Exhibit 10.3
AGREEMENT OF PURCHASE AND SALE
     This Agreement, dated as of October 26, 2007, is between ESS TECHNOLOGY,
INC., a California corporation (“Seller”), and TC FUND PROPERTY ACQUISITIONS,
INC., a Delaware corporation (“Buyer”).
ARTICLE I
PURCHASE AND SALE OF PROPERTY
     Section 1.1 Sale.
     Seller agrees to sell to Buyer, and Buyer agrees to purchase from Seller,
subject to the terms, covenants and conditions set forth herein, all of Seller’s
right, title and interest in and to the following property (collectively, the
“Property”):
          (a) Real Property. That certain real property located at 48401 Fremont
Boulevard, 48461 Fremont Boulevard and 48481 Fremont Boulevard, in the City of
Fremont, State of California, as more particularly described in Exhibit A
attached hereto and made a part hereof (the “Land”), together with (1) all
improvements located thereon (the “Improvements”), (2) all rights, benefits,
privileges, easements, tenements, hereditaments, rights-of-way and other
appurtenances thereon or in any way appertaining thereto, including all mineral
rights, development rights, air and water rights, and (3) all strips and gores
and any land lying in the bed of any street, road or alley, open or proposed,
adjoining such Land (collectively, the “Real Property”); and
          (b) Intangible Personal Property. To the extent assignable at no cost
to Seller, all intangible personal property, if any, owned by Seller and related
to the Real Property and the Improvements, including, without limitation: any
trade names and trademarks associated with the Real Property and the
Improvements (but specifically excluding the names “ESS Technology” and any
derivatives thereof); any plans and specifications and other architectural and
engineering drawings for the Improvements; any warranties; any Service Contracts
(as defined in Section 2.1(b) below) and other contract rights related to the
Property (but only to the extent Seller’s obligations thereunder are expressly
assumed by Buyer pursuant to the Assignment of Intangible Personal Property as
defined in Section 8.3(a)(2) below); and any governmental permits, approvals and
licenses (including any pending applications). Notwithstanding anything to the
contrary contained herein, there shall be excluded from the assignment of any
rights of Seller under any intangible property any rights of Seller against
third parties with respect to the period prior to Closing (the “Excluded
Rights”) and any rights and obligations of Seller under the Transition Services
Agreement (as defined in Section 3.1(d)) (collectively, the “Intangible Personal
Property”).
     Section 1.2 Purchase Price.
          (a) The purchase price of the Property is Twenty Six Million Three
Hundred Thousand Dollars ($26,300,000) (the “Purchase Price”).
          (b) The Purchase Price shall be paid as follows:

 

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               (1) Not later than the second business day after the Effective
Date (as defined herein), Buyer shall deposit in escrow with LandAmerica
Commercial Services, 7552 Rambler Road, Suite 1700, Dallas, Texas 75231,
Attention: Jennifer Flynn-Maxwell (the “Title Company”, which includes any title
insurance company affiliate thereof) a promissory note executed by Buyer payable
to the order of Seller (the “Promissory Note”) in the amount of Two Hundred
Thousand Dollars ($200,000) and in the form set forth on Exhibit B attached
hereto and made a part hereof.
               (2) If Buyer delivers a waiver notice under Section 2.2 to Seller
prior to the expiration of the Contingency Period, Buyer shall deposit in escrow
with the Title Company the amount of One Million Dollars ($1,000,000) (the
“Deposit”, which includes all interest which accrues thereon) in cash or other
immediately available funds within two (2) business days after the expiration of
the Contingency Period. The Deposit shall replace the Promissory Note, and upon
the Title Company’s receipt of the Deposit, the Title Company shall release the
Promissory Note to Buyer. The Deposit shall be considered fully earned by Seller
as consideration for entering into the Agreement and shall be nonrefundable
after the Contingency Period except as otherwise expressly provided herein.
     The Deposit shall be held in an interest bearing account at an FDIC insured
bank. If the sale of the Property as contemplated hereunder is consummated, then
the Deposit shall be paid to Seller at the Closing (as defined in
Section 1.2(b)(3) below) and credited against the Purchase Price. IF THE SALE OF
THE PROPERTY IS NOT CONSUMMATED DUE TO SELLER’S DEFAULT HEREUNDER, THEN BUYER
MAY ELECT, AS BUYER’S SOLE AND EXCLUSIVE REMEDY, EITHER TO: (1) TERMINATE THIS
AGREEMENT AND RECEIVE A REFUND OF THE DEPOSIT, TOGETHER WITH REIMBURSEMENT OF
BUYER’S ACTUAL DOCUMENTED COSTS AND EXPENSES INCURRED IN CONNECTION WITH THE
NEGOTIATION AND EXECUTION OF THIS AGREEMENT, AND IN PERFORMING ITS DUE
DILIGENCE, NOT TO EXCEED ONE HUNDRED THOUSAND DOLLARS ($100,000), IN WHICH EVENT
NEITHER PARTY SHALL HAVE ANY FURTHER RIGHTS OR OBLIGATIONS HEREUNDER EXCEPT AS
PROVIDED IN SECTIONS 6.1, 9.3 AND 9.9 BELOW, OR (2) ENFORCE SPECIFIC PERFORMANCE
OF THIS AGREEMENT. PROVIDED, HOWEVER, THAT IF SELLER’S DEFAULT RESULTS FROM THE
SALE OR OTHER DISPOSITION OF THE PROPERTY, SUCH THAT THE REMEDY OF SPECIFIC
PERFORMANCE IS NOT AVAILABLE, THEN BUYER MAY SEEK MONETARY DAMAGES. BUYER SHALL
NOT HAVE ANY OTHER RIGHTS OR REMEDIES HEREUNDER AS A RESULT OF ANY DEFAULT BY
SELLER PRIOR TO CLOSING, AND BUYER HEREBY WAIVES ANY OTHER SUCH REMEDY AS A
RESULT OF A DEFAULT HEREUNDER BY SELLER. IF THE SALE IS NOT CONSUMMATED DUE TO
ANY DEFAULT BY BUYER HEREUNDER, THEN SELLER SHALL RETAIN THE DEPOSIT AS
LIQUIDATED DAMAGES. THE PARTIES HAVE AGREED THAT SELLER’S ACTUAL DAMAGES, IN THE
EVENT OF A FAILURE TO CONSUMMATE THIS SALE DUE TO BUYER’S DEFAULT PRIOR TO
CLOSING, WOULD BE EXTREMELY DIFFICULT OR IMPRACTICABLE TO DETERMINE. AFTER
NEGOTIATION, THE PARTIES HAVE AGREED THAT, CONSIDERING ALL THE CIRCUMSTANCES
EXISTING ON THE DATE OF THIS AGREEMENT, THE AMOUNT OF THE DEPOSIT IS A
REASONABLE ESTIMATE OF THE DAMAGES

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THAT SELLER WOULD INCUR IN SUCH EVENT. BY PLACING THEIR INITIALS BELOW, EACH
PARTY SPECIFICALLY CONFIRMS THE ACCURACY OF THE STATEMENTS MADE ABOVE AND THE
FACT THAT EACH PARTY WAS REPRESENTED BY COUNSEL WHO EXPLAINED, AT THE TIME THIS
AGREEMENT WAS MADE, THE CONSEQUENCES OF THIS LIQUIDATED DAMAGES PROVISION. THE
FOREGOING IS NOT INTENDED TO LIMIT BUYER’S OBLIGATIONS UNDER SECTIONS 6.1, 9.3
AND 9.9.
INITIALS:           SELLER /s/RLB      BUYER /s/NB
               (3) The balance of the Purchase Price, which is Twenty Five
Million Three Hundred Thousand Dollars ($25,300,000) (plus or minus the
prorations pursuant to Section 8.5 hereof) shall be paid to Seller in cash or by
wire transfer of other immediately available funds at the consummation of the
purchase and sale contemplated hereunder (the “Closing”).
ARTICLE II
CONDITIONS
     Section 2.1 Buyer’s Conditions Precedent.
     Subject to the provisions of Section 9.3 hereof, Seller has provided and/or
shall provide Buyer and its consultants and other agents and representatives
with access to the Property to perform Buyer’s inspections and review and
determine the present condition of the Property. Seller has delivered or made
available to Buyer at Seller’s offices or at the Real Property or on a website
all of those items listed on Schedule 2 attached hereto, and shall within the
Delivery Period (as defined below) deliver or make available to Buyer at
Seller’s offices or at the Real Property or on a website, copies of all other
Due Diligence Materials (as defined in Section 2.2 below) in Seller’s
possession, except as otherwise specifically provided herein along with all
other documents and materials in Seller’s possession or reasonably available to
Seller relating to the ownership or operation of the Property as Buyer may
reasonably request. Notwithstanding anything to the contrary contained herein,
the Due Diligence Materials shall expressly exclude (i) those portions of the
Due Diligence Materials that would disclose Seller’s cost of acquisition of the
Real Property, or cost of construction of the Improvements and related soft
costs, or any estimates of costs to repair, replace, remediate or maintain the
Real Property, (ii) any reports, presentations, summaries and the like prepared
for any of Seller’s boards, committees, partners or investors in connection with
its consideration of the acquisition of the Real Property, construction of the
Improvements or sale of the Property, (iii) any proposals, letters of intent,
draft contracts or the like prepared by or for other prospective purchasers of
the Property or any part thereof, (iv) Seller’s internal memoranda,
attorney-client privileged materials or internal appraisals, and (v) any
information which is the subject of a confidentiality agreement between Seller
and a third party (the items described in clauses (i), (ii) (iii), (iv) and
(v) being collectively referred to as the “Confidential Information”). The
“Delivery Period” shall mean the period which ends five (5) days after the
Effective Date (as defined in Section 9.14 below). Buyer’s obligation to
purchase the Property is conditioned upon Buyer’s review and approval of the
following, within the applicable time periods described in Sections 2.2 and 4.1
hereof:

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          (a) Title to the Property and survey matters in accordance with
Article IV below.
          (b) The Due Diligence Materials, including, but not limited to all
contracts pertaining to the maintenance of the Property (collectively, the
“Service Contracts”).
          (c) The physical condition of the Property.
          (d) The zoning, land use, building, environmental and other statutes,
rules, or regulations applicable to the Property.
          (e) The current real estate tax bills, any warranties, licenses,
permits, certificates of occupancy, plans and specifications, and other
agreements or documents pertaining to the Property which will be binding on
Buyer after Closing.
          (f) Any other matters Buyer deems relevant to the Property.
     Section 2.2 Contingency Period.
     Buyer shall have until the date that is thirty (30) days after the Seller
Board Approval Date as defined in this Agreement (such period being referred to
herein as the “Contingency Period”) to review and approve the matters described
in Sections 2.1(b)-(f) above in Buyer’s sole discretion (title and survey review
and approval shall be governed by the provisions of Section 4.1 below). If Buyer
determines to proceed with the purchase of the Property, then Buyer shall,
before the end of the Contingency Period, so notify Seller in writing, in which
case Buyer shall be deemed to have approved all of the matters described in
Sections 2.1(a)-(f) above (subject to the provisions of Section 4.1 below as to
title and survey matters), including, without limitation, all documents, Service
Contracts and other contracts, agreements, reports and other items and materials
related to the Property prepared by or on behalf of Seller which have been
delivered or otherwise made available to Buyer (collectively, the “Due Diligence
Materials”), and the Deposit shall become nonrefundable except as expressly
provided herein. If before the end of the Contingency Period Buyer fails to give
Seller such written notice, then Buyer shall be deemed to have elected to
terminate this Agreement, the Promissory Note shall be immediately returned to
Buyer, and neither party shall have any further rights or obligations hereunder
except as provided in Sections 6.1, 9.3 and 9.9 below.
ARTICLE III
BUYER’S EXAMINATION
     Section 3.1 Representations and Warranties of Seller.
     Subject to the disclosures contained in Schedule 1 attached hereto and made
a part hereof (the “Disclosure Items”), matters contained in the Due Diligence
Materials, and any matters of public record in the city, county and state where
the Property is located, Seller hereby makes the following representations and
warranties with respect to the Property. Notwithstanding anything to the
contrary contained herein or in any document delivered in connection herewith,
Seller shall have no liability with respect to the Disclosure Items.

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          (a) Seller has not (i) made a general assignment for the benefit of
creditors, (ii) filed any voluntary petition in bankruptcy or suffered the
filing of any involuntary petition by Seller’s creditors, (iii) suffered the
appointment of a receiver to take possession of all, or substantially all, of
Seller’s assets, (iv) suffered the attachment or other judicial seizure of all,
or substantially all, of Seller’s assets, (v) admitted in writing its inability
to pay its debts as they come due, or (vi) made an offer of settlement,
extension or composition to its creditors generally.
          (b) Seller is not a “foreign person” as defined in Section 1445 of the
Internal Revenue Code of 1986, as amended (the “Code”) and any related
regulations.
          (c) Subject to the provisions of Section 9.17 below, (i) this
Agreement has been, and all documents executed by Seller which are to be
delivered to Buyer at Closing will be, duly authorized, executed and delivered
by Seller, and (ii) this Agreement does not and such other documents will not
violate any provision of any agreement or judicial order to which Seller is a
party or to which Seller or, to the best of Seller’s knowledge, the Property is
subject.
          (d) Except for that certain Transition Services Agreement dated
January 1, 2007, by and between Seller and Silicon Integrated Systems
Corporation, a California corporation (“SIS”), pursuant to which SIS occupies
space in the 48461 Fremont Boulevard building (the “Transition Services
Agreement”), no leases are currently in effect for the Property.
          (e) The only Service Contracts in effect for the Property are set
forth in a list of Service Contracts attached hereto as Exhibit E and made a
part hereof (or, if not attached, which Seller shall deliver to Buyer within the
Delivery Period) and which at that time will be attached hereto as Exhibit E and
made a part hereof.
          (f) Except as set forth on Schedule 1, Seller has received no written
notice of any litigation or governmental proceeding (including, but not limited
to any condemnation proceeding) pending with respect to the Property, or with
respect to Seller which impairs Seller’s ability to perform its obligations
under this Agreement, except for any personal injury or property damage action
for which there is adequate insurance coverage.
          (g) To the best of Seller’s knowledge, Seller has received no written
notice from any governmental authority of any violation of any law applicable to
the Property (including, without limitation, any Environmental Law as defined in
Section 3.6(a)(2) below) that has not been corrected.
          (h) To the best of Seller’s knowledge, all of the Due Diligence
Materials delivered or made available by Seller to Buyer in connection with the
Property are true and complete copies of such items in Seller’s possession.
          (i) Seller has been duly organized, is validly existing, and is in
good standing in the state in which it was formed, and, if so required to, is
qualified to do business in the state in which the Real Property is located.
          (j) Seller is in compliance with, and, to Seller’s knowledge, all
beneficial owners of Seller are, in compliance with the requirements of
Executive Order No. 13224, 66 Fed

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Reg. 49079 (September 25, 2001) (the “Order”) and other similar requirements
contained in the rules and regulations of the Office of Foreign Asset Control,
Department of the Treasury (“ OFAC”) and in any enabling legislation or other
Executive Orders in respect thereof (the Order and such other rules,
regulations, legislation, or orders are collectively called the “Orders”).
          (k) Seller has not entered into any contracts for the sale, exchange
or other disposition of the Property or any portion thereof, nor do there exist
any rights of first refusal, options or other rights of any other party to
purchase all or any portion of the Property.
          (l) To the best of Seller’s knowledge, there is no current default or
breach by Seller under the terms or provisions of any of the documents which are
referenced as exceptions in the Title Report, the SIS Lease, or under any of the
Service Contracts.
     Each of the representations and warranties of Seller contained in this
Section 3.1: (1) shall be true in all material respects as of the date of
Closing, subject in each case to (A) any Exception Matters (as defined below),
(B) the Disclosure Items, and (C) other matters expressly permitted in this
Agreement or otherwise specifically approved in writing; and (2) shall survive
the Closing as provided in Section 3.3 below.
     Section 3.2 No Liability for Exception Matters.
     As used herein, the term “Exception Matter” shall refer to a matter which
would make a representation or warranty of Seller contained in this Agreement
untrue or incorrect and which is disclosed to Buyer in the Due Diligence
Materials, the Disclosure Items, or otherwise, or is a matter of public record
in the city, county and state where the Property is located, or is otherwise
discovered by or known to Buyer before the Closing. If Buyer first obtains
knowledge of any Material Exception Matter, as such term is defined below, after
the close of the Contingency Period and prior to Closing and such Exception
Matter was not contained in the Due Diligence Materials, the Disclosure Items or
is not a matter of public record in the city, county and state where the
Property is located, Buyer’s sole remedy shall be to terminate this Agreement on
the basis thereof, upon written notice to Seller within the earlier of (a) five
(5) days following Buyer’s discovery of such Exception Matter or (b) the
Closing, which ever occurs first, in which event the Deposit shall be returned
to Buyer, unless within five (5) days after receipt of such notice or by the
Closing, as the case may be, Seller notifies Buyer in writing that it elects to
attempt to cure or remedy such Exception Matter, in which event there shall be
no return of the Deposit unless Seller fails to so cure or remedy within the
time period set forth below. Seller shall be entitled to extend the Closing Date
(as defined in Section 8.2 below) for up to five (5) business days in order to
attempt to cure or remedy any Exception Matter for which Buyer gives written
notice to Seller within the five (5) business day period prior to the Closing
Date. Buyer’s failure to give notice within five (5) days after it has obtained
knowledge of a Material Exception Matter shall be deemed a waiver by Buyer of
such Exception Matter. Seller shall have no obligation to cure or remedy any
Exception Matter, even if Seller has notified Buyer of Seller’s election to
attempt to cure or remedy any Exception Matter (except as specifically provided
in Section 4.1(c) hereof), and, subject to Buyer’s right to terminate this
Agreement as set forth above, Seller shall have no liability whatsoever to Buyer
with respect to any Exception Matters. Upon any termination of this Agreement,
pursuant to this Section 3.2, neither party shall have

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any further rights nor obligations hereunder, except as provided in
Sections 6.1, 9.3 and 9.9 below. Except as set forth below, if Buyer obtains
knowledge of any Exception Matter before the Closing, but nonetheless elects to
proceed with the acquisition of the Property or is obligated to proceed with the
acquisition of the Property, Seller shall have no liability with respect to such
Exception Matter, notwithstanding any contrary provision, covenant,
representation or warranty contained in this Agreement or in any Other Documents
(as defined in Section 9.18 below). As used in this Section 3.2, the term
“Material Exception Matter” shall mean a matter that would have a negative
impact on the value of the Property in excess of Two Hundred Fifty Thousand
Dollars ($250,000).
     Notwithstanding anything herein to the contrary, if an Exception Matter
results from the breach of Seller’s covenants specifically contained in
Section 7.2 and 7.3 of this Agreement, Buyer may elect to terminate this
Agreement (according to the provisions in Section 1.2(b)(2) above) or Buyer may
proceed to Closing, and may pursue Seller for monetary damages after the
Closing.
     Section 3.3 Survival of Seller’s Representations and Warranties of Sale.
     The representations and warranties of Seller contained herein or in any
Other Documents shall survive for a period of twelve (12) months after the
Closing. Any claim which Buyer may have against Seller for a breach of any such
representation or warranty, whether such breach is known or unknown, which is
not specifically asserted by written notice to Seller within such twelve (12)
month period shall not be valid or effective, and Seller shall have no liability
with respect thereto.
     Section 3.4 Seller’s Knowledge.
     For purposes of this Agreement and any document delivered at Closing,
whenever the phrase “to the best of Seller’s knowledge” or the “knowledge” of
Seller or words of similar import are used, they shall be deemed to mean and are
limited to the current actual knowledge only of Robert Blair, at the times
indicated only, and not any implied, imputed or constructive knowledge of such
individual or of Seller or any Seller Related Parties (as defined in Section 3.7
below), and without any independent investigation or inquiry having been made or
any implied duty to investigate, make any inquiries or review the Due Diligence
Materials. Seller represents that Robert Blair is the person affiliated with
Seller who is most knowledgeable regarding the matters that are being
represented and warranted by Seller hereunder. Furthermore, it is understood and
agreed that such individual shall have no personal liability in any manner
whatsoever hereunder or otherwise related to the transactions contemplated
hereby.
     Section 3.5 Representations and Warranties of Buyer.
     Buyer represents and warrants to Seller as follows:
          (a) This Agreement and all documents executed by Buyer which are to be
delivered to Seller at Closing do not and at the time of Closing will not
violate any provision of any agreement or judicial order to which Buyer is a
party or to which Buyer is subject.

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          (b) Buyer has not (i) made a general assignment for the benefit of
creditors, (ii) filed any voluntary petition in bankruptcy or suffered the
filing of any involuntary petition by Buyer’s creditors, (iii) suffered the
appointment of a receiver to take possession of all, or substantially all, of
Buyer’s assets, (iv) suffered the attachment or other judicial seizure of all,
or substantially all, of Buyer’s assets, (v) admitted in writing its inability
to pay its debts as they come due, or (vi) made an offer of settlement,
extension or composition to its creditors generally.
          (c) Buyer has been duly organized, is validly existing and is in good
standing in the state in which it was formed, and, if required to do so, is (or
will be, at Closing) qualified to do business in the state in which the Real
Property is located. This Agreement has been, and all documents executed by
Buyer which are to be delivered to Seller at Closing will be, duly authorized,
executed and delivered by Buyer.
          (d) Buyer is purchasing the Property as investment rental property,
and not for Buyer’s own operations or use.
          (e) Buyer is not a party in interest with respect to any employee
benefit or other plan within the meaning of Section 3(3) of the Employee
Retirement Income Security Act of 1974, as amended (“ERISA”), or of
Section 4975(e)(1) of the Code, which is subject to ERISA or Section 4975 of the
Code and which is an investor in Seller.
          (f) Other than the Brokers (as defined in Section 6.1 below) Buyer has
had no contact with any broker or finder with respect to the Property.
          (g) Buyer is in compliance with all laws, statutes, rules and
regulations or any federal, state or local governmental authority in the United
States of America applicable to Buyer and all beneficial owners of Buyer with
respect to or arising out of the requirements of Executive Order No. 13224, 66
Fed Reg. 49079 (September 23, 2001) (the “Order”) and other similar requirements
contained in the rules and regulations of the Office of Foreign Asset Control.
Department of the Treasury (“OFAC”) and in any enabling legislation or other
Executive Orders in respect thereof (the Order and such other rules,
regulations, legislation, or orders are collectively called the “Orders”). Buyer
agrees to make its policies, procedures and practices regarding compliance with
the Orders available to Seller for its review and inspection during normal
business hours and upon reasonable prior notice. Neither Buyer nor to Buyer’s
knowledge (without any duty of inquiry or investigation), any beneficial owner
of Buyer:
               (1) is listed on the Specially Designated Nationals and Blocked
Persons List maintained by OFAC pursuant to the Order and/or on any other list
of terrorists or terrorist organizations maintained pursuant to any of the rules
and regulations of OFAC or pursuant to any other applicable Orders (such lists
are collectively referred to as the “Lists”);
               (2) has been determined by competent authority to be subject to
the prohibitions contained in the Orders;
               (3) is owned or controlled by, nor acts for or on behalf of, any
person or entity on the Lists or any other person or entity who has been
determined by competent authority to be subject to the prohibitions contained in
the Orders; or

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               (4) shall transfer or permit the transfer of any interest in
Buyer or any beneficial owner in Buyer to any person who is or whose beneficial
owners are listed on the Lists.
Each of the representations and warranties of Buyer contained in this Section
shall be deemed remade by Buyer as of the Closing and shall survive the Closing
for a period of twelve (12) months. Any claim which Seller may have against
Buyer for a breach of any such representation or warranty, whether such breach
is known or unknown, which is not specifically asserted by written notice to
Buyer within such twelve (12) month period shall not be valid or effective, and
Buyer shall have no liability with respect thereto.
     Section 3.6 Buyer’s Independent Investigation.
          (a) By Buyer electing to proceed under Section 2.2, Buyer will be
deemed to have acknowledged and agreed that it has been given a full opportunity
to inspect and investigate each and every aspect of the Property, either
independently or through agents of Buyer’s choosing, including, without
limitation:
               (1) All matters relating to title and survey, together with all
governmental and other legal requirements such as taxes, assessments, zoning,
use permit requirements and building codes.
               (2) The physical condition and aspects of the Property,
including, without limitation, the interior, the exterior, the square footage
within the improvements on the Real Property, the structure, seismic aspects of
the Property, the foundation, roof, paving, parking facilities, utilities, and
all other physical and functional aspects of the Property. Such examination of
the physical condition of the Property shall include an examination for the
presence or absence of Hazardous Materials, as defined below, which shall be
performed or arranged by Buyer (subject to the provisions of Section 9.3 hereof)
at Buyer’s sole expense. For purposes of this Agreement, “Hazardous Materials”
shall mean inflammable explosives, radioactive materials, asbestos, asbestos —
containing materials, polychlorinated biphenyls, lead, lead-based paint, radon,
under and/or above ground tanks, hazardous materials, hazardous wastes,
hazardous substances, oil, or related materials, which are listed or regulated
in the Comprehensive Environmental Response, Compensation and Liability Act of
1980, as amended (42 U.S.C. Sections 6901, et seq.), the Resources Conservation
and Recovery Act of 1976 (42 U.S.C. Section 6901, et seq.), the Clean Water Act
(33 U.S.C. Section 1251, et seq.), the Safe Drinking Water Act (14 U.S.C.
Section 1401, et seq.), the Hazardous Materials Transportation Act (49 U.S.C.
Section 1801, et seq.), and the Toxic Substance Control Act (15 U.S.C.
Section 2601, et seq.), the California Hazardous Waste Control Law (California
Health and Safety Code Section 25100, et seq.), the Porter-Cologne Water Quality
Control Act (California Water Code Section 13000, et seq.), and the Safe
Drinking Water and Toxic Enforcement Act of 1986 (California Health and Safety
Code Section 25249.5, et seq.) and any other applicable federal, state or local
laws (collectively, “Environmental Laws”).
               (3) Any easements and/or access rights affecting the Property.

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               (4) The Service Contracts and any other documents or agreements
of significance affecting the Property.
               (5) All other matters of material significance affecting the
Property, including, but not limited to, the Due Diligence Materials and the
Disclosure Items.
          (b) Except as expressly stated herein, Seller makes no representation
or warranty as to the truth, accuracy or completeness of any materials, data or
information delivered by Seller to Buyer in connection with the transaction
contemplated hereby. Buyer acknowledges and agrees that all materials, data and
information delivered by Seller to Buyer in connection with the transaction
contemplated hereby are provided to Buyer as a convenience only and that any
reliance on or use of such materials, data or information by Buyer shall be at
the sole risk of Buyer, except as otherwise expressly stated herein. Without
limiting the generality of the foregoing provisions, Buyer acknowledges and
agrees that (a) any environmental or other report with respect to the Property
which is delivered by Seller to Buyer shall be for general informational
purposes only, (b) Buyer shall not have any right to rely on any such report
delivered by Seller to Buyer, but rather will rely on its own inspections and
investigations of the Property and any reports commissioned by Buyer with
respect thereto, (c) neither Seller, any affiliate of Seller nor the person or
entity which prepared any such report delivered by Seller to Buyer shall have
any liability to Buyer for any inaccuracy in or omission from any such report
and (d) the failure to deliver any report as to the environmental or other
condition of the Property, including any proposal for work at the Property which
was not performed by Seller, shall not be actionable by Buyer under this
Agreement or otherwise.
          (c) EXCEPT AS EXPRESSLY SET FORTH IN THIS AGREEMENT, BUYER
SPECIFICALLY ACKNOWLEDGES AND AGREES THAT SELLER IS SELLING AND BUYER IS
PURCHASING THE PROPERTY ON AN “AS IS WITH ALL FAULTS” BASIS AND THAT BUYER IS
NOT RELYING ON ANY REPRESENTATIONS OR WARRANTIES OF ANY KIND WHATSOEVER, EXPRESS
OR IMPLIED, FROM SELLER, ANY SELLER RELATED PARTIES, OR THEIR AGENTS OR BROKERS,
OR ANY OTHER PERSON ACTING OR PURPORTING TO ACT ON BEHALF OF SELLER AS TO ANY
MATTERS CONCERNING THE PROPERTY, INCLUDING WITHOUT LIMITATION: (i) the quality,
nature, adequacy and physical condition and aspects of the Property, including,
but not limited to, the structural elements, seismic aspects of the Property,
foundation, roof, appurtenances, access, landscaping, parking facilities and the
electrical, mechanical, HVAC, plumbing, sewage, and utility systems, facilities
and appliances, the square footage within the improvements on the Real Property,
(ii) the quality, nature, adequacy, and physical condition of soils, geology and
any groundwater, (iii) the existence, quality, nature, adequacy and physical
condition of utilities serving the Property, (iv) the development potential of
the Property, and the Property’s use, habitability, merchantability, or fitness,
suitability, value or adequacy of the Property for any particular purpose,
(v) the zoning or other legal status of the Property or any other public or
private restrictions on use of the Property, (vi) the compliance of the Property
or its operation with any applicable codes, laws, regulations, statutes,
ordinances, covenants, conditions and restrictions of any governmental or
quasi-governmental entity or of any other person or entity, (vii) the presence
of Hazardous Materials on, under or about the Property or the adjoining or
neighboring property, (viii) the quality of any labor and materials used in any
improvements on the Real Property, (ix) the condition of title to the Property,
(x) the Service

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Contracts, or other documents or agreements affecting the Property (xi) the
value, economics of the operation or income potential of the Property, or
(x) any other fact or condition which may affect the Property, including without
limitation, the physical condition, value, economics of operation or income
potential of the Property. In addition, Seller shall have no legal obligation to
apprise Buyer regarding any event or other matter involving the Property which
occurs after the Effective Date or to otherwise update the Due Diligence Items,
unless and until an event or other matter occurs which would cause Seller to be
unable to remake any of its representations or warranties contained in this
Agreement.
     Section 3.7 Release.
          (a) Without limiting the above, and subject to Seller’s liability with
respect to the representations, warranties and covenants of Seller contained in
this Agreement, Buyer on behalf of itself and its successors and assigns waives
its right to recover from, and forever releases and discharges, Seller, Seller’s
affiliates, Seller’s investment advisor, the partners, trustees, beneficiaries,
shareholders, members, managers, directors, officers, employees and agents and
representatives of each of them, and their respective heirs, successors,
personal representatives and assigns (collectively, the “Seller Related
Parties”), from any and all demands, claims, legal or administrative
proceedings, losses, liabilities, damages, penalties, fines, liens, judgments,
costs or expenses whatsoever (including, without limitation, court costs and
attorneys’ fees and disbursements), whether direct or indirect, known or
unknown, foreseen or unforeseen, that may arise on account of or in any way be
connected with or related to the Property, this Agreement and/or the
transactions contemplated hereunder, including, without limitation (i) the
physical condition of the Property including, without limitation, all structural
and seismic elements, all mechanical, electrical, plumbing, sewage, heating,
ventilating, air conditioning and other systems, the environmental condition of
the Property and the presence of Hazardous Materials on, under or about the
Property, (ii) any law or regulation applicable to the Property, including,
without limitation, any Environmental Law and any other federal, state or local
law, (iii) the Disclosure Items, (iv) any Exception Matter or (v) any other
matter.
          (b) In connection with Section 3.7(a) above, Buyer expressly waives
the benefits of Section 1542 of the California Civil Code, which provides as
follows: “A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR DOES
NOT KNOW OR SUSPECT TO EXIST IN HIS OR HER FAVOR AT THE TIME OF EXECUTING THE
RELEASE, WHICH IF KNOWN BY HIM OR HER MUST HAVE MATERIALLY AFFECTED HIS OR HER
SETTLEMENT WITH THE DEBTOR.” BUYER ACKNOWLEDGES AND AGREES THAT IT HAS BEEN
REPRESENTED BY LEGAL COUNSEL OF ITS CHOICE IN CONNECTION WITH THIS AGREEMENT,
AND THAT SUCH COUNSEL HAS EXPLAINED TO BUYER THE PROVISIONS OF THIS SECTION 3.7.
BY INITIALING BELOW, BUYER CONFIRMS IT HAS AGREED TO THE PROVISIONS OF THIS
SECTION 3.7.
     In this connection, Buyer hereby agrees, represents and warrants that Buyer
realizes and acknowledges that factual matters now unknown to it may have given
or may hereafter give rise to causes of action, claims, demands, debts,
controversies, damages, costs, losses and expenses and other claims and
liabilities which are presently unknown, unanticipated and unsuspected, and
Buyer further agrees, represents and warrants that the waivers and releases
herein have been

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negotiated and agreed upon in light of that realization and that Buyer
nevertheless hereby intends to release, discharge and acquit Seller and the
Seller Related Parties from any such unknown causes of action, claims, demands,
debts, controversies, damages, costs, losses and expenses and other claims and
liabilities which might in any way be included as a material portion of the
consideration given to Seller by Buyer in exchange for Seller’s performance
hereunder.
     Seller has given Buyer material concessions regarding this transaction in
exchange for Buyer agreeing to the provisions of this Section 3.7. Each Seller
and Buyer have initialed this Section 3.7 to further indicate their awareness
and acceptance of each and every provision hereof; provided, however that
failure of any party to initial this Section 3.7 below shall not invalidate this
Section 3.7 nor any other provision of this Agreement.

             
SELLER
      BUYER    
 
           
/s/RLB  
      /s/NB    
 
           
      
                  

     Section 3.8 Survival.
     The provisions of this Article III shall survive the Closing subject to the
limitations and qualifications contained in such provisions and in Sections 9.11
and 9.18 hereof.
ARTICLE IV
TITLE
     Section 4.1 Conditions of Title.
          (a) Upon execution of this Agreement, Buyer will order a current
preliminary title report or commitment from the Title Company (the “Title
Report”), together with copies of all underlying documents relating to title
exceptions referred to therein. Buyer shall immediately order a survey of the
Property or any update thereto from a duly licensed surveyor (the “Survey”) if
desired by Buyer or if necessary to support the issuance of the Title Policy (as
defined in Section 4.2 below). Buyer shall provide to Seller a copy of the
Survey, which shall be certified to the Title Company, Buyer and Seller. Buyer
shall pay the entire cost of the Survey. If Closing does not occur, Buyer shall,
if Seller so requests, assign to Seller all contract rights Buyer has with the
surveyor and in such event Seller shall reimburse Buyer for the cost of the
Survey.
          (b) Within five (5) business days after the later of the Seller Board
Approval Date, or Buyer’s receipt of the Title Report and Survey (the “Title
Review Date”), Buyer shall furnish Seller with a written statement of
objections, if any, to the title to the Property, including, without limitation,
any objections to any matter shown on the Survey (collectively, “Objections”).
In the event the Title Company amends or updates the Title Report after the
Title Review Date (each, a “Title Report Update”), Buyer shall furnish Seller
with a written statement of Objections to any matter first raised in a Title
Report Update within three (3)

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business days after its receipt of such Title Report Update (each, a “Title
Update Review Period”). Should Buyer fail to notify Seller in writing of any
Objections in the Title Report prior to the Title Review Date, or to any matter
first disclosed in a Title Report Update prior to the Title Update Review
Period, as applicable, Buyer shall be deemed to have approved such matters which
shall be considered to be “Conditions of Title” as defined in Section 4.1(e)
below.
          (c) If Seller receives a timely Objection in accordance with
Section 4.1(b) (“Buyer’s Notice”), Seller shall have the right, but not the
obligation, within five (5) business days after receipt of Buyer’s Notice
(“Seller’s Response Period”), to elect to attempt to cure any such matter upon
written notice to Buyer (“Seller’s Response”), and may extend the Closing Date
for up to five (5) business days to allow such cure. If Seller does not give any
Seller’s Response, Seller shall be deemed to have elected not to attempt to cure
any such matters. Notwithstanding the foregoing, Seller shall in any event be
obligated to cure all matters or items (i) that are mortgage or deed of trust
liens or security interests against the Property, in each case granted by Seller
(and not by other third parties), (ii) real estate tax liens, other than liens
for taxes and assessments not yet delinquent, (iii) that have been voluntarily
placed against the Property by Seller (and not by other third parties) after the
date of this Agreement and that are not otherwise permitted pursuant to the
provisions hereof and (iv) liens, such as, but not limited to, mechanic’s liens,
but only those liens that arise pursuant to agreements in which Seller or its
agents (and not tenants or third parties) is the contracting party, and which do
not exceed Two Hundred Fifty Thousand Dollars ($250,000). Seller shall be
entitled to apply the Purchase Price towards the payment or satisfaction of such
liens, and may cure any Objection by causing the Title Company to insure against
collection of the same out of the Property.
          (d) If Seller elects (or is deemed to have elected) not to attempt to
cure any Objections raised in any Buyer’s Notice timely delivered by Buyer to
Seller pursuant to Section 4.1(b), or if Seller notifies Buyer that it elects to
attempt to cure any such Objection but then does not for any reason effect such
cure on or before the Closing Date as it may be extended hereunder, then Buyer,
as its sole and exclusive remedy, shall have the option of terminating this
Agreement by delivering written notice thereof to Seller within three
(3) business days after (as applicable) (i) its receipt of Seller’s Response
stating that Seller will not attempt to cure any such Objection or (ii) the
expiration of Seller’s Response Period if Seller does not deliver a Seller’s
Response or (iii) Seller’s failure to cure by the Closing Date (as it may be
extended hereunder) any Objection which Seller has previously elected to attempt
to cure pursuant to a Seller’s Response. In the event of such a termination, the
Deposit shall be immediately returned to Buyer, and neither party shall have any
further rights or obligations hereunder except as provided in Sections 6.1, 9.3
and 9.9 below. If no such termination notice is timely received by Seller
hereunder, Buyer shall be deemed to have waived all such Objections in which
event those Objections shall become “Conditions of Title” under Section 4.1(e).
If the Closing is not consummated for any reason other than Seller’s default
hereunder, Buyer shall be responsible for any title or escrow cancellation
charges.
          (e) At the Closing, Seller shall convey title to the Property to Buyer
by deed in the form of Exhibit C attached hereto (the “Deed,” which shall be
modified in form but not in substance if required by the Title Company) subject
to no exceptions other than:

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               (1) Interests of occupant under the Transition Services
Agreement;
               (2)Matters created by or with the written consent of Buyer;
               (3) Non-delinquent liens for real estate taxes and assessments;
and
               (4) Any exceptions disclosed by the Title Report and any Title
Report Update which is approved or deemed approved by Buyer in accordance with
this Article IV above, and any other exceptions to title disclosed by the public
records or which would be disclosed by an inspection and/or survey of the
Property.
All of the foregoing exceptions shall be referred to collectively as the
“Conditions of Title.” By acceptance of the Deed and the Closing of the purchase
and sale of the Property, (x) Buyer agrees it is assuming for the benefit of
Seller all of the obligations of Seller with respect to the Conditions of Title
from and after the Closing, and (y) Buyer agrees that Seller shall have
conclusively satisfied its obligations with respect to title to the Property.
The provisions of this Section shall survive the Closing.
     Section 4.2 Evidence of Title.
     Delivery of title in accordance with the foregoing shall be evidenced by
the willingness of the Title Company to issue, at Closing, its Owner’s ALTA
standard Policy of Title Insurance (2006 Form) in the amount of the Purchase
Price showing title to the Real Property vested in Buyer, subject to the
Conditions of Title (the “Title Policy”). The Title Policy may be written as an
extended coverage policy, provided that Buyer furnishes the Title Company with
an acceptable Survey, and may contain such endorsements as reasonably required
by Buyer, provided that the issuance of such extended coverage or endorsements
shall not be conditions to Buyer’s obligations hereunder. Buyer shall pay the
costs for extended coverage and all such endorsements. Seller shall have no
obligation to provide any indemnity or agreement to the Title Company or Buyer
to support the issuance of the Title Policy or any such endorsements other than
an affidavit as to the existence of any tenants at the Property and any ongoing
or recently completed construction work at the Property.
ARTICLE V
RISK OF LOSS AND INSURANCE PROCEEDS
     Section 5.1 Minor Loss.
     Buyer shall be bound to purchase the Property for the full Purchase Price
as required by the terms hereof, without regard to the occurrence or effect of
any damage to the Property or destruction of any improvements thereon or
condemnation of any portion of the Property, provided that: (a) the cost to
repair any such damage or destruction does not exceed Five Hundred Thousand
Dollars ($500,000) in the estimate of an architect or contractor selected by
Seller and reasonably acceptable to Buyer or in the case of a condemnation, the
diminution in the value of the remaining Property as a result of a partial
condemnation is not material (as hereinafter defined) and (b) upon the Closing,
there shall be a credit against the Purchase Price due hereunder equal to the
amount of any insurance proceeds or condemnation awards collected

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by Seller as a result of any such damage or destruction or condemnation, plus
the amount of any insurance deductible, less any reasonable and documented sums
expended by Seller toward the collection of such proceeds or awards and the
restoration or repair of the Property (the nature of which restoration or
repairs, but not the right of Seller to effect such restoration or repairs,
shall be subject to the approval of Buyer, which approval shall not be
unreasonably withheld, conditioned or delayed). If the proceeds or awards have
not been collected as of the Closing, then such proceeds or awards shall be
assigned to Buyer, except to the extent needed to reimburse Seller for sums
expended to collect such proceeds or awards or to repair or restore the
Property, and Seller shall retain the rights to such proceeds and awards to such
extent.
     Section 5.2 Major Loss.
     If the cost to repair the damage or destruction as specified above exceeds
Five Hundred Thousand Dollars ($500,000) in the estimate of an architect or
contractor selected by Seller and reasonably acceptable to Buyer or the
diminution in the value of the remaining Property as a result of a condemnation
is material (as hereinafter defined), then Buyer may, at its option to be
exercised within twenty (20) days of Seller’s notice of the occurrence of the
damage or destruction or the commencement of condemnation proceedings (during
which time period Seller will make available to Buyer all information and
documentation reasonably requested by Buyer relating to the damage or
destruction, or condemnation, and any insurance and/or condemnation award, so
that Buyer may make an informed decision as to whether to proceed with the
transaction or to terminate), either terminate this Agreement or consummate the
purchase for the full Purchase Price as required by the terms hereof. If Buyer
elects to terminate this Agreement by delivering written notice thereof to
Seller or fails to give Seller notice within such twenty (20) day period that
Buyer will proceed with the purchase, then this Agreement shall terminate, the
Deposit shall be immediately returned to Buyer and neither party shall have any
further rights or obligations hereunder except as provided in Sections 6.1, 9.3
and 9.9 below. If Buyer elects to proceed with the purchase, then upon the
Closing, there shall be a credit against the Purchase Price due hereunder equal
to the amount of any insurance proceeds or condemnation awards collected by
Seller as a result of any such damage or destruction or condemnation, plus the
amount of any insurance deductible, less any reasonable and documented sums
expended by Seller toward the collection of such proceeds or awards or to
restoration or repair of the Property (the nature of which restoration or
repairs, but not the right of Seller to effect such restoration or repairs,
shall be subject to the approval of Buyer, which approval shall not be
unreasonably withheld, conditioned or delayed). If the proceeds or awards have
not been collected as of the Closing, then such proceeds or awards shall be
assigned to Buyer, except to the extent needed to reimburse Seller for sums
expended to collect such proceeds or awards or to repair or restore the
Property, and Seller shall retain the rights to such proceeds and awards to such
extent. A condemnation shall be deemed material if more than twenty percent
(20%) of the net rentable area of the Property is taken, or any portion of any
net rentable area of the Property, or any parking is taken which would cause the
Property to be in violation of any existing laws or regulations, including but
not limited to, zoning regulations, or the existing access to the Property is
materially and adversely affected, permanently. After the expiration of the
Contingency Period, Seller will not settle any insurance or condemnation claim
involving a Major Loss without the prior written consent of Buyer.

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ARTICLE VI
BROKERS AND EXPENSES
     Section 6.1 Brokers.
     The parties represent and warrant to each other that no broker or finder
was instrumental in arranging or bringing about this transaction except for
Colliers International (“Seller’s Broker”) and CB Richard Ellis (“Buyer’s
Broker,” collectively with Seller’s Broker, the “Brokers”). At Closing, Seller
shall pay the commission due, if any, to Seller’s Broker, which shall be paid
pursuant to a separate agreement between Seller and Seller’s Broker, and Seller
shall indemnify Buyer against any claims of Seller’s Broker arising out of such
agreement with Seller’s Broker. To the extent that Seller’s Broker and Buyer’s
Broker have agreed to split such commission, arrangements will be made for the
payment of Buyer’s Broker’s share of such commission through escrow at the
Closing. If any other person brings a claim for a commission or finder’s fee
based upon any contact, dealings or communication with Buyer or Seller, then the
party through whom such person makes his claim shall defend the other party (the
“Indemnified Party”) from such claim, and shall indemnify the Indemnified Party
and hold the Indemnified Party harmless from any and all costs, damages, claims,
liabilities or expenses (including without limitation, court costs and
reasonable attorneys’ fees and disbursements) incurred by the Indemnified Party
in defending against the claim. The provisions of this Section 6.1 shall survive
the Closing or, if the purchase and sale is not consummated, any termination of
this Agreement.
     Section 6.2 Expenses.
     Except as expressly provided in this Agreement, each party hereto shall pay
its own expenses incurred in connection with this Agreement and the transactions
contemplated hereby.
ARTICLE VII
AGREEMENTS AFFECTING THE PROPERTY
     Section 7.1 Maintenance of Improvements; Removal of Tangible Personal
Property.
     Seller agrees to keep its customary property insurance covering the
Property in effect until the Closing (provided, however, that the terms of any
such coverage maintained in blanket form may be modified as Seller deems
necessary). Seller shall maintain all Improvements substantially in their
present condition (ordinary wear and tear, casualty and condemnation excepted),
provided that Seller shall in no event be obligated to make any capital
expenditures or repairs. Notwithstanding the foregoing, except with respect to
the Seller Lease Back Space and the SIS Space, Seller shall remove all existing
furniture, fixtures and equipment from the Property that is owned by Seller
prior to the Closing (other than supplies and materials used in connection with
the management, maintenance and operation of the Property, which will be sold
and assigned to Buyer at Closing for no additional consideration).

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     Section 7.2 Service Contracts.
     Seller will not enter into any new Service Contracts or materially modify
any existing Service Contracts (to the extent such Service Contracts will
survive Closing) after the expiration of the Contingency Period, without Buyer’s
prior written approval (not to be unreasonably withheld, conditioned or
delayed). Seller will provide Buyer with any Service Contracts and material
modifications of any existing Service Contracts (to the extent such Service
Contracts will survive Closing), no later than five (5) business days prior to
the expiration of the Contingency Period. Within three (3) business days prior
to the expiration of the Contingency Period, Buyer will advise Seller in writing
which Service Contracts Buyer will assume and which Service Contracts Buyer
requests be terminated at Closing. Seller shall deliver at Closing notices of
termination of all Service Contracts that are not so assumed and Buyer shall be
responsible for any charges applicable to periods commencing with the Closing.
If there are any Service Contracts which Buyer does not elect to assume, but
which require a substantial (i.e., more than Fifty Thousand Dollars ($50,000))
termination fee which Seller refuses to pay, then if Buyer refuses to either
assume such Service Contract or pay such termination fee, or if Seller and Buyer
cannot otherwise resolve the matter to their mutual satisfaction, then Seller
may terminate this Agreement (or Buyer may do so, prior to the end of the
Contingency Period) in which event the Promissory Note shall be immediately
returned to Buyer and neither party shall have any further rights or obligations
hereunder, except as provided in Sections 6.1, 9.3 and 9.9 below.
     Section 7.3 Leases.
     Seller will not enter into any new leases of the Property, or modify the
Transition Services Agreement, from and after the Effective Date and through the
Closing.
ARTICLE VIII
CLOSING AND ESCROW
     Section 8.1 Escrow Instructions.
     Upon execution of this Agreement, the parties hereto shall deposit an
executed counterpart of this Agreement with the Title Company, and this
instrument shall serve as the instructions to the Title Company as the escrow
holder for consummation of the purchase and sale contemplated hereby. Seller and
Buyer agree to execute such reasonable additional and supplementary escrow
instructions as may be appropriate to enable the Title Company to comply with
the terms of this Agreement; provided, however, that in the event of any
conflict between the provisions of this Agreement and any supplementary escrow
instructions, the terms of this Agreement shall control.
     Section 8.2 Closing.
     The Closing hereunder shall be held and delivery of all items to be made at
the Closing under the terms of this Agreement shall be made at the offices of
the Title Company or as otherwise mutually agreed on December 18, 2007, and
before 9:00 a.m. local time, or such other earlier date or later date and time
as Buyer and Seller may mutually agree upon in writing (the

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     "Closing Date”). Except as expressly provided herein, such date and time
may not be advanced or extended without the prior written approval of both
Seller and Buyer.
     Section 8.3 Deposit of Documents.
          (a) At or before the Closing, Seller shall deposit into escrow the
following items:
               (1) the duly executed and acknowledged Deed in the form attached
hereto as Exhibit C conveying the Real Property to Buyer subject to the
Conditions of Title;
               (2) four (4) duly executed counterparts of an Assignment and
Assumption of Service Contracts, Warranties and Other Intangible Property in the
form attached hereto as Exhibit D pursuant to the terms of which Buyer shall
assume all of Seller’s obligations under the Service Contracts, and other
documents and agreements affecting the Property (the “Assignment of Contracts”);
               (3) an affidavit pursuant to Section 1445(b)(2) of the Code, and
on which Buyer is entitled to rely, that Seller is not a “foreign person” within
the meaning of Section 1445(f)(3) of the Code; and
               (4) California 593-C Certificate.
          (b) At or before Closing, Buyer shall deposit into escrow the
following items:
               (1) immediately available funds necessary to close this
transaction, including, without limitation, the Purchase Price (less the Deposit
and interest thereon net of investment fees, if any) and funds sufficient to pay
Buyer’s closing costs and share of prorations hereunder; and
               (2) four (4) duly executed counterparts of the Assignment of
Contracts.
          (c) Seller and Buyer shall each execute and deposit a closing
statement, such transfer tax declarations and such other instruments as are
reasonably required by the Title Company or otherwise required to close the
escrow and consummate the acquisition of the Property in accordance with the
terms hereof. Seller and Buyer hereby designate Title Company as the “Reporting
Person” for the transaction pursuant to Section 6045(e) of the Code and the
regulations promulgated thereunder and agree to execute such documentation as is
reasonably necessary to effectuate such designation.
          (d) Within five (5) business days after the Closing Date, Seller shall
deliver or make available at the Property to Buyer: originals of any items which
Seller was required to furnish Buyer copies of or make available at the Property
pursuant to Sections 2.1(b) or (e) above, to the extent in Seller’s possession.
Seller shall deliver possession of the Property to Buyer as required hereunder
and shall deliver to Buyer or make available at the Property a set of keys to
the Property on the Closing Date.

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     Section 8.4 Intentionally Omitted.
     Section 8.5 Prorations.
          (a) Real property taxes and assessments; water, sewer and utility
charges; amounts payable under any Service Contracts or other agreements or
documents assumed by Buyer in accordance with the terms and conditions of
Section 7.2; annual permits and/or inspection fees (calculated on the basis of
the period covered); and any other expenses of the maintenance of the Property
(including, without limitation, expenses prepaid by Seller and expenses already
paid by Seller but which are being amortized over time by Seller and with
respect to which Seller shall receive a credit at Closing in the amount of the
prepaid or unamortized portion thereof), shall all be prorated as of 11:59 p.m.
on the day immediately prior to Closing (i.e., Buyer is entitled to the income
and responsible for the expenses of the day of Closing), on the basis of a
365-day year.
     Seller shall receive credits at Closing for the amount of any utility or
other deposits with respect to the Property if the utility companies agree, in
writing, that such deposits shall be transferred to Buyer for its account. Buyer
shall cause all utilities to be transferred into Buyer’s name and account at the
time of Closing. To the extent Seller does not receive a credit for a deposit,
Seller hereby retains the rights to such deposit and to pursue such amounts.
     Seller and Buyer hereby agree that if any of the aforesaid prorations and
credits cannot be calculated accurately on the Closing Date, then the same shall
be calculated as soon as reasonably practicable after the Closing Date, and
either party owing the other party a sum of money based on such subsequent
proration(s) or credits shall pay said sum to the other party within thirty (30)
days thereafter. Any amounts not paid within such thirty (30) day period shall
bear interest from the date actually received by the payor until paid at the
greater of (i) the rate of ten percent (10%) per annum or (ii) the prime rate
(or base rate) reported from time to time in the “Money Rates” column or section
of The Wall Street Journal as being the base rate on corporate loans at larger
United States money center commercial banks plus two (2) percent.
     Seller retains the right to pursue and control any pending tax appeals
applicable to periods prior to the tax year of the Closing, and Buyer shall
cooperate with Seller with respect to such appeals at no material cost or
expense to Buyer. Any refund of real property taxes or special assessments
relating to the period prior to Closing shall be for the account of Seller. To
the extent Buyer receives any such refund, Buyer shall remit such refund to
Seller within five (5) business days of receipt thereof. Notwithstanding the
foregoing, Buyer and Seller shall reasonably and jointly pursue and control any
tax appeals applicable to the current tax year, and the parties shall prorate
all costs incurred and recovered in connection therewith based on the portion of
the proceeds of any tax appeal recovery allocable to each party’s respective
period of ownership of the Property.
          (b) Except as provided in Article IV, Section 6.2 and Section 9.5 of
this Agreement, (i) Buyer shall be responsible for all survey costs, the cost of
any ALTA policy, title endorsements and other title fees, and all escrow or
closing fees, (ii) Seller will be responsible for the County documentary
transfer tax, and (iii) all other costs and expenses not listed in subclauses
(i) and (ii) above, shall be paid by Buyer and Seller at Closing in accordance
with

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prevailing local custom in the city, county and state in which the Property is
located. The parties will execute and deliver any required transfer or other
similar tax declarations to the appropriate governmental entity at Closing.
          (c) The provisions of this Section 8.5 shall survive the Closing.
ARTICLE IX
MISCELLANEOUS
     Section 9.1 Notices.
     Any notices required or permitted to be given hereunder shall be given in
writing and shall be delivered (a) in person, (b) by certified mail, postage
prepaid, return receipt requested, (c) by facsimile with confirmation of receipt
or email (subject to the conditions set forth below in this Section 9.1 relating
to email transmissions), or (d) by a commercial overnight courier that
guarantees next day delivery and provides a receipt, and such notices shall be
addressed as follows:

         
 
  To Buyer:   TC Fund Property Acquisitions, Inc.
 
      c/o Trammell Crow Company
 
      Four Embarcadero
 
      Suite 790
 
      San Francisco, California 94111
 
      Attention: Lindsay Gordon
 
      Facsimile No.: (415) 981-8131
 
      Telephone: (415) 490-0304
 
      E-mail: lgordon@trammellcrow.com
 
       
 
  with a copy to:   Baker & Hostetler LLP
 
      12100 Wilshire Boulevard, 15th Floor
 
      Los Angeles, California 90025
 
      Attention: Bruce R. Greene, Esq.
 
      Facsimile No.: (310) 820-8859
 
      Telephone: (310) 820-8800
 
      E-mail: bgreene@bakerlaw.com
 
       
 
  To Seller:   ESS Technology, Inc.
 
      48401 Fremont Boulevard
 
      Fremont, California
 
      Attention: John Marsh, Chief Financial Officer
 
      Facsimile No.: (510) 492-1511
 
      Telephone: (510) 492-1173
 
      E-mail: john.marsh@esstech.com

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  with a copy to:   Orrick, Herrington & Sutcliffe LLP
 
      405 Howard Street
 
      San Francisco, CA 94105-2669
 
      Attention: Gary Louie
 
      Facsimile No.: (415) 773-5759
 
      Telephone: (415) 773-5586
 
      E-mail: garylouie@orrick.com
 
       
 
      Orrick, Herrington & Sutcliffe LLP
 
      1000 Marsh Road
 
      Menlo Park, CA 94025-1015
 
      Attention: Lowell D. Ness
 
      Facsimile No.: (650) 614-7401
 
      Telephone: (650) 614-7455
 
      E-mail: lness@orrick.com

or to such other address as either party may from time to time specify in
writing to the other party. Any notice or other communication sent as
hereinabove provided shall be deemed effectively given (a) on the date of
delivery, if delivered in person; (b) on the date mailed if sent by certified
mail, postage prepaid, return receipt requested or by a commercial overnight
courier; or (c) on the date of transmission, if sent by facsimile with
confirmation of receipt or if sent by email (so long as a hard copy of such
notice sent by email is also sent by a commercial overnight delivery courier for
next business day delivery or is delivered in person the next business day),
provided that the facsimile and email transmissions are made on a business day
and prior to 5:00 p.m. local time of the recipient, and otherwise on the next
business day. Such notices shall be deemed received (a) on the date of delivery,
if delivered by hand or overnight express delivery service; (b) on the date
indicated on the return receipt if mailed; or (c) on the date of transmission,
if sent by facsimile or email (so long as a hard copy of such notice sent by
email is received the next business day by overnight mail or hand delivery),
provided that the facsimile and email transmissions are received on a business
day and prior to 5:00 p.m. local time of the recipient, and otherwise on the
next business day). If any notice mailed is properly addressed but returned for
any reason, such notice shall be deemed to be effective notice and to be given
on the date of mailing. Any notice sent by the attorney representing a party,
shall qualify as notice under this Agreement.
     Section 9.2 Entire Agreement.
     This Agreement, together with the Exhibits and schedules hereto, contains
all representations, warranties and covenants made by Buyer and Seller and
constitutes the entire understanding between the parties hereto with respect to
the subject matter hereof. Any prior correspondence, memoranda or agreements are
replaced in total by this Agreement together with the Exhibits and schedules
hereto.

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     Section 9.3 Entry and Indemnity.
     In connection with any entry by Buyer, or its agents, employees or
contractors onto the Property, Buyer shall give Seller reasonable advance notice
of such entry and shall conduct such entry and any inspections in connection
therewith (a) during normal business hours, (b) so as to minimize, to the
greatest extent possible, interference with Seller’s business (c) in compliance
with all applicable laws, and (d) otherwise in a manner reasonably acceptable to
Seller. Without limiting the foregoing, prior to any entry to perform any
on-site invasive testing, including but not limited to any air sampling,
borings, drillings or other samplings, Buyer shall give Seller written notice
thereof, including the identity of the company or persons who will perform such
testing and the proposed scope and methodology of the testing. Seller shall
approve or disapprove, in Seller’s sole discretion, the proposed testing within
two (2) business days after receipt of such notice. If Seller fails to respond
within such two (2) business day period, Seller shall be deemed to have
disapproved the proposed testing. If Buyer or its agents, employees or
contractors take any sample from the Property in connection with any such
approved testing, Buyer shall provide to Seller a portion of such sample being
tested to allow Seller, if it so chooses, to perform its own testing. Buyer
shall permit Seller or its representative to be present to observe any testing
or other inspection or due diligence review performed on or at the Property.
Upon the request of Seller, Buyer shall promptly deliver to Seller copies of any
reports relating to any testing or other inspection of the Property performed by
Buyer or its agents, representatives, employees, contractors or consultants.
Notwithstanding anything to the contrary contained herein, Buyer shall not
contact any governmental authority (other than making routine requests for
information for a Phase I report or a zoning report) without first obtaining the
prior written consent of Seller thereto in Seller’s sole discretion, and Seller,
at Seller’s election, shall be entitled to have a representative participate in
any telephone or other contact made by Buyer to a governmental authority and
present at any meeting by Buyer with a governmental authority. Buyer shall
maintain, and shall assure that its contractors maintain, public liability and
property damage insurance in amounts (but in no event less than One Million
Dollars ($1,000,000) with respect to any liability insurance) and in form and
substance adequate to insure against all liability of Buyer and its agents,
employees or contractors, arising out of any entry or inspections of the
Property pursuant to the provisions hereof, and Buyer shall provide Seller with
evidence of such insurance coverage prior to any entry on the Property. Buyer
shall indemnify and hold Seller harmless from and against any costs, damages,
liabilities, losses, expenses, liens or claims (including, without limitation,
court costs and reasonable attorneys’ fees and disbursements) arising out of or
relating to any entry on the Property by Buyer, its agents, employees or
contractors in the course of performing the inspections, testings or inquiries
provided for in this Agreement, including, without limitation, any release of
Hazardous Materials or any damage to the Property; provided that Buyer shall not
be liable to Seller solely as a result of the discovery by Buyer of a
pre-existing condition on the Property to the extent the activities of Buyer,
its agents, representatives, employees, contractors or consultants do not
exacerbate the condition. The provisions of this Section 9.3 shall be in
addition to any access or indemnity agreement previously executed by Buyer in
connection with the Property; provided that in the event of any inconsistency
between this Section 9.3 and such other agreement, the provisions of this
Section 9.3 shall govern. The foregoing indemnity shall survive beyond the
Closing, or, if the sale is not consummated, beyond the termination of this
Agreement. Buyer’s right of entry, as provided in this Section 9.3, shall
continue up through the date of Closing.

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     Section 9.4 Time.
     Time is of the essence in the performance of each of the parties’
respective obligations contained herein. If the time period by which any right,
option or election provided under this Agreement must be exercised, or by which
any act required hereunder must be performed, or by which the Closing must be
held, expires on a Saturday, Sunday or legal or bank holiday, then such time
period shall be automatically extended through the close of business on the next
regularly scheduled business day.
     Section 9.5 Attorneys’ Fees.
     If either party hereto fails to perform any of its obligations under this
Agreement or if any dispute arises between the parties hereto concerning the
meaning or interpretation of any provision of this Agreement, whether prior to
or after Closing, or if any party defaults in payment of its post-Closing
financial obligations under this Agreement, then the defaulting party or the
party not prevailing in such dispute, as the case may be, shall pay any and all
costs and expenses incurred by the other party on account of such default and/or
in enforcing or establishing its rights hereunder, including, without
limitation, court costs and reasonable attorneys’ fees and disbursements.
     Section 9.6 Assignment.
     Buyer’s rights and obligations hereunder shall not be assignable without
the prior written consent of Seller in Seller’s sole discretion. Notwithstanding
the foregoing, Buyer shall have the right, without the necessity of obtaining
Seller’s consent but with prior written notice to Seller, to assign its right,
title and interest in and to this Agreement to a related entity in which Buyer
has a direct or indirect ownership interest at any time before the Closing Date.
Buyer shall in no event be released from any of its obligations or liabilities
hereunder in connection with any assignment. Without limiting and
notwithstanding the above, in no event shall Buyer have the right to assign its
rights or obligations hereunder to any party which could not make the
representation and warranty contained in subsection 3.5(e) above, and in
connection with any assignment pursuant to the terms hereof, the assignee shall
reconfirm in a written instrument acceptable to Seller and delivered to Seller
prior to the effective date of the assignment said representation and warranty
as applied to the assignee and that all other terms and conditions of this
Agreement shall apply to such assignee. Subject to the provisions of this
Section, this Agreement shall inure to the benefit of and be binding upon the
parties hereto and their respective successors and assigns.
     Section 9.7 Counterparts.
     This Agreement may be executed in two or more counterparts, each of which
shall be deemed an original, but all of which taken together shall constitute
one and the same instrument.
     Section 9.8 Governing Law.
     This Agreement shall be governed by and construed in accordance with the
laws of the State in which the Real Property is located.

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     Section 9.9 Confidentiality and Return of Documents.
     Buyer and Seller shall each maintain as confidential any and all material
obtained about the other or, in the case of Buyer, about the Property, this
Agreement or the transactions contemplated hereby, and shall not disclose such
information to any third party. Except as may be required by law, Buyer will not
divulge any such information to other persons or entities including, without
limitation, appraisers, real estate brokers, or competitors of Seller.
Notwithstanding the foregoing, Buyer shall have the right to disclose
information with respect to the Property to its officers, directors, employees,
attorneys, accountants, environmental auditors, engineers, potential lenders,
and permitted assignees under this Agreement and other consultants to the extent
necessary for Buyer to evaluate its acquisition of the Property provided that
all such persons are told that such information is confidential and agree (in
writing for any third party engineers, environmental auditors or other
consultants) to keep such information confidential. If Buyer acquires the
Property from Seller, Buyer or Seller shall have the right, subsequent to the
Closing of such acquisition, to publicize the transaction in whatever manner it
deems appropriate. Notwithstanding anything to the contrary contained herein,
Buyer acknowledges that Seller may publicize the transaction and its terms in
connection with applicable laws relating to disclosure and reporting
requirements. The provisions of this paragraph shall survive the Closing or any
termination of this Agreement. In the event the transaction contemplated by this
Agreement does not close as provided herein, upon the request of Seller, Buyer
shall promptly return to Seller all Due Diligence Materials and other documents
and copies obtained by Buyer in connection with the purchase of the Property
hereunder.
     Section 9.10 Interpretation of Agreement.
     The article, section and other headings of this Agreement are for
convenience of reference only and shall not be construed to affect the meaning
of any provision contained herein. Where the context so requires, the use of the
singular shall include the plural and vice versa and the use of the masculine
shall include the feminine and the neuter. The term “person” shall include any
individual, partnership, joint venture, corporation, trust, unincorporated
association, any other entity and any government or any department or agency
thereof, whether acting in an individual, fiduciary or other capacity.
     Section 9.11 Intentionally Deleted.
     Section 9.12 Amendments.
     This Agreement may be amended or modified only by a written instrument
signed by Buyer and Seller.
     Section 9.13 No Recording.
     Neither this Agreement or any memorandum or short form thereof may be
recorded by Buyer.

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     Section 9.14 Drafts Not an Offer to Enter Into a Legally Binding Contract.
     The parties hereto agree that the submission of a draft of this Agreement
by one party to another is not intended by either party to be an offer to enter
into a legally binding contract with respect to the purchase and sale of the
Property. The parties shall be legally bound with respect to the purchase and
sale of the Property pursuant to the terms of this Agreement only if and when
the parties have been able to negotiate all of the terms and provisions of this
Agreement in a manner acceptable to each of the parties in their respective sole
discretion, and both Seller and Buyer have fully executed and delivered to each
other a counterpart of this Agreement (or a copy by facsimile or email
transmission) (the “Effective Date”).
     Section 9.15 No Partnership.
     The relationship of the parties hereto is solely that of Seller and Buyer
with respect to the Property and no joint venture or other partnership exists
between the parties hereto. Neither party has any fiduciary relationship
hereunder to the other.
     Section 9.16 No Third Party Beneficiary.
     The provisions of this Agreement are not intended to benefit any third
parties.
     Section 9.17 Seller’s Conditions Precedent.
     Seller’s obligation to sell the Property to Buyer shall be conditioned on
the approval of Seller’s board of directors in its sole discretion of this
Agreement and the transactions contemplated hereby on or before a date that is
ten (10) days after the Effective Date. If the board of directors does not
approve this Agreement and the transactions contemplated hereby on or before the
date provided above, then this Agreement shall terminate, the Deposit shall be
immediately returned to Buyer and neither party shall have any further rights or
obligations hereunder except as provided in Sections 6.1, 9.3 and 9.9. Seller
shall notify Buyer in writing as to whether the investment committee has
approved or disapproved this Agreement and the transactions contemplated hereby,
such date being referred to herein as the “Seller Board Approval Date”.
     Section 9.18 Limitation on Liability.
     Notwithstanding anything to the contrary contained herein: (a) the maximum
aggregate liability of Seller, and the maximum aggregate amount which may be
awarded to and collected by Buyer (including, without limitation, for any breach
of any representation, warranty and/or covenant by Seller) in connection with
the Property and/or the sale thereof to Buyer including, without limitation,
under this Agreement or any documents executed pursuant hereto or in connection
herewith, including, without limitation, the Deed and the Assignment of
Contracts (collectively, the “Other Documents”, shall under no circumstances
whatsoever exceed One Million Five Hundred Thousand Dollars ($1,500,000); and
(b) no claim by Buyer alleging a breach by Seller of any representation,
warranty and/or covenant of Seller contained herein or in any of the Other
Documents may be made, and Seller shall not be liable for any judgment in any
action based upon any such claim, unless and until such claim, either alone or
together with any other claims by Buyer alleging a breach by Seller of any such
representation, warranty and/or

25

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covenant is for an aggregate amount in excess of Twenty-Five Thousand Dollars
($25,000) (the “Floor Amount”), in which event Seller’s liability respecting any
final judgment concerning such claim or claims shall be for the entire amount
thereof, subject to the limitation set forth in clause (a) above; provided,
however, that if any such final judgment is for an amount that is less than or
equal to the Floor Amount, then Seller shall have no liability with respect
thereto. Notwithstanding anything to the contrary contained in this Agreement,
the obligations of Seller under this Agreement and under all of the Other
Documents are intended to be binding only on Seller, and will not be personally
binding upon, nor shall any resort be had to, the private properties of any
Seller Related Parties.
     Section 9.19 Lease-Back Agreement.
     During the Contingency Period, Seller and Buyer shall negotiate in good
faith towards a commercially reasonable lease on terms and conditions mutually
acceptable to both parties (the “Lease”) in which Seller will lease from Buyer
(i) approximately 46,800 square feet on the ground floor of the 48401 Fremont
Boulevard building (the “Seller Lease Back Space”) and (ii) approximately 8,000
square feet on the second floor of the 48461 Fremont Boulevard building (the
“SIS Space”) . The Lease will be a triple net lease, the term of which shall be
for a period of six (6) months with respect to the Seller Lease Back Space and a
period of one (1) month with respect to the SIS Space, commencing immediately
upon the close of escrow. Base rent will be $0.80 per square foot, and Seller,
as tenant, shall be responsible for its pro-rata share of operating expenses
(including a management fee not to exceed 3% of the base rent). The Lease will
be in the standard current AIREA form for multi-tenant, net commercial leases,
attached hereto as Exhibit F, with no changes to the attached form except as
Buyer and Seller may mutually agree.
     Section 9.20 Survival.
     Except as expressly set forth to the contrary herein, no representations,
warranties, covenants or agreements of Seller contained herein shall survive the
Closing.
     Section 9.21 Financing.
     The obtaining of financing by Buyer is not a condition precedent to the
obligation of Buyer to purchase the Property. However, if Buyer elects to obtain
such financing, Seller agrees to reasonably cooperate with Buyer and Buyer’s
lender in all reasonable respects, provided that there is no out-of-pocket
expense to Seller, and that the Closing is not delayed. Without limiting the
generality of the foregoing, Seller acknowledges that such cooperation may
include (i) allowing additional inspections and investigations of the Project by
such lender’s representatives, so long as lender’s representatives comply with
the terms, conditions and obligations set forth in Section 9.3 of this Agreement
to which Buyer is subject, and (ii) providing such lender with a customary
estoppel certificate with respect to the Lease and/or subordination,
non-disturbance and attornment agreement with respect to the Lease that are
reasonably acceptable to Seller.
     Section 9.22 Survival of Article IX.
     The provisions of this Article IX shall survive the Closing.

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[signature page follows]

27

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     The parties hereto have executed this Agreement as of the date set forth in
the first paragraph of this Agreement.

                      Seller:   ESS TECHNOLOGY, INC.,
a California corporation    
 
               
 
      By:   /s/Robert. L. Blair
 
     
 
      Its:   CEO
 
     
 
      By:        
 
         
 
   
 
      Its:        
 
         
 
   
 
                    Buyer:   TC FUND PROPERTY ACQUISITIONS, INC.,             a
Delaware corporation    
 
                 
 
      By:   /s/Nathan Bialkowski
 
     
 
      Its:   Vice President
 
     
 
      By:        
 
         
 
   
 
      Its:        
 
         
 
   

28

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LIST OF EXHIBITS AND SCHEDULES
Exhibits
Exhibit A      Real Property Description
Exhibit B      Form of Promissory Note
Exhibit C      Deed
Exhibit D      Assignment of Contracts
Exhibit E      List of Service Contracts
Exhibit F      AIREA Lease Form
Schedules
Schedule 1      Disclosure Items
Schedule 2      Seller Delivery Materials

 

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Exhibit A
Real Property Description

 

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Exhibit “A”
Legal Description
Real property in the City of Fremont, County of Alameda, State of California,
described as follows:
BEING PORTIONS OF THOSE CERTAIN PARCELS OF LAND DESCRIBED AS LOTS 1 AND 2 IN THE
LOT LINE ADJUSTMENT NO. 99-2 RECORDED FEBRUARY 10, 1999 AS SERIES NUMBER
99-062151, ALAMEDA COUNTY RECORDS, MORE PARTICULARLY DESCRIBED AS FOLLOWS:
COMMENCING AT THE NORTHERLY CORNER OF SAID LOT 1, SAID CORNER BEING A POINT ON
THE SOUTHWESTERLY LINE OF FREMONT BOULEVARD AS SAID BOULEVARD IS SHOWN ON THE
MAP OF TRACT 5187 FILED JUNE 11, 1984 IN BOOK 145 OF MAPS AT PAGES 6 THROUGH 16,
ALAMEDA COUNTY RECORDS;
THENCE ALONG SAID SOUTHWESTERLY LINE, SOUTHEASTERLY ALONG THE ARC OF AN 844.00
FOOT RADIUS CURVE TO THE LEFT, THE CENTER OF WHICH CURVE BEARS NORTH 39°56’49”
EAST, THROUGH A CENTRAL ANGLE OF 1°46’16”, AN ARC DISTANCE OF 26.09 FEET;
THENCE CONTINUING ALONG SAID SOUTHWESTERLY LINE, SOUTH 51°49’27” EAST, 318.83
FEET TO THE TRUE POINT OF BEGINNING OF THIS DESCRIPTION;
THENCE LEAVING SAID LINE, SOUTH 38°10’33” WEST, 307.51 FEET;
THENCE NORTH 51°49’27” WEST, 76.00 FEET;
THENCE SOUTH 38°10’33” WEST, 310.38 FEET TO THE SOUTHWESTERLY LINE OF SAID LOT
1;
THENCE ALONG SAID SOUTHWESTERLY LINE OF LOT 1 AND ALONG THE SOUTHWESTERLY LINE
OF SAID LOT 2, THE FOLLOWING EIGHT COURSES:
1.) SOUTH 45°00’00” EAST, 1.37 FEET;
2.) SOUTH 48°21’59” EAST, 64.75 FEET;
3.) SOUTH 57°59’41” EAST, 102.61 FEET;
4.) SOUTH 71°57’57” EAST, 228.03 FEET;
5.) SOUTH 63°26’06” EAST, 92.12 FEET;
6.) SOUTH 47°43’35” EAST, 63.15 FEET;
7.) SOUTH 31°36’27” EAST, 68.20 FEET; AND
8.) SOUTH 24°34’02” EAST, 198.07 FEET TO THE SOUTHERLY CORNER OF SAID LOT 2;
THENCE ALONG THE SOUTHEASTERLY LINE OF SAID LOT 2, NORTH 67°44’40” EAST, 614.20
FEET TO THE EASTERLY CORNER OF SAID LOT 2, SAID CORNER BEING A POINT ON THE
AFOREMENTIONED SOUTHWESTERLY LINE OF FREMONT BOULEVARD;
THENCE ALONG SAID SOUTHWESTERLY LINE, THE FOLLOWING TWO COURSES;
1.) NORTHWESTERLY ALONG THE ARC OF A 756.00 FOOT RADIUS, NON-TANGENT CURVE TO
THE LEFT, THE CENTER OF WHICH CURVE BEARS SOUTH 67°44’40” WEST, THROUGH A
CENTRAL ANGLE OF 29°34’07”, AN ARC DISTANCE OF 390.15 FEET; AND

 

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2.) NORTH 51°49’27” WEST, 629.42 FEET TO THE TRUE POINT OF BEGINNING.
APN: 519-1694-015-04

A-1

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Exhibit B
Form of Promissory Note

B-1

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PROMISSORY NOTE

      $200,000   October___,2007          

     FOR VALUE RECEIVED, the undersigned, TC FUND PROPERTY ACQUISITIONS, INC., a
Delaware corporation (“Maker”) whose address is c/o Trammell Crow Company, 2001
Ross Avenue, Suite 3400, Dallas, Texas 75201, Attention: J.D. Dell, Esq.,
promises to pay to the order of ESS TECHNOLOGY, INC., a California corporation
(“Payee”), on demand, the principal sum of Two Hundred Thousand Dollars
($200,000). This Note shall not bear interest until five days (5) days after
written demand is made at the address set forth above, and if this Note is not
paid within such five (5) day period, it will bear interest from that date at
the rate of ten percent (10%) per annum. Interest shall be computed on the basis
of a three hundred sixty-five (365) day year and the actual number of days
elapsed.
     Payable in lawful money of the United States. If action is instituted on
this Note, Maker agrees to pay Payee’s reasonable attorneys’ fees and costs
incurred in connection with the collection hereof.
     This Note constitutes the “Promissory Note” described in that certain
Agreement of Purchase and Sale dated October 26, 2007 executed by Maker and
Payee regarding certain real property situated in Fremont, California, as more
particularly described therein (the “Agreement”).
     Maker and all guarantors and endorsers of this Note hereby severally waive
presentment, demand, protest, notice of dishonor and all other notices, except
as expressly provided herein or in the Agreement.
     The holder hereof shall not be deemed, by any act or omission, to have
waived any of its rights or remedies hereunder unless such waiver is in writing
and signed by such holder and then only to the extent specifically set forth in
such writing. A waiver with reference to one event shall not be construed as
continuing or as a bar to or waiver of any right or remedy as to a subsequent
event. No delay or omission of the holder hereof to exercise any right, whether
before or after a default hereunder, shall impair any such right or shall be
construed to be a waiver of any right or default, and the acceptance at any time
by the holder hereof of any past-due amount shall not be deemed to be a waiver
of the right to require prompt payment when due of any other amounts then or
thereafter due and payable.
     Nothing contained in this Note shall be deemed to require the payment of
interest or other charges by the undersigned in excess of the amount which the
holder hereof may lawfully charge under the applicable usury laws. In the event
that the holder hereof shall collect monies which are deemed to constitute
interest which would increase the effective interest rate to a rate in excess of
that permitted to be charged by applicable law, all such sums deemed to
constitute interest in excess of the legal rate shall, upon such determination,
at the option of the holder hereof, be returned to the undersigned or credited
against the principal balance of this Note then outstanding.

 

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     Time is of the essence hereof. Upon any default hereunder, the holder
hereof may exercise all rights and remedies provided for herein and in the
Agreement and by law, including, but not limited to, the right to immediate
payment in full of this Note.
     The remedies of the holder hereof as provided herein or in the Agreement,
or any one or more of them, or in law or in equity, shall be cumulative and
concurrent, and may be pursued singularly, successively, or together at the sole
discretion of the holder hereof, and may be exercised as often as occasion
therefor shall occur; and the failure to exercise any such right or remedy shall
in no event be construed as a waiver or a release thereof.
     This Note shall be construed in accordance with and governed by the laws of
the State of California.

                  TC FUND PROPERTY ACQUISITIONS, INC.,
a Delaware corporation    
 
           
 
  By        
 
           
 
  Its        
 
           

 

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Exhibit C
Form of Deed

                RECORDING REQUESTED BY AND
WHEN RECORDED RETURN IT TO:      
 
                         
 
                         
 
                         
Attention:
             
 
             
 
              MAIL ALL TAX STATEMENTS TO:      
 
                         
 
                         
 
                         
Attention:
             
 
             
 
                     
 
              APNs:                                                           
SPACE ABOVE THIS LINE FOR RECORDER’S USE

The undersigned Grantor declares:
Documentary Transfer Tax not shown
Pursuant to Section 11932 of the
Revenue and Taxation Code, as amended.
GRANT DEED
      FOR VALUABLE CONSIDERATION, receipt of which is hereby acknowledged,
                                                                , a           
                                                      (“Grantor”), hereby grants
to                                                                 , a       
                                                        (“Grantee”), the real
property and all improvements thereon located in the County of      
               , State of California, described on Exhibit A attached hereto and
made a part hereof (the “Property”), subject to the exceptions to title
described on Exhibit B attached hereto and made a part hereof.
[Grantor signature page follows]

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Executed as of this ___ day of                                         , 2007.
Grantor:                      [ADD APPROPRIATE SIG BLOCK]

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          STATE OF CALIFORNIA    ) 
 
       )       ss.
COUNTY OF
       ) 
 
       

      On                                            ___, 2007, before me,
                                          , a notary public for the State of
California, personally appeared                                            ,
personally known to me (or proved to me on the basis of satisfactory evidence)
to be the person whose name is subscribed to the within instrument and
acknowledged to me that he/she executed the same in his/her authorized capacity,
and that by his/her signature on the instrument the person, or the entity on
behalf of which the person acted, executed the instrument.
     Witness my hand and official seal.

         
 
       
 
  Signature of the Notary    

[SEAL]

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Exhibit A
Real Property Legal Description
[See Attached]

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Exhibit B
Exceptions to Title
     (1) Interests of occupant in possession of the Property pursuant to that
certain Transition Services Agreement dated January 1, 2007, by and between such
occupant and Grantor;
     (2) Matters created by or with the written consent of Grantee;
     (3) Non-delinquent liens for real estate taxes and assessments; and
     (4) Any matters affecting the Property and shown on or referred to on that
certain preliminary title report issued by LandAmerica Commercial Services dated
                    , 2007, or any updates thereto, and any other exceptions to
title to the Property disclosed by the public records or which would be
disclosed by an inspection and/or survey of the Property.

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DO NOT RECORD
                                         ___, 2007
                                         County Recorder
     Re:       Request That Statement Of Documentary Transfer Tax Not Be
Recorded
Dear Sir or Madam:
     Request is hereby made in accordance with Section 11932 of the California
Revenue and Taxation Code that this statement of tax due not be recorded with
the attached deed but be affixed to the deed after recordation and before return
as directed on the deed.
     The attached deed names                                             
                   , a                                            
                    ,as Grantor, and                               
                       , a                                                      
          , as Grantee.
     The property being transferred and described in the attached deed is
located in the County of                                         , State of
California.
     The amount of Documentary Transfer Tax due on the attached deed is $      
                                     , computed on full value of the property
conveyed.
[Grantor signature page follows]

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     Grantor:                                          [ADD APPROPRIATE SIG
BLOCK]

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Exhibit D
Assignment of Service Contracts,
Warranties and Other Intangible Property
     This Assignment of Service Contracts, Warranties and Other Intangible
Property (this “Assignment”) is made and entered into                      ,
20     , by and between                                            (“Assignor”),
                                                                   
                 (“Assignee”).
     For good and valuable consideration paid by Assignee to Assignor, the
receipt and sufficiency of which are hereby acknowledged, Assignor does hereby
assign, transfer, set over and deliver unto Assignee all of Assignor’s right,
title, and interest in and to the following (collectively, the “Assigned
Items”): (i) those certain service contracts (the “Service Contracts”) listed on
Exhibit A, if any, attached hereto and made a part hereof for all purposes, and
(ii) to the extent assignable, those certain warranties held by Assignor (the
“Warranties”) listed on Exhibit B, if any, attached hereto and made a part
hereof for all purposes, and (iv) all zoning, use, occupancy and operating
permits, and other permits, licenses, approvals and certificates, maps, plans,
specifications, and all other Intangible Personal Property (as defined in the
Agreement) owned by Assignor and used exclusively in the use or operation of the
Real Property and Personal Property (each as defined in the Agreement),
including, without limitation, any trade names used exclusively in connection
with the Real Property (but excluding the names “ESS Technology” and any
derivatives thereof) and any utility contracts or other agreements or rights
relating to the use and operation of the Real Property and Personal Property but
excluding the Transition Services Agreement (as defined in the Agreement)
(collectively, the “Other Intangible Property”). Notwithstanding anything to the
contrary contained herein, there shall be excluded from the assignment of any
rights of Assignor under any Service Contracts, Warranties or Other Intangible
Property any rights of Assignor against third parties, including, without
limitation, tenants, with respect to the period prior to the date hereof.
     This Assignment is made subject, subordinate and inferior to the easements,
covenants and other matters and exceptions set forth on Exhibit C, if any,
attached hereto and made a part hereof for all purposes.
      Assignee acknowledges and agrees, by its acceptance hereof, that, except
as expressly provided in, and subject to the limitations contained in, that
certain Agreement of Purchase and Sale, dated as of October___, 2007, by and
between Assignor and Assignee (the “Agreement”), the assigned items are conveyed
“as is, where is” and in their present condition with all faults, and that
except as set forth in the Agreement, assignor has not made, does not make and
specifically disclaims any representations, warranties, promises, covenants,
agreements or guaranties of any kind or character whatsoever, whether express or
implied, oral or written, past, present or future, of, as to, concerning or with
respect to the nature, quality or condition of the assigned items, the income to
be derived therefrom, or the enforceability, merchantability or fitness for any
particular purpose of the assigned items.

D-1

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     Except as otherwise expressly provided in Article VII of the Agreement, by
accepting this Assignment and by its execution hereof, Assignee assumes the
payment and performance of, and agrees to pay, perform and discharge, all the
debts, duties and obligations to be paid, performed or discharged from and after
the Closing Date (as defined in the Agreement) by the owner under the Service
Contracts, the Warranties and/or the Other Intangible Property. Assignee agrees
to indemnify, hold harmless and defend Assignor from and against any and all
claims, losses, liabilities, damages, costs and expenses (including, without
limitation, court costs and reasonable attorneys’ fees and disbursements)
resulting by reason of the failure of Assignee to pay, perform or discharge any
of the debts, duties or obligations assumed or agreed to be assumed by Assignee
hereunder arising out of or relating to, directly or indirectly, in whole or in
part, the Assigned Items, from and after the Closing Date. Assignor agrees to
indemnify, hold harmless and defend Assignee from and against any and all
claims, losses, liabilities, damages, costs and expenses (including, without
limitation, court costs and reasonable attorneys’ fees and disbursements)
resulting by reason of the failure of Assignor to pay, perform or discharge any
of the debts, duties or obligations hereunder arising out of or relating to,
directly or indirectly, in whole or in part, the Assigned Items, prior to the
Closing Date.
     All of the covenants, terms and conditions set forth herein shall be
binding upon and shall inure to the benefit of the parties hereto and their
respective successors and assigns.
     This Agreement shall be governed by and construed in accordance with the
laws of the State of California.
[signature page follows]

D-2

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     IN WITNESS WHEREOF, Assignor and Assignee have caused this Assignment to be
executed on the day and year first above written.

               
 
  Assignor:                            ,
 
         
 
      a    
 
           
 
           
 
      By:    
 
           
 
      Its:      
 
        By:

 
 
        Its:

   
 
  Assignee:         ,
 
         
 
      a    
 
           
 
           
 
      By:    
 
           
 
      Its:    
 
             
 
        By:

 
 
        Its:

D-3

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Exhibit E
List of Service Contracts

E-1

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Exhibit F
AIREA Lease Form

F-1

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Schedule 1
Disclosure Items
     Natural hazards described in the following California code sections (the
“Natural Hazard Laws”) may affect the Property: (A) Govt. Code Section 8589.3
(Special Flood Hazard Area); (B) Govt. Code Section 8589.4 (Inundation Area);
(C) Govt. Code Section 51183.5 (Fire Hazard Severity Zone); (D) Public Resource
Code Section 2621.9 (Earthquake Fault Zone); (E) Public Resource Code
Section 2694 (Seismic Hazard Zone); and (F) Public Resource Code Section 4136
(Wildland Area). Seller’s Broker shall execute and deliver to Buyer a Natural
Hazards Disclosure Statement with respect to the foregoing matters (the “Natural
Hazards Disclosure Statement”). Buyer acknowledges and agrees that Buyer will
independently evaluate and investigate whether any or all of such Natural
Hazards affect the Property, and Seller shall have no liabilities or obligations
with respect thereto. Prior to the expiration of the Contingency Period, Buyer
shall execute and deliver to Seller the Natural Hazards Disclosure Statement.
BUYER ACKNOWLEDGES AND REPRESENTS THAT BUYER HAS EXTENSIVE EXPERIENCE ACQUIRING
AND CONDUCTING DUE DILIGENCE REGARDING COMMERCIAL PROPERTIES. THIS PROVISION IS
AN ESSENTIAL ASPECT OF THE BARGAIN BETWEEN THE PARTIES.
     Pursuant to California Health & Safety Code Section 25359.7, which requires
sellers of commercial real estate to disclose the known existence of hazardous
substances that have come to be located on or beneath any real property being
sold or transferred, Seller hereby discloses that the Property may contain
Hazardous Materials, including, without limitation, asbestos, as described or
referred to in the Environmental Reports. Buyer acknowledges and agrees that, in
providing or making available such Environmental Reports, Seller has satisfied
its obligations of disclosure, to the extent required by California Health &
Safety Code Section 25359.7, and that no representation is being made or given
by Seller regarding the presence or absence of any environmental matters or
conditions on or affecting the Property.
     Additional Disclosure Items
     1. The adjacent property is a protected habitat for a mouse.
     2. Approximately ten (10) years ago, there was a burrowing owl on the
Property. Seller and the California Fish and Game Commission entered into a
mitigation agreement at that time and the owl was removed from the Property.

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Schedule 2
Seller Delivery Materials

A.   Property Information

  •   Aerials     •   Plat Maps

B.   Title Information

  •   Preliminary Title Report     •   Tax Roll     •   Grant of Easement     •
  Tract Maps     •   Lot Line Adjustment     •   Bayside Business Park CC&Rs

C.   Reports & Repairs

  •   JCP (dated July 13, 2007)     •   PowerLight Solar System Permit Pkg
(dated March 22, 2005)     •   Generator Specs & Test Report (dated
June 25,1996)     •   Geotechnical Investigation (dated September 10,1995)     •
  Hazardous Materials Statement (dated February 21, 2007)

D.   Site & Floor Plans

E.   Zoning Ordinance

S2-1