normal manner in which similar properties in the area
are operated.
_______________________________________
Modern Real Estate Transactions, July 2006
- 279-
__.
Seller's Representations. The Seller hereby represents and warrants to the
Buyer as of the Closing Date, as follows:
__._ Litigation. Except as disclosed by Schedule "__" attached as a part hereof,
there are no actions, suits, proceedings or investigations pending
or, to the knowledge of the Seller, threatened at law or in equity or
before or by any federal, state, municipal or other governmental
department, commission, board, bureau, agency or instrumentality,
domestic or foreign, which affect any portion of the Project.
__._ Insurance Notice. The Seller has received no uncorrected notice from any
insurance company or Board of Underwriters of any defects or
inadequacies in connection with the Project or the operation
thereof.
__._ Corporate Authority. The Seller is a corporation duly organized and
validly existing under the laws of the State of _________ which is
duly qualified to conduct business in the State of Oklahoma; the
Seller has adequate power, authority and legal right to own,
operate, manage, hold and sell the Project; the Seller is duly
authorized, qualified and licensed under all applicable laws,
regulations, ordinances or orders of public authorities to carry on
the Seller's business in the operation, management, ownership and
sale of the Project; the Seller has adequate authority, power and
legal right to enter into and carry out the provisions of this
Agreement and to consummate the transactions contemplated
hereby, and in doing so will not violate any law (including, without
limitation, the Bank Holding Company Act and the regulations of
the Board of Governors of the Federal Reserve System) or the
provisions of the Seller's charter or bylaws or the terms any
agreement binding on the Seller or the Project.
__._ Full Disclosure. Neither this Agreement nor any statement or instrument
referred to herein or any other information, report or statement
delivered to the Buyer by the Seller contains any untrue statement
or omits to state a material fact necessary to make the statements
herein or therein not misleading. The Seller has disclosed all
material facts which are known to the Seller relating to the
ownership, operation and maintenance of the Project.
__.
Seller's Representations and Warranties. The Seller hereby makes the
following representations and warranties for the benefit of the Buyer and the Buyer's
successors and assigns. The representations and warranties contained in this paragraph
are not intended to replace or limit in any manner any express or implied warranty
_______________________________________
Modern Real Estate Transactions, July 2006
- 280-
provided under applicable law. The Buyer will be entitled to rely on the representations
and warranties of the Seller notwithstanding the Buyer's inspection and investigation of
the Project. The Buyer and the Seller have entered into this Agreement on the condition
that the Seller make the following representations and warranties, which were and are a
material inducement to the Buyer's entering into this Agreement and the Buyer would not
have entered into this Agreement except in reliance on the representations and warranties
of the Seller made herein. The Seller represents and warrants that the following
representations and warranties, as well as the facts and other matters contained therein,
are true as of the date of this Agreement and will be true as of the Closing Date. The
continued accuracy in all respects of the aforesaid representations and warranties is a
condition precedent to the Buyer's obligation to close. The Seller hereby represents and
warrants to the Buyer that:
__._ Project Systems. The Project, and all components thereof, including, but
not limited to, parking lots, electrical systems, roofs, air
conditioning systems, heating systems and elevators are and, on
the Closing Date, will be in good condition and working order and
will perform the work or function for which intended. The
Improvements, and all component parts thereof, are, to the best of
the Seller's knowledge after diligent inquiry, in good condition and
repair and free of physical, structural or mechanical defects. The
Personal Property is in good condition and repair.
__._ Notices of Defects. The Seller has not received, and has no knowledge of,
any notification from any city, county, state or federal authority
having jurisdiction over the Project or of any utility providing
service or of any lender, tenant or party to a restrictive covenant
agreement affecting the Project requiring any work to be done to,
or affecting the use of, the Project or any portion thereof. The
Seller has not received any notice from any insurance carrier nor is
the Seller aware of defects or inadequacies in the Project that if not
corrected would result in termination of insurance coverage or
increase in insurance costs. There is no pending litigation or
threatened litigation or asserted or unasserted claims relating to the
Project.
__._ Flood Plain. The Project is not located in a flood plain.
__._ Compliance. The Project, including the Improvements as constructed and
operated by the Seller, conforms to, and is operated, maintained
and leased in accordance with all applicable city, county, state,
federal and other applicable laws, statutes, ordinances, rules and
regulations; and the Project complies with all private deed
restrictions and restrictive covenant agreements affecting the
Project.
_______________________________________
Modern Real Estate Transactions, July 2006
- 281-
__._ Assessments or Condemnation. There are not presently pending any
special assessments or condemnation actions with respect to the
Project or any part thereof, nor has the Seller any knowledge of
any special assessments or condemnation actions being
contemplated. The Seller has no understanding or agreement with
any taxing authority respecting the imposition or deferment of any
taxes or assessments respecting the Project.
__._ Utilities. All water, sewer, gas, electric, telephone and drainage facilities
and all other utilities required by law and by the normal operation
of the Project are installed across public property or valid
easements to the property lines of the Project, are all connected
with valid permits, and are adequate to serve the Project and to
permit full compliance with all requirements of law.
__._ Licenses and Rights of Way. The Seller has obtained all licenses, permits,
easements and rights-of-way, including proof of dedication,
required from all governmental authorities having jurisdiction over
the Project or from private parties in connection with the use and
operation of the Project and ensure vehicular and pedestrian
ingress and egress to the Project from public roads.
__._ Seller's Authority. The Seller is a ____________________, properly
organized under the laws of the State of
. The Seller has the
right, power, legal capacity and authority to enter into this
Agreement and to convey the Project to the Buyer pursuant to the
terms and provisions hereof and perform the Seller's other
obligations hereunder. The parties and persons executing this
Agreement on behalf of the Seller have been duly authorized to
execute this Agreement and the individual signatories join in this
representation and warranty personally for the purpose of
confirming the same to the Buyer. The execution of this
Agreement by the Seller, the performance by the Seller of the
Seller's obligations hereunder, and the sale, transfer, conveyance
and/or assignments as contemplated hereby, do not require the
consent or approval of any third party. Neither this Agreement nor
anything provided to be done hereunder (including, but not limited
to, the transfer of the Project to the Buyer) violates or will violate
any contract, document, understanding, agreement or instrument to
which the Seller is a party or by which the Seller might be bound,
or any contract, documents, understanding, agreement or
instrument affecting the Project.
_______________________________________
Modern Real Estate Transactions, July 2006
- 282-
__._ No Misrepresentation. The Seller does not know of any facts nor has the
Seller misrepresented any fact which would prevent the use and
operation of the Project after the Closing Date in the manner in
which the Project is currently being operated and used.
__._ No Mechanics' or Materialmen's Claims. On the Closing Date there will
be no outstanding contracts made by the Seller for any
improvements to the Project which have not been fully paid for,
and the Seller will cause to be discharged all liens arising from any
labor or materials furnished prior to the Closing Date which pertain
to the Project.
__._ Service Contracts. The Service Contracts are in full force and effect in
accordance with their terms and conditions without any material
default thereunder by the Seller. The Service Contracts have not
been amended, modified or supplemented, and except for the
foregoing, on the Closing Date there will be no service contracts,
maintenance contracts or other contracts of any nature which will:
(a) be binding on the Buyer; (b) run with the land and bind any part
of the Project; or (c) not be terminable on notice of thirty (30) days
or less, without cost or expense to the Buyer unless the Buyer has
given the Buyer's prior written consent thereto.
__._ Claims. There are no and on the Closing Date there will be no options,
purchase contracts, leases or other agreements of any kind or
nature, written or oral, by which any occupant or party in
possession of the Project or any part thereof has or could claim or
assert any right, title or interest in any of the Project.
__._ Hazardous Substances. There are no hazardous materials or toxic
substances located on the Project, and the Seller has not received
any notices of violation or claimed violation of any law, rule or
regulation relating to hazardous waste substances. No ureaformaldehyde or asbestos or asbestos by-products were used in the
construction of the Project or any remodeling or reworking of the
same. Neither the Land nor the Project has been used for the
storage of oils, other petroleum by-products or other hazardous
material and there have been no spills of any of such substances on
the Project or on any property within one thousand (1,000) feet of
the Project's boundaries. The Seller agrees to hold harmless and
indemnify the Buyer from any liability, claim or injury arising
from or related to the presence of hazardous or toxic materials in or
on the Project where the release of such hazardous or toxic
material occurs or occurred prior to the Closing Date or hereinafter
_______________________________________
Modern Real Estate Transactions, July 2006
- 283-
as to hazardous or toxic materials now in or on the Project.
__._ Parking. There are
(__) parking spaces at the Project. The
parking spaces at the Project are all the parking spaces required by
law with respect to the Project and such spaces comply with all
applicable laws, rules and regulations. No person other than the
tenants under written Leases has the right to park on the Project.
__._ Truth of Representations. The Seller has made no untrue statement or
representation in connection with this Agreement and all items
from the Seller transferred or delivered and/or given to the Buyer
are genuine, true, correct and complete copies of what they purport
to be. Said items have not been amended or modified, other than
as also transferred or delivered and/or given to the Buyer, no item
that should have been transferred, delivered and/or given to the
Buyer has not been so transferred, delivered and/or given, and all
such items fairly present the information set forth in a manner that
is not misleading. The Seller has not failed to state or disclose any
material fact in connection with the transaction contemplated by
this Agreement.
__._ Creditor's Claims. The Seller has not: (a) made a general assignment for
the benefit of creditors; (b) filed any voluntary petition in
bankruptcy or suffered the filing of an involuntary petition by the
Seller's creditors; (c) suffered the appointment of a receiver to take
possession of all or substantially all of the Seller's assets; (d)
suffered the attachment or other judicial seizure of all, or
substantially all, of the Seller's assets; (e) admitted in writing the
Seller's inability to pay the Seller's debts as they become due; or (f)
made an offer of settlement, extension or composition to the
Seller's creditors generally.
__._ Access to Project. The Project has full and free access to and from public
streets and roads, and there are no facts or conditions that could
result in the termination of the present access from or to the Project
to or from any such existing highways and roads, or in the
termination or expiration of any conditional use permits, sign
permits or other governmental permits or approvals necessary for
the use and operation of the Project for the purposes for which the
Project is presently being used and operated.
__._ Notice of Change. The Seller will inform the Buyer in writing of any
material adverse change in the condition, financial or otherwise, of
the Project, or the operation thereof, which occurs at any time prior
_______________________________________
Modern Real Estate Transactions, July 2006
- 284-
to the Closing Date. The Seller will promptly inform the Buyer in
writing of any fact which would indicate that any tenant occupying
the Project is insolvent or is not able to pay rent or perform other
obligations under the relevant Lease when due.
__._ Employees. None of the employees of the Seller at the Project is
employed pursuant to a written agreement and all employees may
be terminated at will. The Seller has not entered into any union
contracts pertaining to employees of the Project nor is the Project
subject to any union contract. The Seller is not aware of any
efforts to organize any or all of the employees of Seller at the
Project into a union or other collective bargaining arrangement.
The Seller will not, as of the Closing Date, owe any money to any
person employed at the Project for work or time spent at or related
to the Project.
__._ Arm's Length Transaction. All of the Leases were negotiated at arm's
length, and neither the Seller nor any of the Seller's constituent
partners: (a) have any beneficial or other ownership interest,
directly or indirectly, in any tenant; or (b) have guaranteed in
whole or in part, directly or indirectly, any obligation of a tenant
under any Lease.
__._ Leases. With respect to each of the Leases, and except as otherwise
disclosed in writing to the Buyer, the following information is true
and correct: (a) each of the Leases, and any and all guaranties with
respect thereto, is in full force and effect strictly according to the
terms set forth therein and in the rent roll; (b) the Leases have not
been modified, amended, or altered, in writing or otherwise, other
than as so disclosed in writing; (c) each tenant under the Leases is
required to pay all sums and perform all obligations set forth in the
Leases, without concessions, abatements, offsets, defenses or other
basis for relief or adjustment; (d) all obligations of the landlord
under the Leases that will accrue prior to the Closing Date will be
performed by the Seller; (e) no tenant is in default under or in
arrears in the payment of any sums or in the performance of any
obligations required of the Seller under the Seller's Lease; (f) no
guarantors of any of the Leases have been released or discharged,
voluntarily or involuntarily, or by operation of law, from any
obligation relating to the Leases or any transaction related thereto;
(g) the Seller has not applied and will not apply any security
deposit to rent due from any tenant whose Lease does not
terminate prior to the Closing Date; and (h) the Seller will pay and
retain sole and exclusive responsibility for all expenses connected
_______________________________________
Modern Real Estate Transactions, July 2006
- 285-
with or arising out of the negotiation, execution and delivery of the
Leases, including, without limitation, brokers' commissions,
leasing fees and recording fees (as well as the cost of all tenant
improvements not paid for by tenants).
__._ No Interest on Deposits. The Seller does not have any obligation to pay
any interest or other charges to any Tenant with respect to any
security deposits held for the benefit of any tenants.
__._ Geological Conditions. There are no soil or geological conditions
affecting the Project that could materially and adversely affect the
Project or the ownership and operation thereof by the Buyer. The
condition of the soil at the Project is such that it will support all of
the Improvements thereon for the foreseeable life of the
Improvements without the need for unusual or new subsurface
excavations, fill, footings, caissons or other installations. The
Improvements, as built, were constructed in a manner compatible
with soil conditions at the time of construction and all necessary
excavations, fill, footings, caissons or other installations were
provided.
__._ Infestation. The Project is free from infestation by rodents, termites or
other insects or animals.
__._ Brokerage Commissions.
On consummation of the transaction
contemplated by this Agreement, there will be no brokerage or
leasing fees or commission or other compensation due or payable
on an absolute or contingent basis to any persons, firm, corporation
or other entity with respect to or on account of any of the Leases
and no such fees, commissions or other compensation will, by
reason of any existing agreement, become due during the terms of
any of the Leases or with respect to any renewal or extension
thereof or the leasing of additional space by any tenant.
__._ Property Management Costs. All property management costs (excluding
any management fee) are recaptured or reimbursed by tenants at
the Project pursuant to such tenants' triple net Leases.
All representations, warranties and covenants contained in this paragraph or elsewhere in
this Agreement will be deemed remade as of the Closing Date.
_______________________________________
Modern Real Estate Transactions, July 2006
- 286-
CLOSING CHECKLIST
Date: _______________
1.
Buyer:
Address:
2.
Buyer's Counsel:
Address:
3.
Seller:
Address:
4.
Seller's Counsel:
Address:
5.
Lender:
Address:
6.
Lender's Counsel:
Address:
7.
Title Insurer:
Address:
8.
Guarantor:
Address:
9.
Surveyor:
Address:
10.
Environmental Engineer:
Address:
11.
Broker:
Address:
12.
Project:
Address:
File No.
Legal Description:
13.
Purchase Price:
Earnest Money:
$___________________
_______________________________________
Modern Real Estate Transactions, July 2006
- 287-
Cash Paid at Closing: $___________________
TOTAL
14.
$___________________
Prorated Items as of _______________:
Buyer
Insurance:
_______ months at $______
Security Deposits:
Prepaid Rent:
_______ months at $______
Personal Property Taxes:
Rate ______
Evaluation ______
Taxes on $______ for ___ months
Paid to ________________
Real Estate Taxes:
Rate ______
Evaluation ______
Taxes on $______ for ___ months
Paid to ________________
Special Assessments:
Rate ______
Evaluation ______
Taxes on $______ for ___ months
Paid to ________________
Mortgage Payments:
Principal: ___ mos. at
$_______
Interest: ___ mos. at
$_______
Insurance Escrow:
___ months at $______
Taxes Escrow:
___ months at $______
Utility Expense:
Water, Sewer, Garbage
_____ days at $______
Electricity:
______ days at $_______
Gas:
Due to
Seller
$______ $______
$______ $______
$______ $______
$______ $______
$______ $______
$______ $______
$______ $______
$______ $______
$______ $______
$______ $______
$______ $______
$______ $______
_______________________________________
Modern Real Estate Transactions, July 2006
- 288-
______ days at $_______
TOTAL
15.
$______ $______
$______ $______
______ ______
Items to be Delivered:
Buyer
Earnest Money
$_____
Sale Agreement
_____
Loan Agreement
_____
Buy-Sell Agreement
_____
Lending Commitment
_____
Warranty Deed/Assignment of Leases
_____
Bill of Sale and Assignment
_____
Promissory Note
_____
Mortgage
_____
Release of Mortgage
_____
Security Agreement
_____
Financing Statement
_____
Assignment of Leases
_____
Guaranty Agreement
_____
Notice of Lease Assignment
_____
Tenant Notice Letter
_____
Owner's Title Policy Commitment
_____
Mortgagee's Title Policy Commitment
_____
First Mortgage Loan Documents
_____
Assumption Agreement
_____
Assignment of Insurance Policies
_____
Assignment of Trust Funds
_____
Transfer Fee
_____
Abstract
_____
Title Opinion
_____
Owner's Title Policy
_____
Mortgagee's Title Policy
_____
Survey
_____
Plans and Specifications
_____
Appraisal
_____
Environmental Assessment
_____
Insurance Policies
_____
Seller's Certificate as to Rent Roll, Inventory,
Contracts
_____
Rent Roll with Security Deposits
_____
Inventory
_____
Contracts or Leases Affecting Property
_____
Termite Certificate
_____
Seller Lender
$_____ $_____
_____ _____
_____ _____
_____ _____
_____ _____
_____ _____
_____ _____
_____ _____
_____ _____
_____ _____
_____ _____
_____ _____
_____ _____
_____ _____
_____ _____
_____ _____
_____ _____
_____ _____
_____ _____
_____ _____
_____ _____
_____ _____
_____ _____
_____ _____
_____ _____
_____ _____
_____ _____
_____ _____
_____ _____
_____ _____
_____ _____
_____ _____
_____
_____
_____
_____
_____
_____
_____
_____
_____
_____
_______________________________________
Modern Real Estate Transactions, July 2006
- 289-
Flood Hazard Certificate
Building Permit
Building Code Certificate
Certificate of Occupancy
Easement Agreement
Lien Affidavit
Mortgage Tax Affidavit
_____ _____
_____ _____
_____ _____
_____ _____
_____ _____
_____ _____
_____ _____
Sales Tax Report
Closing Memorandum
Cash at Closing
Buyer
_____
_____
$_____
Seller Lender
_____ _____
_____ _____
$_____ $_____
Buyer
$_____
_____
_____
Seller Lender
$_____ $_____
_____ _____
_____ _____
16.
_____
_____
_____
_____
_____
_____
_____
Expenses:
Attorney's Fees
Documentary Stamps
Mortgage Tax
Recording Fee:
Deed
Mortgage
Assignment
Financing Statements
Release of Mortgage
Sales Tax
Abstracting Fee
Survey
Inspection Fee
Mortgagee's Title
Policy
Owner's Title Policy
Transfer Fee
Title Opinion
TOTAL
_____
_____
_____
_____
_____
_____
_____
_____
_____
_____
_____
_____
_____
_____
_____
_____
_____
_____
_____
_____
_____
_____
_____
_____
_____
_____
_____
_____
_____
_____
_____
$
_____
_____
_____
_____
$
_____
_____
_____
_____
$
CLOSING MEMORANDUM
Wednesday, August 18, 1993
1.
PROJECT:
WASHINGTON PARK APARTMENTS
8308 Northwest 27th Street
Oklahoma City, Oklahoma 73008
_______________________________________
Modern Real Estate Transactions, July 2006
- 290-
2.
BUYER:
INVESTMENT ASSOCIATES, INC.,
an Oklahoma corporation
3000 Robinson Avenue
Oklahoma City, Oklahoma 73102
Attention: Mr. Chris R. Graves
Telephone: (405) 239-1001
Fax: (405) 239-1000
3.
BUYER'S COUNSEL:
READY, WILLING & ABLE
1400 Broadway Avenue
Oklahoma City, Oklahoma 73102
Attn: Janet R. Able, Esquire
Telephone: (405) 272-1401
Fax: (405) 272-1400
4.
SELLER:
WASHINGTON PARK APARTMENTS
LIMITED PARTNERSHIP, an
Oklahoma limited partnership
1000 Main Street
Oklahoma City, Oklahoma 73102
Attention: Mr. Robert P. Legg
Telephone: (405) 239-3003
Fax: (405) 239-3000
5.
SELLER'S
COUNSEL:
6.
LENDER:
7.
LENDER'S
COUNSEL:
HASTIE AND KIRSCHNER
3000 Oklahoma Tower
210 West Park Avenue
Oklahoma City, Oklahoma 73102
Attn: John D. Hastie, Esquire
Telephone: (405) 239-6404
Fax: (405) 239-6403
NATIONAL BANK
120 North Robinson Avenue
Oklahoma City, Oklahoma 73102
Attention: Ms. Jane D'Argent
Telephone: (405) 270-1000
Fax: (405) 270-6403
SMITH & JONES
100 West 11th Street
_______________________________________
Modern Real Estate Transactions, July 2006
- 291-
Oklahoma City, Oklahoma 73108
Attention: Elizabeth M. Smith,
Esquire
Telephone: (405) 232-6001
Fax: (405) 232-6000
8.
TITLE INSURER: TITLE INSURANCE COMPANY, by and
through its agent, Capitol
Abstract & Title Co.
4141 Northwest Expressway
Oklahoma City, Oklahoma 73116
Attention: Ms. Phea Sympole
Telephone: (405) 272-4181
9.
GUARANTOR:
CHRIS A. CHUMPE
1200 Easy Palm Boulevard
Tulsa, Oklahoma 74125
Telephone: (918) 545-1201
Fax: (918) 549-1200
10.
SURVEYOR:
SITE SURVEYORS, INC.
101 Colcord Drive
Oklahoma City, Oklahoma 73103
Attention: Mr. Johnny Site
Telephone: (405) 232-3232
Fax: (405) 232-2323
11.
ENVIRONMENTAL
ENGINEER:
EMERSON, LAKE & PALMER
312 Groundwater Circle
Midwest City, Oklahoma 73110
Attention: Ms. Veronica Lake
Telephone: (405) 733-0312
Fax: (405) 732-0012
12.
BROKER:
PUSH E. PROMOTERS & ASSOCIATES
1900 Hardsel Avenue
Oklahoma City, Oklahoma 73118
Attn: Mr. Push E. Promoters
Telephone: (405) 848-6900
13.
SALE PRICE:
Earnest Money
Cash at Closing
Total
$
25,000
5,475,000
$5,500,000
_______________________________________
Modern Real Estate Transactions, July 2006
- 292-
14.
CLOSING DATE:
Wednesday, August 18, 1993
15.
PRORATED ITEMS:
The following items have been prorated to the
Closing Date with the Buyer receiving the income
and paying the expenses accrued on the Closing
Date:
OWING TO:
BUYER
Ad Valorem Taxes
(19__ ad valorem taxes
are estimated to be
$50,000 for a per
diem rate of $105.89
with _____ days accrued;
no escrows exist)
$_________
Personal Property Taxes
(19__ personal property
taxes are estimated to
be $2,600 for a per
diem rate of $5.38 with
_____ days accrued)
_________
Prepaid Rents - Apartments
_________
Prepaid Rents - Laundry
(Rental is $5,800 per
annum in advance with an
anniversary date of
October 1 each year
for a per diem rate of
$15.15 with _____ days
unearned)
_________
Prepaid Insurance
(Premium is $25,000
per annum with an anni-
SELLER
$_________
_______________________________________
Modern Real Estate Transactions, July 2006
- 293-
versary date of October 1
each year for a per diem
rate of $70.27 with _____
days prepaid; no escrows
exist)
Security Deposits
_________
Totals
$_________
NET OWING TO BUYER
$
16.
$_________
ITEMS DELIVERED AT CLOSING BY THE SELLER:
16.1 Special Warranty Deed executed by the Seller;
16.2 Bill of Sale executed by the Seller;
16.3 Affidavit of Nonforeign Status executed by the Seller's sole general
partner;
16.4 Letter of consent to transfer and encumbrance of the Project executed by
The Oklahoma Life Insurance Company;
16.5 Insurance Policy No. 40 SM 458088 FCA issued by The Oklahoma
Casualty and Surety Company, with endorsement and evidence of
premium payment;
16.6 Survey and Flood Hazard Certificate issued by Johnny Site, Land
Surveyor;
16.7 Standard Flood Insurance Policies Numbered 77717221, 77717213,
77717205, 77717197, 77717239 issued by Oklahoma Fire and
Marine Insurance Company naming the Buyer and Oklahoma Life
Insurance Company as insureds together with evidence of premium
payment;
16.8 Affidavit to the Title Insurer executed by the Seller;
16.9 Binder for ALTA Owner's Title Insurance Policy in the amount of
$5,500,000 issued by the Title Insurer;
16.10
Certificate of Partnership Authority executed by the parties
comprising the Seller;
_______________________________________
Modern Real Estate Transactions, July 2006
- 294-
17.
16.11
Notice Letter to the City of Oklahoma City for termination of
services and refund of deposit ($1,000.00);
16.12
Notice letter to Oklahoma Gas & Electric Company for
termination of services and refund of deposit ($8,900.00);
16.13
Notice letter to Southwestern Bell Telephone Company for
termination of services and refund of deposit ($1,000.00);
16.14
Notice letters to various contract and account creditors terminating
guarantees of payment and advising of new billing address;
16.15
Seller's check in the amount of $________ in payment of the pro
rated items described in item 15 above;
16.16
Closing Memorandum executed by the Seller.
ITEMS DELIVERED AT CLOSING BY THE BUYER:
17.1 Cash payment of $5,475,000;
17.2 Promissory Note executed by the Buyer in favor of the Lender;
17.3 Mortgage, Security Agreement and Financing Statement executed by the
Buyer in favor of the Lender;
17.4 Financing Statements executed by the Buyer with Schedule "1" (Legal
Description) attached;
17.5 Assignment of Leases executed by the Buyer in favor of the Lender;
17.6 Mortgage Tax Affidavit executed by the Buyer;
17.7 Certificate of corporate authority and incumbency executed by the officers
of the Buyer;
17.8 Oklahoma Sales Tax Return and the Buyer's check in payment of
applicable sales tax;
17.9 Closing Memorandum executed by the Buyer.
18.
SELLER'S CLOSING EXPENSES:
_______________________________________
Modern Real Estate Transactions, July 2006
- 295-
Attorneys' Fees:
Abstracting Costs:
Documentary Stamps:
Surveying Costs:
Mortgage Tax:
Brokerage Commission:
TOTAL
19.
20.
Paid outside closing
Paid outside closing
$__________
Paid outside closing
$__________
$__________
$
BUYER'S CLOSING EXPENSES:
Attorneys' Fees:
Recording Costs:
Warranty Deed:
Mortgage:
Assignment:
Financing Statements:
Sales Tax:
Title Insurance Premium:
Paid outside closing
TOTAL
$
$_________
$_________
$_________
$_________
$_________
$_________
ESTOPPEL:
The undersigned have examined the foregoing Closing Memorandum and find
it to be correct. Execution of this Closing Memorandum acknowledges that the
foregoing payments and documents have been received by the parties indicated
and that the parties mutually release one another from all claims, actions and
costs arising from a certain Sale Agreement dated June 16, 1993, between the
Buyer and the Seller, except as provided in paragraph 12.3 of the Sale
Agreement.
WASHINGTON PARK APARTMENTS
LIMITED PARTNERSHIP, an Oklahoma
limited partnership
By
Robert P. Legg,
Sole General Partner
(the "Seller")
_______________________________________
Modern Real Estate Transactions, July 2006
- 296-
INVESTMENT ASSOCIATES, INC., an
Oklahoma corporation
By
Chris R. Graves, President
(the "Buyer")
ESCROW AGREEMENT
THIS AGREEMENT is made the _____ day of __________, 19__, among
WASHINGTON PARK APARTMENTS LIMITED PARTNERSHIP, an Oklahoma
limited partnership (the "Seller"), INVESTMENT ASSOCIATES, INC., an Oklahoma
corporation (the "Buyer"), and TITLE INSURANCE COMPANY, an Oklahoma
corporation (the "Escrow Agent").
WITNESSETH:
WHEREAS, the Seller and the Buyer entered into a certain Sale
Agreement dated ______________, 19__ (the "Sale Agreement") for the sale of certain
real and personal property located in Oklahoma County, Oklahoma (the "Project"), a
copy of which Sale Agreement has been delivered to the Escrow Agent and the terms of
which are incorporated herein by reference; and
WHEREAS, paragraph 2.1 of the Sale Agreement provides, among other
things, that the Buyer will deposit certain earnest money with the Escrow Agent.
NOW, THEREFORE, the parties agree as follows:
1.
Deposit of Funds. The Escrow Agent acknowledges receipt of the Buyer's check
in the amount of Twenty-Five Thousand Dollars ($25,000.00) payable to the order of the
Escrow Agent representing the earnest money deposit to be delivered by the Buyer in
accordance with paragraph 2.1 of the Sale Agreement. The Escrow Agent agrees to
cause such check to be converted to collected funds and to invest the same at interest as
directed from time to time by the Buyer. Any interest-bearing account or certificate of
deposit representing the investment of the earnest money deposit will be held by and in
the name of the Escrow Agent pursuant to the terms of this Agreement. All interest
earned on such funds will be paid only to the Buyer.
2.
Disposition of Funds. Until the occurrence of one or more of the following
events, the earnest money deposit will be held by the Escrow Agent and delivered only as
_______________________________________
Modern Real Estate Transactions, July 2006
- 297-
follows:
2.1
Delivery Prior to Closing. The Escrow Agent will immediately return the
earnest money deposit to the Buyer at any time after _______________,
19__, on receipt by the Escrow Agent of a statement signed by the Buyer
to the effect that: (a) the Buyer has not received the survey and title
binder required by paragraph 3 of the Sale Agreement in form satisfactory
to the Buyer or the Buyer has disapproved the physical condition of the
Project pursuant to paragraph 5 of the Sale Agreement; (b) the Buyer has
served ten (10) days' written notice to the Seller demanding performance
by the Seller under the Sale Agreement and such performance has not
been forthcoming; and (c) the Buyer has elected to terminate the Sale
Agreement effective on the return of the earnest money deposit to the
Buyer.
2.2
Delivery at Closing. In the event the earnest money deposit is not
delivered pursuant to paragraph 2.1 above, on the written request of the
Seller and the Buyer on or after ________, 19__, confirming that the sale
of the Project is closing in accordance with the terms of the Sale
Agreement, the Escrow Agent will deliver the earnest money deposit to
the Seller (and will deliver any interest earned thereon to the Buyer) to be
applied against the purchase price of the Project.
2.3
Buyer's Default. In the event the earnest money deposit is not delivered
pursuant to paragraphs 2.1 or 2.2 above, at any time after __________,
19__, the Escrow Agent will forthwith deliver the earnest money deposit
to the Seller (and will deliver any interest earned thereon to the Buyer) on
receipt by the Escrow Agent of a statement signed by the Seller to the
effect that: (a) the Seller has tendered to the Buyer the items required to
be delivered by the Seller pursuant to paragraph 4.2 of the Sale Agreement
and otherwise performed all of the Seller's obligations under the Sale
Agreement; (b) the Seller has served ten (10) days' written notice to the
Buyer demanding performance under the Sale Agreement and such
performance has not been forthcoming; and (c) the Seller has elected to
terminate the Sale Agreement effective on payment of the earnest money
deposit to the Seller.
2.4
Seller's Default. In the event the earnest money deposit is not delivered
pursuant to paragraphs 2.1 or 2.2 above, at any time after
_______________, 19__, the Escrow Agent will forthwith deliver the
earnest money deposit and all interest earned thereon to the Buyer on
receipt by the Escrow Agent of a statement signed by the Buyer to the
effect that: (a) the Seller has failed to perform the obligations of the Seller
under the Sale Agreement; (b) the Buyer has served ten (10) days' written
notice to the Seller demanding performance under the Sale Agreement and
_______________________________________
Modern Real Estate Transactions, July 2006
- 298-
such performance has not been forthcoming; and (c) the Buyer has elected
to terminate the Sale Agreement effective on the return of the earnest
money deposit to the Buyer.
2.5
Other Delivery. Notwithstanding any of the foregoing provisions, the
Escrow Agent will deliver the earnest money deposit in accordance with
any supplemental instructions jointly signed by the Seller and the Buyer.
3.
Right of Withdrawal. The Seller agrees that the Buyer will have the right to
withdraw all or any portion of the funds placed on deposit with the Escrow Agent to
reimburse the Buyer for the cost of renovation or repairs to the Project performed by the
Buyer in advance of closing the purchase of the Project. In the event the Buyer elects to
perform such repairs, the Escrow Agent will redeliver to the Buyer that portion of the
earnest money deposit which is equal to the cost of such repairs on delivery to the Escrow
Agent of a statement signed by the Buyer which: (a) describes the work performed and
the cost thereof; and (b) certifies that all charges incurred in connection with such work
have been paid in full. The Buyer and the Seller agree that the purchase price for the
Project will not be increased or decreased by reason of such repairs and, to the extent the
earnest money deposit is reduced by reason of the Buyer's withdrawals hereunder, the
cash amount payable at the time of closing the sale of the Project will be increased
accordingly. On the withdrawal of the entire earnest money deposit, the obligations of
the Escrow Agent under this Agreement will terminate. In the event of a partial
withdrawal of the earnest money deposit, the amounts required to be disbursed pursuant
to paragraph 2 of this Agreement will be reduced to the amounts remaining on deposit
with the Escrow Agent.
4.
Limitations of Liability. The foregoing instructions are subject to the following
provisions which are expressly approved by the Buyer and the Seller:
4.1
Depository Duty. The Escrow Agent will be liable as a depository only
and will not be responsible for the sufficiency or accuracy of the form,
execution or validity of any document delivered to the Escrow Agent
hereunder or any description of the property or other thing contained
therein or the identity, authority or rights of the persons executing or
delivering or purporting to execute or deliver any such document. The
Escrow Agent's duties hereunder are limited to the safekeeping of the
earnest money deposit and the delivery of the same in accordance with this
Agreement.
4.2
Standard of Care. The Escrow Agent will not be liable for any act or
omission done in good faith, or for any claim, demand, loss or damage
made or suffered by any party to this Agreement, excepting such as may
arise through or be caused by the Escrow Agent's willful misconduct or
gross negligence.
_______________________________________
Modern Real Estate Transactions, July 2006
- 299-
5.
4.3
Reliance. The Escrow Agent will not be liable for collection items until
the proceeds of the same in actual cash have been received by the Escrow
Agent. The Escrow Agent is authorized to rely on any document believed
by the Escrow Agent to be authentic in making any delivery of funds or
property hereunder. The Escrow Agent will in no way be responsible or
have any duty to notify any person interested in the earnest money deposit
of any maturity under the terms of this Agreement or any document
deposited herewith or described herein.
4.4
Termination. The Escrow Agent will have the right to terminate and
render this Agreement of no further force and effect by written notice of
termination and delivery of the earnest money deposit to the party
depositing the same. Such termination and redelivery will relieve the
Escrow Agent from any further performance and liability with respect to
this Agreement. Any modification of the terms of this Agreement may be
made at any time by the Buyer and the Seller, provided that the same is
reduced in writing, delivered to and accepted by the Escrow Agent.
4.5
Modification. This Agreement is the only agreement binding on the
Escrow Agent relating to the earnest money deposit and the Escrow Agent
may rely absolutely hereon to the exclusion of any and all other
agreements between the Buyer and the Seller.
Miscellaneous. It is further agreed as follows:
5.1
Time. Time is the essence of this Agreement.
5.2
Notices. Any notice, demand or communication required or permitted to
be given by any provision of this Agreement will be in writing and will be
deemed to have been given when delivered personally or by telefacsimile
(with a hard copy sent within one [1] business day by any other means
described in this paragraph) to the party designated to receive such notice,
or on the date following the day sent by a nationally recognized overnight
courier, or on the third (3rd) business day after the same is sent by United
States certified mail, postage and charges prepaid, directed to the
following addresses or to such other or additional addresses as any party
might designate by written notice to the other part[ies]:
_______________________________________
Modern Real Estate Transactions, July 2006
- 300-
To the Seller:
With Copy To:
To the Buyer:
Washington Park Apartments
Limited Partnership
1000 Main Street
Oklahoma City, OK 73102
Attn: Mr. Robert P. Legg
Telefacsimile: (405) 239-1000
Hastie and Kirschner
3000 Oklahoma Tower
210 West Park Avenue
Oklahoma City, Oklahoma 73102
Attn: John D. Hastie, Esquire
Telefacsimile: (405) 239-6404
Investment Associates, Inc.
3000 Robinson Avenue
Oklahoma City, Oklahoma 73102
Attn: Mr. Chris R. Graves
Telefacsimile: (405) 239-3000
Title Insurer: Title Insurance Company, by
and through its agent,
Capitol Abstract & Title Co.
4141 Northwest Expressway
Oklahoma City, Oklahoma 73116
Attention: Ms. Phea Sympole
5.3
Assignment. None of the rights of the Seller, the Buyer or the Escrow
Agent hereunder may be assigned voluntarily or by operation of law. Any
such assignment by any party without the prior written approval of the
other parties to this Agreement will be null and void ab initio.
5.4
Binding Effect. This Agreement will be binding on and inure to the
benefit of the parties and their respective heirs, personal representatives,
successors and permitted assigns.
IN WITNESS WHEREOF, this Agreement has been executed and
delivered the date first above written.
WASHINGTON PARK APARTMENTS
LIMITED PARTNERSHIP, an
Oklahoma limited partnership
_______________________________________
Modern Real Estate Transactions, July 2006
- 301-
By__________________________
Robert P. Legg,
Sole General Partner
(the "Seller")
INVESTMENT ASSOCIATES, INC.,
an Oklahoma corporation
By__________________________
Chris R. Graves, President
(the "Buyer")
Receipt of these instructions and the deposit described therein is
acknowledged and accepted this ____ day of _______________, 1993.
TITLE INSURANCE COMPANY
By__________________________
Escrow Officer
(the "Escrow Agent")
RECEIPT
The sum of $______________ has been received this ____ day of
_______________, 1993, and the Escrow Agent is relieved from all further responsibility
and liability with reference to the foregoing Escrow Agreement.
____________________________
_______________________________________
Modern Real Estate Transactions, July 2006
- 302-
____________________________
BROKERAGE AGREEMENT
_____________, 19__
______________________________
______________________________
______________________________
______________________________
Attention: __________________
Gentlemen:
Federal Savings and Loan Association ("Federal") has provided you
certain information concerning
(the "Project") and has requested that
you assist Federal in the sale of the Project. We have also indicated that Federal will sell
the Project for a total price of $____________. Federal will require $____________ in
earnest money to be deposited with Federal at the time a definitive sale agreement is
executed [and that the balance of the sale price in the amount of $____________ be
paid in cash at the time the sale is closed.] [and that the balance of the sale price be
paid by an additional payment of $________ at the closing of the sale and the
execution of loan documents in the face amount of $___________. The note will bear
interest at ______ percent (___%) per annum and be payable over a _______ (__) year
amortization period requiring monthly payments of $__________ each. The mortgage
financing will mature ____________ (___) years after closing and will be freely
prepayable.] Federal hopes to close the sale on or before __________, 19__.
Our willingness to sell the Project on the foregoing terms will continue
until ____________, 19__, at which time Federal reserves the right to modify the terms
of sale unless a definitive sale agreement has been executed prior to that date. The
precise terms for sale of the Project will be established by a definitive sale agreement in
form and on terms satisfactory to Federal in all respects. Federal will provide proposed
forms of sale [and mortgage] documents for your review if you receive an expression of
interest from a prospective purchaser.
By means of this letter we should like to confirm our agreement that
_______________________________________
Modern Real Estate Transactions, July 2006
- 303-
Federal will pay you a commission in an amount equal to ________ percent (___%) of
the total purchase price which Federal realizes from the sale of the Project. Your
commission will be deemed to be earned if, as and when the sale is consummated and the
sale price collected by Federal. [The commission will be paid at the time the sale is
closed and the purchase price received by Federal.] [The commission will be payable
in installments; the first such installment will be paid on the closing date in the amount
of ____________ percent (___%) of the cash downpayment; future installments will be
paid monthly without interest at the time of collection of the promissory note to be
delivered by the buyer to Federal. In the event that the buyer's promissory note is not
collected for any reason, there will be no obligation to thereafter pay the unpaid
balance of the commission.] In the event that the sale fails to close for any reason
whatsoever (including, without implied limitation, failure of Federal's title, Federal's
withdrawal of the Project from the market or the failure of Federal to obtain required
regulatory approvals), Federal will have no obligation to pay you any commission. You
will not be entitled to share in any earnest money or other deposit which might be
forfeited as a result of a failure of a contracted sale to close.
At the time of execution of a definitive contract of sale, we will require
that you disclose to Federal all parties entitled to share in the commission and that all
such parties execute a written agreement confirming the terms of this letter, specifying
the precise amounts of commissions to be paid and agreeing to indemnify Federal from
any other claims for commissions, finder's fees and similar charges arising from the sale.
It is Federal's intention to pay only one commission by reason of the sale of the Project
and our payment to you is intended to be payment in satisfaction of all commissions,
finder's fees and similar charges which might be claimed to be owing.
We agree to protect your brokerage position for a period of [________
(__)] months after you present a prospective purchaser to Federal and will refrain from
dealing directly with parties which you present provided that you register the names of
those parties with Federal in writing prior to any direct contact between a prospective
purchaser and Federal. [We will not honor a registration of _____________________
because Federal has been previously contacted by [that party] [those parties] as
prospective purchaser[s]. Federal reserves the right to reject registration of any
prospective purchaser who contacts Federal directly prior to your registration. Please
register the names of the parties with whom you are dealing expeditiously so that there
will be no confusion with respect to your origination of any subsequent sale to those
parties. In the event Federal and any prospective purchaser which you procure are unable
to execute a definitive sale agreement within the [________ (__)] months period, Federal
will be discharged from any obligation to you arising from any sale contracted with any
such party after that time. We should like to further confirm our agreement that Federal
has reserved the right to independently market the Project and to accept proposals to
purchase presented by prospective purchasers and other brokers and therefor has no
exclusive arrangement with you.
_______________________________________
Modern Real Estate Transactions, July 2006
- 304-
If the foregoing correctly states our agreements, please execute and return
a copy of this letter which is enclosed for that purpose. Unless Federal has received your
accepted copy of this letter by __________, 19__, our agreements contained herein will
expire on that date. This letter supersedes, in all respects, all prior written or oral
agreements between Federal and you relating to the sale of the Project and there are
agreements, understandings, warranties or representations between Federal and you
except as set forth herein.
Yours very truly,
___________________________
The foregoing agreements are approved this ____ day of ____________,
19__.
,
____________________________
By__________________________
_______________, President
_______________________________________
Modern Real Estate Transactions, July 2006
- 305-