Exhibit 10.5

REAL PROPERTY PURCHASE AND SALE AGREEMENT
(UNITED STATES)

Between

PBC–POCONO, L.L.C.,
a Virginia limited liability company

and

PBC–NORFOLK, L.L.C.,
a Virginia limited liability company, as Sellers

and

GLADSTONE COMMERCIAL LIMITED PARTNERSHIP,
a Delaware limited partnership, as Purchaser

Dated August 11, 2004

 

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TABLE OF CONTENTS

     
 
  Page
1. PURCHASE AND SALE
  2
1.1 Certain Definitions
  2
1.2 Agreement to Purchase and Sell
  2
1.3 Encumbrances
  2
1.4 Purchase Price
  2
2. DUE DILIGENCE
  3
2.1 Purchaser’s Tests and Inspections
  3
2.2 Surveys and Title Commitments
  4
2.3 Delivery of Documents and Information
  4
2.4 Additional Information
  4
3. STATUS OF TITLE TO THE PROPERTIES
  5
3.1 State of Title
  5
3.2 Preliminary Evidence of Title
  5
3.3 Title Defects
  5
4. CLOSING PRORATIONS AND ADJUSTMENTS
  6
4.1 Prorations and Adjustments
  6
5. CLOSING
  6
5.1 Closing Date
  6
5.2 Closing Documents
  6
5.3 Conditions to the Purchaser’s Obligation to Close
  8
5.4 Conditions to the Sellers’ Obligation to Close
  9
5.5 Transaction Costs
  9
6. REPRESENTATIONS AND WARRANTIES OF THE SELLERS
  10
6.1 Organization
  10
6.2 Authority
  10
6.3 Interest in Properties
  10
6.4 No Defaults
  11
6.5 No Litigation; No Condemnation
  11
6.6 No Violation
  11
6.7 Required Obligations
  12
6.8 Condition of Properties
  12
6.9 Utilities
  12
6.10 Zoning
  12
6.11 Improvements
  12
6.12 Environmental Matters
  12
6.13 Insurance
  13
6.14 Compliance
  13
6.15 Leases
  14
6.16 Service Contracts
  15
6.17 Permits
  15
6.18 Taxes
  15

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6.19 Books and Records
  15
6.20 No Brokers
  16
6.21 Survival of Representations and Warranties; Indemnification
  16
7. REPRESENTATIONS AND WARRANTIES OF THE PURCHASER
  16
7.1 Organization, Good Standing and Qualification
  16
7.2 Authorization
  16
7.3 No Violation
  17
7.4 No Litigation
  17
7.5 No Brokers
  17
7.6 Survival of Representations and Warranties; Indemnification
  17
8. COVENANTS
  18
8.1 Covenants of the Purchaser
  18
8.2 Covenants of the Sellers
  18
9. TERMINATION
  19
9.1 Termination by the Purchaser
  19
9.2 Termination by the Sellers
  20
10. MISCELLANEOUS
  21
10.1 Assignment
  21
10.2 Entire Agreement
  21
10.3 Notices
  21
10.4 Governing Law
  22
10.5 Counterparts
  22
10.6 Interpretation
  22
10.7 Risk of Loss
  23
10.8 Purchase and Sale of Member Interests
  23

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REAL PROPERTY PURCHASE AND SALE AGREEMENT
(UNITED STATES)

     THIS REAL PROPERTY PURCHASE AND SALE AGREEMENT (this “Agreement”) is made
and entered into as of the 11th day of August, 2004, by and between PBC–POCONO,
L.L.C., a Virginia limited liability company (“PBC–Pocono”), and PBC–NORFOLK,
L.L.C., a Virginia limited liability company (“PBC–Norfolk,” and, together with
PBC–Pocono, the “Sellers”), and GLADSTONE COMMERCIAL LIMITED PARTNERSHIP, a
Delaware limited partnership (the “Purchaser”), recites and provides as follows:

RECITALS:

     A. The Sellers are the legal and beneficial owners of fee simple title to
the real property and improvements as indicated on Schedule 1.2 attached
(including the residual interests in any tenant improvements thereon) together
with all rights and appurtenances pertaining to such land, including, without
limitation, (i) all minerals, oil, gas, and other hydrocarbon substances
thereon; (ii) all right, title and interest of Sellers in and to adjacent
strips, streets, roads, avenues, alleys and rights of way, public or private,
open or proposed; (iii) all easements, covenants, privileges, and hereditaments,
whether or not of record; (iv) all access, air, water, riparian, development,
utility, and solar rights; (v) all signs, appliances, security systems,
fixtures, mechanical systems, landscaping and other property owned by Sellers
located at either Property (as hereafter defined), but excluding items of
property owned by Tenant (as hereinafter defined) attached to the Property that,
pursuant to the provisions of the corresponding Lease (as hereafter defined),
may be removed by Tenant; (vi) all site plans, surveys, plans and
specifications, and floor plans relating to the Property; (vii) all warranties,
guarantees and bonds relating to the Property; and (viii) all permits, licenses,
certificates of occupancy, and other governmental approvals which relate to the
Property, each of which is referred to individually as a “Property” and which
are collectively referred to as the “Properties.” The Properties are identified
on Schedule 1.2 by street address.

     B. Each of the Sellers desires to sell all of its interest in the
corresponding Property to the Purchaser, and the Purchaser desires to purchase
all of the Sellers’ interests in the Properties.

AGREEMENT:

     NOW THEREFORE, for and in consideration of the premises, the mutual
covenants and agreements contained in this Agreement, and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties covenant and agree as follows:

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1. PURCHASE AND SALE

1.1 Certain Definitions. For purposes of this Agreement:

1.1.1 “GE Capital” means General Electric Capital Business Asset Funding
Corporation.

1.1.2 “Mortgage Loan” shall mean the mortgage loans made by GE Capital the
repayment of which is secured by mortgages or deeds of trust encumbering the
Properties.

1.1.3 “Purchase Price” means the amount, in U.S. dollars, that is the purchase
price of each Property, as identified on Schedule 1.2 for such Property.

1.1.4 A “Person” shall mean and include natural persons, corporations, limited
liability companies, limited partnerships, general partnerships, joint stock
companies, joint ventures, associations, companies, trusts, banks, trust
companies, land trusts, business trusts, Indian tribes or other organizations,
whether or not legal entities, and governments and agencies and political
subdivisions thereof.

1.1.5 For purposes of this Agreement, the “knowledge” of a Person shall mean the
actual knowledge of such Person’s officers, senior executives, managing members,
managing partners, general partners, majority shareholders, key employees or
their equivalents, and shall mean that the applicable party has conducted a
reasonable review of its files and such review did not disclose any information
contrary to the accuracy or veracity of any such representation or warranty, but
without attribution or other duty of inquiry.

1.1.6 For purposes of this Agreement, “business day” shall mean any day
excluding Saturday, Sunday and any day which in the Commonwealth of Virginia is
a legal holiday or a day on which banking institutions are authorized by law or
by other governmental actions to close.

     1.2 Agreement to Purchase and Sell. Subject to the terms and conditions of
this Agreement, at the “Closing” (as hereafter defined), each Seller shall sell,
transfer and convey to the Purchaser, and the Purchaser shall purchase and
accept from the Sellers, all of each Seller’s rights, title and interests in and
to its Property as identified on Schedule 1.2.

     1.3 Encumbrances. The Purchaser shall acquire each Property free and clear
of all liabilities, obligations and commitments of the Sellers and free and
clear of all liens and encumbrances other than the “Permitted Exceptions” (as
hereafter defined).

     1.4 Purchase Price. On the terms and subject to the conditions of this
Agreement, at the Closing, the Sellers shall sell, transfer, convey, assign and
deliver to the Purchaser, and the Purchaser shall purchase and accept from the
Sellers, all of the rights, title and interests of the

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Sellers in and to the Properties and the “Leases” (as hereafter defined) for an
aggregate purchase price (the “Aggregate Purchase Price”) of $8,265,660. On the
date of full execution of this Agreement (as reflected by the dates opposite the
signatures on the execution page hereof) (the “Execution Date”), the Purchaser
shall deposit with First American Title Insurance Company (the “Title Insurer”)
the sum of $100,000, to be held in an interest-bearing account to be approved by
the Purchaser (such deposit, together with any interest earned thereon, is
hereafter referred to as the “Deposit”), to be held in accordance with an Escrow
Agreement substantially in the form attached hereto as Schedule 1.4, which shall
be applied to the Aggregate Purchase Price, retained by the Sellers, or refunded
to the Purchaser, all as more particularly set forth herein. The Aggregate
Purchase Price shall be allocated between the Properties as set forth in
Schedule 1.2, provided that the parties may change such allocations hereafter by
mutual agreement. The Aggregate Purchase Price shall be payable as follows:

1.4.1 At the Closing, the Deposit shall be applied against the Aggregate
Purchase Price; and

1.4.2 At the Closing, the Purchaser shall pay the remainder of the Aggregate
Purchase Price to the Sellers by wire transfer of immediately available funds.

The Aggregate Purchase Price will be adjusted pursuant to Sections 4.1, 6.1 and
6.2, as applicable.

2. DUE DILIGENCE

     2.1 Purchaser’s Tests and Inspections. The Purchaser, its agents,
contractors, employees and other representatives, shall have the right at any
time during normal business hours throughout the period (the “Due Diligence
Period”) extending from the Execution Date to 11:59 p.m. on the 30th day
thereafter, and upon 24 hours prior notice to the Sellers (which notice may be
oral or written,) to enter upon the Properties, subject to the rights of the
respective tenants thereof, and to conduct environmental assessments,
appraisals, surveys and other inspections and tests of the Properties. The
Purchaser shall have the right, by written notice to the Sellers, to extend the
Due Diligence Period for up to ten (10) days to the extent necessary for the
Purchaser to obtain final reports from the third party inspectors and service
providers performing the services referenced in the preceding sentence. The
Purchaser, in its sole and absolute discretion, shall have the right to
terminate this Agreement by giving written notice of termination to the Sellers
at any time prior to the expiration of the Due Diligence Period. Upon any such
termination, the Deposit shall be returned to the Purchaser, and the parties
shall have no further rights or obligations hereunder, except for any
obligations imposed under the last 3 sentences of this Section 2.1, the Sellers’
indemnification obligations under Section 6.21 hereof with respect to a breach
of the Sellers’ representations and warranties under Section 6.20 hereof, the
Purchaser’s indemnification obligations under Section 7.6 hereof with respect to
a breach of the Purchaser’s representations and warranties under Section 7.5
hereof, the Purchaser’s obligations under Sections 8.1.1 and 8.1.3 hereof, and
the Sellers’ obligations under Sections 8.2.1 and 8.2.2 hereof (together, the
“Post-Termination Obligations”). The Purchaser shall indemnify against and hold
the Sellers harmless from any claims, demands, liabilities,

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losses damages, costs, and expenses, including, without limitation, attorneys’
fees, arising from entry upon the Properties by the Purchaser, or any of the
Purchaser’s agents, contractors, employees, or other representatives, or the
conduct of such tests, surveys, studies or other due diligence. If the Closing
does not occur, the Purchaser, at its own expense, shall repair any damage to
the Properties caused in the performance of the Purchaser’s tests and studies.
If the Purchaser elects to rescind and terminate this Agreement as aforesaid,
the Purchaser shall deliver to the Sellers copies of the written results of such
tests, surveys, studies and other due diligence (other than internal marketing
or economic studies) within thirty (30) days after the expiration of the Due
Diligence Period.

     2.2 Surveys and Title Commitments. Within five (5) days after the
commencement of the Due Diligence Period, the Purchaser will order the following
relative to the Properties: (a) ALTA/ACSM land title surveys; and (b) ALTA
Form B 1970 title insurance commitments, including all required endorsements
(together, the “Title Commitments”), issued by the Title Insurer’s National
Accounts Office in Washington, D.C. The Purchaser shall be responsible for the
costs of such surveys and the Title Commitments as provided in Section 5.5
hereof.

     2.3 Delivery of Documents and Information. Prior to the date of this
Agreement, the Sellers delivered to the Purchaser certain documents and items of
information with respect to the Properties, including, without limitation, the
following:

2.3.1 Copies of the leases as to each of the Properties (the “Leases”), and the
related lease guaranties (the “Lease Guaranties”), as follows:

     2.3.1.1 That certain Lease Agreement, dated as of July 28, 2001 (the
“Pocono Lease”), between United Envelope, LLC, as Tenant, and PBC-Pocono, as
Landlord;

     2.3.1.2 That certain Unconditional Guaranty Agreement, dated as of July 27,
2001, from Workflow Management, Inc., a Delaware corporation (the “Guarantor”),
to PBC-Pocono;

     2.3.1.3 That certain Lease Agreement, dated as of July 28, 2001 (the
“Norfolk Lease”), between i Get Smart.com, Inc., as Tenant (together with United
Envelope, LLC, the “Tenants”), and PBC-Norfolk, as Landlord; and

     2.3.1.4 That certain Unconditional Guaranty Agreement, dated as of July 27,
2001, from the Guarantor to PBC-Norfolk; and

2.3.2 Copies of the most recent survey and owner’s title insurance policy for
each of the Properties.

     2.4 Additional Information. The Sellers shall furnish to the Purchaser all
information concerning the title to, the condition or operation of, and the
income from the Properties that is in the possession of the Sellers and that the
Purchaser may reasonably request.

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3. STATUS OF TITLE TO THE PROPERTIES

     3.1 State of Title. At Closing, the Sellers shall own, beneficially and of
record, good and marketable fee simple title to the Properties, subject only to
those easements, covenants, conditions, restrictions and other matters affecting
title as set forth in Schedule 3.1 attached (the “Scheduled Exceptions.”) The
Leases and the Scheduled Exceptions are referred to collectively herein as the
“Permitted Exceptions.”

     3.2 Preliminary Evidence of Title. Within 3 weeks after the Execution Date,
the Purchaser shall obtain, in a form acceptable to the Purchaser, the following
documents to evidence the condition of the title to each Property:

3.2.1 The Title Commitments which shall commit the Title Insurer to insure, at
standard rates, good and marketable title to each Property, subject only to the
Permitted Exceptions, in the amount of the Purchase Price of each such Property.
The Title Commitments shall reflect that fee simple title is held by the
respective Seller. The owner’s title insurance policies, and endorsements
thereto, to be issued to the Purchaser at Closing pursuant to Section 5.3.5
hereof are hereafter referred to as the “Title Insurance Policies.”

3.2.2 Written results of searches reflecting any liens, judgments, tax liens,
bankruptcies, and open dockets (the “UCC Searches”), conducted by a company
reasonably acceptable to the Purchaser. The UCC Searches shall name each Seller
and shall search the appropriate land records and/or county prothonotary’s and
central filing office for Uniform Commercial Code financing statements.

3.2.3 Legible copies of all documents of record referred to in any Title
Commitment or disclosed by the UCC Searches.

     3.3 Title Defects. The Purchaser shall have the right to review the Title
Commitments, UCC Searches and any surveys of the Properties obtained by
Purchaser or any existing survey (or any revision or update of any of them, all
of which are collectively referred to as the “Surveys”). The Purchaser shall
obtain any new Surveys within 3 weeks after the Execution Date. The Purchaser
shall notify the Sellers in writing within 10 business days after the Purchaser
receives the last of the Title Commitments, the Surveys or the UCC Searches, as
the case may be, of any defects in or exceptions to title to either of the
Properties (other than the Permitted Exceptions) that the Purchaser finds to be
unacceptable. Within 5 business days after receiving such notice from the
Purchaser, the Sellers shall notify the Purchaser of the Sellers’ election
(a) to cure such exceptions, in which event the Sellers shall cure such
exceptions promptly and at their expense, and the Closing Date shall be extended
as necessary to permit the completion of such cure, or (b) not to cure such
exceptions, in which event the Purchaser shall either waive such condition and
proceed to purchase the Properties as provided herein or terminate this
Agreement. If the Purchaser so elects to terminate, the Deposit shall be
returned to the Purchaser, and the parties shall have no further rights or
obligations hereunder, except for the Post-Termination Obligations. Unless the
Sellers expressly agree to do so, the Sellers shall

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have no obligation to cure or remove any title defects or exceptions; provided
that the Sellers shall pay off the Mortgage Loan, and any other monetary liens
(other than the Permitted Exceptions), at the Closing so as to effect the
release of the Properties from any mortgages, deeds of trust and other documents
and instruments securing repayment of the Mortgage Loan.

4. CLOSING PRORATIONS AND ADJUSTMENTS

     4.1 Prorations and Adjustments. Rent payable under the Leases shall be
prorated between the Sellers and the Purchaser as of the Closing Date, with the
Sellers being entitled to all of such rent accruing up to and through the
Closing Date, and the Purchaser being entitled to all of such rent accruing
after the Closing Date. The Tenant for each Property is solely responsible for,
and the Sellers and the Purchaser shall not prorate or adjust between
themselves, any other disbursements, payments, or obligations relating to the
Properties, whether accruing before, during or after the Closing Date,
including, without limitation,:

4.1.1 Real estate and personal property taxes and assessments; and

4.1.2 Water, electric, telephone and all other utility and fuel charges.

5. CLOSING

     5.1 Closing Date. The closing of the purchase and sale transaction
contemplated by this Agreement (the “Closing”) shall occur at the offices of the
Title Insurer at 9:00 a.m. on the 20th day after the expiration of the Due
Diligence Period (the “Closing Date,” provided that, if such 20th day is not a
business day, the Closing Date shall be the next business day thereafter),
provided that all conditions to Closing have been satisfied or waived, or at
such other time and place as the Sellers and the Purchaser shall agree in
writing.

     5.2 Closing Documents

5.2.1 Sellers. Not later than the Closing Date, the Sellers shall deliver or
execute and deliver, as the case may be, to the Purchaser the following:

     5.2.1.1 Special warranty deeds for the Properties (the “Deeds”) in the form
attached as Schedule 5.2.1.1;

     5.2.1.2 Original, executed counterparts of the Leases and the Lease
Guaranties;

     5.2.1.3 An executed assignment and assumption agreement (the “Assignment”)
with respect to the Leases in the form attached as Schedule 5.2.1.3;

     5.2.1.4 An executed quitclaim bill of sale as to all of Sellers’ rights,
title and interests, if any, in and to any tangible personal property and
fixtures at or on the Properties in the form attached as Schedule 5.2.1.4;

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     5.2.1.5 Any affidavits, certificates and other documents that are
reasonably required for the Title Insurer to issue the Title Insurance Policies
in the form required by this Agreement;

     5.2.1.6 For each Seller, a resolution authorizing the transactions
contemplated by this Agreement, a certificate of fact, a certified copy of each
of the operating agreement and the articles of organization for such Seller, and
a certificate of incumbency certifying the titles and signatures of the persons
authorized to consummate the transactions contemplated hereunder on behalf of
such Seller;

     5.2.1.7 For each Seller, an affidavit stating, under penalty of perjury,
its U.S. taxpayer identification number and that it is not a foreign person
within the meaning of Section 1445 of the Internal Revenue Code of 1986, as
amended;

     5.2.1.8 The Seller’s Certificate Re: Representations and Warranties (the
“Seller’s Certificate”) in the form attached as Schedule 5.2.1.8;

     5.2.1.9 An opinion of Sellers’ counsel substantially in the form attached
as Schedule 5.2.1.9; and

     5.2.1.10 All other documents reasonably required by the Purchaser in
connection with the transactions contemplated by this Agreement, provided that
such documents do not require the Sellers to make representations, warranties
and covenants, or to incur obligations, in addition to those required by or
provided under this Agreement.

5.2.2 Purchaser. At the Closing, the Purchaser shall deliver, pay or execute and
deliver, as the case may be, the following:

     5.2.2.1 The Aggregate Purchase Price as provided in Section 1.4 hereof;

     5.2.2.2 For the Purchaser, a resolution authorizing the transactions
contemplated by this Agreement, a certified copy of each of the partnership
certificate, the partnership agreement and any other structural documents of the
Purchaser, a certificate of incumbency certifying the titles and signatures of
the persons authorized to consummate the transactions contemplated hereunder on
behalf of the Purchaser, and a certificate of good standing, or its equivalent,
from the appropriate governmental authority in the state of the Purchaser’s
organization;

     5.2.2.3 The Assignment;

     5.2.2.4 An opinion of Purchaser’s counsel substantially in the form
attached as Schedule 5.2.2.4; and

     5.2.2.5 All other documents reasonably required by the Sellers in
connection with the transactions contemplated by this Agreement, provided that
such documents do

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not require the Purchaser to make representations, warranties and covenants, or
to incur obligations, in addition to those required by or provided under this
Agreement.

     5.3 Conditions to the Purchaser’s Obligation to Close. The obligations of
the Purchaser under this Agreement, including the obligation to pay the
Aggregate Purchase Price at Closing as provided in Section 1.4 hereof, are
subject to the satisfaction of the following conditions (unless explicitly
waived in writing):

     5.3.1 Each and every representation and warranty of the Sellers contained
in this Agreement shall be true, correct and complete in all material respects
as of the date hereof and at all times through the Closing Date as certified in
Seller’s Certificate;

     5.3.2 The Sellers shall have fully performed and satisfied each and every
material obligation, term and condition to be performed and satisfied by them
under this Agreement;

     5.3.3 All consents, authorizations, certificates, and approvals required to
be obtained by the Sellers in connection with this Agreement shall have been
obtained;

     5.3.4 The condition of the Property shall not have changed materially since
the Execution Date;

     5.3.5 The Purchaser shall have received the Title Insurance Policy (or
marked-up commitment therefor) for each Property insuring fee simple title to
such Property in the amount of the Purchase Price for such Property, subject
only to the Permitted Exceptions, at the Purchaser’s expense.

     5.3.6 The Sellers shall have delivered to the Purchaser all closing
documents required by Section 5.2.1 hereof.

     5.3.7 The “Canadian Sellers” (as hereafter defined) shall close under that
certain Real Property Purchase and Sale Agreement, of even date herewith (the
“Canadian Purchase Agreement”), between the Purchaser and 3058348 Nova Scotia
Company and 3058349 Nova Scotia Company (the “Canadian Sellers”)
contemporaneously with the Closing.

     5.3.8 No material adverse change shall have occurred in the financial
condition of the Tenants and the Guarantor since the Execution Date.

     5.3.9 The Sellers shall have delivered to the Purchaser a certificate from
each Tenant, dated no more than 30 days prior to the Closing Date, certifying:
(1) that such Tenant has accepted the premises leased under its Lease; (2) that
such Lease is in full force and effect and has not been modified (or, if
modified, setting forth all modifications thereof), or, if such Lease is not in
full force and effect, specifying the reasons therefor; (3) the commencement
date and the scheduled expiration date of such Lease, whether such Tenant has
any options to extend the term thereof and, if so, describing such extension
options;

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(4) the date to which the base rent and additional rent under such Lease have
been paid and the amount thereof then payable; (5) the amount of the prepaid
rent and/or security deposit, if any, being held by the corresponding Seller, as
landlord; (6) whether, to such Tenant’s knowledge, there are then any existing
defaults by the corresponding Seller in the performance of its obligations under
such Lease, and, if there are any such defaults, specifying the nature and
extent thereof; and (7) that no notice has been received by such Tenant of any
default under such Lease that has not been cured, except as to defaults
specified in such certificate. Each such certificate shall not contain any
information that is inconsistent with the terms of the corresponding Lease;
provided that such certificate may reflect any uncured claim of breach or
default, or any information that is inconsistent with the terms of the
corresponding Lease, only if such uncured claim or inconsistent information is
acceptable to the Purchaser.

5.3.10 The Purchaser shall have received as to each Property (i) a zoning letter
for the jurisdiction in which the Property is located in form acceptable to the
Purchaser or (ii) a zoning report/evaluation from a zoning consultant selected
by the Purchaser or (iii) an opinion of counsel acceptable to the Purchaser, in
each case indicating that the use and operation of the Property are in
compliance with the applicable zoning ordinance. Purchaser shall request such
zoning letter, zoning report/evaluation or opinion of counsel, as appropriate,
promptly after the Execution Date, shall thereafter diligently pursue the
issuance thereof and shall be solely responsible for any fees or costs in
connection therewith.

     5.4 Conditions to the Sellers’ Obligation to Close. The obligations of the
Sellers under this Agreement are subject to the satisfaction of the following
conditions (unless explicitly waived in writing):

5.4.1 Each of the representations and warranties of the Purchaser contained in
this Agreement shall be true, correct and complete as of the date hereof and at
all times through the Closing Date.

5.4.2 The Purchaser shall have fully performed and satisfied each and every
material obligation, term and condition to be performed and satisfied by it
under this Agreement.

5.4.3 All consents, authorizations and approvals required to have been obtained
by the Purchaser in connection with this Agreement shall have been obtained.

5.4.4 The Purchaser shall close under the Canadian Purchase Agreement
contemporaneously with the Closing.

     5.5 Transaction Costs. Regardless of whether Closing occurs, but subject to
the provisions of Article 9 hereof, each of the parties shall be responsible for
its own costs in connection with this Agreement and the transaction contemplated
hereby, including, without limitation, fees of attorneys, engineers,
accountants, surveyors, title insurers and other professionals; provided that
the Purchaser shall be responsible for all of its due diligence costs,

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including title examination costs, and for all title insurance premiums and
charges and survey costs. The Sellers shall be responsible for any fees or costs
that are charged by GE Capital in connection with the payoff of the Mortgage
Loan. The Sellers shall pay the Grantor’s tax payable in connection with the
recordation of the Deed as to the Norfolk Property and one-half of the
recordation taxes payable in connection with the recordation of the Deed as to
the Pocono Property. All other documentary stamps, clerk’s fees, transfer and
recordation taxes and other recording costs with respect to the Deeds shall be
paid by the Purchaser.

6. REPRESENTATIONS AND WARRANTIES OF THE SELLERS

The Sellers, jointly and severally, represent and warrant to the Purchaser that,
except as described on the Schedules attached and incorporated by reference
herein, the following are true, complete and correct as of the date of this
Agreement.

     6.1 Organization. Each of the Sellers is a limited liability company duly
organized and validly existing under the laws of the Commonwealth of Virginia,
and has all requisite power and authority to own or lease and operate its
properties (including its respective Property) and assets and to conduct its
business in the manner in which they are being owned or leased and operated and
conducted, as the case may be. Each Seller is duly qualified in all
jurisdictions where its ownership, lease or operation of assets and properties
(including the Properties) or the conduct of its business requires such
qualification.

     6.2 Authority. The execution and delivery of this Agreement and all
agreements, documents and instruments contemplated hereby, and the performance
of all transactions contemplated herein or therein, have been duly and validly
authorized by all necessary limited liability company action, and by all
necessary action of the members, of each Seller. This Agreement and the
agreements, documents and instruments to be executed and delivered by the
Sellers in connection herewith constitute the legal, valid and binding
obligations of the Sellers, enforceable against the Sellers in accordance with
their respective terms, subject to applicable bankruptcy, insolvency, fraudulent
conveyance, reorganization, moratorium and similar laws generally affecting
creditors’ rights and remedies, and subject, as to enforceability, to general
principles of equity, including principles of commercial reasonableness, good
faith and fair dealing (regardless of whether enforcement is sought in a
proceeding at law or in equity) and except to the extent that rights to
indemnification under or contemplated by this Agreement or such other agreements
may be limited by federal or state securities laws or public policy relating
thereto. To the knowledge of the Sellers, neither of the Sellers is required to
obtain any consent, authorization, approval or waiver from any governmental
agency or authority or from any third party in connection with the execution and
delivery of, and the performance of the obligations to be performed under, this
Agreement and the documents and instruments to be executed and delivered in
connection herewith, or, if any of the foregoing is required, it has been
obtained.

     6.3 Interest in Properties. Each Seller is the record and beneficial owner
of, and has good, marketable and insurable fee simple title to, the Properties
set forth opposite such Seller’s name on Schedule 1.2, free and clear of all
liens, options, adverse claims or encumbrances, except the Permitted Exceptions.
Between the date hereof and the Closing Date, no liens, claims

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or encumbrances will be created by Seller or permitted to be created by Seller
on any Property other than Permitted Exceptions. Except for the Tenants, their
assigns and subtenants, if any, there are no parties in possession of any
portion of the Properties as of the Closing Date, and there are no other rights
of possession, or agreements providing for the sale, assignment or transfer of
title to either Property or portion thereof (other than this Agreement), which
have been granted by the Sellers to any third parties.

     6.4 No Defaults. (a) Each of the Sellers has performed in all material
respects its material obligations under any agreement, license, contract, deed,
mortgage, lease, instrument, certificate, affidavit or covenant affecting title
to the Properties; (b) there are no contracts or agreements between either of
the Sellers and any third party, such as maintenance, service, or utility
contracts, affecting title to the Properties; and (c) there are no contracts or
agreements between either of the Sellers and any third party for the management
or leasing of either Property, and there is no leasing commission due and owing,
or to become due and owing, in connection with either of the Leases; and
(d) except for the Permitted Exceptions, there are no contracts, agreements,
liabilities, claims or obligations of any kind or nature relating to title to
the Properties and to which the Purchaser will be bound or the Properties will
be subject after the Closing.

     6.5 No Litigation; No Condemnation. There are no actions, suits,
proceedings or claims pending, or to the knowledge of each Seller, threatened or
contemplated, with respect to or in any manner affecting the Properties, or
either Seller’s interest therein, or the ability of each Seller to complete the
transactions contemplated by this Agreement, or that could prevent either Seller
from satisfying its obligations under this Agreement. Neither Seller has
received written notice of any pending or threatened condemnation or similar
proceedings or special assessments affecting the Properties, or any part
thereof.

     6.6 No Violation. The execution and delivery of this Agreement and the
agreements, documents and instruments executed and delivered in connection
herewith, the consummation of the transactions contemplated hereby or thereby,
and the operation of each Property shall not: (a) conflict with, or result in a
breach of, the terms, conditions or provisions of, or constitute a default
under, any agreement, contract, mortgage, deed, lease, license, or instrument to
which either Seller is a party or is subject or to which either Property is
subject; (b) to the Sellers’ knowledge, violate any franchise, restriction,
easement, or restrictive covenant to which either Seller or either Property is
subject; (c) to the Sellers’ knowledge, constitute a violation of any applicable
code, resolution, law, statute, regulation, ordinance, rule, judgment, decree or
order applicable to either Seller; (d) with respect to each Seller, violate any
provision of its organizational documents; or (e) result in the acceleration of
any indebtedness or any encumbrance pertaining to either Seller or either
Property, or the cancellation of any contract, agreement, license, instrument or
lease pertaining to either Property. Neither of the Sellers has received any
written notice of any material violation (both as to the condition and the use
of the Properties) of any applicable laws, statutes, ordinances, codes
(including, but not limited to, zoning, building, subdivision, pollution,
environmental protection, water disposal, health, fire and safety engineering
codes, and laws and regulations with respect to the submetering of any

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utilities serving either Property), and the rules and regulations of, any
governmental authority having jurisdiction over either of the Properties.

     6.7 Required Obligations. The Sellers have paid and performed all material
obligations relating to the Properties required to have been paid or performed
prior to the date hereof and prior to the Closing Date.

     6.8 Condition of Properties. To Sellers’ knowledge, none of the structural,
mechanical, electrical, plumbing, roofing and other major systems on either
Property are required to be replaced or are in need of material repair.

     6.9 Utilities. To the Sellers’ knowledge, usable sanitary and storm sewers
and public water, gas and electrical utilities of adequate capacity for the
operation of the Properties as presently operated, are installed in, and are
duly connected to, the Properties and can be used without any charge except the
normal and usual charges imposed by such utility services.

     6.10 Zoning. To each Seller’s knowledge, each Property is currently located
in areas zoned for its current use, which classification permits the
development, use and operation of the improvements on such Property as such
improvements currently are being used. The Sellers have no knowledge of any
threat of, and have not received written notice of, any proceeding to change
adversely or down-zone the existing zoning classification as to any portion of
either Property.

     6.11 Improvements. To Sellers’ knowledge, all improvements on the
Properties comply with all requirements of applicable laws, ordinances,
regulations and orders, including, without limitation, applicable zoning,
building and fire safety codes and all restrictive covenants, if any, and other
easements, encumbrances or agreements affecting title to either of the
Properties.

     6.12 Environmental Matters.

     6.12.1 For purposes of this Agreement:

6.12.1.1 “Environmental Claim” means any claim, action, cause of action,
investigation, or notice (written or oral) by any person or entity alleging
potential liability (including, without limitation, potential liability for
investigatory costs, cleanup costs, governmental response costs, natural
resource damages, property damages, personal injuries, or civil or criminal
penalties) arising out of or resulting from (a) the actual or alleged presence
or release into the environment of any Substance of Concern at any location,
whether or not owned or operated by either of the Sellers, or (b) circumstances
forming the basis of any actual or alleged violation of any Environmental Law.

6.12.1.2 “Environmental Laws” means all federal, state, and local laws and
regulations relating to pollution or protection of human health or the
environment (including, without limitation, ambient air, surface water, ground
water, wetlands, land

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surface, subsurface strata, and indoor and outdoor workplace), including,
without limitation, the Federal Clean Air Act, as amended; the Federal Clean
Water Act, as amended; the Comprehensive Environmental Response, Compensation
and Liability Act of 1980, as amended (“CERCLA”); the Federal Insecticide,
Fungicide, and Rodenticide Act, as amended (“FIFRA”); the Resource Conservation
and Recovery Act, as amended (“RCRA”); the Superfund Amendments and
Reauthorization Act of 1986, as amended; and the Toxic Substances Control Act,
as amended (“TSCA”), other laws and regulations relating to emissions,
discharges, releases, or threatened releases of Substances of Concern, and
common law principles of tort liability.

     6.12.1.3 “Substances of Concern” means chemicals, pollutants, contaminants,
wastes, toxic substances, hazardous substances, or radioactive materials that
are regulated under any Environmental Law or by any federal, state or local
government authority including, without limitation, (a) crude oil, petroleum or
any fraction thereof, (b) asbestos, (c) PCBs, (d) mold, (e) myotoxins, (f) any
substance or material defined as a “hazardous substance” pursuant to CERCLA, or
any state or local equivalent, (g) any solid or hazardous waste, as defined
under RCRA or any state or local equivalent, (h) any chemical substances and
mixtures, as defined under TSCA or any state or local equivalent, and (i) any
pesticides, as defined under FIFRA or any state or local equivalent.

6.12.3 To the Sellers’ knowledge, each Seller and its Property are in material
compliance with all applicable Environmental Laws.

6.12.4 To the Sellers’ knowledge, there are no pending or actual Environmental
Claims relating to the Sellers or the Properties.

6.12.5 The Sellers have not caused or, to their knowledge, allowed the
generation, treatment, storage or disposal of Substances of Concern at the
Properties, except in accordance with applicable Environmental Laws, and have no
knowledge of the release of Substances of Concern on or at the Properties,
except in accordance with applicable Environmental Laws.

     6.13 Insurance. Neither Seller has received from any insurance company that
carries underwriters insurance on either Property, or any Board of Fire
Underwriters, any notice of any defect or inadequacy in connection with either
Property or its operation that has not been corrected.

     6.14 Compliance. To the Sellers’ knowledge, each Seller has complied in all
material respects with all laws, ordinances, rules, regulations and orders of
governmental authorities applicable to the ownership, management, operation,
maintenance and repair of the Properties.

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6.15 Leases.

6.15.1 Schedule 6.15.1 contains a true, complete and correct list of all current
Leases for the Properties or any part thereof, including, without limitation,
all agreements and understandings with respect to the use or lease of all or any
portion of the Properties or otherwise constituting Leases that are currently
outstanding, including all amendments thereof and modifications thereto, and the
Sellers have delivered to the Purchaser complete copies of each of the Leases,
and complete written descriptions of all oral modifications thereof, if any;

6.15.2 To the Sellers’ knowledge, neither Tenant has any claim or basis for any
claim for reduction, deduction or set-off against the landlord or the rent under
its Lease;

6.15.3 Each Seller is the sole owner of the lessor’s interest in the
corresponding Lease, both of the Leases are in full force and effect, and, to
the Sellers’ knowledge, there are no defaults thereunder by the Tenants or
either of the Sellers;

6.15.4 The Leases have not been modified except as reflected on Schedule 6.15.1;

6.15.5 All painting, repairs, alterations, and other work required to be
performed by each Seller, as landlord, under its Lease, if any, and all other
obligations of such Seller, as landlord, required to be performed thereunder, if
any, have been fully performed and paid for in full;

6.15.6 The Tenants are not, and shall not become, entitled to any concession,
rebate, allowance or free rent for any period subsequent to the Closing Date
without the prior written consent of the Purchaser, no change in the Leases
shall be made without the prior written consent of the Purchaser, and no new
leases as to either of the Properties shall be entered into by the Sellers after
the date hereof, except with the prior written consent of the Purchaser, in its
sole and absolute discretion;

6.15.7 Neither Tenant has given either of the Sellers notice of its intention to
vacate its demised premises prior to the end of the term of its Lease;

6.15.8 There are no leasing commissions required under or in connection with the
Leases;

6.15.9 Each Tenant is the sole lessee under its Lease. To the Sellers’
knowledge, there are no subleases of all or any part of the Properties, and
(except for any leasehold mortgage or mortgages permitted by the terms of the
respective Lease), neither of the Tenants has assigned or encumbered all or any
portion of its Lease or the corresponding Property or otherwise transferred its
interest in such Lease or such Property.

6.15.10 The commencement date and expiration date of each of the Leases are
July 28, 2001 and July 31, 2021, respectively. Neither of the Tenants has
exercised any options

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or rights to renew, extend, amend, modify, or change the term of its Lease, and
has no renewal options or rights other than as set forth in its respective
Lease.

6.15.11 The current monthly base rent under the Pocono Lease is $48,667.50, and
under the Norfolk Lease is $8,009.46. Such monthly base rent has been paid
through August 31, 2004 for each Lease. No such rent has been prepaid for more
than one month. No abatements in such monthly base rent are currently in effect,
and neither of the Tenants is entitled to any such abatements.

6.15.12 Neither of the Tenants has made a security deposit under its Lease.

6.15.13 Each of the Tenants has accepted possession of the premises under its
Lease and is conducting its business therein.

6.15.14 There are no actions for which any landlord consent required under a
Lease has been given to the corresponding Tenant (by way of illustration and not
limitation, consent to sublease or alter the premises) that have not yet been
taken or performed.

6.15.15 To the Sellers’ knowledge, neither of the Tenants has filed, or is the
subject of any filing, for bankruptcy or reorganization under federal or state
bankruptcy, insolvency, reorganization or similar laws.

     6.16 Service Contracts. Schedule 6.16 is a list of all of the Sellers’
contracts affecting or pertaining to the Properties, including, without
limitation, union, purchase, service and maintenance agreements, and equipment
leases affecting or pertaining to the Properties or any part thereof (the
“Service Contracts”). Neither Seller is a party to any licenses or leases of
personal property or any other contracts or agreements, written or oral,
relating to the management, operation, maintenance or repair of either Property,
or otherwise, except for the Leases and the Service Contracts. The Sellers have
performed all obligations required to be performed by them, and are not in
default, under any of the Service Contracts.

     6.17 Permits. All material permits, licenses, inspections and other
approvals from all applicable governmental authorities having jurisdiction over
each Seller and Property that are necessary in connection with the ownership,
and, to the Sellers’ knowledge, in connection with the use and operation, of
each Property as it is currently used, have been obtained and are in full force
and effect.

     6.18 Taxes. The Sellers have filed all federal, state and local tax returns
required to be filed by the Sellers. With respect to any periods prior to the
Closing Date, each Seller has no knowledge of any unpaid taxes that would create
a lien on either of the Properties (other than the lien of real estate taxes not
yet due and payable).

     6.19 Books and Records. The books, records and notes of each Seller with
respect to its Property which have been made available to the Purchaser are
complete and correct in all material respects.

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     6.20 No Brokers. Except for Thalhimer Commercial Real Estate (“TCRE”),
neither of the Sellers has dealt with any other broker, finder, real estate
agent or other person in connection with the transaction contemplated hereunder,
and no such broker, finder, real estate agent or other person is entitled to a
commission or finder’s fee in connection with the transaction contemplated
hereunder, or will be entitled to make any claim against either of the
Properties or the Purchaser for a commission or finder’s fee, by reason of
having been engaged by either or both of the Sellers. Sellers shall be
responsible for payment of any and all broker fees and commissions payable to
TCRE in connection with the transaction contemplated hereunder.

     6.21 Survival of Representations and Warranties; Indemnification. The
representations and warranties of the Sellers made in this Agreement shall
survive the Closing and consummation of the transactions contemplated hereby,
and shall remain in full force and effect thereafter only to the extent that the
Purchaser provides the Seller with written notice of any breach, violation or
right to indemnification thereunder within a period ending 12 months after the
Closing. The Sellers hereby agree to indemnify against and hold the Purchaser
harmless from any and all losses, damages, liabilities, claims, demands, suits,
actions, causes of action, proceedings, fines, costs and expenses, including,
without limitation, attorneys’ fees and costs, made or filed against, or
incurred by, the Purchaser and arising out of or in connection with any breach
of any of the representations, warranties and covenants of the Sellers made in
this Agreement.

7. REPRESENTATIONS AND WARRANTIES OF THE PURCHASER

The Purchaser represents and warrants to the Sellers that the following are
true, complete and correct as of the date of this Agreement:

     7.1 Organization, Good Standing and Qualification. The Purchaser (a) is a
limited partnership duly organized, validly existing and in good standing under
the laws of the jurisdiction of its organization, (b) has all requisite power
and authority to carry on its business and to own or lease and operate its
assets and properties in the manner in which it or they are being conducted and
owned or leased and operated, as the case may be, and (c) is duly qualified to
transact business and is in good standing in all jurisdictions where its
ownership, lease or operation of its properties or assets or the conduct of its
business requires such qualification.

     7.2 Authorization. The execution and delivery of this Agreement and all
agreements, documents and instruments contemplated hereby, and the performance
of all transactions contemplated herein or therein, have been duly and validly
authorized by all requisite action of the Purchaser and its directors and
shareholders. This Agreement, and the agreements, documents and instruments to
be executed and delivered in connection herewith, constitute the legal, valid
and binding obligation of the Purchaser, enforceable against the Purchaser in
accordance with their respective terms, subject to applicable bankruptcy,
insolvency, fraudulent conveyance, reorganization, moratorium and similar laws
affecting creditors’ rights and remedies generally, and subject, as to
enforceability, to general principles of equity, including principles of
commercial reasonableness, good faith and fair dealing (regardless of whether
enforcement is

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sought in a proceeding at law or in equity) and except to the extent that rights
to indemnification under or contemplated by this Agreement or such other
agreements may be limited by federal or state securities laws or public policy
relating thereto. To the knowledge of the Purchaser, the Purchaser is not
required to obtain any consent, authorization, approval or waiver from any
governmental agency or authority or from any third party in connection with the
execution and delivery of, and the performance of the obligations to be
performed under, this Agreement and the documents and instruments to be executed
and delivered in connection herewith or, if any of the foregoing is required, it
has been obtained.

     7.3 No Violation. The execution and delivery of this Agreement and the
agreements, documents and instruments to be executed and delivered in connection
herewith, the consummation of the transactions contemplated hereby or thereby,
and the operation of each Property shall not: (a) conflict with, violate, or
result in a breach of, the terms, conditions or provisions of, or constitute a
default under, any agreement, contract, mortgage, deed, lease, license,
franchise or instrument to which the Purchaser is a party or is subject;
(b) constitute a violation of any applicable code, resolution, law, statute,
regulation, ordinance, rule, judgment, decree or order applicable to the
Purchaser; or (c) violate any provision of the organizational documents of the
Purchaser.

     7.4 No Litigation. The Purchaser is not involved in any pending or, to its
knowledge, threatened litigation that, if adversely resolved, could materially
affect its operations or financial condition or the ability to perform its
obligations under this Agreement.

     7.5 No Brokers. Except for TCRE, the Purchaser has not dealt with any other
broker, finder, real estate agent or other person in connection with the
transaction contemplated hereunder, and no such broker, finder, real estate
agent or other person is entitled to a commission or finder’s fee in connection
with the transaction contemplated hereunder, or will be entitled to make any
claim against either of the Properties or the Sellers for a commission or
finder’s fee, by reason of having been engaged by the Purchaser.

     7.6 Survival of Representations and Warranties; Indemnification. The
representations and warranties of the Purchaser made in this Agreement shall
survive the Closing and consummation of the transactions contemplated hereby,
and shall remain in full force and effect only to the extent that the Sellers
provide the Purchaser with written notice of any breach, violation or right to
indemnification thereunder within a period ending 12 months after the date of
this Agreement. The Purchaser hereby agrees to indemnify against and hold the
Sellers harmless from any and all losses, damages, liabilities, claims, demands,
suits, actions, causes of action, proceedings, fines, costs and expenses,
including, without limitation, attorneys’ fees and costs, made or filed against,
or incurred by, either or both of the Sellers and arising out of or in
connection with any breach of any of the representations and warranties of the
Purchaser made in this Agreement.

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8. COVENANTS

     8.1 Covenants of the Purchaser. The Purchaser hereby covenants and agrees
as follows:

8.1.1 If this Agreement is terminated for any reason, the Purchaser shall
promptly return to the Sellers all materials furnished by the Sellers to the
Purchaser pursuant to this Agreement.

8.1.2 In connection with inspection of the Properties, the Purchaser shall not
unreasonably interfere with either of the Tenants or their respective business
operations on the Properties.

8.1.3 Except as and to the extent required by law, the Purchaser will not
disclose or use, and will direct its representatives not to disclose or use, any
Seller Confidential Information (as hereafter defined) with respect to the
Sellers or the Properties furnished, or to be furnished, by either the Sellers
or their respective representatives to the Purchaser or its representatives at
any time or in any manner, other than in connection with the Purchaser’s
evaluation of the transaction contemplated by this Agreement. For purposes of
this Paragraph, “Seller Confidential Information” means any information about
any of the Sellers or the Properties stamped “confidential” or identified in
writing as such to the Purchaser by any of the Sellers in connection with or
promptly following its disclosure, unless (a) such information is already known
to the Purchaser or its representatives at the time of its disclosure, or such
information becomes publicly available through no fault of the Purchaser or its
representatives; (b) the use of such information is necessary in making any
filing or obtaining any consent or approval required for the consummation of the
transaction contemplated by this Agreement; or (c) the furnishing or use of such
information is required by or necessary in connection with legal proceedings. If
this Agreement is terminated for any reason, the Purchaser will promptly return
to the Sellers, or destroy, any Seller Confidential Information in its
possession and certify in writing to the Sellers that it has done so.

8.2 Covenants of the Sellers. The Sellers hereby covenant and agree as follows:

8.2.1 If this Agreement is terminated for any reason, the Sellers shall promptly
return to the Purchaser, or destroy, all materials that were furnished by the
Purchaser to the Sellers pursuant to this Agreement and certify in writing to
the Purchaser that they have done so.

8.2.2 Except as and to the extent required by law, without the prior written
consent of the Purchaser, the Sellers shall not, and shall direct their
employees, officers, agents and representatives not to, directly or indirectly,
make any public comment, statement or communication with respect to, or
otherwise disclose or permit the disclosure of the existence of, or discussions
regarding a possible transaction between the Purchaser and the Sellers or any of
the terms or other aspects of the transaction contemplated by this Agreement,
except (i) to the extent required by judicial order or other governmental rules

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or regulations, or (ii) to the partners, attorneys, officers, directors,
employees, accountants and other advisors of Sellers, so long as such persons
shall have been informed of Sellers’ obligations hereunder.

8.2.3 The Sellers (i) shall not modify, amend or terminate any Lease, or enter
any new lease or other agreement for the use or occupancy of all or any portion
of the Properties, without first obtaining the written consent of the Purchaser,
and (ii) shall continue to maintain in full force and effect the insurance
coverage, if any, that they currently have in effect for the Properties.

8.2.4 The Sellers shall not become a party to any new licenses, equipment
leases, contracts or agreements of any kind relating to the Properties, except
for (a) such contracts or agreements as will be terminated at or prior to
Closing without cost or expense to the Purchaser or (b) contracts which the
Purchaser agrees, in its sole discretion, to assume at the Closing. The Sellers
shall exercise their respective rights under the Leases to cause the Tenants to
continue to maintain and operate the respective Properties, and to keep the
respective Properties and the tangible personal property thereon in such
condition and repair, as is required by the respective Leases.

8.2.5 The Sellers shall not knowingly take, allow or fail to take any action
that will cause the Properties or any of them to fail to comply in any material
respect with any federal, state, municipal and other governmental laws,
ordinances, requirements, rules, regulations, notices, codes and orders, or any
agreements, covenants, conditions, easements and restrictions currently in
effect relating to the Properties.

8.2.6 Promptly upon receipt, the Sellers shall provide the Purchaser with copies
of all written notices delivered or received under the Leases, correspondence
received from any of the Tenants, neighboring property owners, any insurance
company which carried insurance on the Properties, from any Governmental
Authorities or from any other person or entity with respect to the Properties or
any of them, in each case if delivered or received after the date of this
Agreement.

8.2.7 The Sellers shall not sell, mortgage, pledge, hypothecate or otherwise
transfer or dispose of all, or any part, of any Property or any interest
therein, nor initiate, consent to, approve or otherwise take any action with
respect to zoning or any other governmental rules or regulations presently
applicable to all or any part of any Property.

9. TERMINATION

     9.1 Termination by the Purchaser. If any condition for the protection of
the Purchaser set forth in this Agreement cannot or will not be satisfied prior
to Closing, or upon the occurrence of any other event that would entitle the
Purchaser to terminate its obligations under this Agreement, the Purchaser, at
its option, may either (a) terminate this Agreement, in which event the parties
shall have no further obligations or liabilities to each other hereunder, and
the Deposit shall be returned promptly to the Purchaser, or (b) proceed to
purchase the Properties as

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provided in Section 5. Notwithstanding the foregoing, (i) the parties shall
remain liable for the Post-Termination Obligations, and (ii) if the Purchaser
exercises either of the foregoing options as a consequence of a material
misrepresentation or breach of warranty by either or both of the Sellers
hereunder, or of a default by either or both of the Sellers in the performance
of their obligations hereunder, the Purchaser shall be entitled to recover the
“Due Diligence Expenses” (as hereafter defined) and shall retain all remedies at
law and in equity with respect to such misrepresentation, breach or default,
including, but not limited to, the right to recover its reasonable attorneys’
fees and costs incurred in connection therewith and (if the Purchaser has not
terminated this Agreement) the right to specific performance of this Agreement;
provided that the Purchaser shall not be entitled to seek, obtain or recover any
consequential or punitive damages. For purposes of the preceding sentence, the
term “Due Diligence Expenses” shall mean third party costs and expenses incurred
by the Purchaser in conducting its due diligence review of the Properties,
including, without limitation, the reports, investigations, surveys and other
information described in Section 2.1 hereof, and the Purchaser’s attorneys’ fees
incurred in connection with the preparation and negotiation of the letter of
intent between the parties, dated June 22, 2004, and this Agreement, and in
connection with matters related thereto. Notwithstanding any contrary provisions
hereof, a material misrepresentation or breach of warranty by either or both of
the Canadian Sellers, or a default by either or both of the Canadian Sellers in
the performance of its or their obligations, under the Canadian Purchase
Agreement that entitles the Purchaser to pursue the remedies specified in
Section 9.1 of the Canadian Purchase Agreement shall also be deemed to be a
default by the Sellers in the performance of their obligations under this
Agreement that entitles the Purchaser to pursue the remedies specified in this
Section 9.1. Notwithstanding any contrary provisions of this Section 9.1 or any
other provisions of this Agreement, the Sellers shall not have any obligations
or liabilities to the Purchaser, and the Purchaser hereby waives and releases
any and all rights and remedies that it may have against the Sellers, arising
under Environmental Laws, whether by direct action or proceeding, impleader,
cross-claim or other third party claim, action or proceeding or otherwise.

     9.2 Termination by the Sellers. If the Purchaser makes a material
misrepresentation or breach of warranty or defaults in the performance of any
obligation of the Purchaser under this Agreement for any reason, the Sellers
may, at their option, give the Purchaser prompt written notice of such default
or failure, and, after 10 days written notice thereof (if the Purchaser fails to
cure such misrepresentation, breach or default within such time), the Sellers
may, at their option, terminate this Agreement, in which event the Deposit shall
be paid to the Sellers as full and complete liquidated damages hereunder, and
the parties shall have no further claims against each other and no further
rights or obligations hereunder, except for the Post-Termination Obligations.
The Sellers shall also have the option, in lieu of terminating this Agreement,
to pursue all of the Sellers’ other remedies at law and in equity with respect
to such default or failure (including, but not limited to, the right to specific
performance of this Contract and the right to recover their reasonable
attorneys’ fees and costs incurred in connection therewith); provided that the
Sellers shall not be entitled to seek, obtain or recover any consequential or
punitive damages. Notwithstanding any contrary provisions hereof, a material
misrepresentation or breach of warranty or default in the performance of any
obligation of the Purchaser under the Canadian Purchase Agreement that entitles
the Canadian Sellers to pursue the remedies specified in Section 9.2 of the
Canadian Purchase Agreement shall also be deemed

20

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to be a default by the Purchaser in the performance of its obligations under
this Agreement that entitles the Sellers to pursue the remedies specified in
this Section 9.2. Notwithstanding any contrary provisions of this Section 9.2 or
any other provisions of this Agreement, the Purchaser shall not have any
obligations or liabilities to the Sellers, and the Sellers hereby waive and
release any and all rights and remedies that they may have against the
Purchaser, arising under Environmental Laws, whether by direct action or
proceeding, impleader, cross-claim or other third party claim, action or
proceeding or otherwise.

10. MISCELLANEOUS

     10.1 Assignment. Neither this Agreement nor any interest hereunder may be
assigned or transferred by either the Sellers or the Purchaser without the prior
written consent of the other party, in such other party’s sole and absolute
discretion. Notwithstanding the foregoing provisions, the Purchaser shall be
entitled to assign its rights under this Agreement to any entity that is owned,
controlled or managed by, or under common control or management with, the
Purchaser. No such assignment shall relieve the Purchaser of any of its
liabilities or obligations under this Agreement.

     10.2 Entire Agreement. Any prior agreement or understanding among the
parties concerning the subject matter hereof is hereby superseded. This
Agreement constitutes the entire agreement among the parties with respect to the
subject matter hereof and the transaction contemplated hereunder and shall not
be modified or amended except by a written document signed by all of the
parties. This Agreement shall be for the benefit of, and shall be binding on,
the parties and their respective successors and assigns.

     10.3 Notices. All notices or other communications required or permitted
under this Agreement shall be in writing and delivered personally or by
registered or certified mail, return receipt requested, postage prepaid, or by a
nationally recognized overnight courier (such as UPS or Federal Express) with
receipted delivery, or by facsimile transmission. Notices to the parties shall
be addressed as follows:

If to the Sellers:

c/o Palm Beach Capital Partners
180 Royal Palm Way
Palm Beach, FL 33480
Attn: Shaun L. McGruder
Fax: 561-659-9055

21

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with a copy to:

Paul G. Saunders, II, Esq.
Williams, Mullen, Clark & Dobbins
Two James Center
1021 Cary Street
Richmond, VA 23219
Fax: 804-783-6507

If to the Purchaser:

Gladstone Commercial Limited Partnership
1616 Anderson Road, Suite 208
McLean, Virginia 22102
Attn: Mr. Christopher Massey
Fax: 703-286-0795

With a copy to:

Winston & Strawn LLP
1400 L Street, N.W.
Washington, D.C. 20005
Richard F. Williamson, Esq.
Fax: 202-371-5950

All notices given in accordance with the terms hereof shall be deemed effective
(a) if delivered in person or by overnight courier, on the business day it is
delivered, (b) if sent by registered or certified mail, two (2) business days
after deposit with the U.S. mail, and (c) if sent by facsimile transmission, on
the date received, if it is a business day, otherwise, on the next business day.
Any party may change its address by written notice to all parties sent in
accordance with the terms of this Section, and any such notice of change of
address shall be effective five (5) days after delivery.

     10.4 Governing Law. This Agreement shall be governed by and interpreted in
accordance with the laws of the Commonwealth of Virginia, without regard to its
conflicts of law principles.

     10.5 Counterparts. This Agreement may be executed in any number of
identical counterparts, any or all of which may contain the signatures of fewer
than all of the parties, but all of which shall be taken together as a single
instrument.

     10.6 Interpretation. Both the Sellers and the Purchaser have negotiated the
terms and provisions of this Agreement, and, therefore, the rule of construction
that any ambiguities shall be construed against the drafter shall not apply, it
being understood and agreed that both parties have participated in the drafting
of this Agreement.

22

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     10.7 Risk of Loss. The Sellers shall retain the risk of loss until Closing
(except for any loss or damage caused by the Purchaser’s tests, surveys, studies
and due diligence), and the Purchaser shall bear the risk of loss after Closing.

     10.8 Purchase and Sale of Member Interests. Notwithstanding any contrary
provisions of this Agreement, the Purchaser, at its option, may elect to acquire
all of the member interests in PBC-Pocono rather than acquiring the Property
owned by PBC-Pocono as contemplated hereunder. The Purchaser may exercise such
option by giving written notice of exercise to the Sellers prior to the end of
the Due Diligence Period. If the Purchaser exercises such option as aforesaid:

(a) the portion of the Aggregate Purchase Price payable by the Purchaser at the
Closing for the Property owned by PBC-Pocono as set forth in Schedule 1.2 shall
instead be payable by the Purchaser at the Closing for the member interests in
PBC-Pocono,

(b) the execution and delivery of the Deed as to the Property owned by
PBC-Pocono shall not be required,

(c) to the extent that they contemplate the transfer of the Property of
PBC-Pocono, any other documents and instruments that either or both of the
Sellers and the Purchaser are required to deliver or to execute and deliver at
the Closing shall be amended to reflect that the member interests in PBC-Pocono
are being sold and transferred to the Purchaser rather than the Property owned
by PBC-Pocono,

(d) the parties shall execute and deliver at the Closing such additional
documents and instruments as are necessary to transfer to the Purchaser all of
the member interests in PBC-Pocono, and

(e) any other conditions and requirements of this Agreement shall be deemed
amended to the extent necessary to reflect that the member interests in
PBC-Pocono are being sold and transferred to the Purchaser rather than the
Property owned by PBC-Pocono.

REMAINDER OF PAGE LEFT INTENTIONALLY BLANK
SIGNATURE PAGE TO FOLLOW

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SIGNATURE PAGE

     IN WITNESS WHEREOF, the parties have executed this Agreement under seal:

     

  PBC – POCONO, L.L.C.,
a Virginia limited liability company
 
   
Date:                                        , 2004
   

  By:                                                   (SEAL)

  Name                                                             

  Title:                                                              
 
   

  PBC – NORFOLK, L.L.C.,
a Virginia limited liability company
Date:                                        , 2004
   

  By:                                                  (SEAL)

  Name                                                             

  Title:                                                              
 
   

  GLADSTONE COMMERCIAL LIMITED
PARTNERSHIP, a Delaware limited partnership
 
   

  By: Gladstone Commercial Corporation, its general
partner
 
   
Date:                                        , 2004
   

  By:                                                       (SEAL)
          Christopher Massey, Managing Director

24

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SCHEDULE 1.2 - PROPERTIES

                                SITE NO.     FEE OWNER     PROPERTY ADDRESS    
PURCHASE PRICE    
1)
    PBC-Pocono, L.L.C., a Virginia limited liability company     Huxley Envelope
Building Industrial Park Blvd. Mt. Pocono, PA     $ 7,210,000    
2)
    PBC-Norfolk, L.L.C., a Virginia limited liability company     3701 E.
Virginia Beach Blvd. Norfolk, VA     $ 1,055,660    

25

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SCHEDULE 1.4

FORM OF ESCROW AGREEMENT

THIS ESCROW AGREEMENT (this “Agreement”) is made and entered into this ___ day
of _____, 2004, among PBC-NORFOLK, L.L.C., a Virginia limited liability company
(“PBC-Norfolk”), and PBC-POCONO, L.L.C., a Virginia limited liability company
(together with PBC-Norfolk, the “Sellers”), GLADSTONE COMMERCIAL LIMITED
PARTNERSHIP, a Delaware limited partnership (the “Company”), and FIRST AMERICAN
TITLE INSURANCE COMPANY (“Escrow Agent”). Reference is made to that certain Real
Property Purchase and Sale Agreement (United States) dated as of August 11, 2004
(the “Contract”), between Sellers and the Company. The defined terms

Purchaser and Sellers have agreed to select Escrow Agent to serve as escrow
agent with respect to the $100,000.00 deposit (together with any interest earned
thereon, the “Deposit”) to be made by Purchaser pursuant to the Contract. The
purpose of this Agreement is to prescribe instructions governing the services of
Escrow Agent with respect to the Deposit and the Closing.

1. Sellers and Purchaser hereby engage Escrow Agent to serve as escrow agent
with respect to the Deposit made by Purchaser pursuant to the terms of the
Contract, a copy of which has been delivered to and received by Escrow Agent.
Escrow Agent hereby accepts such engagement.

2. Escrow Agent acknowledges receipt of the Deposit and agrees to place the
Deposit into an interest-bearing escrow account and to notify Purchaser and
Sellers of the location and number of such interest-bearing account. Interest
shall be maintained in the escrow account as a part of the Deposit and credited
to Purchaser for tax purposes. Purchaser’s Federal Taxpayer Identification
Number is ________________.

3. Escrow Agent shall disburse the Deposit and any interest earned thereon in
accordance with the terms and conditions of the Contract.

4. In the event that there is a dispute regarding the disbursement or
disposition of the Deposit or the interest earned thereon, or in the event
Escrow Agent shall receive conflicting written demands or instructions with
respect thereto, then Escrow Agent shall withhold such disbursement or
disposition until notified by both parties that such dispute is resolved or
Escrow Agent may file a suit of interpleader at the cost and expense of Sellers
and Purchaser.

5. Escrow Agent shall not be liable for any damage, liability or loss arising
out of or in connection with the services rendered by Escrow Agent pursuant to
this Agreement unless the same results from the negligence, gross negligence, or
willful misconduct of Escrow Agent.

6. Copies of all notices given by any party hereunder shall be delivered in
person or mailed, postage prepaid, to all other parties hereto, to the following
addresses:

26

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    (1 )   If to Purchaser   Gladstone Commercial Limited Partnership

              1616 Anderson Road, Suite 208

              McLean, Virginia 22102

              Attn: Mr. Christopher Massey
 
               

          with a copy to:   Winston & Strawn LLP

              1400 L Street, N.W.

              Washington, D.C. 20005

              Attn: Richard F. Williamson, Esq.
 
               

    (2 )   If to the Sellers:   PBC-Norfolk, L.L.C.

              PBC-Pocono, L.L.C.

              c/o Palm Beach Capital Partners

              180 Royal Palm Way

              Palm Beach, FL 33480

              Attn: Shaun L. McGruder
 
               

    (3 )   with a copy to:   Paul G. Saunders, II, Esq.

              Williams, Mullen, Clark & Dobbins

              Two James Center

              1021 Cary Street

              Richmond, VA 23219

The instructions contained herein may not be modified, amended or altered in any
way except by a writing (which may be in counterpart copies) signed by Sellers,
Purchaser and Escrow Agent.

7. Purchaser and Sellers reserve the right, at any time and from time to time,
to substitute a new escrow agent in place of Escrow Agent.

8. This Agreement is intended solely to supplement and implement the provisions
of the Contract and is not intended to modify, amend or vary any of the rights
or obligations of Purchaser or Sellers under the Contract.

9. This Agreement may be executed in one or more counterparts, each of which
shall be deemed to be an original, but all of which together shall constitute
one and the same instrument; provided, however, in no event shall this Agreement
be effective unless and until signed by all parties hereto.

27

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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
date first written above.

     

  SELLERS:
 
   

  PBC-NORFOLK, L.L.C., a Virginia limited liability

  company
 
   

  By:                                                             

  Name:                                                             

  Its:                                                             
 
   

  PBC-POCONO, L.L.C., a Virginia limited liability

  company
 
   

  By:                                                             

  Name:                                                             

  Its:                                                             
 
   

  PURCHASER:
 
   

  GLADSTONE COMMERCIAL LIMITED PARTNERSHIP,

  a Delaware limited partnership
 
   

  By:                                                             

  Name:                                                             

  Its:                                                             
 
   

  ESCROW AGENT:
 
   

  FIRST AMERICAN TITLE INSURANCE COMPANY
 
   

  By:                                                             

  Name:                                                             

  Its:                                                             

28

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SCHEDULE 3.1 - SCHEDULED EXCEPTIONS

AS TO THE NORFOLK PROPERTY:

1.   Any taxes due for the fiscal year 2004.   2.   Possible supplemental
assessments and taxes for improvements constructed on the premises.   3.  
Twenty-five (25) foot building setback line along Norfolk Square and fifty
(50) foot along Virginia Beach Boulevard as shown on the recorded plats of
subdivision in Map Book 23, page 57 and in Map Book 23, page 82.   4.  
Easements to Virginia Electric and Power Company as recorded in the said Clerk’s
Office in Deed Book 1073, page 86; Deed Book 1073, page 88 and Deed Book 1102,
page 53.   5.   Examination of a plat of survey made by W.P. Large, Inc., dated
July 26, 2001, last revised October 16, 2001, provided by the insured herein for
matters adverse to the title herein insured disclosed the following:

  (a)   Existing curb inlet in northern portion of insured premises.     (b)  
Existing Virginia Power and Electric Company easement R/W #1367 (M.B. 23, PG.
82) across the southwestern portion of insured premises.     (c)   Existing
signs (cable marker) in two locations in the northwestern portion of insured
premises.     (d)   Existing cable television vault in the northwestern portion
of insured premises.

AS TO THE POCONO PROPERTY:

1.   Encroachments, overlaps, boundary line disputes, and any other matters
which would be disclosed by an accurate survey and inspection of the premises.  
2.   Easements, or claims of easements, not shown by the public records   3.  
Taxes not yet due and payable and possible additional assessment for taxes on
any new construction or major improvements to premises.   4.   Covenants as set
forth in Record Book 2022, page 3517 (Premises “A”).   5.   Rights granted to
Pennsylvania Power and Light Company as in Record Book 2023, page 7053.   6.  
Declaration of Right, Easements, Covenants, Conditions, Affirmative Obligations
and Restrictions Applicable to Pocono Mountains Business Park recorded in Record
Book 1882, page 276 and First Amendment thereto which is unrecorded.

29

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7.   Conditions disclosed by map entitled “Minor Subdivision of Lands of Senn
and Pocono Mountains Industries, Inc.” recorded in Plat Book 66, page 207.  
8.   Conditions disclosed by map entitled “Pocono Mountains Business Park,
Section 2” recorded in Plat Book 65, page 56.   9.   Conditions as disclosed on
Plan of Survey prepared for PBC-Pocono, LLC by Leonard T. Tusar, P.L.S. PA
License No. SU 028864-E, dated July 13, 2001:

  a.   10’ drainage easement with specific rights to Lot 13;     b.   existing
outlet control structure;     c.   existing sewage pumping station surrounded by
chain-link fence;     d.   existing gravity sewer line, bathroom waste only;    
e.   existing 15” outfall;     f.   25’ slope and drainage easement;     g.  
existing 4’ walk;     h.   existing 4’ high chain-link fence around detention
pond area;     i.   existing storm water detention basin; and     j.   notes.

30

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SCHEDULE 5.2.1.1 - FORM OF DEEDS

This instrument was prepared by:
Paul G. Saunders, II, Esq.
Williams Mullen
Two James Center
1021 East Cary Street
Richmond, Virginia 23219

Tax Parcel No. ____________

DEED OF BARGAIN AND SALE
[to convey the Norfolk Property]

     THIS DEED OF BARGAIN AND SALE, dated as of ___, 2004, by and between
PBC-NORFOLK, L.L.C., a Virginia limited liability company (“Grantor”), and
GLADSTONE COMMERCIAL LIMITED PARTNERSHIP, a Delaware limited partnership
(“Grantee”), provides as follows:

W I T N E S S E T H:

     THAT, for and in consideration of the sum of $10.00, cash, in hand paid,
and other good and valuable consideration, the receipt and sufficiency of which
Grantor hereby acknowledges, Grantor hereby grants and conveys to Grantee, with
Special Warranty but subject to the matters hereafter set forth, the real
property located in the City of Norfolk, Virginia, and more particularly
described on Schedule A, attached and made a part hereof (the “Property”).

     This conveyance is subject to the matters set forth on Schedule B, attached
and made a part hereof.

     WITNESS the following signature:

     

  PBC-NORFOLK, L.L.C., a Virginia limited

  liability company
 
   

  By:                                                             

  Name:                                                             

  Its:                                                             

31

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STATE OF ____________

CITY/COUNTY OF _____________, to-wit:

     The foregoing instrument was acknowledged before me in the City/County of
___, State of ___this ___day of ___, 2004, by ___, as ___of PBC-Norfolk, L.L.C.,
a Virginia limited liability company, on behalf of the limited liability
company.

     My commission expires:

     

 
                                                                                

  Notary Public

Grantee’s address:

1616 Anderson Road
Suite 208
McLean, Virginia 22102

32

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SCHEDULE A

[Legal Description]

 

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

 

SCHEDULE B

[List of Permitted Exceptions]

-2-

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Tax Code No. 3/88941

[To convey the Mt. Pocono Property]

     THIS INDENTURE made the ___day of ___in the year of our Lord one two
thousand four (2004).

Between PBC-NORFOLK, L.L.C., a Virginia limited liability company with an office
at c/o Palm Beach Capital Partners, LLC, 180 Royal Palm Way, Palm Beach, Florida
33480, Grantor, party of the first part,

-  A N D  -

GLADSTONE COMMERCIAL LIMITED PARTNERSHIP, a Delaware limited partnership, with
an office at 1616 Anderson Road, Suite 208, McLean, Virginia 22102, Grantee,
party of the second part.

Witnesseth, that the said party of the first part, for and in consideration of
the sum of ____________________________ DOLLARS ($____________), lawful money of
the United States of America, unto it well and truly paid by the said party of
the second part at and before the sealing and delivery of these presents, the
receipt whereof is hereby acknowledged, has granted, bargained, sold, aliened,
enfeoffed, released and confirmed, and by these presents does grant, bargain,
sell, alien, enfeoff, release and confirm unto the said party of the second
part, its successors and assigns,

THE REAL PROPERTY MORE PARTICULARLY DESCRIBED ON EXHIBIT A
ATTACHED

     UNDER AND SUBJECT to (a) the Declaration of Rights, Easements, Covenants,
Conditions, Affirmative obligations and Restrictions Applicable to Pocono
Mountains Business Park dated January 15, 1993 and recorded April 16, 1993 in
the aforesaid Recorder’s Office in Record Book Volume 1882, Page 276 as amended
by that certain First Amendment to Declaration of Rights, Easements, Covenants,
Conditions, Affirmative Obligations and Restrictions Applicable to Pocono
Mountains Business Park, and (b) that certain Lease Agreement, dated as of
July 28, 2001, between United Envelope, LLC, as tenant, and the said party of
the first part, as Landlord.

Together with all and singular the buildings, ways, waters, water-courses,
rights, liberties, privileges, hereditaments and appurtenances whatsoever
thereunto belonging, or in any wise appertaining, and the reversions and
remainders, rents, issues and profits thereof; and all the estate, right, title,
interest, property, claim and demand whatsoever, of the said party of the first
part, in law equity, or otherwise howsoever, of, in, and to the same and every
part thereof,

-3-

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To have and to hold the said lot, parcel or piece of ground, hereditaments and
premises hereby granted or mentioned and intended so to be, with the
appurtenances, unto the said party of the second part, its successors and
assigns, to and for the only proper use and behoof of the said party of the
second part, its successors and assigns, forever.

And the said party of the first part, for itself, its successors and assigns,
does by these presents, covenant, grant and agree, to and with the said party of
the second part, its successors and assigns, that it, the said party of the
first part, its successors and assigns, all and singular the hereditaments and
premises herein above described and granted, or mentioned and intended so to be,
with the appurtenances, unto the said party of the second part, its successors
and assigns, against it, the said party of the first part, its successors and
assigns, and against all and every other person or persons whomsoever lawfully
claiming or to claim the same or any party thereof, shall and will S P E C I A L
L Y WARRANT and forever DEFEND.

In Witness Whereof, the said limited liability company has caused these presents
to be executed and its common or corporate seal hereto affixed.

     
 
  PBC-POCONO, L.L.C., a Virginia limited liability
 
  company
 
   
 
  By:                                                             
 
  Name:                                                             
 
  Its:                                                             

-4-

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STATE OF                                                        
:  
 
  ss
CITY/COUNTY OF                                            
:  

          On this, the ___day of ___, 2004, before me, a Notary Public in and
for said County and State, the undersigned officer, personally appeared ___, who
acknowledged himself to be the ___of PBC-Pocono, L.L.C., a Virginia limited
liability company, and that he as such ___, being authorized to do so, executed
the foregoing instrument for the purposes herein contained by signing the name
of the limited liability company by himself as ___.

          IN WITNESS WHEREOF, I have hereunto set my hand and official seal.

     
 
 
                                                                                

The correct and precise P.O. address
of the within named Grantee is:

1616 Anderson Road
Suite 208
McLean, Virginia 22102

     On behalf of said Grantee

     Recorded in the Office for the Recording of Deeds in and for

             
 
          in Deed Book No. ______
 
           
 
          page ___________ &c.
 
                    Witness my hand and seal of Office this

day of                    Anno Domini 20__

-5-

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EXHIBIT A

[Legal Description]

-6-

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SCHEDULE 5.2.1.3 - FORM OF ASSIGNMENT AND ASSUMPTION AGREEMENT

ASSIGNMENT AND ASSUMPTION AGREEMENT

     THIS ASSIGNMENT AND ASSUMPTION AGREEMENT (this “Assignment”) made as of the
___day of ___, 2004 by and between PBC-NORFOLK, L.L.C., a Virginia limited
liability company (“PBC-Norfolk”), and PBC-POCONO, L.L.C., a Virginia limited
liability company (“PBC-Pocono” and, together with PBC-Norfolk, “Assignor”), and
GLADSTONE COMMERCIAL LIMITED PARTNERSHIP, a Delaware limited partnership
(“Assignee”), recites and provides as follows:

RECITALS:

     1. PBC-Norfolk is the owner of certain real property located in Norfolk,
Virginia, and more particularly described in Schedule A, attached and made a
part hereof (the “Norfolk Real Property”), and PBC-Pocono is the owner of
certain real property located in Mt. Pocono, Pennsylvania, and more particularly
described in Schedule B, attached and made a part hereof (the “Pocono Real
Property”).

     2. PBC-Norfolk is the lessor of the Norfolk Real Property pursuant to the
lease that is listed on Schedule C, attached and made a part hereof (the
“Norfolk Lease”, which term shall include all guaranties of the tenants’
obligations thereunder), and PBC-Norfolk is entitled to receive all rents,
issues and profits that are or will be payable pursuant to the Norfolk Lease
(collectively, the “Norfolk Income”, which term shall include all security and
other deposits thereunder). PBC-Pocono is the lessor of the Pocono Real Property
pursuant to the lease that is listed on Schedule D, attached and made a part
hereof (the “Pocono Lease”, which term shall include all guaranties of the
tenants’ obligations thereunder), and PBC-Pocono is entitled to receive all
rents, issues and profits that are or will be payable pursuant to the Pocono
Lease (collectively, the “Pocono Income”, which term shall include all security
and other deposits thereunder).

     3. By deed, of even date herewith, PBC-Norfolk has conveyed the Norfolk
Real Property to Assignee, and by indenture, of even date herewith, PBC-Pocono
has conveyed the Pocono Real Property to Assignee.

     4. PBC-Norfolk desires to assign to Assignee all of its rights, title and
interests in and to the Norfolk Lease and the Norfolk Income, PBC-Pocono desires
to assign to Assignee all of its rights, title and interests in and to the
Pocono Lease and the Pocono Income, and Assignee desires to accept such rights,
title and interests, and to assume certain obligations with respect thereto, all
as hereafter set forth.

-7-

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AGREEMENT:

     NOW, THEREFORE, in consideration of the premises, the mutual covenants and
agreements herein set forth, $10.00 cash, in hand paid, and other good and
valuable consideration, the receipt and sufficiency of which the parties hereby
acknowledge, the parties hereby covenant and agree as follows:

     1. Transfer and Assignment. PBC-Norfolk hereby sells, grants, conveys,
transfers, sets over, delivers, and assigns unto Assignee, its successors and
assigns, all rights, title and interests that PBC-Norfolk has in and to the
Norfolk Lease and the Norfolk Income, and PBC-Pocono hereby sells, grants,
conveys, transfers, sets over, delivers, and assigns unto Assignee, its
successors and assigns, all rights, title and interests that PBC-Pocono has in
and to the Pocono Lease and the Pocono Income; provided that the provisions of
Section 4.1 of that certain Real Property Purchase and Sale Agreement (United
States), dated August 11, 2004, between Assignor and Assignee, shall govern the
proration of the Norfolk Income and the Pocono Income between PBC-Norfolk and
PBC-Pocono, on the one hand, and Assignee, on the other hand.

     2 Assumption of Obligations. Assignee hereby assumes and shall observe and
perform all of the covenants, duties, obligations and liabilities of PBC-Norfolk
under the Norfolk Lease, and of PBC-Pocono under the Pocono Lease, accruing
after, but not before, the date of this Assignment.

     3. Indemnity. PBC-Norfolk hereby agrees to indemnify against and hold
Assignee harmless from all claims, demands, losses, damages, liabilities, suits,
actions, expenses and costs, including, but not limited to, attorneys’ fees,
incurred, arising out of or in connection with PBC-Norfolk’s failure, prior to
the date hereof, to observe, perform and discharge each and every one of its
covenants, duties, obligations and liabilities accruing under the Norfolk Lease
prior to the date of this Assignment. PBC-Pocono hereby agrees to indemnify
against and hold Assignee harmless from all claims, demands, losses, damages,
liabilities, suits, actions, expenses and costs, including, but not limited to,
attorneys’ fees, incurred, arising out of or in connection with PBC-Pocono’s
failure, prior to the date hereof, to observe, perform and discharge each and
every one of its covenants, duties, obligations and liabilities accruing under
the Pocono Lease prior to the date of this Assignment. Assignee hereby agrees to
indemnify against and hold PBC-Norfolk harmless from all claims, demands,
losses, damages, liabilities, suits, actions, expenses and costs, including, but
not limited to, attorneys’ fees, incurred, arising out of or in connection with
Assignee’s failure, after the date hereof, to observe, perform and discharge
each and every one of the covenants, duties, obligations and liabilities assumed
by Assignee pursuant to Section 2 of this Assignment and accruing under the
Norfolk Lease after the date of this Assignment. Assignee hereby agrees to
indemnify against and hold PBC-Pocono harmless from all claims, demands, losses,
damages, liabilities, suits, actions, expenses and costs, including, but not
limited to, attorneys’ fees, incurred, arising out of or in connection with
Assignee’s failure, after the date hereof, to observe, perform and discharge
each and every one of the covenants, duties,

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obligations, and liabilities assumed by Assignee pursuant to Section 2 of this
Assignment and accruing under the Pocono Lease after the date of this
Assignment.

     4. Headings. The headings used in this Assignment are for purposes of
convenience only and shall not be used in construing the provisions hereof.

     5. Covenant of Further Assurances. The parties agree to execute such other
documents and perform such other acts as may be necessary or desirable to carry
out the purposes of this Assignment.

     6. Successors And Assigns. This Assignment shall bind and benefit the
respective successors and assigns of the parties.

     7. Governing Law. This Assignment shall be governed by and construed in
accordance with the laws of the Commonwealth of Virginia, without regard to the
conflict of law principles thereof.

     8. Severability. The provisions of this Assignment shall be deemed
severable, and the invalidity or unenforceability of any one or more of the
provisions hereof shall not affect the validity or enforceability of the other
provisions hereof.

     IN WITNESS WHEREOF, the parties have caused this Assignment to be executed
as of the day and year first above written.

     

  ASSIGNOR:
 
   

  PBC-NORFOLK, L.L.C., a Virginia limited liability

  company
 
   

  By:                                                             

  Name:                                                             

  Its:                                                             
 
   

  PBC-POCONO, L.L.C., a Virginia limited liability

  company
 
   

  By:                                                             

  Name:                                                             

  Its:                                                             

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  ASSIGNEE:
 
   

  GLADSTONE COMMERCIAL LIMITED PARTNERSHIP,

  a Delaware limited partnership
 
   

  By:                                                             

  Name:                                                             

  Its:                                                             

SCHEDULE A

[Norfolk Real Property Legal Description]

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SCHEDULE B

[Description of Norfolk Lease]

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SCHEDULE C

[Pocono Real Property Legal Description]

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SCHEDULE D

[Description of Pocono Lease]

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SCHEDULE 5.2.1.4 - FORM OF QUITCLAIM BILL OF SALE

QUITCLAIM BILL OF SALE

     THIS QUITCLAIM BILL OF SALE, dated as of ______, 2004, by and between
PBC-NORFOLK, L.L.C., a Virginia limited liability company (“PBC-Norfolk”), and
PBC-POCONO, L.L.C., a Virginia limited liability company (“PBC-Pocono” and,
together with PBC-Norfolk, “Seller”), and GLADSTONE COMMERCIAL LIMITED
PARTNERSHIP, a Delaware limited partnership (“Purchaser”), provides as follows::

W I T N E S S E T H:

     THAT, for and in consideration of the sum of $10.00, cash, in hand paid,
and other good and valuable consideration, the receipt and sufficiency of which
Seller hereby acknowledges, (a) PBC-Norfolk hereby quitclaims, grants, bargains,
sells, assigns, transfers, sets over and delivers unto Purchaser, its successors
and assigns, all rights, title and interests of PBC-Norfolk, if any, in and to
all personal property, fixtures, goods, chattels, machinery, furniture,
furnishings and equipment of every kind and type, located on or used in
connection with the real property more particularly described in Schedule A
attached, including, without limitation, all rights, title and interests of
Seller, if any, in and to all compressors, engines, elevators and escalators and
other mechanical systems, fixtures and equipment, all electrical systems,
fixtures and equipment, all heating fixtures, systems and equipment, all air
conditioning fixtures, systems and equipment, all plumbing fixtures, systems and
equipment, all carpets, drapes and other furnishings, maintenance equipment and
tools, signs, appliances, and all other machinery, equipment, fixtures and
personal property of every kind and character, and all accessories,
improvements, modifications, additions, restorations, repairs and replacements
thereto and thereof (collectively, the “Norfolk Personalty”), and (b) PBC-Pocono
hereby quitclaims, grants, bargains, sells, assigns, transfers, sets over and
delivers unto Purchaser, its successors and assigns, all rights, title and
interests of PBC-Pocono, if any, in and to all personal property, fixtures,
goods, chattels, machinery, furniture, furnishings and equipment of every kind
and type, located on or used in connection with the real property more
particularly described in Schedule B attached, including, without limitation,
all rights, title and interests of Seller, if any, in and to all compressors,
engines, elevators and escalators and other mechanical systems, fixtures and
equipment, all electrical systems, fixtures and equipment, all heating fixtures,
systems and equipment, all air conditioning fixtures, systems and equipment, all
plumbing fixtures, systems and equipment, all carpets, drapes and other
furnishings, maintenance equipment and tools, signs, appliances, and all other
machinery, equipment, fixtures and personal property of every kind and
character, and all accessories, improvements, modifications, additions,
restorations, repairs and replacements thereto and thereof (collectively, the
“Pocono Personalty” and, together with the Norfolk Personalty, the
“Personalty”).

     SELLER MAKES NO WARRANTY, EXPRESS OR IMPLIED, WHETHER OF TITLE,
MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE OR OTHERWISE.

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PURCHASER HAS MADE AND RELIED UPON ITS OWN INSPECTION OF THE PERSONALTY AND
ACCEPTS IT IN “AS IS” CONDITION.

     IN WITNESS WHEREOF, PBC-Norfolk and PBC-Pocono have caused this Bill of
Sale to be executed on their behalf as of the ______ day of ______, 2004.

         

  SELLER:    
 
       

  PBC-NORFOLK, L.L.C., a Virginia limited liability company        
 
       

  By:                                                                 

  Name:                                                            

  Its:                                                                 
 
       

  PBC-POCONO, L.L.C., a Virginia limited liability company    
 
       

  By:                                                                 

  Name:                                                            

  Its:                                                                 
 
        SCHEDULE A
 
        [Norfolk Property Legal Description]

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SCHEDULE B

[Pocono Property Legal Description]

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SCHEDULE 5.2.1.8

SELLERS’ CERTIFICATE RE: REPRESENTATIONS AND WARRANTIES

THIS SELLERS’ CERTIFICATE RE: REPRESENTATIONS AND WARRANTIES (this
“Certificate”), is made as of ______, 200______, by PBC-NORFOLK, L.L.C., a
Virginia limited liability company , and PBC-POCONO, L.L.C., a Virginia limited
liability company, each having an address at c/o Palm Beach Capital Partners,
LLC, 180 Royal Palm Way, Palm Beach, Florida 33480 (“Sellers”), to GLADSTONE
COMMERCIAL LIMITED PARTNERSHIP, a Delaware limited partnership (the “Company”)
having an address at ______, in connection with the sale of certain land and
improvements located at ______, as further identified on Exhibit A attached
hereto (collectively, the “Property”).

W I T N E S S E T H:

WHEREAS, Sellers and the Company entered into that certain Real Property
Purchase and Sale Agreement (United States) dated as of August 11, 2004 (the
“Agreement”), for the sale of the Property.

WHEREAS, Section 5.1 of the Agreement requires the delivery of this Certificate.

NOW THEREFORE, Sellers do hereby certify to the Company that, in accordance with
Section 5.1 of the Agreement, each of the representations and warranties of
Sellers as and to the extent contained in the Agreement is true and correct as
of the date hereof.

     IN WITNESS WHEREOF, Sellers have caused this Certificate to be executed on
their behalf as of the ___day of ___, 2004.

     

  SELLER:
 
   

  PBC-NORFOLK, L.L.C., a Virginia limited liability
company
 
   

  By:                                                             

  Name:                                                        

  Its:                                                             

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  PBC-POCONO, L.L.C., a Virginia limited liability company
 
   

  By:                                                             

  Name:                                                        

  Its:                                                             

EXHIBITS:

Exhibit A – Legal Description of both Properties

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SCHEDULE 5.2.1.9

FORM OF OPINION OF SELLERS’ COUNSEL

1. The Seller is duly organized or formed, validly existing and in good standing
under the laws of its State of organization or formation.

2. The Seller has the requisite corporate, partnership or other entity power and
authority to execute and deliver, and to perform its obligations under the [list
and define applicable transaction documents].

3. The execution and delivery of the [applicable transaction documents] by the
Seller have been duly authorized by all necessary corporate, partnership or
other entity action and the persons executing the [applicable transaction
documents] have been duly authorized to do so.

4. The execution and delivery of the [applicable transaction documents] and the
performance thereunder by the Seller will not violate the charter,
organizational documents or bylaws of the Seller.

5. Each of the [applicable transaction documents] has been duly executed and
delivered by the Seller, and all such documents are the legal, valid and binding
obligation of the Seller, enforceable against Seller in accordance with their
terms, except that enforcement may be limited by bankruptcy, insolvency,
reorganization, arrangement, moratorium, or similar laws, or by equitable
principles, relating to or limiting the rights of creditors generally.

6. To the undersigned’s knowledge, without investigation, the execution and
delivery of the [applicable transaction documents] will not breach or otherwise
violate the provisions of or cause an event of default under any agreement,
contract, mortgage or other binding commitment or existing obligation of the
Seller, and will not breach or otherwise violate any permit, license, court
judgment, decree or order of any court or any law, rule or regulation of any
governmental body to which the Seller is subject or by which Seller is bound.

7. To the undersigned’s knowledge, there are no actions, suits or proceedings
pending or threatened against the Seller or the Property (as defined in the
Purchase Agreement) that affect the Property or would materially affect the
Seller’s ability to perform under the [applicable transaction documents] or
which seeks to affect the enforceability of the [applicable transaction
documents].

8. To the undersigned’s knowledge, the Seller is not in default and has not
received any notice of default with respect to any judgment, order, writ,
injunction or decree or any lease, contract, agreement, commitment, instrument
or obligation to which it is a party or by which the Property is bound or may be
subject that affects the Property or could materially affect the Seller’s
ability to perform its obligations under the [applicable transaction documents].

- 5 -

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9. To the undersigned’s knowledge, all consents, approvals, or authorizations
required by any third party or governmental authority in connection with the
performance of the Seller’s obligations under the [applicable transaction
documents] have been properly obtained.

10. No filing, registration or qualification with any governmental authority is
required in connection with the execution and delivery by Seller of the deeds to
the Property and the [applicable transaction documents].

This Opinion may be relied upon by the Company and its counsel, Winston & Strawn
LLP.

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Schedule 5.2.2.4

FORM OF OPINION OF PURCHASER’S COUNSEL

1. The Purchaser is duly organized or formed, validly existing and in good
standing under the laws of its State of organization or formation.

2. The Purchaser has the requisite corporate, partnership or other entity power
and authority to execute and deliver, and to perform its obligations under the
[list and define applicable transaction documents].

3. The execution and delivery of the [applicable transaction documents] by the
Purchaser have been duly authorized by all necessary corporate, partnership or
other entity action and the persons executing the [applicable transaction
documents] have been duly authorized to do so.

4. The execution and delivery of the [applicable transaction documents] and the
performance thereunder by the Purchaser will not violate the charter,
organizational documents or bylaws of the Purchaser.

5. Each of the [applicable transaction documents] has been duly executed and
delivered by the Purchaser, and all such documents are the legal, valid and
binding obligation of the Purchaser, enforceable against Purchaser in accordance
with their terms, except that enforcement may be limited by bankruptcy,
insolvency, reorganization, arrangement, moratorium, or similar laws, or by
equitable principles, relating to or limiting the rights of creditors generally.

6. To the undersigned’s knowledge, without investigation, the execution and
delivery of the [applicable transaction documents] will not breach or otherwise
violate the provisions of or cause an event of default under any agreement,
contract, mortgage or other binding commitment or existing obligation of the
Purchaser, and will not breach or otherwise violate any permit, license, court
judgment, decree or order of any court or any law, rule or regulation of any
governmental body to which the Purchaser is subject or by which Purchaser is
bound.

7. To the undersigned’s knowledge, there are no actions, suits or proceedings
pending or threatened against the Purchaser that would materially affect the
Purchaser’s ability to perform under the [applicable transaction documents] or
which seeks to affect the enforceability of the [applicable transaction
documents].

8. To the undersigned’s knowledge, the Purchaser is not in default and has not
received any notice of default with respect to any judgment, order, writ,
injunction or decree or any lease, contract, agreement, commitment, instrument
or obligation to which it is a party or by which it is bound or may be subject
that could materially affect the Purchaser’s ability to perform its obligations
under the [applicable transaction documents].

- 7 -

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9. To the undersigned’s knowledge, all consents, approvals, or authorizations
required by any third party or governmental authority in connection with the
performance of the Purchaser’s obligations under the [applicable transaction
documents] have been properly obtained.

10. No filing, registration or qualification with any governmental authority is
required in connection with the execution and delivery by Purchaser of the
[applicable transaction documents].

This Opinion may be relied upon by the Sellers.

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SCHEDULE 6.15.1 - LEASES AND TENANTS

                                                        PROPERTY                
NO.     ADDRESS     TENANT     LEASES                            
1)
    Huxley Envelope Building Industrial Park Blvd. Mt. Pocono, PA     United
Envelope, LLC, a Delaware limited liability company     Lease Agreement between
PBC-Pocono, L.L.C., and United Envelope, LLC, dated July 28, 2001              
             
2)
    3701 E. Virginia Beach Blvd. Norfolk, VA     iGetSmart.com, Inc., a Delaware
corporation     Lease Agreement between PBC-Norfolk, L.L.C., iGetSmart.com, Inc.
dated July 28, 2001                          

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SCHEDULE 6.16 - SERVICE CONTRACTS

NONE

- 10 -