MOU for building construction

MEMORANDUM OF UNDERSTANDING

 

THIS MEMORANDUM OF UNDERSTANDING (the ”MOU”) is made and entered into as of this [  ] day of May 2009, by and between PPPPP Korea, a corporation duly organized and existing under the laws of Korea, with its registered office _____________________ (the “PPPPP”) and _________________, a corporation duly organized and existing under the laws of Bermuda, with its regional office at ________________________ (the “HHHHH”). (The PPPPP and the HHHHH are collectively referred to as the “Parties” and individually as the “Party” hereinafter).

                                       

                                                  RECITALS

 

WHEREAS, PPPPP is currently proceeding with the construction and development of an office building in the location of _______________________, a redevelopment project known as ____________________ Project (the “Project”) and scheduled to be completed in the year 2010;

 

WHEREAS, prior to the date of completion, PPPPP wishes to cause DDDD which shall serve as a PFV of the Project (the “Seller”) to sell and HHHHH wishes to cause a buyer  (the “Buyer”) to purchase the office building, which consists of __ floors and underground 5 floors with ______ pyung of gross floor area (the “Property”);

 

WHEREAS, subject to the terms and conditions set forth below, the Parties desire to enter into this MOU which states their respective understanding and intentions regarding the potential sale and purchase of the Property.

 

NOW, THEREFORE, in consideration of the foregoing premises and the mutual covenants and considerations herein, the Parties hereby agree as follows:

 

1.       Purchase Price

 

The estimated purchase price for the Property shall not exceed Korean Won (“KRW”) Two Hundred and Ten Billion (KRW ____________, the “Purchase Price” KRW _____ per pyung), and the PPPPP profit shall not exceed KRW Ten Billion (KRW 10,000,000,000).

 

The final purchase price will be adjusted after HHHHH’s due diligence and subject to other terms and conditions to be included in the Sale and Purchase Agreement.

 

The followings are major conditions to the SPA.

§   Completion of the Land Consolidation

§   Agreement on the Plan and Specification

§   Secure of the Planning Approval and Construction Permit

§   Construction Contract in place

§   Completion of the Project Financing

§   Completion Guarantee and Payment Guarantee by Contractor

In offering the Purchase Price for the Property, HHHHH assumes and PPPPP represents;

 

A.    The Property is expected to be completed by 2010;

B.     The Property is to be completed as a grade A+ intelligent building of which minimum specification would be;

§   Efficiency:

1.       Leasing Efficiency: 55% or above

2.       Floor efficiency higher than 76%

§   Floor Height:

1.       Ceiling to Floor: 2.8 – 3.0 meter

2.       Access Floor: 200 mm

3.       Slab to Slab: 4.2 – 4.4 meter

§   Structure:

1.       Column less Steel Structure

2.       Office Floor loading: 3.5 – 4.0 KN / m2

3.       Server Room: 7.5 KN/m2

§   Power:

1.       100V/m2 city power for usable floor area

2.       25 V/m2 stand by for usable floor area

§   Lighting: 500 Lux, electronic ballast, high efficiency fluorescent lamps and parabolic reflector fixtures in 600 mm x 600 mm ceiling

§   HVAC:

1.       Central Air Conditioning: 150W/m2

2.       AHU Cooling Capacity: 150W/m2

3.       Electric re-heats for perimeter fan powered VAVs

4.       Minimum 8 zone temperature control

5.       24 hour condensate water supply for the tenant server room connection

6.       KMC controls building management system

7.       Temperature Design Criteria

A.      Summer: 23 +/- 2 degrees with 60% +/-5% relative humidity

B.      Winter: 20 +/- 2 degree

 

§   Elevator: 8 high speed passenger elevators with average waiting time less than 20 second at a speed of 3.5 m/s for a low zone and 5.5 m/s for a high zone plus 2 fireman / service and 2 car park shuttle elevators at a speed not less than 3.5 m/s.

 

§   Telecommunication

1.       Telephone line: 5 m2 / line

2.       CAT 6 UTP cable

3.       Fiber Optic backbone

4.       Satellite / Microwave

5.       Video Conferencing

6.       Computer clean earth provision

 

§   Security Systems

1.       24 hr CCTV

2.       Card Access System after our entry

3.       Smoke Detector / Heat Detector

4.       Sprinkler system

 

§   Facade: High quality Curtain Wall

§   Interior Finish: High quality Marble / Granite / Glass / Wood

§   Ceiling: Suspended Grid with 600 mm x 600 mm mineral fiber acoustic tiles

§   Others: Prime Building Grade A

C.     The Property is to be delivered to the Buyer in good operational status and with no defects;

D.    The Property is to be delivered to the Buyer with good and marketable title and free and clear of any and all liens and encumbrances.

E.     The Property shall be delivered through share transfer of the PFV before building completion

 

2.          Deal Structure

 

HHHHH will cause a Buyer to purchase 100% share of the PFV, tax efficient structure allowed by the tax regulation, subject to such other matters as set forth in this MOU and other terms as may be agreed between the Buyer and Seller in a prospective sale and purchase agreement (“SPA”).

 

3.         Payment

 

Due to the unique nature of this sale prior to Property construction and development, the Parties propose the following terms regarding payment of this transaction:

 

A.    Parties assume that Project will qualify for tax exemption law, which would allow for 50% reduction in acquisition and registration tax and 100% exception of income tax.

B.     The Sale and Purchase Agreement shall be executed absent a requirement of payment.

C.     Property construction shall commence subject to: i) Buyer’s approval and satisfaction of the Property design and specifications ii) Seller’s acquisition of the building permit based on the approved design and specification.

D.    Buyer’s down payment shall not exceed 10% of the total purchase price which would be paid as an earnest deposit into an escrow account nominated by the Buyer and such payment shall be subject to the above C and Seller’s receipt of: i) completion of the land consolidation, ii) agreement on the plan and specification, iii) completion of the all government approvals including approval of sale, iv) construction contract in place, v) completion of project financing including the debt and equity and vi) completion guarantee and payment guarantee by Contractor containing provisions on penalty and compensation prevalent in the market.

E.     Balance Payment will be made on Final Completion of the building

 

4.          Exclusivity

 

PPPPP shall grant to HHHHH an exclusive right for a period of 365 days or SPA execution date which ever comes later (“Exclusivity Period”) following PPPPP’s acceptance of this MOU, during which time neither PPPPP nor Seller and / or any affiliates thereof shall not negotiate, discuss nor execute with any third party (other than HHHHH or its agents or representatives) a sale and purchase agreement relating to the sale of the Property or the Seller’s interest therein.

 

5. Due Diligences

 

PPPPP shall provide HHHHH with access to relevant information and materials reasonably requested by HHHHH to conduct its due diligence review with respect to matters related to the Property, including but not limited to, ownership structure, tax, market, and plan & specification review.

 

6.          SPA

 

During the Exclusivity Period, both Parties shall use their best efforts and act in good faith to negotiate, develop and cause Buyer and Seller enter into a mutually acceptable SPA for the sale of the Property and any other relevant agreements.

 

7.          Closing Costs

 

The Seller and the Buyer shall each be responsible for all of its own respective legal and other professional fees and disbursements incurred in connection with the purchase and sale of the Property.

 

8.          Confidentiality

 

Except as may be required by appropriate regulatory authorities or by valid legal process, and except disclosure to their respective professional advisers who have been informed of the confidentiality obligations in this paragraph, each of the Parties hereto agrees not to disclose any information with respect to their negotiations or the sale and purchase of the Property without the consent and participation in such disclosure, of the other Party. If the disclosure is required by appropriate regulatory authorities or by valid legal process, the disclosing party shall notify the non-disclosing Party promptly so that the non-disclosing Party may seek a protective order or other appropriate remedy. The disclosing Party shall give to the non-disclosing Party a copy of each public announcement before any disclosure is made.

 

9.          Warranties of the Parties

 

Both Parties hereto represent and warrant that they have full power and authority to enter into this MOU, and that their respective signatories are duly and lawfully authorized to execute this MOU.

 

10.        Term

 

This MOU shall come into effect on the date hereof and shall continue for a period of 365 days or SPA execution date which ever comes later from the PPPPP’s acceptance of this MOU unless it is terminated earlier by a) the unanimous written consent of both Parties, or b) the execution of the definitive SPA.

 

The obligations of the Parties under Paragraph 7 herein shall survive the termination of this MOU for a period of 1 year after the date of such termination. 

 

If HHHHH wants to extend the Exclusivity Period before its expiration, HHHHH shall give PPPPP advance written notice and PPPPP shall not unreasonably withhold the extension of the Exclusivity Period.

 

11.         Governing Law

 

This MOU shall be governed and construed in accordance with the laws of the Republic of Korea, with regard to its conflict of law principles.

 

Neither party shall have any legal obligation to complete the proposed transaction as contemplated hereunder or have any obligations to each other. A full written agreement shall be required to make any legally binding and enforceable terms and obligations on both parties. Notwithstanding anything to the contrary in this MOU, this MOU will constitute a legally binding and enforceable agreement on both Parties with respect to the matters set forth in the paragraphs 8, 9, 10 and 11.

 

 

IN WITNESS THEREOF, both Parties mutually accept the terms and conditions stipulated in this MOU and further agree and acknowledge the mutual acceptance of this MOU by affixing the authorized signatures on this MOU as of the date first set forth above.

 

PPPPP Korea Co., Ltd.

 

________________________

Name:

Title:

 

HHHHH

 

_________________________

Name: LOPOE

Title: Principal