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Option Agreement And Joint Escrow

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Sectors: Electronics and Miscellaneous Technology
Governing Law: California , View California State Laws
Effective Date: July 06, 2000
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EXHIBIT 10.12


OPTION AGREEMENT
----------------


AND JOINT ESCROW INSTRUCTIONS
-----------------------------


SELLER: DIVERSIFIED EASTGATE VENTURE,
an Illinois general partnership


BUYER: ILLUMINA, INC.,
a Delaware corporation


TABLE OF CONTENTS
-----------------


Page
---- ARTICLE 1 OPTION AGREEMENT................................................. 1


1.1 Description of Property.......................................... 1
1.2 Grant of Option.................................................. 1
1.3 Option Consideration............................................. 1
1.4 Term of Option................................................... 2
1.5 Exercise of Option............................................... 2
1.6 Expiration of Option............................................. 2
1.7 Memorandum of Option............................................. 2
1.8 Termination of Option............................................ 2
1.9 Repayment of Option Deposit...................................... 2
1.10 No Exercise of Option............................................ 3


ARTICLE 2 PURCHASE PRICE................................................... 3


2.1 Purchase Price................................................... 3


ARTICLE 3 ESCROW........................................................... 4


3.1 Escrow Agent..................................................... 4
3.2 Opening of Escrow................................................ 4
3.3 Escrow Instructions.............................................. 4
3.4 Close of Escrow.................................................. 4
3.5 Deliveries to Escrow............................................. 5
3.6 Completion of Documents.......................................... 5
3.7 Prorations, Escrow Fees and Costs................................ 5
3.8 Existing Encumbrances............................................ 5
3.9 Distribution of Funds and Documents.............................. 5


ARTICLE 4 TITLE MATTERS.................................................... 6


4.1 Preliminary Title Report......................................... 6
4.2 Title Insurance.................................................. 7
4.3 Seller's Lease of Building "D" from Buyer........................ 7


ARTICLE 5 CONDITIONS TO CLOSE OF ESCROW.................................... 7


5.1 Buyer's Conditions to Close of Escrow............................ 7
5.2 Seller's Conditions to Close of Escrow........................... 8


ARTICLE 6 REPRESENTATIONS AND WARRANTIES................................... 8


6.1 Buyer's Representations and Warranties........................... 8
6.2 Seller's Representations and Warranties.......................... 8
6.3 Real Estate Commissions.......................................... 8
6.4 Survival of Warranties........................................... 9


ARTICLE 7 ADDITIONAL OBLIGATIONS........................................... 9


7.1 Condemnation..................................................... 9


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7.2 Possession....................................................... 9


ARTICLE 8 GENERAL PROVISIONS............................................... 9


8.1 Assignment....................................................... 9
8.2 Attorneys' Fees.................................................. 9
8.3 Counterparts..................................................... 9
8.4 Entire Agreement................................................. 9
8.5 Exhibits......................................................... 10
8.6 Further Assurances............................................... 10
8.7 Governing Law.................................................... 10
8.8 Headings......................................................... 10
8.9 Interpretation................................................... 10
8.10 Modification, Waiver............................................. 10
8.11 No Other Inducement.............................................. 10
8.12 Notices.......................................................... 10
8.13 Severability..................................................... 11
8.14 LIQUIDATED DAMAGES............................................... 11
8.15 WAIVER OF RIGHT TO RECORD LIS PENDENS............................ 12
8.16 Successors....................................................... 12
8.17 Time............................................................. 12
8.18 Time Period Computation.......................................... 12
8.19 Waiver........................................................... 12
8.20 Building "D" Lease............................................... 12
8.21 Mutual Cooperation............................................... 13


EXHIBIT LIST ------------


"A" LEGAL DESCRIPTION OF PROPERTY "A-1" THE SITE PLAN "B" INTENTIONALLY OMITTED "C" MEMORANDUM OF OPTION "D" CONSENT OF ESCROW AGENT "E" LIST OF DEVELOPMENT COSTS "F" EXISTING PERMITTED EXCEPTIONS "G" BUILDING "D" LEASE "H" MEMORANDUM OF BUILDING "D" LEASE "I" OPTION DEPOSIT DEED OF TRUST "J" FORM OF REPAYMENT PROMISSORY NOTE


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OPTION AGREEMENT
----------------


AND JOINT ESCROW INSTRUCTIONS
-----------------------------


This OPTION AGREEMENT AND JOINT ESCROW INSTRUCTIONS ("Agreement"), effective as of July 6th, 2000 (the "Effective Date"), by and between DIVERSIFIED EASTGATE VENTURE, an Illinois general partnership ("Seller"), on the one hand, and ILLUMINA, INC., a Delaware corporation ("Buyer"), on the other hand, constitutes (1) an option agreement, and, if the option is exercised, (2) a purchase and sale agreement, and (3) joint escrow instructions to the Escrow Agent identified herein.


ARTICLE 1
OPTION AGREEMENT
----------------


1.1 Description of Property. Seller owns certain real property
----------------------- ("Property") located in the County of San Diego, State of California, and more particularly described on Exhibit "A" attached hereto.
-----------


1.2 Grant of Option. Execution of this Agreement by both parties creates a
--------------- binding agreement whereby Seller grants Buyer an option ("Option") to purchase the Property from Seller on the terms and conditions stated herein.


1.3 Option Consideration. As partial consideration for the granting of the
-------------------- Option described herein, Buyer has concurrently entered into that certain lease by and between Seller, as Landlord, and Buyer, as Tenant for two buildings, Building "A" and Building "B", which are to be constructed on the Property, all as provided in the lease (the "Building "A" and "B" Lease" or the "Lease"). As additional consideration for the granting of the Option described herein, and upon the satisfaction of the Loan Commitment Condition described in Section 2(e) of the Building "A" and "B" Lease, Buyer shall deposit the sum of Six Million Two Hundred Thousand Dollars ($6,200,000) (the "Option Deposit") with Escrow Agent, within three (3) business days of written notice from Seller that the loan contemplated by the Loan Commitment is to fund. The Option Deposit, together with interest calculated thereon at the rate of nine percent (9%) per annum (calculated from the date of such deposit until either (a) the Closing Date, or (b) the Repayment Date, as such terms are defined herein), shall be applied to the Purchase Price in the event Buyer exercises the Option pursuant to Section 1.5 herein. In the event Buyer does not exercise the Option as provided herein, then and in such event, the amount of the Option Deposit plus interest thereon shall be repaid to Buyer on the later to occur of (i) three hundred sixty-four (364) days from the date the Option Deposit is provided to Seller, or (ii) one hundred five (105) days after the occurrence of both lease commencement and occupancy of the Premises under the Building "A" and "B" Lease (the later of (i) and (ii) to be the "Repayment Date"). In the event Buyer does exercise the Option as provided herein, but thereafter defaults in its obligations to acquire the subject Property, then the amount of the Option Deposit plus interest thereon shall be repaid to Buyer upon the later to occur of (A) nine (9) months after the date of such default or (B) one hundred five (105) days after the occurrence of both Lease commencement and the occupancy of the Premises under the Building "A" and "B" Lease. The obligation of Seller to repay to Buyer the amount of the Option Deposit, together with interest thereon, shall be


manifested by a promissory note, a form of which shall be agreed upon by Buyer and Seller and attached hereto as Exhibit "J" (the "Repayment Promissory Note")
----------- no later than the date of the satisfaction of Loan Commitment Condition, which Repayment Promissory Note shall be executed by Seller concurrent with the delivery of the Option Deposit by Buyer. The Repayment Promissory Note shall be secured by that certain Option Deposit Deed of Trust, defined and described in Section 1.9 hereof.


1.4 Term of Option. The term of the Option ("Option Term") shall commence
-------------- on the date of this Agreement and shall expire at 5:00 p.m. on December 1, 2000.


1.5 Exercise of Option. Buyer may exercise the Option, at any time during
------------------ the Option Term, by delivering directly to Seller (with a copy to Escrow Agent) written notice of exercise of the Option together with a cashier's check, or other good funds, payable to Seller in the amount of Two Million Three Hundred Thousand Dollars ($2,300,000) (the "Exercise Deposit"). Exercise of the Option shall create a binding purchase and sale agreement whereby Seller agrees to sell and Buyer agrees to buy the Property, on the terms and conditions stated in this Agreement.


1.6 Expiration of Option. If Buyer fails to timely exercise the Option as
-------------------- provided hereunder, the option granted hereunder shall automatically, without any further action of Buyer or Seller hereunder, expire and be of no further force and effect.


1.7 Memorandum of Option. Concurrently with execution of this Agreement,
-------------------- the parties shall execute and acknowledge, in recordable form, a Memorandum of Option in the form attached hereto as Exhibit "C". Buyer shall cause the
----------- Memorandum to be recorded promptly thereafter, at Buyer's expense.


1.8 Termination of Option.
---------------------


(a) By Buyer. Buyer may terminate this Agreement and the Option at
-------- any time by delivering written notice thereof to Seller.


(b) By Seller. Seller may terminate this Agreement and the Option if
--------- Buyer is in default in its obligations to post the Security Deposit under the Lease, or, once Buyer exercises the option as provided herein, if Buyer is in default hereunder, provided that Seller has first delivered written notice of default to Buyer and has provided Buyer with an opportunity to cure such default for a period of three (3) business days, in the case of any monetary default, and five (5) business days, in the case of any non-monetary default.


(c) Effect of Termination. If this Agreement is terminated as
--------------------- permitted herein, or if Buyer fails to exercise the Option prior to expiration of the Option Term, neither party shall have any further rights or obligations hereunder, except as specifically set forth herein.


1.9 Repayment of Option Deposit. In the event this Agreement is terminated
--------------------------- as provided in Section 1.8(c), then and in such event Seller's obligations to repay to Buyer the amount of the Option Deposit on or before the Repayment Date as provided in Section 1.3 above, is secured by that certain Deed of Trust, a copy of which shall be agreed upon by Buyer


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and Seller and attached hereto as Exhibit "I" no later than the date of the
----------- satisfaction of the Loan Commitment Condition (the "Option Deposit Deed of Trust"). The Option Deposit Deed of Trust shall be executed by Buyer and Seller concurrent with the delivery of the Option Deposit by Buyer and deposited with Escrow Agent, together with instructions which authorize Escrow Agent to record the Option Deposit Deed of Trust against the subject Property upon the funding of the construction loan that is the subject of the Loan Commitment, which recordation shall occur immediately after and be subordinate to the recordation of such construction lender's first deed of trust. Buyer shall execute such commercially reasonable subordination agreement as may be required by the construction lender with regard to the subordination of the Option Deposit Deed of Trust and any reasonable required changes to the Option Deposit Deed of Trust that are required by the construction lender.


1.10 No Exercise of Option. In the event Buyer elects not to exercise the
--------------------- option hereunder and, by written notice to Seller tendered to Seller within five (5) days of the expiration or termination of such option, notifies Seller of its desire to negotiate with Seller with regard to an equity interest in Seller, Buyer shall have the first right to negotiate an equity relationship with Seller with regard to the ongoing ownership of the Project, which equity relationship would include (i) a fifty percent (50%) membership interest in Seller, (ii) a nine percent (9%) preferred return on Buyer's capital investment, (iii) that Buyer would be a nonmanaging member of Seller, and (iv) that Buyer would be required to contribute some additional capital with regard to the construction of the remainder of the Project. Notwithstanding the terms and provisions of the foregoing sentence, in no event shall Seller be obligated to agree with Buyer as to any such equity interest in Seller.


ARTICLE 2
PURCHASE PRICE
--------------


2.1 Purchase Price. The total Purchase Price which Buyer agrees to pay and
-------------- Seller agrees to accept for the Property is the sum of (a) Five Million Seven Hundred Fifty Thousand Dollars ($5,750,000) the ("Principle Cash Consideration"), plus (b) in the event Building "D" is not constructed by Seller, Eight Hundred Twenty-Five Thousand Dollars ($825,000), (which sum is equal to sixty percent (60%) of the Building "D" Allowance Amount on Exhibit "E"
----------- (the "Building "D" Cash Consideration"), plus (c) the product of nine percent (9%) per annum multiplied by the amount of Three Million Four Hundred Fifty Thousand Dollars ($3,450,000) (the "Interest Cash Consideration") which Interest Cash Consideration shall be calculated for the period of time between December 1, 2000 and the actual Closing Date, plus (d) the amount of all of the costs incurred by Seller with regard to the Property, including, but not limited to those associated with the acquisition and entitlement of the Property and the construction of the improvements thereon, as the same are outlined on Exhibit
------- "E", the aggregate amount of which have been approved by Buyer, which Exhibit --- ------- "E" is attached hereto and is incorporated herein by this reference (the --- "Development Costs"). In the event Building "D" is not constructed by Seller and the Building "D" Cash Consideration is paid to Seller as a portion of the Purchase Price, then and in such event the parties acknowledge that the amount of the Development Costs shall be reduced by the sum of One Million Three Hundred Seventy-Five Thousand Dollars ($1,375,000). Buyer and Seller acknowledge that the specific components of Exhibit "E" may change during the course of
----------- construction of the improvements to the subject Property and, while the aggregate amount of the Development Costs may not change without Buyer's approval, the


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line items of the proposed budget which comprise the aggregate amount of the Development Costs depicted on Exhibit "E" may be modified by Seller without
----------- Buyer's approval. Seller may, at its election, periodically provide updates of Exhibit "E" to Buyer reflecting any such modifications to the line items of the ----------- Development Costs components.


The Principle Cash Consideration, the Interest Cash Consideration, the Building "D" Cash Consideration, if any, and the Development Costs are collectively referred to herein as the "Purchase Price". The Purchase Price shall be payable through Escrow as follows:


(a) Subject to the terms and provisions of this Agreement, provided Buyer does not default hereunder and the Closing occurs as contemplated hereby, the Option Deposit and the Exercise Deposit shall be credited against the Purchase Price.


(b) The Cash Consideration and the Development Costs shall be delivered by Buyer to Escrow Agent in cash, prior to the date scheduled for Close of Escrow.


(c) Any portion of the Building "D" Cash Consideration that has not been incurred as of the Closing Date shall be disbursed as provided in Paragraph 33 of the Building "D" Lease, as such term is defined below.


ARTICLE 3
ESCROW
------


3.1 Escrow Agent. Chicago Title Insurance Company, ATTN: Shelva Molm, 925
------------ B Street, San Diego, California 92101 ("Escrow Agent") is designated, authorized and instructed to act as Escrow Agent pursuant to the terms of this Agreement.


3.2 Opening of Escrow. The "Opening of Escrow" shall be deemed to have
----------------- occurred the date Buyer delivers a fully executed copy of this Agreement to Escrow Agent together with the Deposit and Escrow Agent acknowledges the same. Escrow Agent shall acknowledge the date of Opening of Escrow and its agreement to act as the Escrow Agent hereunder by: (a) executing the Consent of Escrow Agent attached hereto as Exhibit "D"; and (b) promptly delivering a copy of the
----------- executed Consent to Seller and Buyer.


3.3 Escrow Instructions. This Agreement shall constitute initial escrow
------------------- instructions to Escrow Agent. The parties shall execute a copy of Escrow Agent's general conditions after Opening of Escrow and any additional escrow instructions reasonably required by Escrow Agent or either party to consummate the transaction provided for herein; provided, however, such additional escrow instructions shall not modify or otherwise be inconsistent with the provisions of this Agreement.


3.4 Close of Escrow. "Close of Escrow" or "Closing" means the date Escrow
--------------- Agent records the Grant Deed to the Property in favor of Buyer and delivers the Purchase Price (less applicable charges and adjustments) to Seller. Escrow shall close on the date that is the earlier to occur of (i) thirty (30) days after the Commencement Date and occupancy of the Premises under the Lease by Buyer as Tenant thereunder, or (ii) August 1, 2001 ("Closing Date").


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3.5 Deliveries to Escrow. Each party shall timely deliver to Escrow, no
-------------------- later than one (1) business day prior to Closing the funds and documents required to complete the Closing (including without limitation the Grant Deed and the Purchase Price).


3.6 Completion of Documents. Escrow Agent is authorized to complete the
----------------------- documents deposited into Escrow, when appropriate and consistent with this Agreement.


3.7 Prorations, Escrow Fees and Costs.
---------------------------------


(a) Prorations. The following items shall be prorated in Escrow, as
---------- of the date of Close of Escrow, based on the latest information available to Escrow Agent: real property taxes and any bonds and assessments which are Permitted Exceptions as described in Section 4.2. All prorations shall be made on the basis of a 30-day month and a 365-day year, unless the parties otherwise agree in writing.


(b) Seller's Payments. Seller will pay: (1) the County Documentary
----------------- Transfer Tax, in the amount Escrow Agent determines to be required by law; (2) the cost of the Title Policy described in Section 4.2 equal to the cost of a standard C.L.T.A. Owner's Policy; (3) one-half (1/2) of Escrow Agent's escrow fee or escrow termination charge; and (4) one-half (1/2) of all recording fees and charges and other charges and expenses, in accordance with the customary practices of Escrow Agent.


(c) Buyer's Payment. Buyer shall pay the cost of the Title Policy
--------------- described in Section 4.2 equal to the cost of any endorsements or extensions in coverage to the C.L.T.A. Title Policy and one-half (1/2) of all escrow and recording fees and charges.


3.8 Existing Encumbrances. Escrow Agent is authorized to secure
--------------------- beneficiary demands and requests for reconveyance for those monetary liens which are not Permitted Exceptions pursuant to Section 4.2. Buyer has the right to approve all demands and statements described in this Section, and which are Permitted Exemptions.


3.9 Distribution of Funds and Documents. At the Close of Escrow, Escrow
----------------------------------- Agent shall do each of the following:


(a) Payment of Encumbrances. Pay the amount of those monetary liens
----------------------- which are not Permitted Exceptions to the obligees thereof, in accordance with the demands approved by Buyer, utilizing funds deposited in Escrow by Buyer.


(b) Recordation of Documents. Submit to the County Recorder of San
------------------------ Diego County the Grant Deed for the Property, and each other document to be recorded under the terms of this Agreement or by general usage, and, after recordation, cause the County Recorder to mail the Grant Deed to Buyer, and each other such document to the grantee, beneficiary or person acquiring rights thereunder or for whose benefit said document was recorded.


(c) Non-Recorded Documents. Deliver by United States mail (or hold
---------------------- for personal pickup, if requested): (1) the Title Policy to Buyer; and (2) each other non-recorded document received hereunder to the payee or person acquiring rights thereunder or for whose benefit said document was acquired.


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(d) Distribution of Funds. Deliver by United States mail (or as
--------------------- otherwise instructed
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