PROPERTY CONTRIBUTION AGREEMENT
 
AND JOINT ESCROW INSTRUCTIONS

 
 

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TABLE OF CONTENTS
       
Page
1.
 
Formation of the Partnership
3
2.
 
Capitalization of the Partnership
3
           
2.1
Contribution of the Property by LGI De
3
   
2.1.1
Net Value of the Property
3
   
2.1.2
Express Exclusions from "Property"
3
           
2.2
 
NetREIT's Capital Contributions
3
   
2.2.1
NetREIT's Contribution to Preferred Stock
4
   
2.2.2
NetREIT's Contribution of Cash
4
   
2.2.3
NetREIT's Deposit of Cash
4
   
2.2.4
Closing Cash Payment
4
           
2.3
Illustration of Capitalization Intent
5
           
2.4
The Partnership Agreement and Related Agreements
5
   
2.4.1
Conversion Rights Agreement
5
   
2.4.2
NetREIT's Call Option
5
3.
 
Limitations on Benefits
5
4.
 
Conditions to Parties' Obligations
6
           
4.1
 
NetREIT's Pre-Closing Conditions
6
 
4.1.1
 
Title
6
 
4.1.2
 
Physical Inspections
7
 
4.1.3
 
Plans, Permits, Reports and Related Information
8
 
4.1.4
 
Existing Environmental Reports
9
 
4.1.5
 
Governmental Authority and Other Inquiries
9
 
4.1.6
 
Contracts
9
 
4.1.7
 
Natural Hazard Disclosure
9
 
4.1.8
 
Leases and Financial Information
10
 
4.1.9
 
Financing Contingency
10
 
4.1.10
 
Review of Operating Statements
10
           
4.2
LGI De's Pre-Closing Conditions
11
   
4.2.1
The Partnership's Organizational Documents
11
   
4.2.2
Preferred Stock Documentation
12
   
4.2.3
Documentation Establishing the Options
13
   
4.2.4
Financing Contingency
14
   
4.2.5
Effort to Remove LGI De’s Liability for Loan
14
                     
4.3
Failure of Pre-Closing Conditions; Approval of General Contingency Matters
14
           
4.4
Closing Conditions
15
   
4.4.1
NetREIT's Closing Conditions
15
   
4.4.2
LGI De's Closing Conditions
16
           
4.5
Failure of Closing Conditions
17
           
4.6
Return of Due Diligence Materials
18
           
4.7
Investigations, Obligations and Indemnity
18
   
4.7.1
Inspection Obligations
18
   
4.7.2
NetREIT's Indemnity
18
         
5.
 
Remedies/Liquidated Damages
19
           
5.1
NetREIT's Default
19
           
5.2
LGI De's Default
19
         
6.
 
Closing and Escrow
20
           
6.1
Escrow Instructions
20
           
6.2
Closing and Close of Escrow
20
   
6.2.1
Closing
20
   
6.2.2
Closing Date
21
           
6.3
Conveyance
21
           
6.4
Closing Documents
21
   
6.4.1
LGI De's Closing Documents
21
   
6.4.2
LGI De's Deliveries Outside of Escrow
22
   
6.4.3
NetREIT's Closing Contributions and Documents
22
           
6.5
Actions of Escrow Holder
22
   
6.5.1
Disbursement of Funds
22
   
6.5.2
Recordation
23
   
6.5.3
Delivery of Documents
23
           
6.6
Closing Costs
23
   
6.6.1
LGI De's Closing Costs
23
   
6.6.2
The Partnership's Closing Costs
23
   
6.6.3
General Allocation
24
           
6.7
Real Estate Commissions
24
           
6.8
Real Estate Reporting Person
24
           
6.9
Prorations
24
   
6.9.1
General
24
   
6.9.2
Rent, Tenant Charges and Arrearages
25
   
6.9.3
Real Estate Taxes and Assessments
26
   
6.9.4
Operating Expenses
27
   
6.9.5
Closing Statement; Final Proration Adjustment
27
         
7.
 
Interim Operation and Leasing of the Property; Leasing Costs
28
           
7.1
Operation
28
           
7.2
Leasing
28
           
7.3
Contracts
29
           
7.4
Leasing Costs
29
         
8.
 
Casualty and Condemnation
29
           
8.1
Immaterial Casualty or Condemnation
29
           
8.2
Material Casualty or Condemnation
30
         
9.
 
Representations and Warranties
30
           
9.1
Representations and Warranties of LGI De
     
9.1.1
Legal Power and Authorization
31
   
9.1.2
Income Tax Consequences
31
   
9.1.3
Requisite Action
31
   
9.1.4
Individual(s) Authority
31
   
9.1.5
Foreign Person Affidavit
32
   
9.1.6
ERISA Matters
32
   
9.1.7
Bankruptcy Matters
32
   
9.1.8
Contracts
32
   
9.1.9
Leases
32
   
9.1.10
Pending Actions
32
   
9.1.11
LGI De's Documents
32
   
9.1.12
OFAC
32
           
9.2
Qualification of LGI De's Representations and Warranties
33
           
9.3
Definition of LGI De's Knowledge
33
           
9.4
Survival Period
34
           
9.5
Representations and Warranties of NetREIT
34
   
9.5.1
Legal Power
34
   
9.5.2
Duly Authorized
34
   
9.5.3
Requisite Action
34
   
9.5.4
Individuals Authority
34
   
9.5.5
ERISA Representations
34
   
9.5.6
OFAC
35
   
9.5.7
Pending Actions
35
   
9.5.8
NetREIT's Knowledge
35
         
10.
 
AS-IS Condition of Property
35
         
11.
 
Limited Liability
37
         
12.
 
Release
37
         
13.
 
Notices
39
         
14.
 
Provisions of General Application
41
           
14.1
Entire Agreement; Participation in Drafting
41
           
14.2
Successors and Assigns
41
           
14.3
Assignment by the Parties
41
           
14.4
Severability
42
           
14.5
Governing Law
42
           
14.6
Modifications
42
           
14.7
Confidentiality
42
           
14.8
Dispute Costs
43
           
14.9
Time of the Essence; Business Days
43
           
14.1
Required Actions of NetREIT and LGI De
43
           
14.11
No Recordation
43
           
14.12
Drafts not an Offer to Enter into a Legally Binding Contract
43
           
14.13
Multiple Counterparts
43
           
14.14
Electronic Signatures
44
           
14.15
Interpretation
44
           
14.16
Exhibits
44
           
14.17
No Partnership/Fiduciary Relationship
44
                   
EXHIBITS
     
EXHIBIT A
 
LEGAL DESCRIPTION OF THE REAL PROPERTY
 
EXHIBIT B
 
GRANT DEED
 
EXHIBIT C
 
GENERAL ASSIGNMENT
 
EXHIBIT D
 
BILL OF SALE
 
EXHIBIT E
 
FIRPTA CERTIFICATE
 
EXHIBIT F
 
ASSIGNMENT OF LEASES
 
EXHIBIT G
 
LIST OF CONTRACTS
 
EXHIBIT H
 
ESTOPPEL CERTIFICATE
 
EXHIBIT I
 
NOTICE TO TENANTS
 
EXHIBIT J
 
IDENTIFIED LEASING COSTS
 
EXHIBIT K
 
LIST OF LGI DE’S DOCUMENTS
 
EXHIBIT L
 
LIST OF LEASES
 

       
--
 

 
 

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To Escrow: Chicago Title Company
701 "B" Street, Suite 760
San Diego, CA 92101
Phone : (619) 230-6363
Fax: (619) 230-6368
 
Escrow No. ______________
Escrow Officer:  Della DuCharme
Title Order No.  _____________
 
Title Officer:  Zona Weekley
Chicago Title Company
Lawyers Title
Commonwealth Land Title Insurance Company
2365 Northside Drive, Suite 500
San Diego, CA 92108
Phone: (619) 521-3492
Fax: (619) 521-3691
E-mail: zona.weekley@ctt.com
 

 
THIS PROPERTY CONTRIBUTION AGREEMENT AND JOINT ESCROW INSTRUCTIONS (this
"Agreement") is made and entered into as of _____________, 2011 (the "Agreement
Date"), by and between LGI Delaware, LLC, a Delaware limited liability company
("LGI De"), and NetREIT Inc., a Maryland corporation ("NetREIT"). LGI De and
NetREIT are sometimes referred to herein as the "Parties" and individually as a
"Party."
 
R E C I T A L S :
 
A.           LGI De and NetREIT desire to form, organize and capitalize NetREIT
NC LP, a proposed California limited partnership (the "Partnership").

B.           To capitalize the Partnership, NetREIT and LGI De desire to make
the following capital contributions:

1.           LGI De desires to contribute consideration for its limited partner
interest in the Partnership pursuant to one of the following alternatives:

(a) LGI De will contribute all of its fee interest in (i) that certain improved
real property comprised of those two adjacent multi-tenant industrial properties
located at 940 West 19th Street and 2101 Haffley Avenue, National City,
California, APN No. 559-040-35-01 and APN No. 559-04-36-01, respectively, as
legally described in Exhibit A attached hereto, and any easements,
appurtenances, rights and privileges belonging thereto (collectively, the "Real
Property"); (ii) the buildings and any other site improvements located on the
Real Property which are owned by LGI De (collectively, the "Improvements");
(iii) the fixtures, machinery, equipment and other tangible personal property
owned by LGI De (if any) located in or on the Real Property or the Improvements
and used exclusively in connection with the Real Property (collectively, the
"Personal Property"); and (iv) the intangible personal property owned by LGI De
which is assignable and relates exclusively to the Real Property, the
Improvements or the Personal Property, including any warranties, guaranties,
service contracts, plans and specifications, transferable licenses and permits,
and entitlements and appurtenances (collectively, the "Intangible Property").
The Real Property, the Improvements, the Personal Property and the Intangible
Personal Property are collectively referred to herein as the
 

       
 
 

 
 

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"Property."  LGI De's contribution of the Property as described in the foregoing
is referred to as the "Property Contribution."
 
(b)           In the alternative to subparagraph (a) above, at the request of
LGI De, and only upon the written consent and approval of NetREIT, the member(s)
of LGI De shall contribute all of the outstanding membership interest in LGI De
to the Partnership in consideration for the limited partner interest otherwise
issued to LGI De referenced in Section 2.1. In such event, the Parties shall
amend this Agreement as necessary to effect the Contributions of membership
interests in LGI De in place of its direct contribution of the Property.  The
contribution of LGI De's indirect interest in the Property pursuant to the
foregoing is referred to as the "LLC Membership Contribution."

2.           NetREIT desires to contribute the following to the capital of the
Partnership (the "Partnership's Capital"):

(a)           Cash as follows:

(i)           as General Partner of the Partnership the sum of $5,000.00; and

(ii)           in consideration for its limited partner interest in the
Partnership, cash in the amount necessary to effect the Capitalization (the
"Capitalization Costs"). The Parties currently estimate the Capitalization Costs
will be $468,325, and shall be comprised of the actual (i) security deposits
restored by NetREIT pursuant to Section 6.9.2(c); (ii) broker commissions; (iii)
escrow costs and transfer taxes; and (iv) all other loan interest prorations due
at closing;

(b)           In consideration for its limited partner interest in the
Partnership, NetREIT will contribute the number of shares of its $1,000
liquidation value, 6.3% Preferred Stock to the Partnership's Capital (the
"Preferred Stock") equal to the Net Value of the Property, as defined, divided
by the liquidation value. Based on the current estimated Net Value of the
Property of $1,531,675, NetREIT would contribute 1,531.675 shares of its
Preferred Stock to the Partnership.

C.           LGI De and NetREIT desire to enter into certain option agreement
(the "Stock Option") and that certain call option (the "Call Option") agreements
respecting LGI De's limited partner interest in the Partnership and with respect
to the Preferred Stock (together the "Options").

D.           LGI De and NetREIT desire to receive interests in the Partnership
based upon their cash contributions and the agreed upon values of their non-cash
contributions to the capital of the Partnership.

E.           The Parties desire to establish an escrow (the "Escrow") with
Chicago Title Company, as identified in detail in Section 13 ("Escrow Holder")
through which the contributions of the Property to the Capital of the
Partnership, including the conveyance of the
 
 
 

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Property, shall be effected at the close of the Escrow as provided in this
Agreement (the "Closing").

F.           The Parties agree that capitalized terms used in this Agreement
shall have the meanings ascribed to them in this Agreement.
 
NOW, THEREFORE, in consideration of the mutual promises and covenants contained
herein, and other good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, LGI De and NetREIT hereby agree that the terms
and conditions of this Agreement and their instructions to the Escrow Holder
with regard to the Escrow created pursuant hereto are as follows:
 
1. Formation of the Partnership.  NetREIT shall cause the Partnership to be
formed in accordance with California law. NetREIT, or its wholly owned
subsidiary, shall be the sole general partner and NetREIT and LGI De shall be
the sole limited partners.
 
2.  Capitalization of the Partnership.
 
2.1 Contribution of the Property by LGI De.  At the Closing, LGI De shall either
(x) make the Partnership Contribution of the Property to the Partnership; or (y)
make the LLC Membership Contribution to the Partnership, and NetREIT shall cause
the Partnership to accept such contribution under the terms and conditions set
forth in this Agreement.
 
2.1.1 Net Value of the Property. The Net Value of the Property is $14,500,000,
less the sum of the following:
 
(a) The unpaid balance of the current loan secured by the Property (the "Loan")
at the Closing, which is estimated to be $12,500,000; and

(b) The cash necessary to effect the Capitalization (the "Capitalization
Costs"). The Parties currently estimate the Capitalization Costs will be
$468,325, and shall be comprised of the actual (i) security deposits; (ii)
broker commissions; (iii) escrow costs and transfer taxes; and (iv) all other
loan interest prorations due at the Closing; and

(c) Any credit or debit to a Party by reason of Section 4.2.4.
 
2.1.2 Express Exclusions from "Property".  Notwithstanding anything to the
contrary contained in this Agreement, the Parties agree that the term "Property"
shall not include any of the following items, all of which are excluded from
either the Property Contribution or the LLC Membership Contribution to the
Partnership: (a) all cash on hand, checks, money orders and accounts receivable;
(b) any accounts maintained by or on behalf of LGI De or any affiliate of LGI De
with respect to the Property; and (c) any refundable cash or other security
deposits or any bonds posted by or on behalf of LGI De with any lender,
governmental authority, utility or other Party.
 
2.2 NetREIT's Capital Contributions. NetREIT shall make the following
contributions to the Partnership's Capital:
 
 
 
 

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2.2.1 NetREIT's Contribution to Preferred Stock. For its limited partner
interest in the Partnership, NetREIT shall deliver the Preferred Stock,
estimated to be one thousand five hundred thirty one and six hundred seventy
five one thousandths (1,531.675) shares, issued in the name of the Partnership,
which number shall be adjusted at the Closing as required herein. The exact
number of such shares to be adjusted at the Closing to equal (x) the Net Value
of the Property as of the Closing, divided by (y) $1,000.00.  The Statement of
Rights, Preferences and Privileges of the Preferred Stock (the "Preferred Stock
Statement") shall be filed with the Maryland Secretary of State and authorize
NetREIT's issuance of the Preferred Stock with the rights, preferences and
privileges set forth therein.  The exact number of shares of the Preferred Stock
shall be determined at Closing; and
 
2.2.2 NetREIT's Contribution of Cash. NetREIT shall contribute cash to the
capital of the Partnership as follows:

(a) By Closing, cash in the amount of $5,000.00 in its capacity as General
Partner; and
 
(b) By Closing, cash in the amount of the Capitalization Costs.
 
2.2.3 NetREIT's Deposit of Cash. Within one (1) Business Day after the Opening
of Escrow, NetREIT shall deposit by wire transfer of immediately available funds
into the escrow account to be opened with Escrow Holder (the "Escrow Account")
the amount of One Hundred Fifty Thousand and No/100ths Dollars ($150,000.00) as
a deposit (the "Deposit"). The Escrow Account shall be an interest bearing bank
account acceptable to NetREIT. Any interest earned on the Deposit while held by
Escrow Holder shall be added to and become a part of the Deposit.  The Deposit
shall be refundable to NetREIT until NetREIT delivers an Approval Notice to LGI
De that all of the Pre-Closing Conditions have been satisfied or waived. If
NetREIT fails to deliver an Approval Notice prior to 5:00 p.m. (Pacific Time)
thirty (30) Business Days from the mutual execution of this Agreement (the "Due
Diligence Deadline"), then this Agreement shall automatically terminate, Escrow
Holder shall return the Deposit to NetREIT (less one-half (1/2) of any title and
escrow cancellation fees and charges, which NetREIT hereby agrees to pay), and
thereafter neither Party shall have any further rights or obligations hereunder
except for NetREIT's obligations and indemnities under Section 4.1.2,
Section 4.6, Section 4.7, Section 6.7, and Section 14.7 (collectively,
"NetREIT's Surviving Obligations"). If NetREIT fails to deliver the Deposit into
the Escrow Account strictly as and when contemplated herein, LGI De shall have
the right to terminate this Agreement by delivering written notice thereof to
NetREIT at any time prior to Escrow Holder's receipt of the Deposit and
thereafter neither Party shall have any further rights or obligations hereunder
except for NetREIT's Surviving Obligations.
 
2.2.4 Closing Cash Payment. The balance of NetREIT's Cash Contributions to the
Partnership's Capital as required by Section 2.2 remaining after deduction for
the Deposit and as adjusted by any prorations and credits expressly provided in
this Agreement shall be paid by NetREIT by wire transfer of immediately
available funds into the Escrow Account on the Closing Date, as provided in
Section 4.4.2(a).
 
 
 

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2.3 Illustration of Capitalization Intent.  As an illustration of the foregoing,
without the intent of limiting the provisions of this Section 2, the Parties
agree that the following example constitutes their understanding as to the
status of the Partnership's Capital as a result of the application of this
Section 2.  As provided in this Section 2, and subject to adjustment based on
the actual Capitalization Costs and Loan balance at Closing, the Parties agreed
upon values of their respective contributions to the Partnership's Capital, the
Partnership's Capital at Closing would be:

   
Value
   
Percentage
of Total Value
 
NetREIT's General Partner Contribution:
  $ 5,000       0.16 %
LGI De's Limited Partner Contribution:
    1,531,675       49.92 %
NetREIT's Limited Partner Contribution:
    1,531,675       49.92 %
Total
  $ 3,068,350       100 %

Based on the foregoing, the respective percentage interests in the Partnership
at Closing would be:

NetREIT, as General Partner:
 
 0.16%
LGI De as Limited Partner:
 
 49.92%
NetREIT as Limited Partner:
 
 49.92%
Total
 
 100.00%

 
2.4 The Partnership Agreement and Related Agreements. At Closing, there shall be
in effect the Partnership's Agreement of Limited Partnership (the "Partnership
Agreement") and each of the following contracts.  Each such agreement shall be
in the form agreed to by the Parties.
 
2.4.1 Conversion Rights Agreement. The Partnership and LGI De shall enter into
the Stock Option agreement (which may be included in the Partnership Agreement
or in a separate agreement) that provides LGI De the option to convert its
limited partner interest into shares of the Preferred Stock.  The Stock Option
shall provide LGI De the right to convert its limited partner interest into the
number of shares of Preferred Stock equal to the Net Value of the Property at
the Closing (subject to Partner anti-dilution and other specified and agreed
upon adjustments) divided by $1,000, at any time or from time to time until
December 23, 2021.
 
2.4.2 NetREIT's Call Option. LGI De, the Partnership and NetREIT shall enter
into the Call Option agreement.  The Call Option shall provide that at any time
after December 23, 2021, NetREIT may require LGI De to convert any limited
partner interest it then has in the Partnership into shares of Preferred Stock
at the same price as the conversion price of the Stock Option.
 
3. Limitations on Benefits.  It is the explicit intention of NetREIT and LGI De
that, except for the Released Parties referred to above in this Agreement, no
person or entity, including the Partnership, other than NetREIT and LGI De and
their permitted successors and assigns, is or shall be entitled to bring any
action to enforce any provision of this Agreement against either of the Parties
hereto, and the covenants, undertakings and agreements set forth in
 
 
 

--------------------------------------------------------------------------------

 
 
this Agreement shall be solely for the benefit of, and shall be enforceable only
by, NetREIT, the Partnership and LGI De, or their respective successors and
assigns as permitted hereunder.  Nothing contained in this Agreement shall under
any circumstances whatsoever be deemed or construed, or be interpreted, as
making any third party (including the Broker or NetREIT's Lender) a beneficiary
of any term or provision of this Agreement or any instrument or document
delivered pursuant hereto, and NetREIT and LGI De expressly reject any such
intent, construction or interpretation of this Agreement.
 
4. Conditions to Parties' Obligations.
 
4.1 NetREIT's Pre-Closing Conditions. NetREIT's obligations under this Agreement
shall be subject to the satisfaction of or waiver by NetREIT of the following
matters described below in this Section 4.1 (collectively, "NetREIT's
Pre-Closing Conditions" and together with LGI De's Pre-Closing Conditions as
defined in Section 4.2, the "Pre-Closing Conditions") on or before the earlier
of (a) the time periods specified in each subsection below, or if not so
specified, (b) the Due Diligence Deadline:
 
4.1.1 Title. Upon execution of this Agreement, LGI De shall deliver, or cause to
be delivered, to NetREIT: (a) a preliminary title report for the Real Property
(the "Title Report") issued by Chicago Title Company (the "Title Company"),
(b) any underlying documents evidencing exceptions to title referred to in the
Title Reports, and (c) LGI De's existing ALTA Land Title Survey for the Real
Property, as identified on the attached Exhibit K (collectively, the "Existing
ALTA Survey"). The Title Report, such underlying documents evidencing title
exceptions therein and the Existing ALTA Survey are referred to herein
collectively as the "Title Documents." NetREIT shall have until the expiration
of the Due Diligence Deadline to either approve the exceptions to title and
other matters contained in the Title Documents or to deliver written notice to
LGI De (the "Title Objection Notice") specifying any title objections or other
matters in the Title Documents to which NetREIT objects (collectively, "Title
Objections"). NetREIT's failure to timely deliver a Title Objection Notice shall
be deemed to be NetREIT's approval of all of the exceptions to title and other
matters shown in or disclosed by the Title Documents and any update thereof
obtained by NetREIT upon the expiration of the Due Diligence Deadline. NetREIT
shall not be entitled to deliver a Title Objection Notice that is subject to any
condition other than the issuance of a title endorsement as part of the Title
Policy and any title exception or other matter set forth in the Title Documents
that is approved subject to any condition other than the issuance of a title
endorsement as part of the Title Policy shall be deemed to be a Title Objection
which has been objected to by NetREIT.  LGI De shall have a period of five (5)
Business Days after LGI De's receipt of the Title Objection Notice to elect by
written notice to NetREIT (the "Title Response Notice") to either (i) attempt to
remove or cure at or prior to the Closing some or all of the Title Objections,
or (ii) to advise NetREIT that LGI De is unable or unwilling to remove or cure
 
 
 
 

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some or all of the Title Objections. Such election by LGI De shall be at LGI
De's sole option and discretion; it being understood LGI De has no obligation to
remove or cure any Title Objections (other than as provided in the last sentence
of this Section 4.1.1 as to monetary liens created by LGI De). If LGI De fails
to timely deliver to NetREIT the Title Response Notice, it shall be conclusively
deemed that LGI De has informed NetREIT that LGI De is unable or unwilling to
remove or cure any of the Title Objections.  If LGI De advises NetREIT in LGI
De's Title Response Notice (or is deemed to have advised NetREIT) that LGI De is
unable or unwilling to remove or cure some or all of the Title Objections, then
NetREIT shall have until the date that is ten (10) Business Days after receipt
of the Title Response Notice to either terminate this Agreement or to waive such
Title Objections pursuant to an Approval Notice delivered to LGI De in
accordance with Section 4.3 below.  Notwithstanding anything to the contrary
contained in this Agreement, NetREIT's delivery of an Approval Notice to LGI De
pursuant to Section 4.3 below shall be deemed to be NetREIT's election to waive
all Title Objections with respect to the Title Documents and NetREIT's approval
of the Title Documents and all title exceptions and other matters disclosed
thereby.  If any amendment or supplement to the Title Report issued after the
expiration of the Due Diligence Deadline reveals any new material defect or
exception to title not disclosed by the Title Documents, NetREIT shall have the
same rights to object to such new defect or exception as provided above with
respect to the Title Documents; provided, however, NetREIT must deliver any
Title Objection Notice to LGI De within five (5) Business Days after NetREIT's
receipt of the amendment or supplement to the Title Report and NetREIT must
elect to terminate this Agreement or waive any Title Objections within two (2)
Business Days after LGI De advises NetREIT in LGI De's subsequent Title Response
Notice (or is deemed to advise NetREIT) that LGI De is unable or unwilling to
cure some or all of the Title Objections regarding the amendment or supplement
to the Title Report.  Except as provided in the immediately following sentence,
LGI De's failure to remove or cure at or prior to Closing those specified Title
Objections which LGI De has elected to attempt to remove or cure in any Title
Response Notice (whether delivered prior to the Due Diligence Deadline or any
subsequent Title Response Notice) shall be deemed to be a failure of the Closing
Condition in Section 4.4.1(b) below, in which event, unless NetREIT withdraws
such Title Objection(s) in writing, this Agreement shall terminate, and the
Deposit shall be returned to NetREIT (less one-half (1/2) of any escrow and
title cancellation fees and charges, which NetREIT hereby agrees to pay), and
the parties shall have no further obligations hereunder except for NetREIT's
Surviving Obligations.
 
4.1.2 Physical Inspections.  After NetREIT has provided to LGI De a certificate
of insurance(s) evidencing NetREIT's or NetREIT's agents', consultants' and/or
contractors' (as the case may be) procurement of a commercial general liability
insurance policy as required herein, LGI De shall permit NetREIT and NetREIT's
authorized agents, consultants and contractors to enter upon the Property during
reasonable business hours to make and perform such non-invasive environmental
evaluations, and other non-invasive inspections, investigations, tests and
studies of the physical condition of the Property as NetREIT may elect to make
or obtain.  NetREIT shall maintain, and shall ensure that NetREIT's agents,
consultants and contractors maintain, public liability and property damage
insurance insuring against any liability arising out of any entry, inspections,
investigations, tests or studies of the Property pursuant to the provisions
hereof.  Such insurance maintained by NetREIT and/or NetREIT's agents,
consultants and contractors (as applicable) shall be in the amount of Two
Million Dollars ($2,000,000) combined single limit for injury to or death of one
or more persons in an occurrence, and for damage to tangible property (including
loss of use) in an occurrence.  The policy maintained by NetREIT shall insure
the contractual liability of NetREIT covering the indemnities herein and shall
(a) name LGI De (and their successors, assigns and affiliates) as additional
insureds, and (b) contain a provision that "the insurance provided by NetREIT
hereunder shall be primary and non-contributing with any other insurance
available to LGI De."  NetREIT shall provide LGI De with evidence of such
insurance coverage prior to any entry, inspections, investigations, tests or
studies of the Property by NetREIT or any of NetREIT's
 
 
 

--------------------------------------------------------------------------------

 
 
agents, consultants or contractors.  The aforementioned insurance coverage may
be obtained under a blanket policy carried by NetREIT or NetREIT's agents,
consultants or contractors, as the case may be.  Notwithstanding anything to the
contrary contained in this Agreement, NetREIT shall not be permitted to
undertake any invasive, intrusive or destructive investigation, testing or study
of the Property, including a "Phase II" environmental assessment, without in
each instance first obtaining LGI De's written consent thereto, which consent
LGI De may give, withhold or condition in LGI De's sole and absolute
discretion.  Prior to any entry onto the Property (and on each and every
occasion), NetREIT shall deliver to LGI De prior written notice, or prior verbal
notice wherein NetREIT actually speaks with a representative of LGI De (i.e. not
a voice mail message), not less than two (2) Business Days prior to such entry,
and NetREIT shall afford LGI De a reasonable opportunity to have a
representative of LGI De present to accompany NetREIT or NetREIT's agents,
consultants and contractors while any inspections, investigations, tests or
studies of the Property are made or performed; provided, however, that entry
onto the Property by NetREIT and/or NetREIT's agents, consultants and/or
contractors (as the case may be), shall be subject to any restrictions and/or
instructions as LGI De shall deem necessary, in its sole discretion; and
provided, further, that NetREIT hereby agrees to cooperate with and abide by LGI
De's restrictions and/or instructions.  If requested by LGI De, NetREIT shall
provide LGI De the identity of the company or party(s) who will perform such
inspections, investigations, tests or studies and the proposed scope of the
inspections, investigations, tests or studies. LGI De shall have the right to
approve or disapprove any proposed inspections, investigations, tests or studies
and the party(s) performing the same within five (5) Business Days after LGI
De's receipt of such notice identifying the same. LGI De's failure to notify
NetREIT of LGI De's disapproval of any proposed inspections, investigations,
tests or studies and the party(s) performing the same within such five (5)
Business Day period shall be deemed LGI De's approval thereof, except to the
extent said proposed inspections, investigations, tests or studies relate to
"Phase II" environmental matters or constitute invasive, intrusive or
destructive inspections, investigations, tests or studies, in which event LGI
De's failure to advise NetREIT of LGI De's approval or disapproval of any
proposed inspections, investigations, tests or studies and the party(s)
performing the same within such five (5) Business Day period shall be deemed LGI
De's disapproval thereof.  NetREIT shall not contact any tenants, without first
obtaining the prior consent of LGI De.  Upon LGI De's request, NetREIT shall
provide LGI De with the identity of the company or persons who will perform any
tenant interview or contacts.  LGI De or its representative(s) may be present at
any such interview or meeting with a tenant and NetREIT will reasonably
cooperate and coordinate with LGI De to effectuate same.  NetREIT shall have
until the Due Diligence Deadline to approve the results of any evaluations,
inspections, investigations, tests and studies of the Property as NetREIT
desires to have made or performed by delivering an Approval Notice to LGI
De.  NetREIT's failure to deliver an Approval Notice to LGI De prior to the Due
Diligence Deadline shall be deemed to be a failure of this Pre-Closing Condition
and NetREIT's election to terminate this Agreement pursuant to Section 4.3
below.
 
4.1.3 Plans, Permits, Reports and Related Information. Within five (5) days
after to the Agreement Date, LGI De shall deliver to NetREIT copies of those
documents identified on the attached Exhibit K (collectively, the "LGI De's
Documents.  In no event shall LGI De be required to prepare or obtain any
information, report, document, survey, study, report or other item not presently
in LGI De's possession.  Furthermore, except as provided on Exhibit K, in no
event shall LGI De be obligated to deliver or make available to NetREIT or
NetREIT's agents, consultants or contractors any of the following:  (a) any
third party
 
 
 

--------------------------------------------------------------------------------

 
 
purchase inquiries and correspondence, any appraisals and any economic
evaluations of the Property; (b) LGI De's organizational documents, any records,
internal budgets, financial projections, reports or correspondence prepared by
LGI De or any advisor exclusively for LGI De or any of LGI De's constituent
owners and any other internal documents (other than documents relating to the
zoning and other land use entitlements of the Real Property and the physical or
environmental condition of Real Property); and (c) any documents or materials
which are subject to the attorney/client privilege or which are the subject of a
confidentiality obligation.  NetREIT shall have until the Due Diligence Deadline
to approve all of the LGI De's Documents by delivering an Approval Notice to LGI
De.
 
4.1.4 Existing Environmental Reports.  LGI De shall include within the LGI De's
Documents any existing environmental reports conducted, in connection with the
environmental condition of the Property, including any environmental assessments
and studies of the Property.
 
4.1.5 Governmental Authority and Other Inquiries.  Prior to the Due Diligence
Deadline, NetREIT and NetREIT's authorized agents, consultants and contractors
shall have the right, as part of NetREIT's due diligence investigation, to
contact governmental authorities about various aspects of the Property.  NetREIT
shall provide LGI De by prior written notice (or prior verbal notice as provided
in Section 4.1.2 above) not less than five (5) Business Days before any such
inquiry, contact, interview and meeting by NetREIT and NetREIT's authorized
agents, consultants and contractors with any governmental authority, and LGI De
shall have the right to be present and otherwise participate in all such
inquiries, contacts, interviews and meetings, provided, however, that LGI De's
consent shall not be required prior to NetREIT's request for routine zoning or
UCC-1 financing reports prepared by third parties in the ordinary course of
NetREIT's due diligence (e.g., Planning, Zoning and Resources Corporation
reports).  NetREIT shall have until the Due Diligence Deadline to approve the
results of any inquiries of governmental authorities which NetREIT desires to
make by delivering an Approval Notice to LGI De.
 
4.1.6 Contracts.  Within five (5) days after the Agreement Date, LGI De shall
deliver to NetREIT copies of all service agreements, maintenance agreements,
easement agreements, improvement agreements, license agreements, and other
agreements related to or affecting the Property and not included as part of the
Title Documents delivered pursuant to Section 4.1.1 hereof (collectively, the
"Contracts").  NetREIT shall have the option to require that all Contracts be
either assigned to NetREIT at Closing pursuant to the General Assignment (as
defined herein) or terminated prior to Closing.
 
4.1.7 Natural Hazard Disclosure.  LGI De may be required to disclose if the
Property lies within the following natural hazard areas or zones:  (a) a special
flood hazard area designated by the Federal Emergency Management Agency; (b) an
area of potential flooding; (c) a very high fire hazard severity zone; (d) a
wild land area that may contain substantial forest fire risks and hazards;
(e) an earthquake fault zone; or (f) a seismic hazard zone.  Escrow Holder shall
engage the services of Title Company (which, in such capacity, is referred to
herein as the "Natural Hazard Expert") to examine the maps and other information
specifically made available to the public by government agencies for the
purposes of enabling LGI De to fulfill LGI De's disclosure obligations, if and
to the extent such obligations exist, with
 
 
 

--------------------------------------------------------------------------------

 
 
respect to the natural hazards referred to in this section and to report the
result of the Natural Hazard Expert's examination to NetREIT in writing, at
least five (5) days prior to the Due Diligence Deadline.
 
4.1.8 Leases and Financial Information.  Within five (5) days after the
Agreement Date, LGI De shall deliver to NetREIT for inspection by NetREIT, true
and complete copies of the following described documents and information:  (i)
the existing leases of the Property, together with any amendments or
modifications thereto (collectively, the ("Leases"); and (ii) a current rent
roll for the Property, in the format customarily used by LGI De, with the
information contained therein made as of the date stated thereon; and (iii)
year-end operating statements for the Property for the most recent full calendar
year prior to the Closing and to the extent available and in LGI De's
possession, the current year and the second full calendar year prior to the
Closing.  LGI De shall assign its rights and interests in and to the Leases and
all security deposits (if any) then being held by LGI De to NetREIT at the
Closing pursuant to the Assignment and Assumption of Leases. NetREIT's failure
to deliver an Approval Notice to LGI De prior to the Due Diligence Deadline
shall be deemed to be a failure of this Pre-Closing Condition and NetREIT's
election to terminate this Agreement pursuant to Section 4.3 below.
 
4.1.9 Financing Contingency. Closing shall be contingent upon:
 
(a)           either:
 
(i) NetREIT's assumption of the Loan (pursuant to which any and all personal
liability of Lee Gittleman is removed); or
 
(ii) NetREIT obtaining a new loan with terms removing any and all personal
liability of Lee Gittleman;
 
and,
 
(b)           the satisfaction of the IRC 752(b) debt allocation to LGI De in
accordance with Section 9.1.2.
 
(c)           Anything in this Agreement to the contrary notwithstanding,
nothing in this Agreement shall obligate either Party to perform under this
Agreement and close the transaction contemplated thereby, unless each Party, in
its sole discretion, accepts the terms and conditions of the following:  As
applicable, the assumption of the Loan referenced in subsection 4.1.9(a)(i) or
the new loan referenced in subsection 4.1.9(a)(ii), and the terms and conditions
of debt allocation referenced in subsection 4.1.9(b).
 
The Due Diligence Deadline shall be extended to allow NetREIT sixty (60) days
following the Agreement Date to satisfy this Financing Contingency and the Due
Diligence Deadline shall be further extended as necessary for any delay in
NetREIT’s ability to satisfy the Financing Contingency, which delay is beyond
NetREIT's control.
 
4.1.10 Review of Operating Statements. Within 60 days following the Closing and
upon NetREIT's reasonable prior written request and at NetREIT's sole cost and
expense, NetREIT shall cause its independent, outside accounting firm (herein
"Auditor") to
 
 
 

--------------------------------------------------------------------------------

 
 
prepare an audit of the operating income from the Property in conformity with
the requirements of Rule 3-14 of Regulations S-X promulgated by the Securities
and Exchange Commission for the 2010 calendar year (herein "Property
Audit").  LGI De agrees to provide Auditor with reasonable access to its books
and records solely related to the Property as defined herein in connection with
the preparation of the Property Audit, and a copy of the same shall be provided
to LGI De promptly upon completion.  NetREIT agrees to compensate LGI De and
Manager for their actual out of pocket expenses incurred in connection with the
Property Audit (including but not limited to the costs associated with any
representation letter, if any, that LGI De and/or Manager is mandated by
applicable Federal law to provide).  NetREIT acknowledges that LGI De's
agreement to facilitate the Property Audit as herein provided is being made
strictly as an accommodation to NetREIT, without representation or warranty of
any kind to or for the benefit of NetREIT.  In no event shall any Property Audit
or update thereto give rise to or be grounds for a claim or lawsuit by NetREIT
against LGI De or Manager, and NetREIT agrees to indemnify and hold LGI De and
Manager harmless from any claim, damage, loss, cost, expense or liability which
LGI De and/or Manager may incur or to which LGI De and/or Manager is at any time
subjected as a result of LGI De's and Manager's compliance with this Section
4.1.10.
 
4.2 LGI De's Pre-Closing Conditions. LGI De's obligations under this Agreement
shall be subject to the satisfaction or waiver by LGI De of the following
matters described in this Section 4.2 (collectively, the "LGI De's Pre-Closing
Conditions") on or before the earlier of (a) the time period specified in each
Section below, or (b) the Due Diligence Deadline:
 
4.2.1 The Partnership's Organizational Documents. Within seven (7) Business Days
of the execution of this Agreement, NetREIT shall deliver, or cause to be
delivered to LGI De:

(a) A copy of the form of the Partnership's Certificate of Limited Partnership;
and
 
(b) The form of the Partnership Agreement.

LGI De shall have until the expiration of the Due Diligence Deadline to either
approve the forms of the Certificate of Limited Partnership and the form of the
Partnership Agreement (collectively, the "Partnership Organizational
Documents"), or to deliver written notice to NetREIT (the "Partnership Objection
Notice") specifying with reasonable specificity LGI De's objections to the
Partnership Organizational Documents (the "Partnership Objections"); provided,
however, that with respect to the Partnership Agreement, LGI De has received the
terms of the financing required under Section 4.1.9 (“Financing Terms”) no less
than ten (10) Business Days before the Due Diligence Deadline.  If the Financing
Terms are received less than ten (10) Business Days before the Due Diligence
Deadline, LGI De shall have ten (10) Business Days from the date of its receipt
of the Financing Terms to provide the Partnership Objection Notice. LGI De's
failure to timely deliver a Partnership Objection Notice shall be deemed to be
LGI De's approval of the Partnership Organizational Documents and other matters
shown in, disclosed by or associated with the Partnership Organizational
Documents and any update thereof obtained by LGI De within five (5) Business
Days prior to the execution of the Due Diligence Deadline. LGI De shall not be
entitled to deliver a Partnership Objection Notice that is
 
 
 

--------------------------------------------------------------------------------

 
 
subject to any condition other than the form and content of the Partnership
Organizational Documents. NetREIT shall have a period of five (5) Business Days
after its receipt of any Partnership Document Objection Notice to elect by
written notice to LGI De (the "Partnership Objection Response Notice") to
delete, amend or otherwise modify the Partnership Organizational Document
identified in the Partnership Objection Notice, or to advise LGI De that NetREIT
is unable or unwilling to remove or cure some or all of the Partnership
Objections.  Such election by NetREIT shall be at NetREIT's sole option and
discretion; it being understood that NetREIT has no obligation to remove or cure
any Partnership Objection.  If NetREIT fails to timely deliver to LGI De the
Partnership Objection Response Notice, it shall be conclusively deemed that
NetREIT has informed LGI De that NetREIT is unable or unwilling to remove or
cure any of the title objections.  If NetREIT advises LGI De in the Partnership
Objection Response Notice (or is deemed to have advised LGI De), that NetREIT is
unable or unwilling to remove or cure some or all of the Partnership Objections,
then LGI De shall have until the date that is three (3) Business Days after
receipt of the Partnership Document Response Notice to either terminate this
Agreement or to waive such Partnership Objection pursuant to an Approval Notice
delivered to NetREIT in accordance with Section 4.3 below.  Notwithstanding
anything to the contrary contained in this Agreement, LGI De's delivery of an
Approval Notice pursuant to Section 4.3 shall be deemed to be LGI De's election
to waive all Partnership Objections with respect to its approval of the
Partnership Organizational Documents and all matters disclosed thereby.  Any
further change, amendment or modification to the Partnership Organizational
Documents occurring after the Due Diligence Deadline shall be effective as to
LGI De only if LGI De provides its written approval to such amendment, change or
modification.
 
4.2.2 Preferred Stock Documentation. Within seven (7) Business Days of the
execution of this Agreement, NetREIT shall deliver, or cause to be delivered to
LGI De the form of the Preferred Stock Statement and the form of Preferred Stock
Certificate (collectively, the "Preferred Stock Documentation"):

LGI De shall have fourteen (14) Business Days from the date the Preferred Stock
Documentation is delivered to either approve the form of the Preferred Stock
Documentation or to deliver written notice to NetREIT (the "Preferred Stock
Objection Notice") specifying with reasonable specificity LGI De's objections to
the Preferred Stock Documentation (the "Preferred Stock Objections"). LGI De's
failure to timely deliver a Preferred Stock Objection Notice shall be deemed to
be LGI De's approval of the Preferred Stock Documentation and other matters
shown in, disclosed by or associated with the Preferred Stock Documentation and
any update thereof obtained by LGI De within five (5) Business Days prior to the
execution of the Due Diligence Deadline. LGI De shall not be entitled to deliver
a Preferred Stock Objection Notice that is subject to any condition other than
the form and content of the Preferred Stock Documentation. NetREIT shall have a
period of five (5) Business Days after its receipt of any Preferred Stock
Document Objection Notice to elect by written notice to LGI De (the "Preferred
Stock Objection Response Notice") to delete, amend or otherwise modify the
Preferred Stock Documentation to resolve the objections identified in the
Preferred Stock Objection Notice (the "Preferred Stock Objections"), or to
advise LGI De that NetREIT is unable or unwilling to remove or cure some or all
of the Preferred Stock Documentation Objections.  Such election by NetREIT shall
be at NetREIT's sole option and discretion; it being understood that NetREIT has
no obligation to remove or cure any Preferred Stock Documentation Objection.  If
NetREIT fails to timely deliver to LGI De the Preferred Stock Objection Response
Notice, it shall be
 
 
 

--------------------------------------------------------------------------------

 
 
conclusively deemed that NetREIT has informed LGI De that NetREIT is unable or
unwilling to remove or cure any of the Preferred Stock Objections.  If NetREIT
advises LGI De in the Preferred Stock Objection Response Notice (or is deemed to
have advised LGI De), that NetREIT is unable or unwilling to remove or cure some
or all of the Preferred Stock Objections, then LGI De shall have until the date
that is three (3) Business Days after receipt of the Preferred Stock Objection
Response Notice to either terminate this Agreement or to waive such Preferred
Stock Objection pursuant to an Approval Notice delivered to NetREIT in
accordance with Section 4.3 below.  Notwithstanding anything to the contrary
contained in this Agreement, LGI De's delivery of an Approval Notice pursuant to
Section 4.3 shall be deemed to be LGI De's election to waive all Preferred Stock
Objections with respect to its approval of the Preferred Stock Documentation and
all matters disclosed thereby.  Any further change, amendment or modification to
the Preferred Stock Documentation occurring after the Due Diligence Deadline
shall be effective as to LGI De only if LGI De provides its written approval to
such amendment, change or modification.
 
4.2.3 Documentation Establishing the Options. Within seven (7) Business Days of
the execution of this Agreement, NetREIT shall deliver, or cause to be delivered
to LGI De a copy of the form of the Stock Option and the Call Option.
 
LGI De shall have fourteen (14) Business Days from the date the Options are
delivered to either approve the forms of the Options, or to deliver written
notice to NetREIT (the "Options Objection Notice") specifying with reasonable
specificity LGI De's objections to the Option (the "Options Objections").  LGI
De's failure to timely deliver an Options Objection Notice shall be deemed to be
LGI De's approval of the Options and other matters shown in, disclosed by or
associated with the Options and any update thereof obtained by LGI De within
five (5) Business Days prior to the execution of the Due Diligence Deadline. LGI
De shall not be entitled to deliver an Options Objection Notice that is subject
to any condition other than the form and content of the Options. NetREIT shall
have a period of five (5) Business Days after its receipt of any Options
Objection Notice to elect by written notice to LGI De (the "Options Objection
Response Notice") to delete, amend or otherwise modify an Option in response to
an Option Objection identified in the Options Objection Notice, or to advise LGI
De that NetREIT is unable or unwilling to remove or cure some or all of the
Option Objections.  Such election by NetREIT shall be at NetREIT's sole
discretion; it being understood that NetREIT has no obligation to remove or cure
any Option Objection.  If NetREIT fails to timely deliver to LGI De the Options
Objection Response Notice, it shall be conclusively deemed that NetREIT has
informed LGI De that NetREIT is unable or unwilling to remove or cure any of the
Option Objections.  If NetREIT advises LGI De in the Options Objection Response
Notice (or is deemed to have advised LGI De), that NetREIT is unable or
unwilling to remove or cure some or all of the Option Objections, then LGI De
shall have until the date that is three (3) Business Days after receipt of the
Option Objection Response Notice to either terminate this Agreement or to waive
such Option Objection pursuant to an Approval Notice delivered to NetREIT in
accordance with Section 4.3 below.  Notwithstanding anything to the contrary
contained in this Agreement, LGI De's delivery of an Approval Notice pursuant to
Section 4.3 shall be deemed to be LGI De's election to waive all Option
Objections with respect to its approval of the Options and all matters disclosed
thereby.  Any further change, amendment or modification to the Options occurring
after the Due Diligence Deadline shall be effective as to LGI De only if LGI De
provides its written approval to such amendment, change or modification.
 
 
 
 

--------------------------------------------------------------------------------

 
 
4.2.4 Financing Contingency. Closing shall be contingent upon:
 
(a)           either the Lender approving:
 
(i) NetREIT's assumption of the Loan (pursuant to which any and all personal
liability of Lee Gittleman is removed); or
 
(ii) NetREIT obtaining a new loan with terms removing any personal liability of
Lee Gittleman;
 
and,
 
(b)           the satisfaction of the IRC 752(b) debt allocation to LGI De in
accordance with Section 9.1.2.
 
The Due Diligence Deadline shall be extended to allow NetREIT sixty (60) days
following the Agreement Date to satisfy this Financing Contingency and the Due
Diligence Deadline shall be further extended as necessary for any delay in
NetREIT’s ability to satisfy the Financing Contingency, which delay is beyond
NetREIT's control.
 
4.2.5 Effort to Remove LGI De’s Liability for Loan. The Parties acknowledge that
the Closing is expressly and absolutely conditioned and contingent on the
financing contingencies set forth in Section 4.2.4. The Parties agree to use
commercially reasonable efforts to obtain such financing and eliminate Lee
Gittleman’s personal liability for the Loan or any subsequent loan secured by
the Property.  The Parties acknowledge that either Party may terminate this
Agreement pursuant to Section 4.3 if any such pre-closing contingency is not
met. In the event LGI De's existing loan is assumed by NetREIT, NetREIT shall
credit LGI De with the amount of approximately $700,000.00 from the leasing
reserve balance upon closing.  The actual amount of such credit shall be added
to the Net Value of the Property.  The Due Diligence Deadline may be extended,
if necessary, for any lender-driven delay beyond NetREIT's control.  Any loan
secured by the Property upon Closing is herein referred to as a "Loan."
 
4.3 Failure of Pre-Closing Conditions; Approval of General Contingency
Matters.  If, for any reason or no reason whatsoever, any of the Pre-Closing
Conditions are not satisfied or if LGI De, in its sole and absolute discretion,
is not satisfied with the Partnership Documentation or if NetREIT, in its sole
and absolute discretion, is not satisfied with any aspect of the Partnership
Documentation or the Property, including the condition and suitability of the
Property for the Partnership's contemplated use thereof, then that Party may, at
its sole option, elect to terminate this Agreement by delivering written notice
to Escrow Holder and the other Party at any time prior to Due Diligence
Deadline.  The Pre-Closing Conditions shall be deemed to have failed and be
disapproved by NetREIT unless prior to the Due Diligence Deadline the Party
delivers to the other Party a written Notice that the Pre-Closing Conditions
have all been satisfied or waived by the Party and that Party elects to proceed
with the acquisition of the Property in accordance with this Agreement (the
"Approval Notice").  If the Party delivers the Approval Notice, then all of that
Party's Pre-Closing Conditions shall be deemed satisfied or waived and the
Parties shall, subject to the satisfaction of their respective Closing
Conditions, be obligated to proceed to the Closing.  The Party shall not be
entitled to send an Approval Notice
 
 
 

--------------------------------------------------------------------------------

 
 
that is a conditional approval of any of the Pre-Closing Conditions (or any
aspect thereof).  Any Approval Notice that contains anything other than the
unconditional approval of all of the Pre-Closing Conditions (excepting a Party's
right to extend the Due Diligence Deadline pursuant to Section 4.1.1 above)
shall be deemed to be NetREIT's disapproval of the Pre-Closing Conditions.  If
NetREIT or LGI De fails, for any reason or no reason, to provide an Approval
Notice with respect to the Pre-Closing Conditions, then this Agreement shall
automatically terminate, Escrow Holder shall return the Deposit to NetREIT (less
one-half (1/2) of any escrow and title cancellation fees and charges, which
NetREIT hereby agrees to pay) and neither Party shall have any further rights or
obligations under this Agreement except for the Parties' Surviving Obligations,
which shall survive any such termination.
 
4.4 Closing Conditions.
 
4.4.1 NetREIT's Closing Conditions. Following the Due Diligence Deadline,
NetREIT's obligation to consummate LGI De's conveyance of the Property to the
Partnership shall be subject only to the satisfaction or waiver by NetREIT of
the following conditions (collectively, the "NetREIT's Closing Conditions") on
or before the earlier of (a) the time periods specified in each subsection
below, or (b) the Closing Date:
 
(a)           LGI De's Delivery of Closing Documents. LGI De shall have
performed all of LGI De's material obligations under this Agreement, including
delivery to Escrow Holder of all of the documents referred to in Section 6.4.1
below.
 
(b)           Delivery of Title Policy.  At the Closing, whether or not NetREIT
has timely delivered to the Title Company such update, revision or
recertification of the Existing ALTA Surveys (or new ALTA surveys) in insurable
form, if any, required by the Title Company to issue the ALTA Title Policy to
NetREIT (collectively, the "Updated ALTA Surveys"), the Title Company shall be
irrevocably committed to issue to the Partnership ALTA Owner's Policies of Title
Insurance in the amount of $14,500,000 (as allocated by NetREIT on behalf of the
Partnership among the real property comprising the Real Property) insuring fee
title to the Real Property is vested in the Partnership subject only to the
Permitted Exceptions (collectively, the "ALTA Title Policy").  The Updated ALTA
Surveys required by the Title Company for the issuance of the ALTA Title Policy,
if any, shall be prepared and delivered at the Partnership's sole cost and
expense and, notwithstanding anything to the contrary contained herein, neither
the title review period set forth in Section 4.1.1 above nor the Closing Date
shall be extended to allow the Partnership to obtain the Updated ALTA Surveys or
any updated title report(s) based thereon or to otherwise raise or address any
title and/or survey issues disclosed by such Updated ALTA Surveys or updated
title report(s) based on such Updated ALTA Surveys; provided, however, NetREIT's
comments to the Updated ALTA Surveys may be included in NetREIT's Title
Objection Notice. As used in this Agreement, the term "Permitted Exceptions"
shall mean (a) all matters set forth in the Title Documents and any updated
title report(s) which NetREIT approves (or is deemed to approve) pursuant to
Section 4.1.1 above (b) non-delinquent Property Taxes (including non-delinquent
community facilities district, business improvement district or local
improvement district assessments); (c) the lien of supplemental taxes assessed
relating to the period from and after the Closing, including supplemental
assessments resulting from the transfer of the Property to the Partnership and
any construction of the Improvements; (d) all zoning restrictions, regulations
and requirements, all
 
 
 

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building codes and all other applicable laws, ordinances and governmental
regulations affecting the Property, provided NetREIT shall be entitled to review
and approve the same pursuant to Section 4.1.5 above; (e) all matters directly
or indirectly caused by or arising through NetREIT or NetREIT's agents,
consultants or contractors; and (f) all matters existing with the written
consent of NetREIT.
 
(c)           LGI De's Representations. LGI De's representations contained in
Section 9 of this Agreement shall have been true and correct in all material
respects when made and, except as otherwise disclosed to NetREIT in writing
prior to the date of Closing (the "Closing Date"), shall be true and correct in
all material respects as of the Closing Date.
 
(d)           Estoppel Certificates.  LGI De shall obtain and deliver to the
Partnership estoppel certificates ("Estoppel Certificate") from all direct
tenants (specifically excluding any and all subtenants) in the Building,
substantially in the form attached hereto as Exhibit H, provided that the same
is in conformance with the requirements of the Leases, duly executed by such
tenants and dated not earlier than forty-five (45) days prior to the Closing
Date.  NetREIT shall not have the right to disapprove an Estoppel Certificate
unless it materially conflicts with the corresponding Lease or discloses a
breach of the corresponding Lease. NetREIT's failure to approve or disapprove
the Estoppel Certificates (or any one of them) prior to the Closing Date shall
be deemed to constitute NetREIT's approval thereof.
 
(e)           Pre-Closing Conditions Satisfied. All of the Pre-Closing
conditions provided in Section 4.1 shall have been satisfied to NetREIT's
satisfaction or expressly waived by NetREIT in writing.
 
4.4.2  LGI De's Closing Conditions.  LGI De's obligation to consummate the
conveyance of the Property to the Partnership is conditioned upon the
satisfaction or LGI De's written waiver on or prior to the Closing Date of the
following conditions (collectively, the "LGI De's Closing Conditions"):
 
(a)           Delivery of Cash. On the Closing Date, NetREIT shall deliver into
the Escrow Account, by wire transfer of immediately available funds, the balance
of its cash payments required by Section 2.2.4.
 
(b)           Delivery of the Preferred Stock and the Closing Documents by
NetREIT and the Partnership.  The Preferred Stock and each of the documents
required to be delivered by NetREIT or the Partnership pursuant to Section 6.4.2
shall have been timely delivered as provided therein.
 
(c)           Representations by NeREIT and the Partnership. All of the
representations and warranties by NetREIT and the Partnership contained herein
shall be true and correct in all material respects when made and shall be true
and correct in all material respects as of the Closing Date.
 
(d)           NetREIT's Obligations.  NetREIT shall have performed all of its
material obligations under this Agreement.
 
 
 
 

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(e)           Pre-Closing Conditions Satisfied. All of the Pre-Closing
conditions provided in Section 4.2 shall have been satisfied to LGI De’s
satisfaction or expressly waived by LGI De in writing.
 
4.5 Failure of Closing Conditions.  If any or all of NetREIT's Closing
Conditions are not satisfied or waived by NetREIT on or before the Closing Date,
then NetREIT shall notify LGI De in writing of those NetREIT Closing Conditions
which have not been satisfied or otherwise waived by NetREIT ("NetREIT's Closing
Conditions Failure Notice").  LGI De shall have three (3) Business Days after
NetREIT has delivered to LGI De NetREIT's Closing Conditions Failure Notice (and
the originally scheduled Closing Date shall be extended by the number of
Business Days necessary to give LGI De such three (3) Business Day period) to
notify NetREIT in writing of LGI De's election either to (a) take such actions
as may be necessary to cure such failure of NetREIT's Closing Condition(s) to
NetREIT's reasonable satisfaction prior to the Closing Date (as same may be
extended), or (b) advise NetREIT that LGI De will not cure such matters ("LGI
De's Conditions Notice").  Such election shall be at LGI De's sole option and
discretion; it being understood LGI De has no obligation to cure any of
NetREIT's Closing Conditions which have not been satisfied or waived (other than
those which constitute a material breach by LGI De under this Agreement).  If
LGI De elects not to cure such failure of NetREIT's Closing Condition(s) (or
fails to timely deliver LGI De's Conditions Notice), then within two (2)
Business Days after NetREIT's receipt of the LGI De's Conditions Notice or the
expiration of the period during which LGI De may deliver LGI De's Conditions
Notice (and the originally scheduled Closing Date shall be extended by the
number of Business Days necessary to give NetREIT such two (2) Business Day
period), NetREIT, at NetREIT's sole option, may elect to do any of the
following:  (i) if NetREIT's Closing Condition in question is any of those
conditions specified in Section 4.4.1(b) or Section 4.4.1(c) or Section 4.4.1(d)
and LGI De is not in any material manner responsible for the deviation or
failure of such NetREIT's Closing Condition, then NetREIT's sole remedy shall be
to waive such NetREIT's Closing Condition or NetREIT may elect to terminate this
Agreement by delivering written notice thereof to LGI De within said two (2)
Business Day period, in which event LGI De shall promptly return the Deposit to
NetREIT and the Parties shall have no further obligations under this Agreement
except for NetREIT's Surviving Obligations or (ii) if NetREIT's Closing
Condition in question is NetREIT's Closing Condition specified in
Section 4.4.1(a) above, or if NetREIT's Closing Condition in question is any of
those NetREIT's Closing Conditions specified in Section 4.4.1(b) or
Section 4.4.1(c) or Section 4.4.1(d) and LGI De is actually responsible for the
deviation or failure of such Closing Condition, then NetREIT may pursue the
remedies available to NetREIT pursuant to Section 5.2 below or NetREIT may elect
to waive NetREIT's Closing Condition(s) in question and proceed with the
conveyance of the Property.  If LGI De elects to cure such failure of NetREIT's
Closing Condition(s) as set forth in NetREIT's Closing Conditions Failure
Notice, LGI De shall promptly take any and all actions as may be necessary to
cure same and the date of the Closing may be extended for a period of time
reasonably acceptable to both LGI De and NetREIT to enable LGI De to accomplish
same, but no later than thirty (30) days beyond the originally scheduled Closing
Date.  If any of the LGI De's Closing Conditions are not satisfied or otherwise
expressly waived in writing by LGI De on or prior to the Closing Date, LGI De
may elect, in LGI De's sole and absolute discretion, to terminate this
Agreement; provided, however, nothing contained herein shall be deemed or
construed to relieve NetREIT of any liability or waive any of LGI De's remedies
if any LGI De's Closing Condition is not satisfied due to a breach by NetREIT
under this Agreement.
 
 
 

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4.6 Return of Due Diligence Materials. If NetREIT terminates this Agreement for
failure of a Pre-Closing Condition or a NetREIT's Closing Condition or for any
other reason, then within ten (10) days of such termination by NetREIT, NetREIT
shall deliver to LGI De a copy of any materials, tests, audits, surveys,
reports, studies and the results of any and all investigations and inspections
conducted by NetREIT which are requested by LGI De (excluding any proprietary
materials); provided, however, delivery of same shall be made without any
warranty or representation as to the accuracy or thoroughness thereof or to the
ability of LGI De to rely thereon (collectively, the "NetREIT's Documents") and
NetREIT shall also return to LGI De any and all LGI De's Documents given to
NetREIT by or on behalf of LGI De.  NetREIT's Documents and the LGI De's
Documents are collectively referred to herein as the "Due Diligence
Materials").  The foregoing covenants of NetREIT shall survive any such
termination of this Agreement.
 
4.7 Investigations, Obligations and Indemnity.
 
4.7.1 Inspection Obligations.  NetREIT agrees that when entering the Real
Property and conducting any investigations, inspections, tests and studies of
the Real Property, NetREIT and NetREIT's agents, consultants, contractors and
representatives shall be obligated to:  (a) comply with all terms of all
applicable laws and regulations regarding entry on to the Real Property; (b) not
unreasonably interfere with the operation, use and maintenance of the Property
by LGI De or any tenant or any of the construction work being performed on any
adjacent property; (c) not damage any part of the Property or any adjacent
property; (d) not injure or otherwise cause bodily harm to LGI De or any other
third party; (e) promptly pay when due the costs of all inspections, tests,
investigations, studies and examinations done with regard to the Property; and
(f) not permit any liens to attach to the Property or any adjacent property by
reason of the inspections, tests, investigations, studies and examinations
performed by NetREIT and NetREIT's agents, consultants, contractors and
representatives and promptly remove or cause to be removed (by bonding or
otherwise) any such liens which attach to the Property or any adjacent property.
 
4.7.2 NetREIT's Indemnity.  NetREIT shall keep the Property free from all liens
and shall indemnify, defend (with counsel reasonably satisfactory to LGI De),
protect, and hold LGI De, LGI De's members, officers, directors, trustees,
beneficiaries, employees, representatives, attorneys, agents, lenders, related
and affiliated entities, successors and assigns (collectively, the "LGI De
Parties") harmless from and against any and all claims, demands, liabilities,
judgments, penalties, losses, costs, damages, and expenses (including attorneys'
and experts' fees and costs) relating to or arising in any manner whatsoever
from any studies, evaluations, inspections, investigations or tests made by
NetREIT or NetREIT's agents, consultants, contractors or representatives
relating to or in connection with the Property or entries by NetREIT or
NetREIT's agents, consultants, contractors or representatives in, on or about
the Property (exclusive of the financial effects of the discovery of the
presence of Hazardous Materials on the Property or the cost of any required
remediation, except to the extent NetREIT or NetREIT's agents, consultants,
contractors or representatives exacerbated such condition).  Notwithstanding any
provision to the contrary in this Agreement, the indemnity obligations of
NetREIT under this Agreement shall survive any termination of this Agreement and
shall not merge into the Grant Deed and any other documents or instruments
delivered at Closing.  In addition to the foregoing indemnity, if there is any
damage to the Property caused by
 
 
 

--------------------------------------------------------------------------------

 
 
NetREIT's and/or NetREIT's agents', consultants', contractors' or
representatives' entry in or on the Property, NetREIT shall immediately restore
the Property to the same condition existing prior to NetREIT's and NetREIT's
agents', consultants', contractors' or representatives' entry in, on or about
the Property.
 
5. Remedies/Liquidated Damages.
 
5.1 NetREIT's Default.  IF LGI DE FAILS TO CONTRIBUTE THE PROPERTY TO THE
PARTNERSHIP AS PROVIDED IN THIS AGREEMENT BY REASON OF A MATERIAL DEFAULT OF
NETREIT, LGI DE SHALL BE RELEASED FROM ITS OBLIGATION TO CONTRIBUTE THE PROPERTY
TO THE PARTNERSHIP AND IT SHALL BE ENTITLED TO RETAIN ALL OF THE DEPOSIT AS
LIQUIDATED DAMAGES.  NETREIT AND LGI DE HEREBY ACKNOWLEDGE AND AGREE THAT IT
WOULD BE IMPRACTICAL AND/OR EXTREMELY DIFFICULT TO FIX OR ESTABLISH THE ACTUAL
DAMAGE SUSTAINED BY LGI DE AS A RESULT OF SUCH DEFAULT BY NETREIT, AND AGREE
THAT THE DEPOSIT, THE PAYMENT BY NETREIT OF ALL ESCROW AND TITLE CANCELLATION
CHARGES AND FEES, AND THE DELIVERY TO LGI DE BY NETREIT OF THE DUE DILIGENCE
MATERIALS IS A REASONABLE APPROXIMATION THEREOF. ACCORDINGLY, IN THE EVENT THAT
NETREIT BREACHES THIS AGREEMENT BY MATERIALLY DEFAULTING IN THE COMPLETION OF
THE CONVEYANCE OF THE PROPERTY, THE DEPOSIT, THE PAYMENT BY NETREIT OF ALL
ESCROW AND TITLE CANCELLATION CHARGES AND FEES, AND THE DELIVERY TO LGI DE BY
NETREIT OF THE DUE DILIGENCE MATERIALS SHALL CONSTITUTE AND BE DEEMED TO BE THE
AGREED AND LIQUIDATED DAMAGES OF LGI DE, AND SHALL BE PAID BY NETREIT TO LGI DE
AS LGI DE'S SOLE AND EXCLUSIVE REMEDY. LGI DE AGREES TO WAIVE ALL OTHER REMEDIES
AGAINST NETREIT WHICH LGI DE MIGHT OTHERWISE HAVE AT LAW OR IN EQUITY BY REASON
OF SUCH DEFAULT BY NETREIT; PROVIDED, HOWEVER, THE FOREGOING SHALL NOT LIMIT
(A) NETREIT'S OBLIGATIONS TO PAY TO LGI DE ALL ATTORNEYS' FEES AND COSTS OF LGI
DE TO ENFORCE THE PROVISIONS OF THIS SECTION 5.1 AND/OR NETREIT'S SURVIVING
OBLIGATIONS, OR (B) THE ABILITY AND RIGHT OF LGI DE TO ENFORCE NETREIT'S
SURVIVING OBLIGATIONS. THE PAYMENT OF THE DEPOSIT, THE PAYMENT BY NETREIT OF ALL
ESCROW AND TITLE CANCELLATION CHARGES AND FEES, AND THE DELIVERY TO LGI DE BY
NETREIT OF THE DUE DILIGENCE MATERIALS AS LIQUIDATED DAMAGES IS NOT INTENDED TO
BE A FORFEITURE OR PENALTY, BUT IS INTENDED TO CONSTITUTE LIQUIDATED DAMAGES TO
LGI DE.
 
LGI DE'S INITIALS:                                                NETREIT'S
INITIALS:                                                      
 
5.2 LGI De's Default.  IF LGI DE FAILS TO COMPLETE THE CONVEYANCE OF THE
PROPERTY AS PROVIDED IN THIS AGREEMENT BY REASON OF ANY MATERIAL DEFAULT OF LGI
DE, NETREIT SHALL BE RELEASED FROM NETREIT'S OBLIGATIONS TO CAUSE THE
PARTNERSHIP TO ACQUIRE THE PROPERTY FROM LGI DE, AND NETREIT MAY EITHER
(A) PROCEED AGAINST LGI DE BY BRINGING AN ACTION FOR SPECIFIC PERFORMANCE UNDER
THIS AGREEMENT WITHOUT ANY RIGHT TO SEEK DAMAGES OF ANY KIND OR NATURE
 
 
 

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(WHICH ACTION FOR SPECIFIC PERFORMANCE SHALL BE BROUGHT (IF AT ALL) NO LATER
THAN SIXTY (60) DAYS AFTER SUCH DEFAULT BY LGI DE AND SHALL BE DILIGENTLY
PROSECUTED BY NETREIT TO COMPLETION), OR (B) TERMINATE THIS AGREEMENT IN WHICH
EVENT LGI DE SHALL REIMBURSE NETREIT FOR NETREIT'S ACTUAL, DOCUMENTED AND
REASONABLE OUT-OF-POCKET DUE DILIGENCE COSTS AND EXPENSES NOT TO EXCEED ONE
HUNDRED FIFTY THOUSAND DOLLARS ($150,000) AND THE DEPOSIT SHALL BE RETURNED TO
NETREIT. UPON SUCH TERMINATION, NETREIT SHALL PROMPTLY RETURN TO LGI DE ANY LGI
DE'S DOCUMENTS DELIVERED BY OR ON BEHALF OF LGI DE TO NETREIT, AND THEREAFTER
NEITHER PARTY SHALL HAVE ANY OBLIGATIONS OR LIABILITY UNDER THIS AGREEMENT OTHER
THAN NETREIT'S SURVIVING OBLIGATIONS.  NETREIT AND LGI DE HEREBY ACKNOWLEDGE AND
AGREE THAT IT WOULD BE IMPRACTICAL AND/OR EXTREMELY DIFFICULT TO FIX OR
ESTABLISH THE ACTUAL DAMAGE SUSTAINED BY NETREIT AS A RESULT OF SUCH MATERIAL
DEFAULT BY LGI DE, AND AGREE THAT THE REMEDY SET FORTH IN CLAUSE (B) ABOVE IS A
REASONABLE APPROXIMATION THEREOF. ACCORDINGLY, IN THE EVENT THAT LGI DE BREACHES
THIS AGREEMENT BY MATERIALLY DEFAULTING IN THE COMPLETION OF THE CONVEYANCE OF
THE PROPERTY, AND NETREIT ELECTS NOT TO EXERCISE THE REMEDY SET FORTH IN
CLAUSE (A) ABOVE BUT INSTEAD ELECTS THE REMEDY SET FORTH IN CLAUSE (B) ABOVE,
SUCH SUMS IN CLAUSE (B) SHALL CONSTITUTE AND BE DEEMED TO BE THE AGREED AND
LIQUIDATED DAMAGES OF NETREIT WHICH IS NOT INTENDED TO BE A FORFEITURE OR
PENALTY, BUT IS INTENDED TO CONSTITUTE LIQUIDATED DAMAGES TO NETREIT.
 
LGI DE'S INITIALS:                                                NETREIT'S
INITIALS:                                                      
 
6. Closing and Escrow.
 
6.1 Escrow Instructions.  Upon execution of this Agreement by both NetREIT and
LGI De, the Parties hereto shall deposit a copy of a fully-executed counterpart
of this Agreement with Escrow Holder and this Agreement shall serve as the
instructions to Escrow Holder for consummation of the conveyance of the Property
provided for in this Agreement.  For purposes of this Agreement, the Escrow
shall be deemed opened on the date Escrow Holder shall have received a fully
executed original or originally executed counterparts of this Agreement from
both LGI De and NetREIT (the "Opening of Escrow"). Escrow Holder shall notify
NetREIT and LGI De in writing of the date of the Opening of Escrow. LGI De and
NetREIT agree to execute such reasonable additional and supplementary escrow
instructions as may be appropriate to enable the Escrow Holder to comply with
the terms of this Agreement; provided, however, that in the event of any
conflict between the provisions of this Agreement and any such additional or
supplementary escrow instructions, the terms of this Agreement shall control.
 
6.2 Closing and Close of Escrow.
 
6.2.1 Closing.  As used in this Agreement, the Closing shall include the
consummation of the conveyance of the Property as provided in this Agreement, as
evidenced by submission by the Title Company of the Grant Deed for recordation
in the Official Records of
 
 
 

--------------------------------------------------------------------------------

 
 
San Diego County, California (the "Official Records") and the Escrow Holder's
disbursement of the cash, Preferred Stock, the Options and Partnership
Organizational Documents to the Partnership, LGI De and NetREIT, respectively,
as provided in this Agreement.  Each Party shall timely deposit with Escrow
Holder the funds, documents and supplementary written escrow instructions
required by this Agreement in order to consummate the Closing of the conveyance
of the Property to the Partnership in accordance with this Agreement.
 
6.2.2 Closing Date. Unless otherwise agreed to in writing by both NetREIT and
LGI De, the Closing shall occur on or before the later of ____________, 2011 or
fifteen (15) days after removal of all contingencies (the "Closing Date").  Time
is of the essence with respect to such Closing Date, and such Closing Date may
not be extended without the prior written approval of both LGI De and NetREIT,
except as otherwise expressly provided in this Agreement.
 
6.3 Conveyance.  At Closing, LGI De shall convey to the Partnership fee simple
title to the Real Property by means of a grant deed in substantially the form
attached as Exhibit B hereto ("Grant Deed"), which Grant Deed shall reflect any
Documentary Transfer Tax payable on the conveyance effectuated thereby shall be
reflected on a separate document filed with the Office of the County Recorder.
 
6.4 Closing Documents.
 
6.4.1 LGI De's Closing Documents.  At Closing, LGI De shall deliver to Escrow
Holder for delivery to the Partnership, as applicable, upon the Closing, all of
the following documents:  (a) the Grant Deed, executed and acknowledged by LGI
De; (b) two (2) counterparts of an assignment and assumption of the Contracts
and other Intangible Property in substantially the form attached as Exhibit C
hereto, executed by LGI De (the "General Assignment"); (c) a bill of sale for
the Personal Property, if any, in substantially the form attached as Exhibit D
hereto, executed by LGI De (the "Bill of Sale"); (d) a certificate of
non-foreign status in accordance with the requirements of Internal Revenue Code
Section 1445, as amended (the "FIRPTA Certificate"), in substantially the form
attached as Exhibit E hereto, executed by LGI De; (e) any specific state forms
to be executed by LGI De; (f) two (2) counterparts of the Assignment and
Assumption of Leases in substantially the form attached hereto as Exhibit F,
duly executed by LGI De (the "Assignment of Leases"), (g) notices to the tenants
with respect to the Leases, in substantially the form attached hereto as Exhibit
I and made a part hereof, duly executed by LGI De, (h) evidence of the
existence, organization and authority of LGI De and of the authority of the
person executing documents on behalf of LGI De reasonably satisfactory to the
Title Company (i) evidence of termination of any management or leasing
commission agreements; and (j) such other documents as may be reasonably
required by Escrow Holder or the Title Company, including, without limitation, a
so-called "gap" indemnity affidavit and LGI De's affidavit as to mechanics'
liens and parties in possession arising under contracts to which LGI De is a
party (provided, however, no such additional document shall expand any
obligation, covenant, representation or warranty of LGI De or result in any new
or additional obligation, covenant, representation or warranty of LGI De under
this Agreement beyond those expressly set forth in this Agreement).
 
 
 

--------------------------------------------------------------------------------

 
 
6.4.2 LGI De's Deliveries Outside of Escrow.  On or before the Closing, LGI De
shall deliver to the Partnership the following documents and materials outside
of Escrow (which obligation shall survive the Closing and shall not be merged
into the Grant Deed and the other documents and instruments to be delivered at
Closing):  (a) originals or, if originals are not available, copies, of
Contracts, if any, assigned to and assumed by the Partnership; and (b) to the
extent in LGI De's possession or reasonably available to LGI De, keys to all
entrance doors at the Property, any copies of any warranties which pertain
solely to the Improvements, and any operating manuals for the equipment and
systems which are part of the Improvements.
 
6.4.3 NetREIT's Closing Contributions and Documents.  At Closing, in addition to
NetREIT's delivery to the Partnership of the contributions, NetREIT shall
deliver the following to Escrow Holder for delivery to LGI De, as applicable,
upon the Closing:  (a) two (2) counterparts of the General Assignment in
substantially the form attached as Exhibit C hereto, executed by the
Partnership; (b) two (2) counterparts of the Assignment of Leases in
substantially the form attached as Exhibit F hereto, executed by the
Partnership; (c) evidence of the existence, organization and authority of the
Partnership and of the authority of the person(s) executing documents on behalf
of the Partnership reasonably satisfactory to the Title Company; and (d) such
other documents as may be reasonably required by Escrow Holder or the Title
Company (provided, however, no such additional document shall expand any
obligation, covenant, representation or warranty of the Partnership or result in
any new or additional obligation, covenant, representation or warranty of the
Partnership under this Agreement beyond those expressly set forth in this
Agreement).
 
6.5 Actions of Escrow Holder.  On the Closing Date, Escrow Holder shall promptly
undertake and follow the procedures below with respect to Closing (all of which
shall be considered as having taken place simultaneously, and no delivery or
transaction below shall be considered as having been made until all deliveries
and transactions have been accomplished):
 
6.5.1 Disbursement of Funds.  Escrow Holder shall disburse all funds deposited
with Escrow Holder by NetREIT as follows:
 
(a) Pay all closing costs which are to be paid through Escrow (including
recording fees, brokerage commissions, Title Policy charges and Escrow fees) and
any payments due in connection with the release or reconveyance of any LGI De
monetary liens as provided in Section 4.1.1 above, all in accordance with the
Closing Statement.
 
(b) After (i) deducting in accordance with the Closing Statement all closing
costs which are chargeable to the account of LGI De, and (ii) either deducting
or adding (as appropriate) in accordance with the Closing Statement the net
amount of the prorations and adjustments made pursuant to this Agreement,
disburse the balance of the cash funds (as adjusted pursuant to clause (i) and
clause (ii) above) to the Partnership in accordance with separate wiring
instructions to be delivered to Escrow Holder by NetREIT.
 
(c) Disburse any remaining funds to the Partnership in accordance with separate
wiring instructions to be delivered to Escrow Holder by the Partnership.
 
 
 

--------------------------------------------------------------------------------

 
 
(d) Disburse the following to the Partnership:
 
(i) The Preferred Stock Certificate;
 
(ii)  
The original, manually signed Partnership Agreement;

 
(iii)  
A copy of the original, manually signed Option.

 
(e) Disburse the following to LGI De:
 
(i)  
The original, manually signed Option;

 
(ii)  
A copy of the original, manually signed Partnership Agreement.

 
(f)           Disburse the Call Option to NetREIT.
 
6.5.2 Recordation.  Escrow Holder shall cause the Grant Deed (along with any
other documents which the Parties hereto may mutually direct to be recorded) to
be recorded in the Official Records and obtain conformed copies thereof for
distribution to the Partnership and LGI De.
 
6.5.3 Delivery of Documents.  Escrow Holder shall:  (a) direct the Title Company
to issue the Title Policy to the Partnership; (b) deliver to the Partnership and
LGI De conformed copies of the Grant Deed as recorded in the Official Records;
(c) combine the two (2) original counterparts of each of the General Assignment
and the Lease Assignment delivered into Escrow by LGI De and the Partnership
into two (2) fully executed originals of each of the General Assignment and the
Lease Assignment, and deliver to LGI De one (1) fully executed original of each
of the General Assignment and the Lease Assignment; and (d) deliver to the
Partnership executed originals of the Bill of Sale, the FIRPTA Certificate, any
specific state forms and one (1) fully executed original of each of the General
Assignment and the Lease Assignment.
 
6.6 Closing Costs.
 
6.6.1 LGI De's Closing Costs.  LGI De shall pay (a) the basic premium for a ALTA
policy of title insurance with respect to the Title Policy, (b) all legal and
professional fees and fees of other consultants incurred by LGI De, (c) all
documentary transfer taxes and recording fees payable in connection with the
recordation of the Grant Deed, (d) one-half (½) of all Escrow fees and Escrow
costs related to the conveyance of the Property (but no Escrow fees and Escrow
costs related to the Loan, all of which shall be paid by the Partnership or
NetREIT on behalf of the Partnership), and (e) the payment to the Broker as
provided in Section 6.7 below.
 
6.6.2 The Partnership's Closing Costs.  The Partnership or NetREIT, on behalf of
the Partnership, shall pay (a) the cost of the Title Policy in excess of the
basic premium for a ALTA policy of title insurance, (b) the cost of any
endorsements to the Title Policy, (c) the
 
 
 

--------------------------------------------------------------------------------

 
 
cost of the Updated ALTA Surveys and any modification, update or recertification
thereof, (d) the cost of any title insurance coverage required by the
Partnership's Lender or any other lender providing financing to the Partnership,
(e) all legal and professional fees and fees of other consultants incurred by
the Partnership, (f) any and all Escrow fees and costs and any other costs and
expenses whatsoever related to the Partnership Loan and any other the
Partnership financing, (g) one-half (½) of all Escrow fees and Escrow costs
related to the conveyance of the Property, and (h) all fees, costs, charges,
points, title insurance premiums, recording fees and other costs and expenses of
the Partnership Loan and any other the Partnership financing.
 
6.6.3 General Allocation.  Any other closing costs and expenses which are not
addressed in Section 6.6.1 and Section 6.6.2 above shall be allocated between
the Partnership and LGI De in accordance with the customary practice in San
Diego County, California.
 
6.7 Real Estate Commissions. The Partnership, or NetREIT on behalf of the
Partnership, shall be responsible for any commission, fee or other payment which
may be due to CIRE ("Broker") upon the Closing in connection with the conveyance
of the Property to the Partnership contemplated by this Agreement.  Any
commission to be paid to Broker shall be per a separate agreement between
Broker, NetREIT and LGI De.  NetREIT and LGI De represent and warrant that other
than the Broker identified in this Section 6.7, neither has dealt with any other
broker or finder in this transaction and that no other broker or finder shall be
due any brokerage fee or commission.  Each Party agrees to indemnify and defend
the other Party against and hold the other Party harmless from any and all
claims, demands, losses, liabilities, lawsuits, judgments, costs and expenses
(including without limitation reasonable attorneys' fees) with respect to any
leasing commission or equivalent compensation alleged to be owing on account of
any dealings with Broker, or any real estate broker or agent, occurring by,
through, or under the indemnifying Party.
 
6.8 Real Estate Reporting Person.  Escrow Holder is hereby designated the "real
estate reporting person" for purposes of Section 6045 of Title 26 of the United
States Code and Treasury Regulation 1.6045-4 and the Closing Statement or any
other any settlement statement prepared by the Title Company shall so
provide.  Upon the Closing, if required, NetREIT and LGI De shall cause Escrow
Holder to file a Form 1099 information return and send the statement to LGI De
as required under the aforementioned statute and regulation.
 
6.9 Prorations.
 
6.9.1 General.  The following items set forth below in this Section 6.9 are to
be adjusted and prorated between LGI De and the Partnership, or NetREIT on
behalf of the Partnership, as of 11:59 p.m. on the day immediately preceding the
Closing Date (the "Adjustment Time") (such that the Partnership shall be deemed
to own the Property, and therefore entitled to any revenues and responsible for
any expenses, for the entire day upon which the Closing occurs).  Such
adjustments and prorations shall be calculated on the actual days of the
applicable month in which the Closing occurs and all annual prorations shall be
based upon a three hundred sixty-five (365)-day year.  The net amount resulting
from the prorations and adjustments provided for in this Section 6.9 (along with
the allocation of Closing costs in accordance with Section 6.6 above) shall be
added to (if such net amount is in LGI De's favor) or
 
 
 

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deducted from (if such net amount is in the Partnership's favor) the funds to be
delivered at Closing by NetREIT on behalf of the Partnership.  Any other closing
prorations and adjustments which are customarily made in comparable transactions
involving the conveyance of real property and are not addressed in this
Section 6.9 shall be made between NetREIT on behalf of the Partnership and LGI
De in accordance with the customary practice in San Diego County,
California.  All provisions of this Section 6.9 shall survive the Closing and
the recordation of the Grant Deed and shall not merge into the Grant Deed and
the other documents and instruments delivered at Closing.
 
6.9.2 Rent, Tenant Charges and Arrearages.
 
(a) At Closing, all rents actually paid and collected, and any other charges
owing by tenants and which have been collected by LGI De shall be prorated as of
the Adjustment Time, and the prorated amount attributable to the period
following the Closing shall either be paid to the Partnership at the Closing or
credited against the funds, at LGI De's option.  Any CAM and other charges and
expenses payable by tenants under the Leases (collectively, the "Tenant
Charges") on an estimated basis shall be reconciled against actual charges and
expenses as of and at the Closing, to the extent then possible, and LGI De shall
provide a proposed reconciliation for the NetREIT's approval.  LGI De shall have
a period of ninety (90) days following the actual Closing Date to provide the
Partnership with a final reconciliation of Tenant Charges.  If the final
reconciliation shows that LGI De owes the Partnership additional sums, LGI De
shall, at its sole election, either (x) deliver such amount to the Partnership
in cash or (y) deliver the final reconciliation of the Tenant Charges together
with its executed agreement to reduce its limited partner interest in the
Partnership by a percentage amount equal to the difference in the Net Value of
the Property before and after reduction of such amount (the "Closing NV") and
the Net Value of the Property after deducting such amount (the "Adjusted NV"),
divided by the Closing NV with the resulting amount divided by 100 and adjust
Options and Call Option accordingly.  If the final reconciliation shows that the
Partnership owes LGI De additional sums, NetREIT shall, on behalf of the
Partnership, pay such amount to LGI De within ten (10) days after the
Partnership's receipt of the final reconciliation.
 
(b) Other than as set forth above, there shall not be any further reconciliation
of such Tenant Charges after the final reconciliation thereof, the proration of
such Tenant Charges pursuant to the final reconciliation being conclusively
presumed to be accurate.  After the final reconciliation of the Tenant Charges
is made by and between the Parties, the Partnership shall be solely liable and
responsible to the tenant for such reconciliation of Tenant Charges under the
Leases.
 
(c) At the Closing NetREIT shall contribute to the Partnership outside of
escrow, cash in an amount equal to the aggregate of the security deposits paid
by the tenants under the Leases and received by LGI De in connection with the
Leases, to the extent LGI De has not already returned or applied any of such
security deposits.  Provided, however, with respect to any security deposits
which are other than cash, LGI De shall deliver to the Partnership at the
Closing the original documentation related thereto with such transfer and
assignment documentation as may be necessary (executed by all necessary third
parties and with all fees paid by LGI De), including without limitation, the
original letter of credit, if applicable.  Except as provided in the foregoing,
and subject to its responsibility for the accuracy of its
 
 
 

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reconciliation of Tenant Charges, LGI De shall have no further responsibility to
NetREIT or to the Partnership for such security deposits.
 
(d) The Partnership shall, in the ordinary course of its business (which shall
not include declaring a default or bringing suit) continue to invoice tenants in
an attempt to collect any delinquent or other rental and other expense
arrearages attributable to the period prior to the Closing.  After deduction of
the Partnership's reasonable out-of-pocket costs to collect same, the
Partnership shall promptly account to LGI De and shall immediately reimburse LGI
De for all rents, expense reimbursements and other charges received by the
Partnership after the Closing which apply to any period prior to the Closing to
the extent LGI De has not already been paid for or credited with such sums;
provided, however, that amounts collected by the Partnership shall first be
applied against amounts outstanding and due and payable for the period after the
Closing.  With respect to any rent arrears arising under the Leases, LGI De is
expressly prohibited from attempting to collect such pre-closing delinquent
rental obligations directly from tenants, and without limitation of the
foregoing, after the Closing, LGI De shall not bring an action against any
tenants under the Leases while such tenants are tenants of the Property which
would seek to terminate the related leases, dispossess the related tenants or
seek the involuntary bankruptcy of the related tenants.
 
6.9.3 Real Estate Taxes and Assessments.  For purposes of this Agreement,
"Property Taxes" means real estate or ad valorem real property taxes,
assessments (including any business improvement district charges and principal
and interest installments due on any community facilities district or local
improvement district liens) and personal property taxes with respect to the
Property.  To the extent not paid directly by the tenants of the Property or
reimbursed by tenants as part of the Tenant Charges, Property Taxes shall be
prorated as of the Adjustment Time based upon the latest available tax
bill.  Any Property Taxes which may be paid in installments shall be prorated
based upon such installments and, notwithstanding anything to the contrary
contained in this Agreement, LGI De shall not be required to pre-pay or to bear
(by credit or debit) the prepayment of any amount due for Property Taxes
(including special amounts payable for other assessments) other than the
installments due for the Current Tax Period.  LGI De shall be responsible for
(a) all Property Taxes assessed for any period prior to the Current Tax Period
and (b) that portion of the Property Taxes assessed for the Current Tax Period
determined on the basis of the number of days which have elapsed from the first
day of the Current Tax Period to the Adjustment Time, inclusive, whether or not
the same shall be payable prior to the Adjustment Time.  The Partnership shall
be responsible for (i) all Property Taxes assessed for any period after the
Current Tax Period, and (ii) that portion of the Property Taxes assessed for the
Current Tax Period, determined on the basis of the number of days following the
Adjustment Time through the last day of the Current Tax Period, inclusive.  The
term "Current Tax Period" shall mean the fiscal period of the applicable taxing
or charging authority during which the Closing occurs.  If the latest available
tax bill is not the bill for the Current Tax Period, then Property Taxes shall
be prorated based upon the latest tax information then available (including
previous tax bills, current assessments and other information available from the
taxing authorities) and the Partnership and LGI De shall re-prorate the Property
Taxes following the Closing as soon as the tax bill for the Current Tax Period
becomes available, but in all events no later than the Final Proration
Adjustment as provided in Section 6.9.5 below.  Any increase in Property Taxes
which is assessed following the Closing arising out of the conveyance of the
Real Property to the Partnership or a subsequent sale or change in ownership
thereafter,
 
 
 

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and/or arising out of any construction or improvements to the Real Property
performed following the Closing, shall be paid by the Partnership when
assessed.  Refunds of Property Taxes for the Current Tax Period, net of the
costs of pursuing any tax contest or protest proceedings and collecting such
refunds, shall be prorated in proportion to the respective shares of the
Property Taxes for the Current Tax Period borne by LGI De and the Partnership
hereunder.
 
6.9.4 Operating Expenses.  To the extent not paid directly by the tenants of the
Property, all costs and expenses, other than Property Taxes, with respect to the
operation and maintenance of the Property shall be prorated between NetREIT, on
behalf of the Partnership, and LGI De as of the Adjustment Time, including all
fees and charges for sewer, water, electricity, heat and air-conditioning
service and other utilities; assessments payable under any covenants, conditions
and restrictions encumbering the Property; charges under the Contracts assumed
by the Partnership; insurance premiums; rental taxes, personal property taxes,
business occupational taxes and municipal taxes other than Property Taxes; and
periodic fees payable under transferable licenses and permits for the operation
of any of the Property.  Subject to Section 6.9.2, such costs and expenses shall
be prorated as of the Adjustment Time such that LGI De shall be responsible for
all such costs and operating expenses attributable on an accrual basis to the
period prior to the Adjustment Time and the Partnership shall be responsible for
all such costs and expenses attributable on an accrual basis to the period from
and after the Adjustment Time.  If invoices or bills for any of such costs and
expenses are unavailable on or before the Closing Date, such costs and expenses
shall be estimated and prorated at Closing based upon the latest information
available (including prior bills and operating history) and a final and
conclusive readjustment of any cost and expense item shall be made upon receipt
of the actual invoice or bill, but in all events no later than the Final
Proration Adjustment as provided in Section 6.9.5 below.  NetREIT shall cause
the Partnership to take all commercially reasonable steps to effectuate the
transfer to the Partnership's name as of the date of Closing of all utilities
which are in LGI De's name, and where necessary, open a new account in the
Partnership's name and post deposits with the utility companies. NetREIT shall
cause the Partnership to cooperate with LGI De to have all utility meters read
by the appropriate utility companies as of the date of Closing.  If the
Partnership and LGI De are unable to obtain such final meter readings as of the
Closing Date from all applicable meters, utility expenses related to such meters
shall be estimated at Closing based upon the operating history of the Property
subject to the final adjustment in all events no later than the Final Proration
Adjustment as provided in Section 6.9.5 below. LGI De shall be entitled to
recover any and all deposits held by any utility companies for utilities in any
LGI De's name as of the date of Closing, and if any such deposits are not
returned to LGI De on or before the Closing Date, such deposits shall be
assigned to the Partnership and the amounts thereof shall be credited to LGI
De's account and decrease the amount of funds payable to the Partnership at
Closing.
 
6.9.5 Closing Statement; Final Proration Adjustment.  At least one (1) full
Business Day prior to the Closing Date, LGI De shall deliver to the Partnership
a proration schedule identifying all adjustments for items to be prorated
pursuant to this Section 6.9, with reasonable back-up, and LGI De and the
Partnership shall agree upon the allocation of costs and expenses to be made in
accordance with Section 6.6 above and the prorations to be made in accordance
with this Section 6.9 and submit to Escrow Holder a signed statement (or sign a
statement prepared by Escrow Holder) (the "Closing Statement").  The Closing
Statement shall be utilized for purposes of making the adjustments to the Net
Value upon the Closing for closing
 
 
 

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costs and prorations.  As soon as practicable following the Closing (but in no
event later than ninety (90) days after the Closing), LGI De and the Partnership
shall reprorate the income and expenses set forth in this Section 6.9 based upon
actual bills or invoices received after the Closing (if original prorations were
based upon estimates) and any other items necessary to effectuate the intent of
the Parties that all income and expense items be prorated as provided above in
this Section 6.9 (the "Final Proration Adjustment").  Any reprorated items shall
be promptly paid to the Party entitled thereto.  Any errors or omissions in
computing adjustments at the Closing shall be promptly corrected, but only so
long as the Party seeking to correct such error or omission has notified the
other Party of such error or omission no later than the Final Proration
Adjustment.  The proration of income and expense at the Final Proration
Adjustment shall be final and conclusive; there shall be no further proration or
adjustment following the Final Proration Adjustment.
 
7. Interim Operation and Leasing of the Property; Leasing Costs.
 
7.1 Operation.  From and after the Opening of Escrow and continuing to the
Closing Date, LGI De shall operate, maintain and, subject to Section 8 below,
repair the Property in the ordinary course and consistent with such LGI De's
past practices and shall keep the Property insured against fire, vandalism and
other loss, damage and destruction with the same coverage, policy limits and
deductible amounts as are currently maintained by LGI De.  Notwithstanding the
foregoing, LGI De's maintenance obligations under this Section 7 shall not
include any obligation to make capital expenditures or any other expenditures
not incurred in LGI De's normal course of business unless required for the day
to day operation of the Real Property.
 
7.2 Leasing.  Without limiting the foregoing, but subject to the provisions of
this Section 7.2, from the Agreement Date through the Due Diligence Deadline LGI
De shall, in the ordinary course, negotiate with prospective tenants and enter
into new leases (on terms that LGI De believes, in its commercially reasonable
business judgment, to be market terms), enforce the terms of the Leases in all
material respects and perform in all material respects all of landlord's
obligations under the Leases.  LGI De will promptly notify NetREIT of any new
leases entered into by, or proposals to enter into new leases made by, LGI De at
least two (2) Business Days prior to the Due Diligence Deadline and provide
NetREIT with a summary of the terms of each such new lease or proposal.  After
the Due Diligence Deadline, and at least three (3) Business Days prior to
becoming legally bound with respect to any new lease or other agreement or
modification of the existing Leases or other agreement, LGI De shall consult
with and seek the consent of NetREIT, and shall provide reasonable detail to
NetREIT including, at NetREIT's request, copies of the relevant documentation,
with respect thereto.  Any consent to be given by NetREIT pursuant to this
Section 7.2 shall be granted or withheld in NetREIT's sole and absolute
discretion, and shall be deemed denied if NetREIT does not respond in writing to
LGI De's request for said consent within five (5) Business Days after receipt
thereof.  Prior to the Closing Date, LGI De shall have the right, but not the
obligation (except to the extent that LGI De's failure to act shall constitute a
waiver of such rights or remedies), to enforce the rights and remedies of the
landlord under the Leases, by summary proceedings or otherwise, but after the
expiration of the Due Diligence Deadline, LGI De shall not apply all or any
portion of any security deposit then held by LGI De toward any loss or damage
incurred by LGI De by reason of any defaults by any tenants under the
Leases.  With respect to any application by LGI De,
 
 
 

--------------------------------------------------------------------------------

 
 
prior to the expiration of the Due Diligence Deadline, of any tenant security
deposit held by LGI De, LGI De will deliver, in connection with any such
application, written notice to the applicable tenant(s) under the Leases
indicating that its security deposit has been or is being so applied.  LGI De
shall provide NetREIT with written notice within three (3) Business Days after
any action taken by LGI De pursuant to the foregoing provisions.
 
7.3 Contracts.  Except for leases, service contracts and agreements entered into
in accordance with the preceding provisions of this Section 7, from and after
the Opening of Escrow LGI De shall not enter into, execute or knowingly permit
any contract, lien or encumbrance on the Property without NetREIT's prior
written consent; provided, such consent shall not be unreasonably withheld,
conditioned or delayed with respect to any utility or similar easement necessary
for the operation of the Property.  NetREIT's consent shall be deemed denied if
NetREIT does not respond in writing to LGI De's request for said consent within
five (5) Business Days thereafter.  From and after the Opening of Escrow, LGI De
shall not dispose of any of the Property except for dispositions and replacement
of personal property in the ordinary course of business.
 
7.4 Leasing Costs.  If the Closing occurs, NetREIT shall be responsible and
shall pay for the costs of tenant improvement work or allowances, third-party
leasing commissions and other leasing costs (collectively, the "Leasing Costs")
relating to or arising from (i) those leases or modifications of leases entered
into on or after the Agreement Date, (ii) the exercise by a tenant of a renewal,
expansion or extension option contained in its Lease, which renewal or extension
period commences, or which expansion space such tenant first has the right to
occupy, on or after the Agreement Date (notwithstanding that such tenant may
have exercised such option prior to the Agreement Date) and (iii) any items set
forth on Exhibit J, and any amounts paid by LGI De in respect of such Leasing
Costs shall be reimbursed by NetREIT at the Closing.  LGI De shall be
responsible for, and pay on or before the Closing Date (or provide NetREIT a
credit thereof) all Leasing Costs attributable to the current term of any Lease
for tenants in occupancy as of the Agreement Date.  The provisions of this
Section 7 shall survive the Closing.
 
8. Casualty and Condemnation.
 
8.1 Immaterial Casualty or Condemnation.  In the event there is any damage to
the Real Property or destruction of any Improvement thereon or condemnation of
any portion of the Property after the Agreement Date, then except as provided in
Section 8.2 below, the Partnership shall be required to accept conveyance of the
Property with a credit against the Net Value of the Property otherwise due
hereunder equal to the amount of any insurance proceeds or condemnation awards
actually collected by LGI De prior to the Closing as a result of any such damage
or destruction or condemnation, plus the amount of any insurance deductible or
retention, less any sums expended by LGI De prior to the Closing for the
restoration or repair of the Property and/or in collecting such insurance
proceeds or condemnation awards. LGI De agrees that LGI De will maintain LGI
De's present casualty insurance policy with respect to the Property in full
force and effect until the Closing.  If the insurance proceeds or condemnation
awards have not been collected as of the Closing, then such proceeds or awards
shall be assigned to the Partnership, except to the extent needed to reimburse
LGI De for sums LGI De expended
 
 
 

--------------------------------------------------------------------------------

 
 
prior to the Closing for the restoration or repair of the Property and/or in
collecting such insurance proceeds or condemnation awards.
 
8.2 Material Casualty or Condemnation. Notwithstanding the foregoing provisions
of Section 8.1 above, if the Property or any portion thereof is damaged or
destroyed by a casualty or is condemned and (i) gives rise to a right of
termination or rent abatement under any Lease, or (ii) to the extent that the
cost of repair or restoration to substantially the same condition existing prior
to such casualty (or, in the case of a condemnation, the value of the Property
or portion thereof so condemned) would exceed an amount equal to One Hundred
Thousand No/100ths Dollars ($100,000.00), then LGI De shall give NetREIT prompt
notice thereof and NetREIT may, at NetREIT's option to be exercised by delivery
of written notice to LGI De within five (5) Business Days of LGI De's notice to
NetREIT of the occurrence of such casualty or condemnation, elect not to convey
the Property under this Agreement.  If NetREIT so duly elects not to convey the
Property, this Agreement shall terminate, the Deposit (to the extent then made)
shall be returned to NetREIT (less one-half (1/2) of any escrow and title
cancellation fees and charges, which the Partnership hereby agrees to pay), and
neither NetREIT nor LGI De shall have any further rights or obligations under
this Agreement except for NetREIT's Surviving Obligations.  Any dispute as to
the costs of such repair or restoration or value of a condemned portion of the
Property shall be referred, within five (5) Business Days after written notice
to a Party by the other Party, to a licensed architect jointly selected by
NetREIT and LGI De for resolution.  The determination of such architect, which
shall be made within a period of ten (10) days after such submittal by the
Parties, shall be final, conclusive and binding on the Parties.  If the Parties
shall fail to agree upon the identity of such architect within three (3)
Business Days after either Party has notified the other of such Party's choice
of architect, then either Party may at any time thereafter apply to a court of
competent jurisdiction to appoint immediately such architect.  The fees and
expenses of such architect shall be paid equally by NetREIT and LGI De, and the
Parties shall cooperate with such architect by providing such information as
such architect may reasonably require to resolve the dispute.  If NetREIT does
not timely elect, in writing, not to convey the Property as provided in this
Section 8, NetREIT shall be conclusively deemed to have waived any right to
terminate this Agreement by reason of any such casualty or condemnation and
NetREIT shall proceed with the conveyance of the Property to the Partnership and
at Closing the Partnership shall be entitled to a credit in an amount equal to
the amount of any insurance proceeds or condemnation awards actually collected
by LGI De prior to the Closing as a result of any such damage or destruction or
condemnation, plus the amount of any insurance deductible or any uninsured
amount or retention, less any sums expended by LGI De prior to the Closing for
the restoration or repair of the Property and/or in collecting such insurance
proceeds or condemnation awards.  If the insurance proceeds or condemnation
awards have not been collected as of the Closing, then such proceeds or awards
shall be assigned to the Partnership at Closing, except to the extent needed to
reimburse LGI De for sums LGI De expended prior to the Closing for the
restoration or repair of the Property.
 
9. Representations and Warranties.
 
9.1 Representations and Warranties of LGI De.  LGI De represents and warrants to
NetREIT and to the Partnership that the following matters are true and correct
as of the Opening of Escrow and, subject to Section 9.2 below, will also be true
and correct as of the Closing.
 
 
 

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9.1.1 Legal Power and Authorization.
 
(a) LGI De has the legal power, right and authority to enter into this Agreement
and the instruments referenced herein, and to consummate the transaction
contemplated hereby.
 
(b) This Agreement is, and all the documents executed by LGI De which are to be
delivered by LGI De to the Partnership at the Closing will be, duly authorized,
executed, and delivered by LGI De, and is and will be legal, valid, and binding
obligations of LGI De (except as limited by applicable bankruptcy, insolvency,
moratorium and other principles relating to or limiting the right of contracting
parties generally).
 
9.1.2 Income Tax Consequences. The Parties intend that the transactions set
forth herein shall be nontaxable as a contribution of Property to a partnership
pursuant to Internal Revenue Code (“IRC”) Section 721.  Moreover, the Parties
agree that any financing arrangements made pursuant to Section 4.1.9 shall be
structured so as to allocate sufficient debt to LGI De pursuant to IRC Section
752(b) to prevent the recognition of IRC Section 731 gain by LGI
De.  Notwithstanding the foregoing, the Parties acknowledge that it is LGI De's
sole responsibility to determine its own interests in regard to the federal and
state income tax treatment of its contribution of the Property to the
Partnership and whether the proposed transaction will satisfy those interests.
LGI shall solely be responsible for any and all calculations of the amount of
debt required to be allocated to LGI De to avoid IRC Section 731 gain.  In doing
so, it is understood by the Parties that LGI De will consult with its own tax
advisor(s) in this regard.  The Parties acknowledge that LGI De is not relying
on NetREIT, the Partnership, or any of their officers, directors or agents,
including their legal counsel and independent accountants, in making its
determination with regard to the federal or state income tax consequences of its
participation in the transaction, and has received no legal or tax advice from
these persons in that regard.  To ensure compliance with requirements imposed by
the IRS, we inform you that, unless specifically indicated otherwise, any tax
advice contained in this communication (including any attachments) is not
intended or written to be used, and cannot be used, for the purpose of
(i) avoiding tax-related penalties under the Internal Revenue Code or (ii)
promoting, marketing, or recommending to another party any tax-related matter
addressed herein.
 
9.1.3 Requisite Action. All requisite action (corporate, trust, partnership,
limited liability company or otherwise) has been taken by LGI De in connection
with entering into this Agreement, the instruments referenced herein to be
executed by LGI De, and the consummation of the transaction contemplated
hereby.  No further consent of any shareholder, trustee, partner, member,
trustor, beneficiary, creditor, investor, judicial or administrative body,
governmental authority or other party is required for LGI De to consummate the
transaction contemplated by this Agreement.
 
9.1.4 Individual(s) Authority. The individual(s) executing this Agreement and
the instruments referenced herein on behalf of LGI De has the legal power,
right, and actual authority to bind LGI De to the terms and conditions hereof
and thereof.
 
 
 

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9.1.5 Foreign Person Affidavit. LGI De is not a foreign person as defined in
Section 1445 of the Internal Revenue Code.
 
9.1.6 ERISA Matters.  LGI De is acting on LGI De's own behalf and LGI De is
neither (a) an employee benefit plan as defined in Section 3(3) of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA") which is subject to
Title 1 of ERISA, nor (b) a plan as defined in Section 4975(e)(1) of the
Internal Revenue Code of 1986, as amended, which is subject to Section 4975 of
the Internal Revenue Code of 1986 (any such plan which meets all of the criteria
in clause (a) or clause (b) above is hereinafter referred to collectively as a
"Plan").  LGI De's assets do not constitute "plan assets" of one or more of such
Plans within the meaning of Department of Labor Regulation Section 2510.3-101
and LGI De will not be reconstituted as a Plan or as an entity whose assets
constitute "plan assets" within the meaning of Department of Labor Regulation
2510.3-101.
 
9.1.7 Bankruptcy Matters.  LGI De has not made a general assignment for the
benefit of creditors, filed any voluntary petition in bankruptcy or suffered the
filing of an involuntary petition by LGI De's creditors, suffered the
appointment of a receiver to take possession of substantially all of LGI De's
assets, suffered the attachment or other judicial seizure of substantially all
of LGI De's assets, admitted LGI De's inability to pay LGI De's debts as they
come due, or made an offer of settlement, extension or composition to LGI De's
creditors generally.
 
9.1.8 Contracts.  LGI De warrants that there are no service, supply,
maintenance, repair, construction, leasing or management contracts entered into
by LGI De relating to the Property other than those Contracts listed on
Exhibit G hereto.
 
9.1.9 Leases.  To LGI De's knowledge, LGI De warrants that there are no Leases
other than those Leases (as amended) listed on Exhibit L thereto.
 
9.1.10 Pending Actions.  To LGI De's knowledge, except as set forth in the Title
Documents, LGI De has not received written notice of any pending action
(including any condemnation action), suit or proceeding before any court or
other governmental agency naming LGI De as a party that arises out of LGI De's
ownership of the Property (other than a pending proceeding, if any, to contest a
Property Taxes assessment of the Property and personal injury litigation covered
by insurance policies, subject to customary deductibles).
 
9.1.11 LGI De's Documents. To LGI De's knowledge, the LGI De's Documents
delivered to NetREIT or made available to NetREIT pursuant to Section 4.1.3
above are true, correct and complete copies thereof in LGI De's
possession.  Notwithstanding anything contained herein to the contrary, LGI De
is not making any express or implied representation as to the accuracy or
thoroughness of the contents of any of said LGI De's Documents or of the ability
of NetREIT to rely on any of said LGI De's Documents.  This representation shall
not be deemed breached by virtue of any new agreements entered into after the
Agreement Date in accordance with the provisions of Section 7 hereof.
 
9.1.12 OFAC.  Neither LGI De nor any of its affiliates, nor any of their
respective partners, or to LGI De's knowledge, any of their members,
shareholders or other
 
 
 

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equity owners, and none of their respective employees, officers, directors,
representatives or agents, is a person or entity with whom U.S. persons or
entities are restricted from doing business under regulations of OFAC (including
those named on OFAC's Specially Designated and Blocked Persons List) or under
any statute executive order (including the September 24, 2001 Executive Order
Blocking Property and Prohibiting Transactions with Persons Who Commit, Threaten
to Commit, or Support Terrorism), or other governmental action.
 
9.2 Qualification of LGI De's Representations and Warranties.  Prior to the
Closing, LGI De shall have the right to qualify the representations and
warranties made by LGI De in Section 9.1 above in writing with any information
LGI De first receives concerning such representations and warranties after the
Agreement Date.  In no event shall LGI De be liable to NetREIT or to the
Partnership for, or be deemed to be in default pursuant to this Agreement by
reason of, any inaccuracy of a representation or warranty which results from any
change that occurs between the Agreement Date and the Closing and is expressly
permitted under the terms of this Agreement or any change which is beyond the
control of LGI De to prevent, so long as LGI De notifies NetREIT in writing of
such change promptly following LGI De obtaining knowledge thereof.  If LGI De
notifies NetREIT in writing prior to the Closing of any qualification to LGI
De's representations and warranties in Section 9.1 above which has a material
adverse effect on the Property, then within five (5) Business Days after
NetREIT's receipt of such notice from LGI De, NetREIT may elect to terminate
this Agreement by notice in writing to LGI De.  NetREIT must unconditionally
elect, by a writing received by LGI De within such five (5) Business Day period
(and the Closing Date shall be adjourned, if necessary, for the period of time
necessary for NetREIT's five (5) Business Day election period), to either
(a) terminate this Agreement and the Escrow, in which event the Deposit shall be
returned to NetREIT (less one-half (1/2) of any escrow and title cancellation
fees and charges, which NetREIT hereby agrees to pay) and LGI De and NetREIT
shall have no further obligations and liabilities under this Agreement (except
for NetREIT's Surviving Obligations, which shall survive any such termination),
or (b) proceed with the transaction contemplated by this Agreement, in which
event the representations and warranties made by LGI De in Section 9.1 above
shall be qualified upon the Closing as provided in the written notice to
NetREIT.  In the event that LGI De does not receive such written notification
from NetREIT within such five (5) Business Day period unconditionally stating
which election NetREIT has decided to make, then NetREIT shall be deemed to have
elected to be denied and the Closing shall occur with the representations and
warranties in Section 9.1, modified or qualified as provided in the written
notice to NetREIT, only upon NetREIT’s written consent. NetREIT shall have no
right to terminate this Agreement or any recourse against LGI De for any
qualification to LGI De's representations and warranties which does not have a
material adverse effect on the Property.
 
9.3 Definition of LGI De's Knowledge.  For purposes of this Agreement, whenever
the phrase "to LGI De's knowledge", "to the knowledge of LGI De" or other
references to the knowledge of LGI De are used or made, they shall be deemed to
refer to the present actual (as opposed to constructive or imputed) knowledge of
Lee Gittleman without any investigation or inquiry whatsoever by such
individual. NetREIT acknowledges that the foregoing individual is named solely
for the purpose of defining and narrowing the scope of LGI De's knowledge and
not for the purpose of imposing any liability on or creating any duties running
from such individual to NetREIT.  NetREIT covenants that neither it nor the
Partnership will bring an action of any kind against either of such individual
or any officer, director,
 
 
 

--------------------------------------------------------------------------------

 
 
member, partner, shareholder, agent, representative, or advisor of LGI De
arising out of any of the representations, warranties and covenants made by LGI
De in this Agreement.
 
9.4 Survival Period.  The representations and warranties of LGI De set forth in
Section 9.1 above shall survive for six (6) months following the Closing (the
"Expiration Date") and shall automatically expire upon the Expiration Date
unless NetREIT or the Partnership commences suit against LGI De with respect to
any alleged breach prior to the Expiration Date (and, in the event any such suit
is timely commenced by NetREIT or the Partnership against LGI De, shall survive
thereafter only insofar as the subject matter of the alleged breach specified in
such suit is concerned).  If suit is not timely commenced by NetREIT or the
Partnership prior to the Expiration Date, then LGI De's representations and
warranties shall thereafter be void and of no force or effect.
 
9.5 Representations and Warranties of NetREIT.  NetREIT represents and warrants
to LGI De that the following matters are true and correct as of the Opening of
Escrow and will also be true and correct as of the Closing:
 
9.5.1 Legal Power.  NetREIT has the legal power, right and authority to enter
into this Agreement and the instruments referenced herein, and to consummate
(and cause the Partnership to consummate) the transactions contemplated hereby.
 
9.5.2 Duly Authorized.  This Agreement is, and all the documents executed by
NetREIT or the Partnership which are to be delivered by the Partnership to LGI
De at the Closing will be, duly authorized, executed, and delivered by the
respective signatory, and is and will be legal, valid, and binding obligations
of NetREIT or the Partnership, as the case may be (except as may be limited by
applicable bankruptcy, insolvency, moratorium and other principles relating to
or limiting the right of contracting parties generally).
 
9.5.3 Requisite Action.  All requisite action (corporate, trust, partnership or
otherwise) has been taken by NetREIT in connection with entering into this
Agreement and the instruments referenced herein to be executed by NetREIT or the
Partnership and by the Closing Date all such necessary action will have been
taken to authorize the consummation of the transaction contemplated hereby.  No
further consent of any shareholder, trustee, partner, member, trustor,
beneficiary, creditor, investor, judicial or administrative body, governmental
authority or other party is required for NetREIT and the Partnership to
consummate the transaction contemplated by this Agreement.
 
9.5.4 Individuals Authority.  The individual(s) executing this Agreement and the
instruments referenced herein on behalf of NetREIT or the Partnership has the
legal power, right, and actual authority to bind NetREIT or the Partnership, as
the case may be, to the terms and conditions hereof and thereof.
 
9.5.5 ERISA Representations.  NetREIT and the Partnership are, and will be,
acting on their own behalf and neither is (a) an employee benefit plan as
defined in Section 3(3) of ERISA which is subject to Title 1 of ERISA, nor (b) a
plan as defined in Section 4975(e)(1) of the Internal Revenue Code of 1986, as
amended, which is subject to Section 4975 of the Internal Revenue Code of
1986.  The assets of neither NetREIT nor the Partnership
 
 
 

--------------------------------------------------------------------------------

 
 
constitute "plan assets" of one or more of such Plans (as defined in
Section 9.1.6 above) within the meaning of Department of Labor Regulation
Section 2510.3-101 and neither NetREIT nor the Partnership will be reconstituted
as a Plan or as an entity whose assets constitute "plan assets" within the
meaning of Department of Labor Regulation 2510.3-101.
 
9.5.6 OFAC.  Neither NetREIT nor the Partnership, or any of its affiliates, or
any of their respective partners, or any of their shareholders or other equity
owners, and none of their respective employees, officers, directors,
representatives or agents, is a person or entity with whom U.S. persons or
entities are restricted from doing business under regulations of OFAC (including
those named on OFAC's Specially Designated and Blocked Persons List) or under
any statute executive order (including the September 24, 2001 Executive Order
Blocking Property and Prohibiting Transactions with Persons Who Commit, Threaten
to Commit, or Support Terrorism), or other governmental action.
 
9.5.7 Pending Actions. Except as disclosed to LGI De in writing, to NetREIT's
knowledge NetREIT has not received written notice of any pending action naming
NetREIT as a party, which would materially affect NetREIT’s performance under
this Agreement or the Partnership Agreement.  For the purposes of this Section
9.5.7, "pending action" means a legal action or legal proceeding then pending
before any court or other governmental agency.
 
9.5.8 NetREIT's Knowledge. For the purposes of this Agreement, "NetREIT's
knowledge" or to the "knowledge of NetREIT," or a similar reference, shall be
deemed to refer to the present actual (as opposed to constructive or imputed)
knoweldge of an executive officer or management level employee of NetREIT
without any investigation or inquiry whatsoever by such individual.  LGI De
acknowledges that the foregoing individuals are named solely for the purpose of
defining and narrowing the scope of NetREIT's knowledge and not for the purpose
of imposing any liability on or creating any duties running from such individual
to LGI De.  LGI De covenants that neither it nor the Partnership will bring an
action of any kind against either of such individual or any officer, director,
member, partner, shareholder, agent, representative, or advisor of NetREIT
arising out of any of the representations, warranties and covenants made by
NetREIT in this Agreement.
 
10. AS-IS Condition of Property. NetREIT specifically acknowledges, represents
and warrants that prior to Closing, NetREIT and its agents, consultants,
contractors and representatives will have thoroughly inspected the Property and
observed the physical characteristics and condition of the Property.
Notwithstanding anything to the contrary contained in this Agreement, NetREIT
further acknowledges and agrees that the Partnership will receive and accept the
Property subject to all applicable laws, rules, regulations, codes, ordinances
and orders. NetREIT further acknowledges and agrees that except for any
representations and warranties (if any) expressly made by LGI De in Section 9.1
of this Agreement or any closing document neither LGI De nor any LGI De Party
made any representations, warranties or agreements by or on behalf of LGI De of
any kind whatsoever, whether oral or written, express or implied, statutory or
otherwise, as to any matters concerning the Property, the condition of the
Property, the size (including rentable or useable square footage) of the Real
Property and/or the Improvements (including any discrepancies in the actual
rentable square footage of the Improvements), the present use of the Property or
the suitability of the Partnership's intended use
 
 
 

--------------------------------------------------------------------------------

 
 
of the Property.  NetREIT hereby acknowledges, agrees and represents that the
Property is to be conveyed to and accepted by the Partnership in its present
condition, "AS IS", "WHERE IS" AND WITH ALL FAULTS, and that no patent or latent
defect or deficiency in the condition of the Property whether or not known or
discovered, shall affect the rights of either LGI De or NetREIT or the
Partnership hereunder nor shall the Net Value be reduced as a consequence
thereof.  Except as otherwise expressly provided in Section 9.1.11 above of this
Agreement, any and all information and documents furnished to NetREIT by or on
behalf of LGI De relating to the Property shall be deemed furnished as a
courtesy to NetREIT but without any warranty of any kind from or on behalf of
LGI De.  NetREIT hereby represents and warrants to LGI De that it has (or by the
Closing Date, shall have) performed an independent inspection and investigation
of the Property and has also investigated and has knowledge of operative or
proposed governmental laws and regulations including land use laws and
regulations to which the Property may be subject.  NetREIT further represents
that, except for any representations (if any) expressly made by LGI De in
Section 9.1 of this Agreement or in any closing document, the Partnership shall
acquire the Property solely upon the basis of NetREIT's independent inspection
and investigation of the Property, including:  (a) the quality, nature,
habitability, merchantability, use, operation, value, marketability, adequacy or
physical condition of the Property or any aspect or portion thereof, including
structural elements, foundation, roof, appurtenances, access, landscaping,
parking facilities, electrical, mechanical, HVAC, plumbing, sewage, and utility
systems, facilities and appliances, soils, geology and groundwater, or whether
the Real Property lies within a special flood hazard area, an area of potential
flooding, a very high fire hazard severity zone, a wildland fire area, an
earthquake fault zone or a seismic hazard zone; (b) the dimensions or lot size
of the Real Property or the square footage of the Improvements thereon or of any
tenant space therein; (c) the development or income potential, or rights of or
relating to, the Real Property or its use, habitability, merchantability, or
fitness, or the suitability, value or adequacy of such Real Property for any
particular purpose; (d) the zoning or other legal status of the Real Property or
any other public or private restrictions on the use of the Real Property;
(e) the compliance of the Real Property or its operation with any applicable
codes, laws, regulations, statutes, ordinances, covenants, conditions and
restrictions of any governmental or regulatory agency or authority or of any
other person or entity (including the Americans With Disabilities Act);
(f) NetREIT's ability to obtain any necessary governmental approvals, licenses
or permits for the Partnership's intended use or development of the Real
Property; (g) the presence or absence of Hazardous Materials on, in, under,
above or about the Real Property or any adjoining or neighboring property;
(h) the quality of any labor and materials used in any Improvements; (i) the
condition of title to the Real Property; (j) Contracts or any other agreements
affecting the Real Property or the intentions of any Party with respect to the
negotiation and/or execution of any lease or contract with respect to the Real
Property; (k) LGI De's ownership of the Property or any portion thereof; or
(l) the economics of, or the income and expenses, revenue or expense projections
or other financial matters, relating to the operation of the Real
Property.  Without limiting the generality of the foregoing, NetREIT expressly
acknowledges and agrees that it is not relying on any representation or warranty
of LGI De or any LGI De Party, whether implied, presumed or expressly provided
at law or otherwise, arising by virtue of any statute, common law or other
legally binding right or remedy in favor of it or the Partnership, except as may
be expressly provided in Section 9.1 of this Agreement or in any closing
document.  NetREIT further acknowledges and agrees that LGI De is not under any
duty
 
 
 

--------------------------------------------------------------------------------

 
 
to make any inquiry regarding any matter that may or may not be known to LGI De
or any other LGI De Party.
 
LGI DE'S INITIALS:                                                NETREIT'S
INITIALS:                                                      
 
11. Limited Liability.  NetREIT on its own behalf, and on behalf of the
Partnership and its agents, members, partners, shareholders, employees,
representatives, related and affiliated entities, successors and assigns
(collectively, the "NetREIT Parties") hereby agrees that in no event or
circumstance shall any of the shareholder(s) of LGI De or any of their members,
managers, partners, employees, representatives, officers, directors or agents,
or any of their affiliated or related entities, have any personal liability
under this Agreement, or to any of NetREIT's lenders or other creditors, or to
any other party in connection with the Property.  Notwithstanding anything to
the contrary contained in this Agreement, if the Closing is consummated, neither
NetREIT nor LGI De shall have any liability to the other following the Closing
with respect to any breaches of representations, warranties or covenants under
this Agreement (other than the covenants and obligations contained in
Section 6.6 and Section 6.9 hereof) unless and until the aggregate amount of the
actual general and compensatory damages suffered by the Partnership or LGI De,
as the case may be, by reason of any such breach of representations, warranties
or covenants by the other exceeds the sum of Ten Thousand Dollars ($10,000); but
then in such event, the damages that the non-defaulting Party may collect shall
begin with and include the first dollar of such loss.  LGI De's total liability
with respect to a breach of any of LGI De's representations, warranties or other
obligations contained in this Agreement or in any document or instrument
executed and delivered by LGI De at the Closing (including any indemnity
obligations of LGI De in this Agreement or in any such document or instrument)
is limited in the aggregate to the Net Value of the Property..  The provisions
of this Section 11 shall survive the Closing and the recordation of the Grant
Deed, and shall not be deemed merged into the Grant Deed or other documents or
instruments delivered at the Closing.
 
12. Release.  Each Party, on its own behalf and on behalf of each of its
affiliates, hereby agrees that the other Party, and each of such Party's
members, managers, trustees, beneficiaries, directors, officers, employees,
representatives, property managers, asset managers, agents, attorneys,
affiliated and related entities, heirs, successors and assigns (collectively,
the respective "Released Parties") shall be, and are hereby, fully and forever
released from any and all liabilities, losses, claims (including third party
claims), demands, damages (of any nature whatsoever), causes of action, costs,
penalties, fines, judgments, attorneys' fees, consultants' fees and costs and
experts' fees,  whether direct or indirect, known or unknown, foreseen or
unforeseen (collectively, the respective "Claims") that may arise on account of
or in any way be connected with the Property including the physical,
environmental and structural condition of the Property or any law or regulation
applicable thereto, including any Claim or matter (regardless of when it first
appeared) relating to or arising from (a) the presence of any environmental
problems, or the use, presence, storage, release, discharge or migration of
Hazardous Materials on, in, under or around the Property, regardless of when
such Hazardous Materials were first introduced in, on or about the Property,
(b) any patent or latent defects or deficiencies with respect to the Property,
(c) any and all matters related to the Property or any portion thereof,
including the condition and/or operation of the Property and each part thereof,
and (d) the presence, release and/or remediation of asbestos and asbestos
containing materials in, on or
 
 
 

--------------------------------------------------------------------------------

 
 
about the Property, regardless of when such asbestos or asbestos containing
materials were first introduced in, on or about the Property.
 
Each Party and its affiliates hereby waive and relinquish any and all rights or
benefits that it may have pursuant to Section 1542 of the Civil Code of the
State of California pertaining to the matters released in this
Agreement.  Section 1542 provides as follows:
 
A general release does not extend to claims which the creditor does not know or
suspect to exist in his or her favor at the time of executing the release, which
if known by him or her must have materially affected his or her settlement with
the debtor.
 
Each Party hereby waives and agrees not to commence any action, legal
proceeding, cause of action or suits in law or equity, of whatever kind or
nature, including any private right of action under the federal superfund laws,
42 U.S.C. Sections 9601 et seq. (as such laws and statutes may be amended,
supplemented or replaced from time to time), directly or indirectly, against its
respective Released Parties in connection with Claims described above.  Each
Party shall cause the Partnership to elect to and to assume all risk for such
Claims against such Released Parties which may be brought by the Partnership or
the Partnership Parties heretofore and hereafter arising, whether now known or
unknown by the Partnership.  In this connection and to the greatest extent
permitted by law, the Partnership shall agree, represent and warrant that it
realizes and acknowledges that factual matters now unknown to the Partnership
may have given or may hereafter give rise to Claims which are presently unknown,
unanticipated and unsuspected, and the Partnership further agrees, represents
and warrants that the waivers and releases herein have been negotiated and
agreed upon in light of that realization and that the Partnership nevertheless
hereby intends to release each Party from any such unknown Claims which might in
any way be included as a material portion of the consideration given to the
Released Party by the Partnership in exchange for the Released Party's
performance hereunder.  Without limiting the foregoing, if a Party has knowledge
of (i) a default in any of the covenants, agreements or obligations to be
performed by the Released Party under this Agreement and/or (ii) any breach or
inaccuracy in any representation of the Released Party made in this Agreement,
and the Party nonetheless elects to proceed to Closing, then, upon the
consummation of the Closing, the Party shall be conclusively deemed to have
waived any such default and/or breach or inaccuracy and shall have no Claim
against LGI De or hereunder with respect thereto.  Notwithstanding anything to
the contrary herein, LGI De shall not have any liability whatsoever to the Party
or to the Partnership with respect to any matter disclosed to or discovered by
the Partnership or the Party prior to the Closing Date.
 
Without limiting the generality of the foregoing, each Party hereby expressly
waives, releases and relinquishes any and all claims, causes of action, rights
and remedies it or the Partnership may now or hereafter have against its
respective Released Parties, whether known or unknown, under any Environmental
Law(s), or common law, in equity or otherwise, with respect to (1) any past,
present or future presence or existence of Hazardous Materials on, under or
about the Property (including in the groundwater underlying the Property) or
(2) any past, present or future violations of any Environmental Laws.  For the
purposes of this Agreement, the term "Environmental Laws" means any and all
federal, state and local statutes, ordinances, orders, rules, regulations,
guidance documents, judgments, governmental authorizations, or any other
 
 
 

--------------------------------------------------------------------------------

 
 
requirements of governmental authorities, as may presently exist or as may be
amended or supplemented, or hereafter enacted or promulgated, relating to the
presence, release, generation, use, handling, treatment, storage, transportation
or disposal of Hazardous Materials, or the protection of the environment or
human, plant or animal health, including the Comprehensive Environmental
Response, Compensation and Liability Act of 1980, as amended by the Superfund
Amendments and Reauthorization Act of 1986 (42 U.S.C.A. § 9601 et seq.), the
Hazardous Materials Transportation Act (49 U.S.C. § 1801 et seq.), the Resource
Conservation and Recovery Act (42 U.S.C. § 6901 et seq.), the Federal Water
Pollution Control Act (33 U.S.C. § 1251 et seq.), the Clean Air Act (42 U.S.C.
§ 7401 et seq.), the Toxic Substances Control Act (15 U.S.C. § 2601 et seq.),
the Oil Pollution Act (33 U.S.C. § 2701 et seq.), and the Emergency Planning and
Community Right-to-Know Act of 1986 (42 U.S.C. § 11001 et seq.).  As used
herein, the term "Hazardous Material(s)" includes any hazardous or toxic
material, substance, irritant, chemical or waste, which is (A) defined,
classified, designated, listed or otherwise considered under any Environmental
Law as a "hazardous waste," "hazardous substance," "hazardous material,"
"extremely hazardous waste," "acutely hazardous waste," "radioactive waste,"
"biohazardous waste," "pollutant," "toxic pollutant," "contaminant," "restricted
hazardous waste," "infectious waste," "toxic substance," or any other term or
expression intended to define, list, regulate or classify substances by reason
of properties harmful to health, safety or the indoor or outdoor environment,
(B) toxic, ignitable, corrosive, reactive, explosive, flammable, infectious,
radioactive, carcinogenic or mutagenic, and which is or becomes regulated by any
local, state or federal governmental authority, (C) asbestos and asbestos
containing materials, (D) an oil, petroleum, petroleum based product or
petroleum additive, derived substance or breakdown product, (E) urea
formaldehyde foam insulation, (F) polychlorinated biphenyls (PCBs), (G) freon
and other chlorofluorocarbons, (H) any drilling fluids, produced waters and
other wastes associated with the exploration, development or production of crude
oil, natural gas or geothermal resources, (I) lead-based paint and (J) mold,
rot, fungi and bacterial matter.
 
Notwithstanding anything in this Section 12 to the contrary, the releases
contained in this Section 12 are not intended to and do not include (I) any
claims arising from a breach of a Released Party's express representations or
warranties in Section 9.1 above (subject to the limitations, disclaimers and
other provisions of this Agreement), or (II) any obligation or other covenant of
a Released Party under this Agreement which by its express terms survives the
Closing.
 
Each Party has given the other material concessions regarding this transaction
in exchange for the other Party agreeing to the provisions of this
Section 12.  The Parties have each initialed this Section 12 to further indicate
their awareness and acceptance of each and every provision hereof.  The
provisions of this Section 12 shall survive the Closing and shall not be deemed
merged into the Grant Deed or any other document or instrument delivered at the
Closing.
 
LGI DE'S INITIALS:                                                NETREIT'S
INITIALS:                                                      
 
13. Notices.  Any notice required or permitted to be given under this Agreement
shall be in writing and shall be deemed to have been given when delivered by
U.S. mail, registered or certified, return receipt requested, postage prepaid,
or by overnight delivery service showing
 
 
 

--------------------------------------------------------------------------------

 
 
receipt of delivery, or by personal delivery, or by facsimile transmission or
other electronic signature (it being agreed that facsimile transmission or other
electronic signature shall have the same force and effect as an original
signature).  Such notices shall be sent to the Parties at the following
addresses, or such other address as may otherwise be indicated by any such Party
in writing.
 
If to LGI De:
LGI Delaware, LLC

Attn: Lee Gittleman
 
 

Phone:                                                                
Fax:                                                                
Email:                                                                           

With a copy to:                                           Ellis G. Wasson, Esq.
Gartenberg, Gelfand Wasson & Selden LLP
17011 Beach Boulevard, Suite 1200
Huntington Beach, CA 92647
Phone:  (714) 596-4320
Fax:  (714) 847-8024
Email: ewasson@ggwslaw.com
 
If to NetREIT:
NetREIT Inc.

 
 
1282 Pacific Oaks Place

 
 
Escondido, CA 92029

 
 
Attention:  Asset Manager

 
 
Phone number:  (760) 471-8536

 
 
Facsimile:  (760) 471-0399

Email: gkatz@ netreit.com
 
With a copy to:
NetREIT Inc.

 
 
1282 Pacific Oaks Place

 
 
Escondido, CA 92029

 
 
Attention:  General Counsel

 
 
Phone number:  (760) 471-8536

 
 
Facsimile:  (760) 471-0399

 
Email: krichman@netreit.com

With a copy to:                                    Bruce J. Rushall, Esq.
 
Rushall & McGeever

6100 Innovation Way
Carlsbad, CA 92009
Phone Number: (760) 438-6855
Facsimile: (760) 438-3026
Email: rm@rushallmcgeever.com

 
 
 

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If to Escrow Holder:                             Della DuCharme
Commercial & Industrial Escrow Officer
Chicago Title Company
701 'B' Street, Suite 760
San Diego, CA 92101
Escrow No.                                                      
Phone number:  (619) 230-6363
Facsimile:  (619) 230-6368
Email: della.ducharme@ctt.com
 
 
If to Title Company:                                                      Zona
Weekley
Commercial Title Officer
Chicago Title Company
Lawyers Title
Commonwealth Land Title Insurance Company
2365 Northside Drive, Suite 500
San Diego, CA 92108
Order No.                                                      
Phone number: (619) 521-3492
Facsimile: (619) 521-3691
 
Email: zona.weekley@ctt.com

 
Notices as aforesaid shall be effective upon the earlier of actual receipt, or
twenty-four (24) hours after deposit with the messenger or delivery service, or
the next Business Day after delivery to an overnight delivery service, or within
three (3) days after the deposit in the U.S. mail, or upon confirmation of
transmission by facsimile, or when receipt is refused.
 
14. Provisions of General Application.
 
14.1 Entire Agreement; Participation in Drafting.  This Agreement constitutes
the entire understanding of the Parties and all prior agreements,
representations, and understandings between the Parties, whether oral or
written, are deemed null and void, all of the foregoing having been merged into
this Agreement.  The Parties acknowledge that each Party and/or such Party's
counsel have reviewed and revised this Agreement and that no rule of
construction to the effect that any ambiguities are to be resolved against the
drafting Party shall be employed in the interpretation or enforcement of this
Agreement or any amendments or exhibits to this Agreement or any document
executed and delivered by either Party in connection with this Agreement.  If
NetREIT and/or LGI De are comprised of more than one Party, then each such Party
shall be jointly and severally liable for the obligations of NetREIT or LGI De,
as applicable, hereunder.
 
14.2 Successors and Assigns.  This Agreement, and the terms, covenants, and
conditions contained herein, shall inure to the benefit of and be binding upon
the heirs, personal representatives, successors, and assigns of each of the
Parties hereto.
 
14.3 Assignment by the Parties. Neither Party may assign any of its rights under
this Agreement wihtout the prior written consent of the other Party.
 
 
 

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14.4 Severability.  If for any reason, any provision of this Agreement shall be
held to be unenforceable, it shall not affect the validity or enforceability of
any other provision of this Agreement and to the extent any provision of this
Agreement is not determined to be unenforceable, such provision, or portion
thereof, shall be, and remain, in full force and effect.
 
14.5 Governing Law.  This Agreement shall be governed by, and construed in
accordance with, the laws of the State of California.
 
14.6 Modifications.  Any and all exhibits attached hereto shall be deemed a part
hereof.  This Agreement, including exhibits, if any, expresses the entire
agreement of the Parties and supersedes any and all previous agreements between
the Parties with regard to the Property.  There are no other understandings,
oral or written, which in any way alter or enlarge its terms, and there are no
warranties or representations of any nature whatsoever, either expressed or
implied, except as may expressly be set forth herein.  Any and all future
modifications of this Agreement will be effective only if it is in writing and
signed by the Parties hereto.  The terms and conditions of such future
modifications of this Agreement shall supersede and replace any inconsistent
provisions in this Agreement.
 
14.7 Confidentiality.  NetREIT agrees that, (a) except as otherwise provided or
required by valid law, (b) except to the extent NetREIT considers such documents
or information reasonably necessary to prosecute and/or defend any claim made
with respect to the Property or this Agreement, and (c) except to the extent
reasonably necessary to deliver such documents or information to NetREIT's
lenders, employees, investors, officers, directors, members, partners,
paralegals, attorneys and/or consultants in connection with NetREIT's evaluation
of this transaction, (i) NetREIT and all the NetREIT Parties shall use
commercially reasonable efforts to keep the contents of any materials, reports,
documents, data, test results, and other information related to the transaction
contemplated hereby, including the Due Diligence Materials and all information
regarding NetREIT's acquisition of the Property strictly confidential,
(ii) NetREIT and all the NetREIT Parties shall keep and maintain the contents of
this Agreement, including the amount of consideration being given by the
Partnership for the Property, strictly confidential, and (iii) NetREIT and all
the NetREIT Parties shall refrain from generating or participating in any
publicity or press release regarding this transaction without the prior written
consent of LGI De.  LGI De agrees that, (a) except as otherwise provided or
required by valid law, (b) except to the extent LGI De considers such
information reasonably necessary to prosecute and/or defend any claim made with
respect to the Property or this Agreement, and (c) except to the extent
reasonably necessary to deliver such information to LGI De's employees,
paralegals, attorneys and/or consultants in connection with this transaction,
LGI De and LGI De's shareholders, employees and affiliated entities shall (i)
use commercially reasonable efforts to keep and maintain the contents of this
Agreement, including the amount of consideration being given by the Partnership
for the Property, strictly confidential, and (ii) refrain from generating or
participating in any publicity or press release regarding this transaction
without NetREIT's prior written consent. The provisions of this Section 14.7
shall survive any termination of this Agreement but shall not survive the
Closing except for NetREIT's covenants in clauses (ii) and (iii) hereof, which
covenants shall survive the Closing and shall not be deemed merged into the
Grant Deed or any other document or instrument delivered at Closing.
 
 
 

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14.8 Dispute Costs.  In the event any dispute between the Parties with respect
to this Agreement results in litigation or other proceeding, the prevailing
Party shall be reimbursed by the Party not prevailing in such proceeding for all
reasonable costs and expenses, including reasonable attorneys' and experts' fees
and costs incurred by the prevailing Party in connection with such litigation or
other proceeding and any appeal thereof.  Such costs, expenses and fees shall be
included in and made a part of the judgment recovered by the prevailing party,
if any.  The provisions of this Section 14.8 shall survive any termination of
this Agreement or the Closing and shall not be deemed merged into the Grant Deed
or any other document or instrument delivered at Closing.
 
14.9 Time of the Essence; Business Days.  Time is of the essence in the
performance of each of the Parties' respective obligations contained in this
Agreement.  Unless the context otherwise requires, all periods terminating on a
given day, period of days, or date shall terminate at 5:00 p.m. (Pacific Time)
on such date or dates.  References to "days" shall refer to calendar days except
if such references are to "Business Days" which shall refer to days which are
not a Saturday, Sunday or a legal holiday under the laws of the State of
California.  Notwithstanding the foregoing, if any period terminates on a
Saturday, Sunday or legal holiday, under the laws of the State of California,
the termination of such period shall be on the next succeeding Business
Day.  The time in which any act provided under this Agreement is to be done,
shall be computed by excluding the first day and including the last day, unless
the last day is a Saturday, Sunday or legal holiday under the laws of the State
of California, and then it is also so excluded.
 
14.10 Required Actions of NetREIT and LGI De.  NetREIT and LGI De agree to (and
NetREIT agrees to cause the Partnership to) execute such instruments and
documents and to diligently undertake such actions as may be required by Title
Company in order to consummate the conveyance of the Property to
the  Partnership as provided in this Agreement.
 
14.11 No Recordation.  Neither this Agreement nor a memorandum thereof may be
recorded.
 
14.12 Drafts not an Offer to Enter into a Legally Binding Contract.  The Parties
hereto agree that the submission of a draft of this Agreement by one Party to
another is not intended by either Party to be an offer to enter into a legally
binding contract with respect to the conveyance of the Property.  The Parties
shall be legally bound with respect to the conveyance of the Property to the
Partnership as provided in this Agreement only if and when LGI De and NetREIT
have fully executed and delivered (or caused the delivery) to each other a
counterpart of this Agreement with all exhibits attached hereto.
 
14.13 Multiple Counterparts.  This Agreement may be executed in multiple
counterparts (each of which is to be deemed original for all purposes).  The
signature page of any counterpart may be detached therefrom without impairing
the legal effect of the signature(s) thereon so long as such signature page is
attached to any other counterpart of this Agreement identical thereto except
having additional signature pages executed by the other Parties to this
Agreement attached thereto.
 
 
 

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14.14 Electronic Signatures.  LGI De and NetREIT each (a) has agreed to permit
the use from time to time, where appropriate, of telecopy or other electronic
signatures in order to expedite the transaction contemplated by this Agreement,
(b) intends to be bound by its respective telecopy or other electronic
signature, (c) is aware that the other will rely on the telecopied or other
electronically transmitted signature, and (d) acknowledges such reliance and
waives any defenses to the enforcement of this Agreement and the documents
affecting the transaction contemplated by this Agreement based on the fact that
a signature was sent by telecopy or electronic transmission only.
 
14.15 Interpretation.  For purposes of this Agreement, except as otherwise
expressly provided or unless the context otherwise requires:  (a) all exhibits
attached hereto are incorporated herein by reference; (b) the section and
subsection headings contained in this Agreement are for convenience only and in
no way enlarge or limit the scope or meaning of the various sections or
subsections hereof; (c) all dollar amounts are expressed in United States
currency; (d) all defined terms in this Agreement include the plural as well as
the singular, and the use of any gender herein shall be deemed to include the
other genders; (e) references herein to "Sections," subsections, paragraphs and
other subdivisions without reference to a document are to designated Sections,
subsections, paragraphs and other subdivisions of this Agreement; (f) a
reference to a subsection without further reference to a Section is a reference
to such subsection as contained in the same Section in which the reference
appears, and this rule shall also apply to paragraphs and other subdivisions;
(g) the words "hereof," "herein," "thereof," "hereunder" and other words of
similar import refer to this Agreement as a whole and not to any particular
provision; (h) the word "including" or "includes" means "including, but not
limited to" or "includes without limitation"; (i) the words "approval,"
"consent" and "notice" shall be deemed to be preceded by the word "written";
(j) any reference to this Agreement or any Exhibits hereto and any other
instruments, documents and agreements shall include this Agreement, Exhibits and
other instruments, documents and agreements as originally executed or existing
and as the same may from time to time be supplemented, modified or amended; and
(k) unless otherwise specifically provided, all references in this Agreement to
a number of days shall mean calendar days rather than Business Days.
 
14.16 Exhibits.  Exhibit A through Exhibit L are incorporated herein by
reference.
 
14.17 No Partnership/Fiduciary Relationship. Except with respect to the
Partnership as expressly provided herein, the Parties acknowledge and agree that
the relationship created by this Agreement between LGI De, on the one hand, and
NetREIT, on the other hand, is one of contract only, and that no partnership,
joint venture or other fiduciary or quasi-fiduciary relationship is intended or
in any way created hereby between LGI De and NetREIT.
 
 [END OF TEXT; SIGNATURES FOLLOW ON
IMMEDIATELY SUCCEEDING PAGES]

 
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IN WITNESS WHEREOF the Parties have executed this Agreement as of the Agreement
Date first written above.
 

LGI De:
LGI Delaware, LLC,
a Delaware limited liability company
 
By its sole Member:
 
 
/s/ Lee Gittleman                                  
Lee Gittleman
NetREIT:
 
NetREIT Inc.
a Maryland corporation
By: /s/ Kenneth Elsberry                   
Print Name: Kenneth Elsberry
Title: Chief Financial Officer

 

SIGNATURE PAGE TO PROPERTY CONTRIBUTION AGREEMENT
AND JOINT ESCROW INSTRUCTIONS]

 
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ACCEPTANCE BY ESCROW HOLDER
 
CHICAGO TITLE COMPANY hereby acknowledges that it has received originally
executed counterparts or a fully executed original of the foregoing Property
Contribution Agreement and Joint Escrow Instructions and agrees to act as Escrow
Holder thereunder and to be bound by and perform the terms thereof as such terms
apply to Escrow Holder.
 
Dated:  _____________, 2011
CHICAGO TITLE COMPANY

 
 
By:
   

 
Printed Name:
 

 
 
Its Authorized Agent

 

 

 
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EXHIBIT A
 
 
LEGAL DESCRIPTION OF THE REAL PROPERTY
 

 
EXHIBIT A
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EXHIBIT B
 
FORM OF GRANT DEED
 

 
EXHIBIT B
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EXHIBIT C
 
 
FORM OF GENERAL ASSIGNMENT

EXHIBIT C
 
 
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SCHEDULE 1
 
to Assignment and Assumption of Contracts and Other Intangible Property
 
CONTRACTS
 

 

 

EXHIBIT C
 
 
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EXHIBIT D
 
 
BILL OF SALE
 

 
EXHIBIT D
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SCHEDULE 1
 
to Exhibit D
 
 
LEGAL DESCRIPTION OF THE REAL PROPERTY
 

 

 

 
SCHEDULE 1
TO EXHIBIT D
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EXHIBIT E
 
 
FEDERAL TRANSFEROR'S CERTIFICATION OF NON-FOREIGN STATUS

 
EXHIBIT E
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EXHIBIT F
 
 
ASSIGNMENT AND ASSUMPTION OF LEASES
 

 

 
EXHIBIT F
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EXHIBIT G
 
 
LIST OF CONTRACTS
 

SERVICE CONTRACTS
VENDOR/CONTRACTOR NAME
   

 

 
EXHIBIT G
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EXHIBIT H
 
 
FORM OF ESTOPPEL CERTIFICATE

 

 
EXHIBIT H
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EXHIBIT I
 
 
NOTICE TO TENANTS
 

 
EXHIBIT I
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EXHIBIT J
 
 
IDENTIFIED LEASING COSTS

 
EXHIBIT J
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EXHIBIT K
 
LIST OF LGI DE’S DOCUMENTS
 

 

 
EXHIBIT K
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EXHIBIT L
 
LIST OF LEASES
 

 

 

 
EXHIBIT L
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