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EXHIBIT 10.5
CONTRIBUTION AND EXCHANGE AGREEMENT
by and among
[Contributor]
and
Palace Operating Partnership, L.P., a
Delaware limited partnership
as
the Operating Partnership
and
PALACE REIT, a
Texas real estate investment trust
as
the Company
Dated as of____________,1998
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TABLE OF CONTENTS
ARTICLE 1. SUBJECT OF CONVEYANCE........................................ 1
Section 1.1 Conveyance of the Property.................. 1
Section 1.2 Excluded Assets............................. 2
ARTICLE 2. VALUE AND PAYMENT TERMS...................................... 2
Section 2.1 Issuance of OP Units........................ 2
Section 2.2 Designation of Issuance of OP Units......... 3
ARTICLE 3. TITLE........................................................ 3
Section 3.1 Independent Contract Consideration.......... 3
Section 3.2 Inspection Materials........................ 3
Section 3.3 Title Commitment and Survey................. 3
Section 3.4 Title Policy................................ 4
ARTICLE 4. REPRESENTATIONS AND WARRANTIES OF CONTRIBUTOR................ 5
Section 4.1 Contributor's Representations and Warranties 5
ARTICLE 5. REPRESENTATIONS AND WARRANTIES OF THE OPERATING
PARTNERSHIP AND THE COMPANY..................................11
Section 5.1 Palace's Representations and Warranties.....11
ARTICLE 6. COVENANTS....................................................12
Section 6.1 Covenants of Contributor....................12
Section 6.2 Confidentiality.............................13
Section 6.3 Cooperation.................................13
(i)
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Section 6.4 Time of Closing.............................14
ARTICLE 7. CLOSING......................................................14
Section 7.1 The Closing.................................14
Section 7.2 Deliveries at the Closing by Contributor....14
Section 7.3 Deliveries at the Closing by Palace.........15
Section 7.4 Fees and Expenses...........................16
ARTICLE 8. ADJUSTMENTS..................................................16
Section 8.1 Adjustments at the Closing Date.............16
Section 8.2 Adjustments for Assessments.................17
Section 8.3 Other Adjustments...........................17
Section 8.4 Errors in Calculations......................17
Section 8.5 Survival....................................17
ARTICLE 9. CONDITIONS PRECEDENT TO CLOSING..............................17
Section 9.1 Conditions to Obligations of Contributor....17
Section 9.2 Conditions to Obligations of Palace.........18
ARTICLE 10. ASSIGNMENT...................................................19
ARTICLE 11. BROKERS/COMMISSIONS..........................................19
ARTICLE 12. CASUALTY LOSS................................................19
Section 12.1 Maintenance of Insurance Policies...........19
Section 12.2 Risk of Loss................................19
ARTICLE 13. CONDEMNATION.................................................20
(ii)
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ARTICLE 14. DEFAULT/REMEDIES............................................ 20
Section 14.1 Termination by Palace......................... 20
Section 14.2 Termination by Contributor.................... 21
ARTICLE 15. TAX MATTERS................................................. 22
Section 15.1 Payment of Taxes by Contributor................ 21
Section 15.2 Definition of Taxes............................ 21
Section 15.3 Allocation Method.............................. 21
Section 15.4 Seller Reliance................................ 2l
Section 15.5 Survival....................................... 21
ARTICLE 16. NOTICE...................................................... 22
ARTICLE 17. MISCELLANEOUS............................................... 22
Section 17.1 Survival of Representation and Warranties...... 22
Section 17.2 Entire Agreement; No Third-Party Rights........ 22
Section 17.3 Amendment...................................... 23
Section 17.4 Governing Law.................................. 23
Section 17.5 Section Headings............................... 23
Section 17.6 Severability................................... 23
Section 17.7 No Other Rights or Obligations................. 23
Section 17.8 Counterparts................................... 23
Section 17.9 Construction................................... 23
Section 17.10 Attorneys' Fees............................... 23
(iii)
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Section 17.11 Interpretation............................. 23
Section 17.12 Exclusivity................................ 23
(iv)
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SCHEDULES
Schedule 1.1 (a) Land
Schedule 1.1 (d) Leases
Schedule 1.1 (e) Service Contracts
Schedule 1.2 Excluded Assets
EXHIBITS
Exhibit 6. 1 (h) Form of OP Agreement
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CONTRIBUTION AND EXCHANGE AGREEMENT
THIS CONTRIBUTION AND EXCHANGE AGREEMENT (the "AGREEMENT") dated as of
____________,1998 (the "EFFECTIVE DATE") is made and entered by and among
(the __________________"CONTRIBUTOR"), PALACE REIT, a Texas real estate
investment trust (the "COMPANY"), and PALACE OPERATING PARTNERSHIP, L.P., a
Delaware limited partnership (the "OPERATING PARTNERSHIP"). The Company and
the Operating Partnership are sometimes hereinafter collectively referred to as
"PALACE".
RECITALS
A. Contributor owns certain improved real property.
B. The Operating Partnership desires to acquire such real
property from Contributor in exchange for units of limited partnership interest
in the Operating Partnership (the "OP UNITS"), which OP Units may be redeemed
for shares of common stock of the Company (the "SHARES") as provided in the
Agreement of Limited Partnership of the Operating Partnership (the "OP
AGREEMENT"). Closing hereunder will be contingent on and concurrent with the
closing of the initial public offering of the Shares (the "OFFERING").
NOW, THEREFORE, in consideration of the mutual promises hereinafter
set forth and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto, intending to
be legally bound hereby, do hereby agree as follows:
ARTICLE 1. SUBJECT OF CONVEYANCE.
Section 1. 1 Conveyance of the Property. In accordance with the
terms and conditions of this Agreement and subject to Palace's performance and
satisfaction of the conditions, covenants and obligations contained herein,
Contributor shall convey to the Operating Partnership all of its right, title
and interest in and to the following assets:
(a) the real property described on Schedule 1.1(a) (the
"LAND") and all the buildings, structures, parking areas, landscaping and
improvements located on the Land and all fixtures and other property affixed
thereto (the "IMPROVEMENTS");
(b) (i) any and all rights, titles, power, privileges,
grants, easements, licenses, rights-of-way and interests appurtenant to the
Land and the Improvements, including, without limitation, air rights, water and
water rights, sanitary sewer rights and capacities, development rights, and
rights and interests in and to minerals, oil and gas and other hydro carbons;
(ii) any and all rights, titles, power, privileges, grants, easements,
licenses, easements, rights-of-way and interests of Contributor, either at law
or in equity in possession or in expectancy, in and to any real estate lying
in the streets, highways, roads, alleys, rights-of-way or sidewalks, open or
proposed, in front
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of, above, over, under, through or adjoining the Land and in and to any strips
or gores of real estate adjoining the Land; and (iii) all of Contributor's
right, title, claim and interest, if any, in and to any and all rights, titles,
power, privileges, grants, easements, licenses, rights-of-way and interest
appurtenant to or incident to any of the foregoing (the Land and the
Improvements and all of the foregoing are sometimes referred to herein as the
"REAL PROPERTY");
(c) all personal property, fixtures, equipment, inventory
and computer programming and software owned or licensed by Seller and located
on any of the Real Property (collectively, the "PERSONAL PROPERTY");
(d) all leases and other agreements with respect to the
use and occupancy of the Real Property described in the rent roll attached as
Schedule 1.1(d), together with all amendments and modifications thereto and
any guaranties provided thereunder (the "LEASES"), and rents, additional rents,
reimbursements, profits, income, receipts and the amount deposited (the
"SECURITY DEPOSITS") under the Leases in the nature of refundable security for
the obligations of the performance of those parties occupying space at the Real
Property (the "LESSEES") under such Lease;
(e) (i) all permits, licenses, certificates of occupancy,
approvals, dedications, subdivision maps or plats and entitlement issued,
approved or granted by any applicable governmental authority in connection with
the construction, development, ownership, use or operation of the Real
Property, and all other certificates, guaranties and warranties relating to the
Real Property (collectively, the "PERMITS AND LICENSES") and (ii) all of
Contributor's right, title and interest in and to those contracts and
agreements described in Schedule 1.1(e) for the servicing, maintenance and
operation of the Real Property (the "SERVICE CONTRACTS"); (the Permits and
Licenses and the Service Contracts are herein collectively called the
"INTANGIBLE PROPERTY");
(f) all books, records, promotional materials, tenant
data, leasing material and forms, past and current rent rolls, files,
statements, tax returns, market studies, keys, plans, specifications, reports,
tests and other materials of any kind owned by Seller that are or may be used
by Seller in the use and operation of the Real Property or the Personal
Property (collectively, the "BOOKS AND RECORDS");
(g) Any and all structural reviews, architectural
drawings, engineering, environmental, soils, seismic, geological and
architectural reports, studies and certificates and all plans, specifications
and drawings of the Improvements or any portion thereof (collectively, the
"TESTS AND PLANS");
(h) all Seller's right, title, claim and interest, if
any, in and to all trademarks, trade names or symbols under which the Real
Property (or any part thereof) is operated; and
(i) all other rights, privileges and appurtenances owned
by Contributor and in any way related to the rights and interests described
above in this Section 1.1.
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The Real Property, the Personal Property, the Leases, the Security
Deposits, the Intangible Property, the Books and Records, the Tests and Plans
and the other property interests being transferred hereunder are hereinafter
collectively referred to as the "PROPERTY."
Section 1.2 Excluded Assets. In addition to such other property,
rights and interests of Contributor which are excluded from the conveyance
contemplated by this Agreement through separate, specific reference elsewhere
in this Agreement, all of Contributor's right, title and interest in and to the
items described in Schedule 1.2 are expressly retained by Contributor and
excluded from any conveyance otherwise contemplated by this Agreement.
ARTICLE 2. VALUE AND PAYMENT TERMS.
Section 2.1 Issuance of OP Units. As consideration for conveyance of
the Property by Contributor to the Operating Partnership, at Closing, the
Operating Partnership shall issue to Contributor ________ OP Units.
Section 2.2 Consideration. At the Closing, the Operating Partnership
shall pay Contributor in cash an amount equal to percent (______%) of the
proceeds received by the Operating Partnership from the Offering less
underwriters' fees, offering expenses, including, but not limited to, SEC fees,
NASD fees, printing and engraving expenses, accounting fees and expenses, legal
fees and expenses, blue sky fees, NASDAQ listing fees, transfer agent and
registrar fees and miscellaneous expenses, and $50,000.00 working capital for
the Operating Partnership (the "CASH CONSIDERATION").
Section 2.3 Designation of Issuance of OP Units. The OP Units to be
issued by the Operating Partnership shall be issued to ____________________ at
Closing.
ARTICLE 3. TITLE.
Section 3.1 Independent Contract Consideration. Contemporaneously
with the execution and delivery of this Agreement, the Operating Partnership
has delivered to Contributor, and Contributor hereby acknowledges the receipt
of, a check in the amount of One Hundred Dollars ($100.00) ("INDEPENDENT
CONTRACT CONSIDERATION"), which amount the parties bargained for and agreed to
as consideration for the Operating Partnership's exclusive right to purchase
the Property pursuant to this Agreement and for Contributor's execution,
delivery and performance of this Agreement. The Independent Contract
Consideration is in addition to and independent of any other consideration or
payment provided in this Agreement, is nonrefundable, and it is fully earned
and shall be retained by Contributor notwithstanding any other provision of
this Agreement.
Section 3.2 Inspection Materials. The Seller shall allow the
Operating Partnership and its representatives access to all financial and other
information relating to the Property sufficient to enable them to prepare
audited financial statements in conformity with Regulation S-X of the
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Securities and Exchange Commission and such other information as may be
necessary in connection with any filings or other disclosures under applicable
stock exchange rules or securities laws.
Section 3.3 Title Commitment and Survey. As soon as practicable
after the Effective Date, Contributor shall obtain and deliver to the Operating
Partnership, at Contributor's sole cost and expense, the following as to the
Property:
(a) Title Commitment. A Commitment for Title
Insurance (the "TITLE COMMITMENT") issued by National Title Company, ▇▇▇▇ ▇.
▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇, Attention: ▇.▇. ▇▇▇▇▇▇▇▇, Telephone No. (702)
▇▇▇-▇▇▇▇ (the "TITLE COMPANY") for a title insurance underwriter acceptable to
the Operating Partnership, for the most recent form of ALTA owner's policy,
covering the Land and Improvements, in an amount designated by the Operating
Partnership and providing for such endorsements as the Operating Partnership
may reasonably require, setting forth the current status of the title to the
Land and Improvements, showing all liens, claims, encumbrances, easements,
rights of way, encroachments, reservations, restrictions, and any other matters
affecting the Land and Improvements, and pursuant to which the Title Company
agrees to issue to the Operating Partnership at Closing an Owner's Policy of
Title Insurance (the "TITLE POLICY") on the most recent form of ALTA
comprehensive coverage owner's policy endorsed as the Operating Partnership may
reasonably require. The Title Commitment shall be accompanied by a true,
complete, and legible copy of all documents and instruments (as recorded, where
applicable) (the "SUPPORTING DOCUMENTS") referred to or identified in the Title
Commitment, including, but not limited to, all deeds and other conveyance
documents evidencing transfer of title into Contributor, lien instruments,
leases, plats, surveys, reservations, restrictions and easements.
(b) UCC Search. Current written reports (the "UCC
SEARCHES") from the Office of the Secretary of State of the State where the
Property is located and the deed recording offices of the county where the
Property is located reflecting the results of current searches of the Uniform
Commercial Code Records maintained by such offices, said UCC Searches to be
made under the name of Contributor.
(c) Survey. An "as built" survey (the "SURVEY"), of the
Land and Improvements made on the ground and certified by a professional land
surveyor licensed in the State in which the Property is located and approved by
the Title Company and Operating Partnership (the "SURVEYOR"). If different
from the description contained in Schedule 1.1(a) attached to this Agreement,
the legal description of the Land contained in the Survey (once the correctness
thereof has been confirmed by Contributor, the Operating Partnership and the
Title Company) shall be substituted for the description of the Land contained
in said Schedule 1.1(a). Such description, if available, shall be used in
the Title Policy and the Deed to be delivered at Closing.
(d) Procedure for Objections to Title Commitment and
Survey. The Operating Partnership shall have ten (10) days after receipt of
the last of the Title Commitment together with complete and legible copies of
all Supporting Documents and the Survey to notify Contributor in
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writing (the "OBJECTION NOTICE") of any objections the Operating Partnership
may have to matters reflected in or relating to the Title Commitment, the
Supporting Documents or the Survey. If Contributor has not cured or undertaken
in writing to cure prior to Closing any objection set forth in the Objection
Notice to the Operating Partnership's reasonable satisfaction by Closing, the
Operating Partnership shall be entitled to terminate this Agreement by written
notice given by Closing. If the Operating Partnership shall terminate this
Agreement under this Section 3.3(d), neither Palace nor Contributor shall have
any further right or obligation hereunder except for rights or obligations
which survive termination of this Agreement. If the Operating Partnership has
not terminated this Agreement as provided in this Section 3.3(d), any objection
reflected in the Title Commitment which Contributor has failed to cure shall be
a Permitted Encumbrance, unless Contributor shall have undertaken in writing to
cure such objection prior to Closing. As used in this Agreement, the term
"PERMITTED ENCUMBRANCE" shall mean any title exception reflected in the Title
Commitment as to which the Operating Partnership either did not object in
accordance with Section 3.3(d) or any such title exception as to which the
Operating Partnership did object that is not cured prior to Closing in
accordance with Section 3.3(d).
Section 3.4 Title Policy. At the Closing, Contributor shall
provide to the Operating Partnership, at Contributor's sole cost and expense,
as to the Property, the Title Policy issued pursuant to the Title Commitment,
dated as of the Closing Date, in an amount designated by the Operating
Partnership and insuring that the Operating Partnership has good and marketable
title to the Property in fee simple subject to no exceptions other than the
Permitted Encumbrances. The Title Policy shall be in the form required by
Section 3.3(a).
ARTICLE 4. REPRESENTATIONS AND WARRANTIES OF CONTRIBUTOR.
Section 4.1 Contributor's Representations and Warranties. In order
to induce the Company and the Operating Partnership to enter into this
Agreement and to perform their respective obligations hereunder, Contributor
hereby warrants and represents the following, with respect to itself and to the
Property:
(a) Organization, Good Standing and Power. Contributor
is duly organized, validly existing and in good standing, under the laws of the
jurisdiction in which it was organized, is duly authorized to transact business
under the laws of each state in which the character of the properties owned or
leased by it therein or in which the transaction of its business makes such
qualification necessary, and has all requisite power and authority to execute
and deliver this Agreement and all other documents and instruments to be
executed and delivered by it hereunder and to perform its obligations hereunder
and thereunder in accordance with the terms and conditions hereof and thereof.
(b) Authorization, No Violation. Assuming the due and
valid authorization, execution and delivery of this Agreement by Palace, this
Agreement, and the other agreements and documents to be executed by Contributor
hereunder, will be the legal, valid and binding obligation
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of Contributor, enforceable against Contributor in accordance with their
respective terms, subject to applicable bankruptcy, insolvency, moratorium or
similar laws relating to creditors' rights and general principles of equity.
The performance by Contributor of its duties and obligations under this
Agreement and the documents and instruments to be executed and delivered by it
hereunder will not (i) conflict with, or result in a breach of, or default
under, any provision of any of the Organizational Documents (hereinafter
defined) of Contributor or any agreement, instrument, decree, judgment,
injunction, order, writ, law, rule or regulation, or any determination or award
of any court or arbitrator, to which Contributor is a party or by which its
assets are or may be bound (a "LEGAL REQUIREMENT") or (ii) require any consent,
approval or authorization of, declaration, filing or registration with, or
notice to, any federal, state or local governmental or regulatory authority
having jurisdiction over the Property or Contributor (a "GOVERNMENTAL
AUTHORITY") or any other person or entity or (iii) result in the creation of
any lien or other encumbrance on the Property. As used herein, the term
"ORGANIZATIONAL DOCUMENTS" means as to any entity, its articles or certificate
of incorporation and its bylaws as each of the foregoing may have been or may
hereafter be amended from time to time.
(c) No Right to Acquire Property. No person has any
right or option to acquire all or any portion of the Property or any interest
therein.
(d) Title to Property . Contributor has, and on the
Closing Date will convey to the Operating Partnership, good and marketable
title to the Property, free and clear of any and all liens and encumbrances.
(e) Organizational Documents. The Organizational
Documents of Contributor are in full force and effect and have not been amended
except pursuant to written instrument delivered to Palace. No default has
occurred and is continuing under any such Organizational Document, and no fact
or circumstance has occurred which in and of itself, or with the giving of
notice or the passage of time, or both, would constitute such a default.
(f) Work on Real Property, Liens. No work has been
performed on any Real Property that would require an amendment to the
certificate of occupancy for such Real Property for which an amendment has not
been obtained, and, to Contributor's knowledge, any and all work performed at
the Real Property as of the Effective Date has been, and to the Closing Date
will be, performed in all material respects in accordance with all Legal
Requirements of all applicable Governmental Authorities. Except for items
being paid by Contributor at Closing or prorated at Closing, there are no
outstanding accounts payable or unpaid debts relating to the Property that are
binding on Contributor or would be binding on the Operating Partnership or the
Property, including, without limitation, any unpaid charges, debts,
liabilities, claims or obligations arising from the construction, occupancy,
ownership, use or operation of the Property, which could give rise to any
mechanic's or materialmens' or other statutory liens against any portion of the
Property.
(g) Validity of Service Contracts and Leases. There are no
service contracts,
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management or maintenance agreements, leases or other agreements affecting the
use or occupancy of the Real Property or other agreements otherwise affecting
the Property or the operation thereof other than the Service Contracts and the
Leases. All of the Service Contracts and the Leases are, and as of the
Effective Date and on the Closing Date will be, in full force and effect
without any material default or claim of material default by any party thereto.
To Contributor's knowledge, all sums presently due and payable by Contributor
under the Service Contracts have been fully paid, and all sums which become due
and payable thereunder between the Effective Date and the Closing Date shall be
fully paid by Contributor within the time periods required thereby. All
agreements with respect to the Property, including, without limitation, all
Leases and Service Contracts, heretofore delivered by Contributor to the
Operating Partnership or its representatives for examination, are true,
correct, and complete copies thereof, and have not been amended except as
evidenced by amendments similarly delivered. Contributor has not entered into
any agreement regarding, nor is the Property or any part thereof subject to,
any rights to acquire or to lease the Property or any part thereof, or to
otherwise obtain any interest therein, and there are no outstanding rights of
first refusal, rights of reverter, purchase options or rights of first offer
relating to the Property or any interest therein.
(h) Litigation. There is no litigation, claim, audit,
action, or proceeding pending or, to Contributor's knowledge, threatened before
or by any Governmental Authority or by Contributor or by any other person or
entity in any manner adversely affecting the Property, or the ability of
Contributor to perform any of its obligations hereunder, and also including,
without limitation, any matter seeking to (i) enjoin, restrain, prohibit or
affect the transaction contemplated hereby, (ii) increase significantly any ad
valorem taxes previously assessed or to be assessed in connection with the
Property, (iii) enjoin a violation of the Property concerning any Legal
Requirement or (iv) attach any portion of the Property.
(i) No Actions Relating to Property. Contributor has not
received any notice of, nor to Contributor's knowledge are there any facts or
circumstances which could give rise to, any pending liens or special
assessments or taxes against any portion of the Property by any Governmental
Authority. There is no pending, or to Contributor's knowledge, threatened,
condemnation, environmental, zoning or other land-use regulation proceeding
against the Property or any portion thereof, nor does Contributor have any
knowledge of any public request, plans, proceedings or proposals for changes in
road grade, access, road widening, realignment or other modification or other
municipal improvements or other matters that may materially affect the Property
or (i) result in a tax, levy or assessment against the Property, or (ii) that
could cause a change or modification of the zoning classification or of any
other Legal Requirements applicable to the Property or any part thereof or
applicable to any property adjacent to the Property, or (iii) otherwise
detrimentally affect the use, zoning, operation or value of the Property.
(j) Compliance With Legal Requirements.
(i) Violations. The Property, as improved by the
Improvements, and the
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use and operation thereof, do not violate any Legal Requirement of any
applicable Governmental Authority or any easement or restriction affecting the
Property, and Contributor has not received any notice that any building or
other improvement not included in any part of the Property relies on any part
of the Property to fulfill any Legal Requirement applicable to the Property.
(ii) Licenses. Permanent certificates of
occupancy and all licenses, permits, authorizations and approvals required from
all Governmental Authorities and local boards of fire underwriters (or similar
body) have been issued and are in effect for each building or structure
constituting a portion of the Improvements and have been paid for in full and
are in full force and effect.
(iii) No Agreements. There are no agreements with
or commitments to any Governmental Authorities, agencies, utilities or
quasi-governmental entities or other third parties with respect to the Property
which would bind the Property or the Operating Partnership following the
Closing Date, including, without limitation, any agreements or commitments
which will impose an obligation upon the Operating Partnership or its
successors or assigns to make any contribution or dedication of money or land
or to construct, install or maintain any improvements of a public or private
nature on or off the Property, except those agreements which are identified in
the Title Commitment and disclosed by Survey. To Contributor's knowledge, no
governmental authority has imposed any requirement that any owner or developer
of the Property pay directly or indirectly any special fees or contributions or
incur any expenses or obligations in connection with any development of the
Property or any portion thereof.
(iv) Access/Improvements. The Real Property has
access to and from dedicated streets. Contributor has no knowledge of any
pending or threatened governmental proceeding or any other fact or condition
which would purport to limit or would result in the termination of such access
to and from public roads.
(k) Environmental Matters. With respect to environmental
matters affecting the Property:
(i) No Violation of Laws. The Property is not in
violation of any Environmental Laws. Neither Contributor, nor to Contributor's
knowledge any third party, has or is engaged in any operations or activities
upon, or any use or occupancy of the Property, or any portion thereof, for the
purpose of or in any way involving the handling, manufacture, treatment,
storage, use, generation, release, discharge, refining, dumping or disposal of
any Hazardous Materials, accidental or intentional, on, under or in the
Property, or transported any Hazardous Materials to, from or across the
Property, except in compliance with Environmental Laws.
(ii) No Hazardous Materials. No Hazardous
Materials have been constructed, deposited, placed, discharged, stored, or
otherwise located on, under or in the Property by Contributor or to its
knowledge any third party, except in compliance with Environmental Laws.
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To Contributor's knowledge, (a) the Property has not previously been used as a
landfill or as a dump for garbage or refuse, (b) no Hazardous Materials have
been released into the environment or discharged at, on, from or under the
Property, and (c) no portion of the Property contains any Hazardous Materials,
including, without limitation, any asbestos or asbestos containing materials,
polychlorinated biphenyls and radon, except to the extent that any or all of
the foregoing have been done in compliance with Environmental Laws.
(iii) Notice. Contributor has not received written
notice nor is Contributor aware of (a) the migration of Hazardous Materials
from other properties to the Property (above or below ground), (b) the current
or past use for the disposal, storage, treatment, processing, manufacturing or
other handling of Hazardous Materials on any property adjoining the Property,
and (c) any property adjoining the Property which contains Hazardous Materials.
(iv) Underground Storage Tanks. There are no
underground storage tanks at the Property.
(v) Legal Proceedings and Notices. No
administrative order or notice, consent order, agreement, litigation or
settlement with respect to any Hazardous Materials is in existence with respect
to the Property or, to Contributor's knowledge, proposed, threatened or
anticipated, nor has Contributor received any notice of any such action or
proceeding regarding the Property or any property adjacent to the Property. To
Contributor's knowledge, no investigation with respect to Hazardous Materials
is proposed, threatened or anticipated in respect to the Property, and
Contributor has received no communication from or on behalf of any Governmental
Authority or any other person or entity indicating that any applicable Legal
Requirements relating to Hazardous Materials have been or may have been
violated with respect to the Property. The Property is not currently on and,
to Contributor's knowledge has never been on, any federal or state "Superfund",
or "Superlien" list, and Contributor is not aware that the Property is
anticipated or threatened to be placed on any such list. Contributor has
received no notice of any third party claims regarding damage to property or
persons resulting from any Hazardous Materials affecting the Property or any
adjacent property.
The term "ENVIRONMENTAL LAWS" shall mean the
Comprehensive Environmental Response, Compensation, and Liability Act of 1980,
42 U.S.C. Sections 9601, et. seq., the Resource Conservation and Recovery Act
of 1976, 42 U.S.C. Sections 6901 et seq., the Toxic Substances Control Act, 15
U.S.C. Sections 2601 et. seq., the Hazardous Materials Transportation Act, 49
U.S.C. 1801 et seq., the Clean Water Act, 33 U.S.C. Sections 1251 et seq., as
said laws have been supplemented or amended to date, the regulations
promulgated pursuant to said laws and any other administrative, federal, state
or local law, statute, rule, regulation or ordinance which regulates or
proscribes the use, storage, disposal, presence, cleanup, transportation or
release or threatened release into the environment of Hazardous Materials. The
term "HAZARDOUS MATERIALS" shall mean any substance, chemical, waste or other
material which is listed, defined or otherwise identified as "hazardous" or
"toxic" under any of the Environmental Laws, and including,
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without limitation, formaldehyde, urea, polychlorinated biphenyls, petroleum,
petroleum product or by-product, crude oil, natural gas, natural gas liquids,
liquefied natural gas, or synthetic gas usable for fuel or mixture thereof,
radon, asbestos and any by-product of same.
(l) Solvency. Contributor is solvent, and has not made a
general assignment for the benefit of creditors or a transfer in fraud of
creditors, or been adjudicated a bankrupt or insolvent, nor has a receiver,
liquidator, custodian, or trustee of any of them or any of their respective
properties (including the Property) been appointed or taken possession of any
of their respective properties, or a petition filed by or against any of them
for bankruptcy, composition, rearrangement, extension, reorganization, or
arrangement pursuant to the Federal Bankruptcy Act or any similar present or
future federal or state insolvency or bankruptcy law or statute, or any
proceeding instituted for the dissolution or liquidation of any of them.
(m) Utilities. To Contributor's knowledge, all
utilities and services necessary for operation of the Improvements (including,
without limitation, road access, gas, water, storm and sanitary sewers,
electricity and telephone), are available at the boundary of Real Property, may
be used or tapped into by Contributor, and, to Contributor's knowledge, after
Closing by the Operating Partnership, will be connected with valid permits, are
of sufficient capacity to meet adequately all needs and requirements necessary
for the use of the Real Property for its intended purposes. To Contributor's
knowledge, the Real Property is legally entitled to be served by such utilities
without further action by Contributor. To Contributor's knowledge, such
utilities and services are properly and fully installed and operating and
comply with all Legal Requirements. To Contributor's knowledge (i) no fact,
condition or proceeding exists which would result in the termination or
impairment of the furnishing of such utilities to the Real Property, and (ii)
no material, latent defects exist in the plumbing, electrical, mechanical,
heating, ventilating or air-conditioning system or other systems in the Real
Property and the same are in good operating order and repair. To Contributor's
knowledge, all utility lines servicing the Real Property are located either
within the boundaries of the Real Property, or within lands dedicated to the
public use, or within recorded easements for such purpose and are serviced and
maintained by the appropriate public or quasi-public entity.
(n) Property Condition. To Contributor's knowledge, (i)
there is no condition or defect of the Property not disclosed in writing to the
Operating Partnership that would, if known, cause a reasonable and prudent
person to decide not to purchase the Property, (ii) the Improvements are free
from material defects in design and construction, (iii) there is no adverse
geological or soil condition affecting the Property, and (iv) there are no
material, latent defects in the roof or other structural components of the
Property. Contributor has not altered the appearance of the Property in any
way that would cause a normal inspection of the Property to not accurately
reveal its present condition and general state of repair. Contributor has not
received written notice of any outstanding requirements or recommendations by
(1) the insurance company(s) currently insuring the Property, or (2) any board
of fire underwriters or other body exercising similar functions, which in any
case require or recommend any repairs or work to be done on the Property of a
material nature.
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(o) Flood Hazard Area. Except as shown on the Surveys,
no portion of the Property is located within any flood plain or flood prone
area.
(p) Taxes. Contributor has paid all Taxes due and
payable prior to the Closing and timely filed all returns and reports required
to be filed prior to the Closing with respect to the ownership and operation of
the Real Property (by it or any predecessor entity) for which the Operating
Partnership could be held liable or a claim made against the Real Property.
There are no audits or other proceedings by any Governmental Authority pending
or threatened with respect to Taxes resulting from the ownership and operation
of the Real Property (by it or any predecessor entities) for which the
Operating Partnership could be held liable or a claim made against the Real
Property, and no agreement extending the period for assessment and collection
has been executed with respect thereto.
(q) Property Reports. Contributor has delivered to the
Operating Partnership true and complete copies of all environmental, asbestos,
soil, substrata and geotechnical reports regarding the Property and surrounding
land in its possession or control.
(r) Insurance. All insurance coverage with respect to
the Property is in full force and effect, insures the Property in reasonably
sufficient amount against all risks usually insured against by persons
operating similar businesses or properties of similar size in the localities
where such businesses or properties are located, provides coverage as may be
required by applicable regulation and by any and all contracts to which
Contributor is a party and has been issued by insurers of recognized
responsibility. There is no default under any such coverage nor has there been
any failure to give notice or present any claim under any such coverage in a
due and timely fashion. There are no outstanding unpaid premiums except in the
ordinary course of business and no notice of cancellation or nonrenewal of any
such coverage has been received. No insurer has advised Contributor that it
intends to reduce coverage, increase premiums or fail to renew any existing
policy or binder.
(s) Contributor Not a Foreign Person. Contributor is not
a "foreign person" which would subject the Operating Partnership to the
withholding tax provisions of Section 1445 of the Internal Revenue Code of
1986, as amended.
(t) Material Facts. No representation or warranty by
Contributor herein, nor any certificate or other writing furnished or to be
furnished by Contributor to the Operating Partnership pursuant hereto or in
connection with the transaction contemplated hereby, contains any untrue
statement of a material fact, or omits or will omit to state a material fact
necessary to make the statements contained herein or therein not misleading.
Contributor has no information or knowledge of any change contemplated in any
applicable governmental requirement or any judicial administrative action or
any action by any adjacent landowners or any natural or artificial conditions
upon the Property or any significant adverse fact or condition relating to the
Property or its continued use by the Operating Partnership which has not been
disclosed in writing to the Operating
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Partnership by Contributor or which would prevent, limit, impede or render
materially more costly the Operating Partnership's continued use of the
Property.
ARTICLE 5. REPRESENTATIONS AND WARRANTIES OF THE OPERATING PARTNERSHIP AND THE
COMPANY.
Section 5.1 Palace's Representations and Warranties. In order
to induce Contributor to enter into this Agreement and to perform its
obligations hereunder, the Operating Partnership and the Company hereby jointly
and severally warrant and represent the following:
(a) Organization, Good Standing and Power of the Company.
The Company is a real estate investment trust duly organized, validly existing
and in good standing under the laws of the State of Texas, is duly authorized
to transact business under the laws of any state in which the character of the
properties owned or leased by it therein or in which the transaction of its
business makes such qualification necessary and has all requisite corporate
power and authority to execute and deliver this Agreement and all other
documents and instruments to be executed and delivered by it hereunder and to
perform its obligations hereunder and thereunder in accordance with the terms
and conditions hereof and thereof.
(b) Organization, Valid Existence and Partnership Power
of the Operating Partnership. The Operating Partnership is a limited
partnership duly formed and validly existing under the laws of the State of
Delaware, is duly authorized to transact business under the laws of any state
in which the character of the properties owned or leased by it therein or in
which the transaction of its business makes such qualification necessary has
all requisite partnership power and authority to execute and deliver this
Agreement and all other documents and instruments to be executed and delivered
by it hereunder and to perform its obligations hereunder and thereunder in
accordance with the terms and conditions hereof and thereof.
(c) Authorization, No Violation. Assuming the due and
valid authorization, execution and delivery of this Agreement by Contributor,
this Agreement and the other agreements and documents to be executed and
delivered by each of the Operating Partnership and the Company hereunder, when
duly executed and delivered, will be the legal, valid and binding obligation of
each of the Operating Partnership and the Company, enforceable against the
Operating Partnership and the Company in accordance with their respective
terms, subject to applicable bankruptcy, insolvency, moratorium or similar laws
relating to creditors' rights and general principles of equity. The
performance by each of the Operating Partnership and the Company of its
respective duties and obligations under this Agreement and the documents and
instruments to be executed and delivered by each of them hereunder will not (i)
conflict with, or result in a breach of, or default under, any provision of any
of the organizational documents of either of the Operating Partnership or the
Company or any agreements, instruments or Legal Requirements to which either of
the Operating Partnership or the Company is a party or by which the assets of
either are or may be bound, or (ii) require any consent, approval or
authorization of, or declaration, filing or registration with, or notice
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to, any Governmental Authority.
(d) OP Units and Shares. The OP Units to be issued to
Contributor are duly authorized and, when issued by the Operating Partnership,
will be fully paid and non-assessable, free and clear of any mortgage, pledge,
lien, encumbrance, security interest, claim or rights of interest of any third
party of any nature whatsoever. The Shares to be issued by the Company upon
redemption of the OP Units, upon issuance, will be fully paid and non-
assessable, free and clear of any mortgage, pledge, lien, encumbrance, security
interest, claim or rights of interest of any third party of any nature
whatsoever.
(e) Litigation. There is no pending or, to Palace's
knowledge, threatened litigation against the Operating Partnership or the
Company that if adversely determined would have a material adverse effect on
Palace or its ability to perform its obligations under this Agreement in a
timely manner.
ARTICLE 6. COVENANTS.
Section 6.1 Covenants of Contributor. Contributor covenants and
agrees that between the Effective Date and the Closing Date, unless Palace has
consented in writing to any other act or omission, it shall perform or observe
the following:
(a) Contributor will use commercially reasonable efforts
to obtain Tenant Estoppel Certificates from all tenants at the Property;
(b) Contributor will keep and maintain the Property in
good order and condition, in compliance with all Legal Requirements and will
cause all necessary repairs, renewals and replacements to be made promptly.
Contributor will not manage or maintain the Property differently due to the
transaction contemplated by this Agreement.
(c) Contributor will continue to operate the Property in
the usual and customary manner and will not enter into any new Service Contract
or Lease or extend, renew, amend, cancel or terminate any existing Service
Contract or Lease.
(d) If Contributor discovers any defect, error or
omission in any representation or warranty made in Section 4.1, Contributor
will give the Operating Partnership prompt written notice thereof accompanied
by information in detail reasonably required to correct such defect, error or
omission.
(e) Contributor will make all required payments under any
indebtedness secured by a lien on its Real Property (other than payments due at
stated maturity) within any applicable grace period. Contributor shall also
comply with all other material terms, covenants and conditions of any such
indebtedness.
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(f) Except for the Permitted Encumbrances, Contributor
will not cause or permit the Property, or any interest therein, to be sold,
transferred, alienated, mortgaged, licensed, encumbered or otherwise be
transferred.
(g) Contributor will maintain and keep in full force and
effect the hazard, liability and casualty insurance policies it is currently
maintaining with respect to the Property.
(h) Contributor shall promptly give the Operating
Partnership written notice of, and promptly deliver to the Operating
Partnership, a true and complete copy of any written notice Contributor may
receive, on or before the Closing Date, from any Governmental Authority,
concerning a violation of any applicable Legal Requirement pertaining to the
Property.
(i) At Closing, Contributor shall execute and deliver the
OP Agreement in the form attached hereto as Exhibit 6.1(h), whereby Contributor
shall become a limited partner in the Operating Partnership upon and subject to
the terms of the OP Agreement.
(j) Contributor shall cooperate in the preparation by the
Company of a registration statement on Form S-11 to be filed with the
Securities and Exchange Commission ("SEC") under the 1933 Act in connection
with the Offering. Contributor shall provide the Company with all such
financial and other information relating to the Property and in such form which
would be sufficient to enable the Company to prepare financial statements in
conformity with Regulation S-X of the SEC and such other information as may be
necessary in connection with any filings or other disclosures under applicable
stock exchange rules or securities laws.
Section 6.2 Confidentiality. Except as hereinafter provided,
from and after the execution of this Agreement, Palace and Contributor shall
keep the terms, conditions and provisions of this Agreement confidential and
neither shall make any public announcements hereof unless the other first
approves of same in writing, nor shall either disclose the terms, conditions
and provisions hereof, except to their respective attorneys, accountants,
engineers, surveyors, financiers and bankers. Notwithstanding the foregoing,
in connection with the Offering, Palace will have the absolute right to market
the Shares and prepare and file all necessary or required registration
statements and other papers, documents and instruments necessary or required in
Palace's judgment and that of the attorneys and underwriters to file a
registration statement with respect to the Shares with the SEC and/or similar
state authorities and to cause same to become effective and to disclose therein
and thus to its underwriters, to the SEC and/or to similar state authorities
and to the public all of the terms, conditions and provisions of this
Agreement. The obligations of this Section 6.3 shall survive any termination
of this Agreement.
Section 6.3 Cooperation. Subject to the terms and conditions
herein provided, the parties to this Agreement shall (a) use their best efforts
to cooperate with each other in (i) determining which filings are required to
be made prior to the Closing Date with, and which consents, approvals, permits
or authorizations are required to be obtained prior to the Closing Date from,
Governmental
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Authorities or third parties in connection with the execution and delivery of
this Agreement and the transactions contemplated hereby and (ii) timely making
all such filings and timely seeking all such consents, approvals, permits or
authorizations; (b) use their best efforts to obtain in writing any consents
required from third parties necessary to effectuate the transactions
contemplated hereby; and (c) use their best efforts to take, or cause to be
taken, all other actions and do, or cause to be done, all other things
necessary, proper or appropriate to consummate and make effective the
transactions contemplated by this Agreement. If, at any time after the Closing
Date, any further action is necessary or desirable to carry out the purpose of
this Agreement, the proper officers and directors and other duly authorized
representatives of the parties shall take all such necessary action.
Section 6.4 Time of Closing. Each of the parties hereto shall use
its best efforts to consummate the transactions contemplated hereby on or prior
to the Closing Date.
ARTICLE 7. CLOSING.
Section 7.1 The Closing. The consummation of the transactions
contemplated hereunder (the "CLOSING") shall take place on the date of closing
(the "CLOSING DATE") of the Offering or September 30, 1998, whichever occurs
earlier, at such place as the parties hereto shall mutually agree.
Section 7.2 Deliveries at the Closing by Contributor. At the
Closing, Contributor will deliver or cause to be delivered to the Operating
Partnership the following and, where appropriate, duly executed on behalf of
all necessary parties thereto other than the Operating Partnership and the
Company:
(a) A current schedule of all Leases and the Tenant
Estoppel Certificates or Building Tenants certificate, as required by Section
9.2(b) hereof,
(b) With respect to the Property conveyed to the
Operating Partnership by Contributor as contemplated in Section 1.1 hereof,
(i) a special warranty deed, or the equivalent in the jurisdiction in which the
Real Property is situated ("DEED"), duly executed by Contributor in proper form
for recording so as to convey to the Operating Partnership good and marketable
title to its Real Property, free and clear of all liens and encumbrances,
except the Permitted Encumbrances and (ii) a ▇▇▇▇ of sale and assignment (the
"▇▇▇▇ OF SALE") duly executed by Contributor conveying to the Operating
Partnership all of Contributor's right, title and interest in and to the
Personal Property, the Leases, the Intangible Property, the Books and Records,
and the Tests and Plans pertaining to its Real Property, and whereby the
Operating Partnership will assume and agree to perform all of Contributor's
duties and obligations under the foregoing assigned documents from and after
the Closing Date.
(c) All original Leases and all other documents
pertaining thereto or copies of same where Contributor, using its best efforts,
is unable to deliver originals and an updated rent roll.
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(d) All other original documents or instruments referred
to herein, including, without limitation, the Service Contracts, Licenses and
Permits, and Tests and Plans or copies of same where Contributor, using its
best efforts, is unable to deliver originals; and keys to the Improvements.
(e) Any affidavits and such other documents or
instruments required by the Title Company to consummate the transactions
contemplated hereby.
(f) Affidavits and other instruments, including but not
limited to all organizational documents of Contributor, including bylaws,
articles of incorporation and certificates of good standing and/or existence
reasonably requested by Palace or the Title Company evidencing the power and
authority of such entity to enter into and perform this Agreement and any
documents to be delivered hereunder.
(g) A certificate executed by a duly authorized
representative of Contributor stating that the representations and warranties
made by Contributor in this Agreement are true and correct in all material
respects as of the Closing Date and that Contributor has performed all of its
covenants and other obligations under this Agreement.
(h) All proper instruments as shall be reasonably
required for the conveyance to the Operating Partnership of all right, title
and interest, if any, of Contributor in and to any award or payment made, or to
be made, (i) for any taking in condemnation, eminent domain or agreement in
lieu thereof of land adjoining all or any part of the Real Property, (ii) for
damage to the Land or the Improvements or any part thereof by reason of change
of grade or closing of any such street, road, highway or avenue, and (z) for
any taking in condemnation or eminent domain of any part of the Land or the
Improvements.
(i) In order to avoid the imposition of the withholding
tax payment pursuant to Section 1445 of the Code, a certificate signed by a
duly authorized representative of Contributor to the effect that Contributor is
not a "foreign person" as that term is defined in section 1445(f)(3) of the
Code.
(j) All such transfer and other tax declarations and
returns and information returns, duly executed and sworn to by Contributor to
the extent required by law in connection with the conveyance of the Property to
the Operating Partnership.
(k) Possession of the Property, subject only to the
Leases, and the Permitted Encumbrances.
(l) The OP Agreement.
(m) The Title Policy.
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(n) Updated UCC Searches.
(o) The Survey.
(p) Such other documents as may be reasonably required or
appropriate to effectuate the consummation of the transactions contemplated by
this Agreement.
Section 7.3 Deliveries at the Closing by Palace. At the
Closing, the Operating Partnership and the Company shall deliver or cause to be
delivered to Contributor the following and, where appropriate, duly executed by
all necessary parties thereto other than Contributor:
(a) The Cash Consideration.
(b) The certificates representing the OP Units to be
issued at the Closing properly issued to the appropriate party.
(c) A certificate executed by a duly authorized
representative of the Operating Partnership and the Company stating that the
representations and warranties made by the Operating Partnership and the
Company in this Agreement are true and correct in all material respects as of
the Closing Date, and that the Operating Partnership and the Company have
performed their respective covenants and other obligations under this
Agreement.
(d) Affidavits and other instruments, including but not
limited to all organizational documents of the Operating Partnership and the
Company including limited partnership agreements, filed copies of limited
partnership certificates, articles of organization, and certificates of good
standing and existence, reasonably requested by Contributor evidencing the
power and authority of the Operating Partnership and the Company to enter into
and perform this Agreement and any documents to be delivered hereunder.
(e) The OP Agreement.
(f) Such other documents as may be reasonably required
or appropriate to effectuate the consummation of the transactions contemplated
by this Agreement.
Section 7.4 Fees and Expenses. Contributor shall pay for
preparation of each Deed and the expense of recording each Deed, including, but
not limited to, transfer, indebtedness, intangible, sales, recordation and/or
conveyance taxes, whether at the local or state level. Subject to Section
17.10, each party shall pay the fees and expenses of its own attorneys and
accountants. Contributor shall pay for the Title Policy, Survey, UCC searches,
documentary stamp taxes, revenue stamps and filing fees, whether at the local
or state level. The parties shall share equally the Title Company's escrow
closing expenses. The provisions of this Section 7.4 shall survive the
Closing.
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ARTICLE 8. ADJUSTMENTS.
Section 8.1 Adjustments at the Closing Date. The following items
shall be apportioned as of midnight on the date preceding the Closing Date
between Contributor and the Operating Partnership:
(a) Rents payable by Lessees as and when collected. All
moneys received from Lessees from and after the Closing shall belong to the
Operating Partnership and shall be applied by the Operating Partnership to
current rents and other charges under the Leases. After application of such
moneys to current rents and charges, the Operating Partnership shall remit to
Contributor any excess amounts paid by a Lessee to the extent that such Lessee
was in arrears in the payment of rent prior to the Closing.
(b) At the Closing, Contributor shall pay to the
Operating Partnership an amount equal to all Security Deposits and any prepaid
rents.
(c) Utility charges payable by Contributor, including,
without limitation, electricity, gas, water and sewer bills. If there are
meters on the Real Property, Contributor will cause readings of all said meters
to be performed not more than ten (10) days prior to the Closing Date. To the
extent said meters are not read prior to Closing, the Operating Partnership
will cause same to be read promptly thereafter and a pro-rata adjustment shall
be made upon said reading.
(d) Amounts payable under the Service Contracts.
(e) Real estate taxes due and payable for the calendar
year. If the Closing Date shall occur before the tax rate is fixed, the
apportionment of real estate taxes shall be upon the basis of the tax rate for
the preceding year applied to the latest assessed valuation. If subsequent to
the Closing Date, real estate taxes (by reason of change in either assessment
or rate or for any other reason) for the Real Property should be determined to
be higher or lower than those that are apportioned, a new computation shall be
made, and Contributor agrees to pay the Operating Partnership any increase
shown by such recomputation and vice versa. All of the foregoing adjustments
shall be made in cash at Closing, with Contributor making a cash payment to
Palace of the net amount due Palace or vice versa. In no event will such
adjustment affect the calculation of Net Value under Section 2.1.
(f) All other items of revenue and expense, such that
Contributor shall be entitled to all revenues and shall be responsible for all
expenses derived from or related to the Property up to but not including the
Closing Date, and the Operating Partnership shall be entitled to all revenues
and shall be responsible for all expenses derived from or related to the
Property from and after the Closing Date.
Section 8.2 Adjustments for Assessments. If,on the Closing Date,
the Real Property or
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any part thereof shall be or shall have been affected by an assessment or
assessments which are or may become payable in annual installments, all the
unpaid installments of any such assessment due and payable on or prior to the
Closing Date shall be paid and discharged by Contributor on the Closing Date.
The Operating Partnership shall pay and discharge all such installments of such
assessments due and payable after the Closing Date.
Section 8.3 Other Adjustments. Except as otherwise provided in this
Agreement, all other adjustments and prorations shall be made in accordance
with the customs in respect to title closings in the State where the Real
Property is located.
Section 8.4 Errors in Calculations. Any errors in calculations or
adjustments shall be corrected or adjusted within one hundred twenty (120) days
after the Closing.
Section 8.5 Survival. The provisions of this Article 8 shall
survive the Closing Date.
ARTICLE 9. CONDITIONS PRECEDENT TO CLOSING.
Section 9.1 Conditions to Obligations of Contributor. The
obligations of Contributor to convey the Property and to perform the other
covenants and obligations to be performed by Contributor on the Closing Date
shall be subject to satisfaction of the following conditions (all or any of
which may be waived, in whole or in part, by Contributor):
(a) The representations and warranties made by the
Operating Partnership and the Company herein shall be true and correct in all
material respects with the same force and effect as though such representations
and warranties had been made on and as of the Closing Date; provided, however,
that a failure of any representations or warranties to be true and correct in
all material respects shall not give rise to a claim or right of termination by
Contributor hereunder so long as such matters do not have a material adverse
effect on the transactions contemplated herein.
(b) The Operating Partnership and the Company shall have
executed and delivered to Contributor all of the items and documents provided
herein for said delivery.
(c) The Operating Partnership and the Company shall have
performed all covenants and obligations undertaken by the Operating Partnership
and the Company herein in all material respects and materially complied with
all conditions required by this Agreement to be performed or complied with by
them on or before the Closing Date.
Section 9.2 Conditions to Obligations of Palace. The obligations
of the Operating Partnership to accept title to the Property and the Operating
Partnership's and the Company's obligation to perform the other covenants and
obligations to be performed by the Operating Partnership and the Company on the
Closing Date shall be subject to satisfaction of the following conditions (all
or any of which may be waived, in whole or in part, by the Operating
Partnership or
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the Company):
(a) The representations and warranties made by
Contributor herein shall be true and correct in all material respects with the
same force and effect as though such representations and warranties had been
made on and as of the Closing Date; provided, however, that a failure of a
representation or warranty to be true and correct in all material respects
shall not give rise to a claim or right of termination by the Operating
Partnership or the Company hereunder so long as such matters do not have a
material adverse effect on the transactions contemplated herein.
(b) Contributor shall have delivered to the Operating
Partnership in form, substance and quantity satisfactory to the Operating
Partnership, (i) Tenant Estoppel Certificates, a form of which is attached
hereto as Schedule 9.2-A, from a sufficient number of tenants so that
certificates have been received for tenants occupying 70% of the occupied
rentable square footage at the Property (including all tenants leasing over 10%
of the occupied rentable square footage), or (ii) a Building Tenants
Certificate completed by ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, a form of which is attached hereto as
Schedule 9.2-B.
(c) Contributor shall have executed and delivered to the
Operating Partnership and the Company all of the items and documents provided
herein for said delivery.
(d) Contributor shall have performed all covenants and
obligations undertaken by Contributor herein in all material respects,
including, without limitation, the covenants set forth in Section 6.1(h), and
materially complied with all conditions required by this Agreement to be
performed or complied with by it on or before the Closing Date.
(e) The closing of the Offering upon terms and conditions
satisfactory to Palace, including, without limitation, pricing and timing,
shall occur simultaneously with Closing under this Agreement.
(f) The Title Company shall have delivered or committed
to deliver the Title Policy in the form and on the terms required by this
Agreement.
(g) The Real Property shall be in substantially the same
condition and repair on the Closing Date as existed on the Effective Date,
reasonable wear and tear excepted.
ARTICLE 10. ASSIGNMENT.
No party may assign this Agreement or any interest therein to any
other person without the prior written consent of the other parties hereto.
ARTICLE 11. BROKERS/COMMISSIONS.
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Contributor and Palace covenant and agree one with the other that no
real estate commissions, finders' fees or brokers' fees have been or will be
incurred in connection with this Agreement or the transaction contemplated
hereby. Contributor and Palace shall indemnify, defend and hold each other
harmless from and against any claims, liabilities, obligations or damages for
commissions, finders' or brokers' fees resulting from or arising out of
Palace's acquisition of the Property hereunder asserted against either party by
any broker or other person claiming by, through or under the indemnifying party
or whose claim is based on the indemnifying party's acts or omissions. The
provisions of this Article 11 shall survive the Closing or other termination of
this Agreement.
ARTICLE 12. CASUALTY LOSS.
Section 12.1 Maintenance of Insurance Policies. Contributor
shall continue to maintain, in all material respects, the fire and extended
coverage insurance policies with respect to the Property which are currently in
effect, through the Closing Date.
Section 12.2 Risk of Loss.
(a) The risk of any damage or loss to the Property prior
to Closing shall remain with Contributor. If at any time prior to the Closing
Date all or any portion of the Property is destroyed or damaged as a result of
fire or any other casualty (a "CASUALTY"), Contributor shall promptly give
written notice ("CASUALTY NOTICE") thereof to Palace. If the estimated cost to
repair or restore the Property following such Casualty equals or exceeds Fifty
Thousand and no/100 Dollars ($50,000.00), such Casualty is herein called a
"MAJOR CASUALTY." Upon the occurrence of a Major Casualty, Palace may, at its
option, either (i) terminate this Agreement only by written notice to
Contributor within twenty (20) days after receipt of the Casualty Notice, or
(ii) acquire the Property without in any manner affecting the consideration
payable to Contributor hereunder, provided, (A) the proceeds of any applicable
insurance policy together with a cash adjustment at Closing in an amount equal
to the deductible under such insurance policy shall be paid to the Operating
Partnership at Closing, or (B) if such proceeds have not yet been collected, all
unpaid claims and other rights in connection with the Casualty shall be assigned
to the Operating Partnership at Closing.
(b) If the Property is the subject of a Casualty but
Palace either is not entitled to or does not terminate this Agreement pursuant
to the provisions of this Article 12, then Contributor shall prior to the
Closing Date cause all temporary repairs to be made to the Property as shall be
required to prevent further deterioration and damage to the Property and to
protect public health and safety.
(c) If the Property is the subject of a Casualty which is
not a Major Casualty, this Agreement shall continue in full force and effect,
and (a) the proceeds of any applicable insurance policy, together with a credit
equal to the deductible under such insurance policy, shall be paid to
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the Operating Partnership at Closing, and (b) all unpaid claims and rights in
connection with the Casualty shall be assigned to the Operating Partnership at
Closing without in any manner affecting the consideration payable to
Contributor hereunder.
ARTICLE 13. CONDEMNATION.
In the event of a Material Taking of the Property, Palace shall have
the right, at its sole option, to either (a) terminate this Agreement by giving
Contributor written notice to such effect within fifteen (15) days after its
receipt of written notification of any such occurrence or (b) accept title to
the Property without reduction of any consideration to be given to Contributor
hereunder. In the event that Palace elects not to terminate this Agreement
under this Article 13, Contributor shall assign all proceeds of such taking to
the Operating Partnership, and same shall be the Operating Partnership's sole
property, and the Operating Partnership shall have the sole right to settle any
claim in connection with the Property. The term "MATERIAL TAKING" as to the
Property or any portion thereof shall be defined to mean the institution or
threatened institution of any proceedings, judicial, administrative or
otherwise which Palace in the exercise of its sole discretion determines (a)
causes access to the Real Property to be taken or materially diminished (i.e.,
following such taking the Real Property no longer has access to a publicly
dedicated street or traffic flow from and to the Real Property is materially
impaired), (b) results in parking no longer being in compliance with applicable
zoning laws; (c) results in a taking of any portion of any buildings
constituting the Improvements; or (d) materially and adversely impacts the use
or value of the Property.
ARTICLE 14. DEFAULT/REMEDIES.
Section 14.1 Termination by Palace. If any condition set forth
herein for the benefit of Palace cannot or will not be satisfied prior to
Closing, or upon the occurrence of any other event that would entitle Palace to
terminate this Agreement and its obligations hereunder, and Contributor fails
to cure any such matter within ten (10) days after notice thereof from Palace,
Palace at its option, may elect either (a) to terminate this Agreement, and all
rights and obligations of Contributor and Palace hereunder shall terminate
immediately, (b) to enforce specific performance or (c) to waive its right to
terminate (but without waiving any breach or default on the part of
Contributor) and, instead, to proceed to Closing.
Section 14.2 Termination by Contributor. If any condition set
forth herein for the benefit of Contributor (other than a default by Palace)
cannot or will not be satisfied prior to Closing, and Palace fails to cure any
such matter within ten (10) days after notice thereof from Contributor,
Contributor may, at its option, elect either (a) to terminate this Agreement,
in which event the rights and obligations of Contributor and Palace hereunder
shall terminate immediately, or (b) to waive its right to terminate, and
instead, to proceed to Closing. If, prior to Closing, Palace defaults in
performing any of its obligations under this Agreement (including its
obligation to purchase the Property), and Palace fails to cure any such default
within ten (10) days after notice thereof from Contributor, Contributor's sole
and exclusive remedy for such default shall be to terminate this
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Agreement, whereupon Palace shall pay to Contributor as liquidated damages the
sum of $1,000.00, said sum being established by agreement of the parties as a
reasonable estimate of the amount of damages incurred by Contributor in that
event as the actual amount of such damages would be difficult or impossible to
determine, and neither Palace nor Contributor shall have any further rights,
liabilities or obligations hereunder. Except as otherwise provided in the
immediately preceding sentence, Contributor waives any claims for damages,
whether actual, consequential, punitive or otherwise, that it may possess
against Palace arising out of or resulting from any such default by Palace
hereunder.
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ARTICLE 15. TAX MATTERS.
Section 15.1 Payment of Taxes by Contributor. Contributor will pay
or provide for payment of all Taxes due and payable on or after the Closing and
will file all returns and reports required to be filed on or after the Closing
with respect to Taxes imposed in connection with the ownership and operation of
the Property for all taxable periods (or portions thereof) ending on or prior
to the Closing for which the Operating Partnership could be held liable on a
claim made against the Operating Partnership.
Section 15.2 Definition of Taxes. "TAXES" mean all federal, state,
county, local, foreign and other taxes of any kind whatsoever (including,
without limitation, income, profits, premium, estimated, excise, sales, use,
occupancy, gross receipts, franchise, ad valorem, severance, capital levy,
production, transfer, license, stamp, environmental, withholding, employment,
unemployment compensation, payroll related and property taxes, import duties
and other governmental charges or assessments), whether or not measured in
whole or in part by net income, and including deficiencies, interest, additions
to tax or interest, and penalties with respect thereto, and including expenses
associated with contesting any proposed adjustment related to any of the
foregoing.
Section 15.3 Allocation Method. The Operating Partnership and its
affiliates will use the "traditional method with curative allocations" (as
defined in Treas. Reg. Section 1.704-3(b)) of allocating income, gain, loss
and deduction to account for the variation between the fair market value and
adjusted basis of the Property for federal income tax purposes with respect to
(i) the contribution of the Property, and (ii) any revaluation of the Property
in accordance with the provisions of Treas. Reg. Sections
1.704-1(b)(2)(iv)(f), 1.704-1(b)(2)(iv)(g) and 1.704-3(a)(6).
Section 15.4 Seller Reliance. Seller acknowledges that it has
relied upon its own tax advisors to determine the impact of federal, state and
local income tax laws on the transaction contemplated by this Agreement, and
that Palace has made no representations to it in this regard.
Section 15.5 Survival. The provisions of this Article 15 shall
survive the Closing Date.
ARTICLE 16. NOTICE.
All notices, demands, requests, or other writings in this Agreement
provided to be given, made or sent, or which may be given, made or sent, by
either party hereto to the other, shall be in writing and shall be delivered by
depositing the same with any nationally recognized overnight delivery service,
or by telecopy or fax machine, in either event with all transmittal fees
prepaid, properly addressed, and sent to the following addresses:
If to Contributor: [to come]
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with a copy to: ▇▇▇▇, ▇▇▇▇▇▇ & ▇▇▇▇▇▇, Ltd.
▇▇▇ ▇. ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇
Attention: W. ▇▇▇▇ ▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
If to the Operating Partnership 3535 Las Vegas Blvd. South
or the Company: ▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇▇▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to: Liddell, Sapp, Zivley,
Hill & ▇▇▇▇▇▇, L.L.P.
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
or to such other address as either party may from time to time designate by
written notice to the other. Notices given by (i) overnight delivery service
as aforesaid shall be deemed received and effective on the first business day
following such dispatch and (ii) telecopy or fax machine shall be deemed given
at the time and on the date of machine transmittal provided same is sent prior
to 5:00 p.m., central time, on a business day (if sent later, then notice shall
be deemed given on the next business day) and if the sending party receives a
written send confirmation on its machine and forwards a copy thereof by
overnight delivery service accompanied by such notice or communication.
Notices may be given by counsel for the parties described above, and such
notices shall be deemed given by said party, for all purposes hereunder.
ARTICLE 17. MISCELLANEOUS.
Section 17.1 Survival of Representation and Warranties. The
representations and warranties made by Contributor in Article 4 and by Palace
in Article 5 shall survive the Closing.
Section 17.2 Entire Agreement; No Third-Party Rights. This
Agreement constitutes the entire agreement between the parties and incorporates
and supersedes all prior negotiations and discussions between the parties.
This Agreement shall be binding upon and inure solely to the benefit of each
party hereto and their successors and assigns, and nothing in the Agreement,
express or implied, is intended to confer upon any other person any rights or
remedies of any nature whatsoever under or by reason of this Agreement.
Section 17.3 Amendment. This Agreement cannot be amended, waived
or terminated
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orally, but only by an agreement in writing signed by each party hereto.
Section 17.4 Governing Law. This Agreement shall be interpreted and
governed by the laws of the State of Texas, without regard to its rules of
conflicts of laws and shall be binding upon the parties hereto and their
respective successors and assigns.
Section 17.5 Section Headings. The caption headings in this
Agreement are for convenience only and are not intended to be part of this
Agreement and shall not be construed to modify, explain or alter any of the
terms, covenants or conditions herein contained.
Section 17.6 Severability. If any term, covenant or condition of
this Agreement is held to be invalid, illegal or unenforceable in any respect,
this Agreement shall be construed without such provision.
Section 17.7 No Other Rights or Obligations. Nothing contained in
this Agreement shall be deemed to create any rights or obligations of
partnership, joint venture or similar association between Contributor and the
Company.
Section 17.8 Counterparts. This Agreement may be executed by the
parties hereto in counterparts, all of which together shall constitute a single
Agreement.
Section 17.9 Construction. All references herein to any Section, or
Exhibit shall be to the Sections of this Agreement and to the Exhibits annexed
hereto unless the context clearly dictates otherwise. All of the Exhibits
annexed hereto are, by this reference, incorporated herein.
Section 17.10 Attorneys' Fees. In the event of any litigation or
alternative dispute resolution between the Operating Partnership or the
Company, on the one hand, and Contributor, on the other hand, in connection
with this Agreement or the transactions contemplated herein, the non-prevailing
party in such litigation or alternative dispute resolution shall be responsible
for payment of all expenses and reasonable attorneys' fees incurred by the
prevailing party. The provisions of this Section 17.10 shall survive the
Closing.
Section 17.11 Interpretation. Whenever used herein, the singular
number shall include the plural, the plural shall include the singular, and the
use of any gender shall be applicable to all genders.
Section 17.12 Exclusivity. In consideration for the significant time
and expense that Palace will devote to consummation of this Agreement and the
Offering, and in order to facilitate consummation of this transaction,
Contributor agrees that until termination of this Agreement, it will not, and
will not permit any of its affiliates or anyone acting on its behalf to, (i)
solicit, encourage, negotiate, act upon, conclude or entertain in any way any
offer from any person or entity other than Palace to (1) purchase or acquire
any interest in the Property, or (2) consolidate or combine any of
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such person's or entity's assets with the Property, or (ii) furnish any
information with respect to Contributor or the Property to any person or
entity, other than Palace. Contributor agrees to immediately notify the
Company of its receipt of any unsolicited offer (written or oral) in respect of
such a transaction and the proposed terms of the offer.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the Effective Date.
SELLER:
------------------------------------------
a
----------------------------------------
By:
---------------------------------------
Name:
-------------------------------------
Title:
------------------------------------
COMPANY:
PALACE REIT,
a Texas real estate investment trust
By:
---------------------------------------
Name:
-------------------------------------
Title:
------------------------------------
OPERATING PARTNERSHIP:
PALACE OPERATING PARTNERSHIP, L.P.,
a Delaware limited partnership
By: Palace REIT, a Texas real estate
investment trust, Sole General Partner
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By:
---------------------------------------
Name:
-------------------------------------
Title:
------------------------------------
SIGNATURE PAGE TO
CONTRIBUTION AND EXCHANGE AGREEMENT
