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Exhibit 10.2

 
 
Pacific Center Purchase Agreement Title [pacific_purchtitle.jpg]
 

 

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Table of Contents

Page
1.
Purchase and Sale
1
2.
Purchase Price; Deposit; Escrow
2
3.
Buyer’s Investigation
3
3.1
Scope of Investigation
3
3.2
Entry; Insurance; Indemnity
4
3.3
Title Matters; Buyer’s Objections; Seller’s Right to Cure
5
3.4
Certain Miscellaneous Agreements
7
4.
As-Is Sale; Release and Indemnity
7
4.1
As-Is Sale
7
4.2
Release and Indemnity
9
4.3
Representations and Warranties of Seller
10
4.4
Seller’s Knowledge
11
4.5
Survival of and Limitations on Seller’s Representations and Warranties
11
4.6
Representations and Warranties of Buyer
12
4.7
Survival of Buyer’s Representations and Warranties
13
5.
Interim Operation of the Property
13
5.1
Lease Matters
13
5.2
Certain Leases and Other Agreements
14
5.3
Operation of Property
15
5.4
Survival
15
6.
Conditions to Closing
15
6.1
Conditions to Buyer’s Obligations to Close
15
6.2
Conditions to Seller’s Obligations to Close
17
7.
Closing and Transfer of Title
18
7.1
Closing Date
18
7.2
Seller’s Deliveries
19
7.3
Buyer’s Deliveries
20
7.4
Possession of the Property
21

 
 
 
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8.
Prorations and Adjustments
21
8.1
General
21
8.2
Post Closing Reconciliation
23
8.3
Survival
24
9.
Risk of Loss and Insurance Proceeds
24
9.1
Minor Loss
24
9.2
Major Loss
25
10.
Default
26
11.
Expenses
27
12.
Brokers
28
13.
Assignment
28
14.
Notices
29
15.
Miscellaneous
30
15.1
Attorneys’ Fees
30
15.2
Gender
30
15.3
Captions
30
15.4
Construction
31
15.5
Business Days; Deadlines
31
15.6
Entire Agreement
31
15.7
Recording
31
15.8
No Continuance
31
15.9
Time of Essence
32
15.10
Original Document
32
15.11
Governing Law
32
15.12
Acceptance of Offer
32
15.13
Confidentiality
32
15.14
Section 1031 Exchange
33
15.15
Amendment
34
15.16
Waiver
34

 
 

 

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List of Schedules
1.1 Description of the Land
 
3.2 Access Agreement
 
3.4 Certain Miscellaneous Agreements
 
1.1(a)(1) Leases
 
1.1(a)(2) Lease Default Notices
 
1.1(a)(3) Aged Receivables Report
 
1.1(a)(4) Security Deposits
 
1.1(c) Future Leasing Commissions and Tenant Improvement Costs for Existing
Leases for Which Buyer is Responsible
 

 

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List of Exhibits
 
Exhibit A
—
Estoppel Certificate

 
Exhibit B
—
Grant Deed

 
Exhibit C
—
Bill of Sale

 
Exhibit D
—
Assignment and Assumption of Leases

 
Exhibit E
—
Assignment and Assumption of Miscellaneous Agreements

 
Exhibit F
—
Assignment and Assumption of Permits, Intangible Property and Warranties

 
Exhibit G
—
Seller’s Closing Certification

 
Exhibit H
—
FIRPTA Affidavit

 
Exhibit I
—
Designation Agreement

 
Exhibit J
—
Letter to Tenants

 
Exhibit K
—
Notice to Vendors

 
Exhibit L
—
Buyer’s Closing Certification

 
Exhibit M
—
Confidentiality Agreement

 
 

 

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Purchase and Sale Agreement
 
This Purchase and Sale Agreement (this “Agreement”), dated for reference
purposes as of January 10, 2006, is made by and between DL Pacific Center LP, a
Delaware limited partnership (“Seller”), and Maguire Properties, L.P., a
Maryland limited partnership (“Buyer”). This Agreement shall not be effective
until executed by both Buyer and Seller, and the date on which this Agreement is
executed by Buyer or Seller, whichever is later, as indicated on the signature
page hereto, shall be referred to herein as the “Effective Date.”
 
1.
Purchase and Sale

 
Seller hereby agrees to sell to Buyer, and Buyer hereby agrees to purchase from
Seller, subject to the terms, covenants and conditions set forth herein, all of
the following property:
 
(a) That certain real property located in the City of San Diego, County of
San Diego, State of California, commonly known as 1455 Frazee Road and
1615 Murray Canyon Road, and more particularly described in Schedule 1.1 hereto
(the “Land”);
 
(b) The buildings, structures and improvements erected or located on the Land
(collectively, the “Improvements,” and together with the Land, collectively, the
“Premises”);
 
(c) All of Seller’s right, title and interest, if any, in and to any rights and
appurtenances pertaining to the Land, including minerals, oil and gas rights,
air, water and development rights, roads, alleys, easements, streets and ways
adjacent to the Land, rights of ingress and egress thereto, any strips and gores
within or bounding the Land and in profits or rights or appurtenances pertaining
to the Land (the “Appurtenant Rights”);
 
(d) All of Seller’s right, title, and interest, if any, in all tangible personal
property located on the Premises, including furniture, and equipment, but
excluding any of the same owned by Tenants (as defined below) (the “Personal
Property”);
 
(e) All of Seller’s right, title, and interest in all leases in effect at the
closing of the purchase and sale contemplated hereunder (the “Closing”) for
portions of the Premises, any guaranties thereof (collectively, the “Leases”),
and any security deposits deposited by tenants of the Property (the “Tenants”)
in respect of such Leases;
 
(a) All of Seller’s right, title, and interest in those agreements affecting the
Property that Buyer is required to assume pursuant to Section 3.4 below, or that
are the source of obligations Buyer is required to assume pursuant to
Section 5.1 or 5.2 below (collectively, the “Miscellaneous Agreements”);
 
(g) All of Seller’s right, title and interest, if any, in and to all assignable
permits and licenses to the extent the same pertain to the Premises
(collectively, the “Permits”);
 
(h) All of Seller’s right, title and interest, if any, in and to any other
assignable intangible property, if any, not otherwise specified herein and that
is used exclusively in connection with the occupancy and operation of the
Premises or that otherwise relates exclusively to the
 

 

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Premises, including, without limitation, plans and drawings for the Improvements
(the “Intangible Property”); and
 
(i) All of Seller’s right, title and interest, if any, in and to all assignable
warranties of any contractor, manufacturer or materialman which relate to the
Improvements or the Personal Property (collectively, the “Warranties”).
 
The Premises, Appurtenant Rights, Personal Property, Leases, Miscellaneous
Agreements, Permits, Intangible Property and Warranties are herein collectively
referred to as the “Property”.
 
2.
Purchase Price; Deposit; Escrow

 
(b) The purchase price (“Purchase Price”) for the Property shall be One Hundred
Forty-Nine Million Dollars ($149,000,000.00), subject to adjustment as provided
in Section 8 below, and shall be paid as set forth in subparagraphs (c), (c) and
(c) below.
 
(c) Within one (1) business day following the Effective Date, Buyer shall
deposit in escrow with Commonwealth Land Title Company, One Market Street, Spear
Street Tower #1850, San Francisco, California 94105, Attn: Linda Rae Paul (the
“Escrow Holder”), as an initial deposit hereunder, the sum of Four Million Five
Hundred Thousand Dollars ($4,500,000.00) (the “Initial Deposit”). If Buyer
exercises the First Extension Option pursuant to Section 1.1(f), Buyer shall
deposit the First Extension Deposit (as defined in Section 1.1(g)) with Escrow
Holder as provided in said Section. If Buyer exercises the Second Extension
Option pursuant to Section 1.1(g), Buyer shall deposit the Second Extension
Deposit (as defined in Section 1.1(g)) with Escrow Holder as provided in said
Section. The Initial Deposit and, if applicable, the First Extension Deposit and
the Second Extension Deposit, together with all interest earned on the Initial
Deposit, the First Extension Deposit and the Second Extension Deposit while the
same are held by Escrow Holder, are referred to herein as the “Deposit”. At all
times before the Closing while the Deposit is held by Escrow Holder, the Deposit
shall be invested in an interest-bearing account approved by Buyer in writing.
Buyer shall provide Escrow Holder with its taxpayer identification number, and
all interest earned on the Deposit shall be reported to the appropriate tax
authorities using Buyer’s taxpayer identification number. At the Closing, the
Deposit shall be applied to the Purchase Price. The Initial Deposit shall be
non-refundable and shall be deemed fully earned by Seller (except as otherwise
expressly set forth herein).
 
(c) The balance of the Purchase Price, subject to adjustment for any prorations
and credits provided hereunder, shall be deposited with Escrow Holder by Buyer
by wire transfer of immediately available funds by such time as necessary to
permit the transfer of funds to Seller and its lenders to be completed by
1:00 p.m., California time, on the day of the Closing.
 
(d) Within two (2) business days following the Effective Date, Seller shall
deliver a copy of this Agreement to Escrow Holder. This Agreement shall serve as
the initial escrow instructions. Counsel for Buyer and Seller are hereby
authorized to execute any further escrow instructions necessary or desirable,
and consistent with the terms hereof, in connection with the escrow established
for this transaction by Escrow Holder (the “Escrow”). Escrow Holder shall be the
“Reporting Person” pursuant to Internal Revenue Code Section 6045(e) with
respect to the transaction contemplated by this Agreement.
 
 

 

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3.
Buyer’s Investigation

 

 
3.1
Scope of Investigation

 
Buyer had the period commencing on December 7, 2005 and ending on the Effective
Date (the “Investigation Period”) to review and approve all matters relating to
the Property, including the following matters:
 
(a) All matters relating to title to the Property, including (i) matters
disclosed by that certain 2nd amended preliminary title report dated
November 16, 2005, or by any underlying exception document referred to therein
(collectively, the “Title Report”), issued by Commonwealth Land Title Company
(the “Title Company”) under Order No. 03206370, and a copy of which has been
provided to Buyer, or disclosed by any updates thereof or supplements thereto,
and (ii) matters disclosed by any survey of the Property. Seller provided Buyer
with a copy of that certain survey dated August 28, 2005 and prepared by
Hirsch & Company under Job No. 2002.054, without representation or warranty of
any kind with respect thereto. Buyer may obtain, at Buyer’s sole cost and
expense, an updated ALTA survey of the Property, in form sufficient to satisfy
the requirements of the Title Company for the issuance of an ALTA owner’s policy
of title insurance, and a copy of which, as well as copies of any updates
thereof or supplements thereto, shall be provided by Buyer to Seller promptly
upon Buyer’s receipt thereof.
 
(b) All matters relating to any governmental and other legal requirements
relating to the Property, such as taxes, assessments, zoning, use permit
requirements and building codes, including any certificates of occupancy, other
governmental permits and plans and specifications for the Property.
Notwithstanding any provisions of this Agreement to the contrary, Buyer shall
not file or cause to be filed any application or make any request (other than
inquiries of the public records) with any governmental or quasi-governmental
agency which would or could lead to a hearing before any governmental or
quasi-governmental agency or which would or could lead to a notice of violation
of law or municipal ordinance, order or requirement imposed by such an agency,
at the Property or any change in zoning, parcelization, licenses, permits or
other entitlements or any investigation or restriction on the use of the
Property, or any part thereof; provided, however, that the foregoing shall not
preclude Buyer from requesting a customary zoning letter with respect to the
Premises from the appropriate governmental agency; and provided, further, that
if Buyer’s due diligence discloses other matters as to which Buyer desires
confirmation from appropriate governmental authorities, Seller shall not
unreasonably withhold its consent to a request from Buyer for such confirmation.
 
(d) The physical condition of the Property, including the interiors, exteriors,
structures, pavements, utilities, and all other physical and functional aspects
of the Property, and including an investigation as to the presence of Hazardous
Materials (as defined in Section 4.1(b) below) at, on or under the Property and
the compliance of the Property with all Hazardous Materials Laws (as defined in
Section 4.1(b) below).
 
(d) Any easements and/or access rights affecting the Property.
 
(e) To the extent in Seller’s possession or reasonable control, the following
written materials relating to the Property, originals or true copies of all of
which materials in Seller’s
 

 

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possession or control have been delivered or made available at the Property or
at Landmark Asset Management Group, 100 Bayview Circle, Suite 200, Newport
Beach, California:
 
(i) Bills for property taxes and assessments for the 2003-2004, 2004-2005 and
2005-2006 tax years;
 
(ii) Certificates of occupancy and plans and specifications for the Property;
 
(iii) Materials regarding the physical condition of the Property, including the
interiors, exteriors, structures, utilities, and all other physical and
functional aspects of the Property;
 
(i) Reports, studies, assessments, investigations and other materials related to
the presence of Hazardous Materials (as defined in Section 4.1(b) below) at, on
or under the Property and the compliance of the Property with all Hazardous
Materials Laws (as defined in Section 4.1(b) below);
 
(v) The Leases, any other leases and occupancy agreements affecting the Property
and all amendments thereto, and all the correspondence files for all Tenants;
 
(vi) Profit and loss operating statements for the Property for the 2003, 2004
and 2005 (year to date) calendar years;
 
(ii) All agreements affecting the Property not encompassed within any of the
other subparagraphs of this Section 3.1(e); and
 
(viii) Personal Property inventory.
 
(f) All matters relating to the feasibility of Buyer’s proposed ownership of the
Property.
 
(g) Natural hazards disclosure statements for the Property, as required under
California law, to be delivered to Buyer within five (5) days after the
Effective Date. The natural hazards disclosure statements shall be based on a
report or reports of a licensed engineer, land surveyor, geologist, or expert in
natural hazard discovery, which report or reports shall be attached to such
natural hazards disclosure statement. Buyer acknowledges that the natural
hazards disclosure statements shall be based solely on the information contained
in the report or reports attached thereto, and Seller shall have no liability
for any inaccuracy in such reports, except to the extent that Seller has actual
knowledge of the inaccuracy at the time the corresponding natural hazards
disclosure statement is signed by Seller.
 

 
3.2
Entry; Insurance; Indemnity

 
(e) Pursuant to that certain Access Agreement (the “Access Agreement”) dated
December 7, 2005, by Seller and Buyer (a copy of which is attached hereto as
Schedule 3.2), Buyer shall have the right, in compliance with the requirements
of the Access Agreement and this Section 3.2, to enter on any portion of the
Premises for the limited purpose of conducting “Inspections” (as defined in the
Access Agreement). Buyer shall conduct such entries and any Inspections in
 

 

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connection therewith so as to minimize disruption at the Property or
interference with Seller’s business or with Tenants and otherwise in a manner
reasonably acceptable to Seller.
 
(b) Buyer’s indemnification of Seller pursuant to Section 12 of the Access
Agreement shall extend to the partners, members, trustees, shareholders,
directors and officers of Seller, any party owning a direct or indirect interest
in Seller, the affiliates of Seller, and the partners, members, trustees,
shareholders, directors, officers, employees and agents of each of the foregoing
parties (such parties are referred to collectively with Seller as the
“Seller-Related Parties”).
 

 
3.3
Title Matters; Buyer’s Objections; Seller’s Right to Cure

 
(a) Disapproved Matters.
 
(i) For the period commencing on December 7, 2005 and ending on
December 19, 2005 (the “Title Review Period”) Buyer had the right, by written
notice delivered to Seller (the “Initial Disapproval Notice”), to disapprove any
matter relating to title of the Property. Buyer sent the Initial Disapproval
Notice to Seller on December 19, 2005.
 
(ii) If any material matter relating to title of the Property first arises after
the expiration of the Title Review Period, and is not created or caused by
Buyer, then Buyer shall have the right to disapprove such matter by delivering a
written notice to Seller (a “Disapproval Notice”) within five (5) days after
Buyer first becomes aware of such matter.
 
(i) All matters relating to title to the Property to which Buyer objects
pursuant to Section 3.3(a)(i) or 3.3(a)(ii) above shall be referred to as
“Disapproved Matters.” All matters relating to title to the Property which are
not Disapproved Matters shall be deemed approved by Buyer.
 
(f) Seller’s Right to Undertake Curative Action. Within four (4) business days
after Seller’s receipt of a Disapproval Notice, Seller may give written notice
to Buyer (a “Cure Notice”) of (i) any Disapproved Matters set forth in such
Disapproval Notice with respect to which Seller is willing to undertake any
curative action before the Closing, and (ii) the nature of each such curative
action that Seller is willing to undertake (individually and collectively,
“Curative Action”). Except as expressly set forth in any Cure Notice, Seller
shall be deemed to have elected not to undertake any Curative Action with
respect to any Disapproved Matters. If (1) the Curative Action set forth by
Seller in any Cure Notice consists of anything less than the complete and
unconditional cure of all Disapproved Matters set forth in the Disapproval
Notice to which such Cure Notice relates, or (2) Seller does not reply to a
Disapproval Notice within four (4) business days after Seller’s receipt thereof,
then Buyer may terminate this Agreement by giving written notice to Seller no
later than 5:00 p.m. California time on the third (3rd) business day after
receipt of such Cure Notice or the expiration of such four (4) business day
period without reply from Seller, as the case may be. If Buyer does not so elect
to terminate this Agreement, then Buyer shall be deemed to have waived its
disapproval of all Disapproved Matters set forth in such Disapproval Notice
except to the extent of Seller’s agreement pursuant to the Cure Notice to
undertake Curative Action with respect thereto. Unless Buyer terminates this
Agreement pursuant to the foregoing, if Seller gives Buyer one or more Cure
Notices, then
 

 

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(A) Seller shall use commercially reasonably efforts to complete the Curative
Action set forth therein on or before the Closing Date, and (B) it shall be a
condition to Buyer’s obligation to purchase the Property hereunder, but not a
covenant of Seller, that all Curative Action shall actually be performed on or
before the Closing Date. In response to Buyer’s Initial Disapproval Notice:
(i) Seller agrees to take the following Curative Actions: cause the deed of
trust described in exception no. 27 and the assignment of leases described in
exception no. 28 of the Title Report to be removed at Closing; and (ii) Seller
agrees that the issuance of CLTA 103.3 endorsements to the Title Policy (as
defined in Section 6.1 below) for each of the utilities easements described in
exceptions nos. 9, 13 and 17, the deletion of exception no. 31, and the
modification of exception no. 33 as specified in Buyer’s Initial Disapproval
Notice shall be conditions to Buyer obligation to purchase the Property. In
reliance on the agreements of Seller set forth in the preceding clauses (i) and
(ii), Buyer agrees that it shall have no right to terminate this Agreement
pursuant to the third sentence of this Section 1.1(f) as a result of Buyer’s
Initial Disapproval Notice.
 
(g) Extension of Closing Date. If any situation described in Section 3.3(a)(ii)
above occurs, and the respective time periods afforded Buyer and Seller to make
any elections and give notices with respect thereto as permitted under
Sections 3.3(a) and (f) will extend beyond the fifth (5th) day before the
Closing Date, then the Closing Date shall be postponed until five (5) days after
the disposition of such matter is determined in accordance with the provisions
of this Section 3.3.
 
(h) Agreement of Title Company to Insure Over Disapproved Matters.
Notwithstanding Seller’s unwillingness to agree to completely and
unconditionally cure any Disapproved Matter, Buyer may obtain the agreement of
the Title Company to omit such Disapproved Matter from the schedule of
exceptions to the Title Policy or to affirmatively insure over such Disapproved
Matter by endorsement to the Title Policy. Any agreement of the Title Company to
so omit or insure shall be a matter solely between Buyer and the Title Company,
and the same shall not be condition to Closing, except to the extent the Title
Company’s agreement to so omit or insure is based upon Seller’s agreement
pursuant to the Cure Notice to undertake Curative Action with respect to such
Disapproved Matter and Seller fails to undertake such Curative Action prior to
the Closing. Further, with regard to Seller’s obligation to convey title to the
Property, any Disapproved Matter which Seller has not agreed to completely and
unconditionally cure shall be a Permitted Exception (as defined in
subparagraph (g) below) to the Deed (as defined in Section 7.2(a) below)
notwithstanding the Title Company’s agreement to omit such Disapproved Matter
from the Title Policy or to affirmatively insure against such Disapproved Matter
by endorsement to the Title Policy, and Buyer shall only seek recourse against
the Title Company, and not Seller, with respect to any such Disapproved Matter.
 
(e) Permitted Exceptions. The Deed shall be subject to the following matters
(the “Permitted Exceptions”):
 
(i) general real estate taxes not yet due and payable as of the date of Closing;
 
(ii) the Leases;
 
(iii) the Miscellaneous Agreements;
 
 

 

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(iv) all title matters relating to the Property, other than Disapproved Matters,
that are (1) discoverable by means of an accurate survey or inspection of the
Property or by making inquiry of persons in possession, or (2) disclosed to
Buyer in writing before the Closing;
 
(v) all Disapproved Matters Seller has not completely and unconditionally agreed
to cure, except to the extent, if any, Seller has agreed to undertake Curative
Action pursuant to a Cure Notice; and
 
(vi) all other exceptions created or agreed to by Buyer.
 

 
3.4
Certain Miscellaneous Agreements

 
At the Closing, Seller’s rights and obligations under those agreements set forth
on Schedule 3.4 attached hereto shall be assigned to and assumed by Buyer. As
soon as practicable after the Effective Date, Seller shall deliver to Burnham
(as defined in Schedule 3.4) a notice that the Burnham Agreement (as defined in
Schedule 3.4), is terminated effective as of the earlier of the thirtieth (30th)
day after such notice or the Closing. In addition, prior to the Closing,
(i) Buyer shall deliver a letter to Goldman Ferguson Partners, with a copy to
Seller, acknowledging that Buyer shall assume agreement listed as number 3 on
Schedule 3.4, effective as of the Closing, and (ii) Seller shall deliver to
Landmark (as defined in Schedule 3.4) a notice that the agreement listed as
number 5 on Schedule 3.4, is terminated effective as of the Closing. The
termination of the Burnham Agreement and the agreement listed as number 5 on
Schedule 3.4 shall not relieve Buyer of the obligation to assume certain
post-termination obligations under those agreements as set forth on
Schedule 3.4.
 
4.
As-Is Sale; Release and Indemnity

 

 
4.1
As-Is Sale

 
(a) Buyer acknowledges and agrees that it will have been given, before the
expiration of the Investigation Period, a full opportunity to inspect and
investigate each and every aspect of the Property, either independently or
through agents of Buyer’s choosing. The closing of escrow for the purchase of
the Property by Buyer shall conclusively constitute Buyer’s approval of each and
every aspect of the Property, except as otherwise specifically provided herein.
 
(b) Except with respect to any representations expressly made by Seller in this
Agreement, Seller: (i) makes no representations or warranties concerning the
Property, income derived therefrom or any matters pertaining thereto; and
(ii) makes no representations or warranties with respect to the physical
condition or any other aspect of the Property, including, without limitation:
(A) the structural integrity of, or the quality of any labor and materials used
in the construction of, any improvements on the Land; (B) the conformity of the
Improvements to any plans or specifications for the Property (including any
plans and specifications that may have been or which may be provided to Buyer by
Seller); (C) 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, including zoning or building code requirements; (D) the
existence of soil instability, past soil repairs, soil additions or conditions
of soil fill or susceptibility to landslides; (E) the sufficiency of any
undershoring; (F) the sufficiency of any drainage; (G) whether the
 

 

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Land is located wholly or partially in any flood plain or flood hazard boundary
or similar area; (H) the existence or non-existence of underground storage
tanks; (I) any other matter affecting the stability or integrity of the Land or
any buildings or improvements situated on or as part of the Improvements;
(J) the availability, quality, nature, adequacy and physical condition of public
utilities and services for the Property; (K) the habitability, merchantability,
fitness, suitability, functionality, value or adequacy of the Property or any
component or system thereof for any intended use; (L) the potential for further
development of the Property; (M) the existence of vested land use, zoning or
building entitlements affecting the Premises; (N) the quality, nature, adequacy
and physical condition of the Property, including the structural elements,
foundations, roofs, appurtenances, access, landscaping, parking facilities and
the electrical, mechanical, HVAC, plumbing, sewage, and utility systems,
facilities and appliances; (O) the quality and nature of any groundwater;
(P) the zoning or other legal status of the Property or any other public or
private restrictions on use of the Property; (Q) the presence of any Hazardous
Materials (as defined below) or mold or any mold-like substance on, in, under or
about the Property or any nearby property; (R) the condition of title to the
Property; (S) the Leases, Miscellaneous Agreements, or other agreements
affecting the Property; and (T) the economics of the operation of the Property.
Except with respect to any representations expressly made by Seller in this
Agreement, Buyer expressly acknowledges that the Property is being sold and
accepted “as is, where is” and is being accepted without any representation or
warranty, including any representation or warranty by Seller or any agent,
officer, employee or representative of Seller. Buyer agrees to make such
investigations of the condition of the Property as Buyer deems adequate and
shall rely solely upon its own investigation of such condition and not upon any
statement of Seller except as may be expressly stated in this Agreement. As used
herein, “Hazardous Materials” means any material, substance or waste designated
as hazardous, toxic, radioactive, injurious or potentially injurious to human
health or the environment, or as a pollutant or contaminant, or words of similar
import, under any Hazardous Materials Law (as defined below), including, but not
limited to, petroleum and petroleum products, asbestos, polychlorinated
biphenyls, urea formaldehyde, radon gas, radioactive matter, medical waste,
mold, and chemicals which may cause cancer or reproductive toxicity. As used
herein, “Hazardous Materials Law” means any federal, state or local law,
statute, regulation or ordinance now or hereafter in force, as amended from time
to time, pertaining to materials, substances or wastes which are injurious or
potentially injurious to human health or the environment or the release,
disposal or transportation of which is otherwise regulated by any agency of the
federal, state or any local government with jurisdiction over the Property or
any such material, substance or waste removed therefrom, or in any way
pertaining to pollution or contamination of the air, soil, surface water or
groundwater, including, but not limited to, the Comprehensive Environmental
Response, Compensation and Liability Act of 1980, as amended (42 U.S.C.
Section 9601 et seq.), the Resource 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 (42 U.S.C. Section 300f et seq.), the
Hazardous Materials Transportation Act (49 U.S.C. Section 1801 et seq.), the
Toxic Substance Control Act (15 U.S.C. Section 2601 et seq.), the Hazardous
Substance Account Act (California Health and Safety Code Section 25300 et seq.),
the Hazardous Waste Control Law (California Health and Safety Code Section 25100
et seq.), the Medical Waste Management Act (California Health and Safety Code
Section 25015 et seq.), and the Porter-Cologne Water Quality Control Act
(California Water Code Section 13000 et seq.).
 
 

 

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4.2
Release and Indemnity

 
(i) Without limiting the provisions of Section 4.1, Buyer waives its right to
recover from the Seller-Related Parties, and forever releases, covenants not to
sue and discharges the Seller-Related Parties from, any and all damages,
demands, claims, losses, liabilities, penalties, fines, liens, judgments, costs
or expenses whatsoever, including attorneys’ fees and costs, whether direct or
indirect, known or unknown, foreseen or unforeseen, that may arise on account of
or in any way be connected with the physical condition of the Property,
including, but not limited to, the presence of any Hazardous Materials on, in,
under or about the Property, except for any liability of Seller for any breach
of any representation or warranty set forth in Section 4.3 below, which
liability shall survive the Closing only for the Survival Period (as defined in
Section 4.5 below) and shall be subject to the limitation on liability set forth
in Section 4.5 below.
 
(j) In the event the Closing occurs, Buyer shall indemnify, defend and hold
harmless the Seller-Related Parties from and against any and all suits, actions,
proceedings, investigations, demands, claims, liabilities, fines, penalties,
liens, judgments, losses, injuries, damages, expenses or costs whatsoever,
including attorneys’ and experts’ fees and costs and investigation and
remediation costs (“Claims”), asserted by the party originally identified as
Buyer herein (“Original Buyer”), or any assignee to whom Buyer assigns its
rights under this Agreement (“Assignee”), or the partners, members, trustees,
shareholders, directors or officers of any party owning a direct or indirect
interest in Original Buyer or any such Assignee, or any affiliate of Original
Buyer or any such Assignee possessing at any time an ownership interest (whether
direct or indirect) in the Property (including any party which may hereafter
become an affiliate of Original Buyer or any such Assignee), arising from,
relating to, or occasioned in any way by the physical condition of the Property,
including, but not limited to, the presence of any Hazardous Materials on, in,
under or about the Property, except for any liability of Seller for any breach
of any representation or warranty set forth in Section 4.3 below, which
liability shall survive the Closing only for the Survival Period and shall be
subject to the limitation on liability set forth in Section 4.5 below.
 
(k) The release set forth in Section 1.1(i) above, and the indemnification set
forth in Section 1.1(j) above, includes claims, liabilities and other matters of
which Buyer is presently unaware or which Buyer does not presently suspect to
exist which, if known by Buyer, would materially affect Buyer’s willingness to
enter into the release and indemnification of the Seller-Related Parties set
forth in Sections 1.1(i) and 1.1(j). In this connection and to the fullest
extent permitted by law, 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, loses and expenses which are presently unknown,
unanticipated and unsuspected, and Buyer further agrees, represents and warrants
that the release and indemnification set forth in Sections 1.1(i) and 1.1(j)
have been negotiated and agreed upon in light of that realization and that Buyer
nevertheless hereby intends to release, discharge and acquit the Seller-Related
Parties from any such unknown causes of action, claims, demands, debts,
controversies, damages, costs, losses and expenses, except for any liability of
Seller for any breach of any representation or warranty set forth in Section 4.3
below, which liability shall survive the Closing only for the Survival Period
and shall be subject to the limitation on liability set forth in Section 4.5
below. In connection with the
 

 

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release set forth in Section 1.1(i) 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
expect to exist in his favor at the time of executing the release, which if
known to him must have materially affected the settlement with the debtor.
 
(l) The provisions of this Section 4.2 shall survive the Closing.
 

 
4.3
Representations and Warranties of Seller

 
Seller represents and warrants to Buyer as follows:
 
(a) Seller is a limited partnership, duly organized, validly existing and in
good standing under the laws of Delaware, and qualified to transact business and
in good standing in the State of California.
 
(b) Seller has the power and authority to enter into this Agreement and convey
the Property to Buyer and to execute and deliver the other documents referred to
herein and to perform hereunder and thereunder on behalf of Seller. This
Agreement has been duly authorized, executed and delivered by Seller.
 
(c) Neither the execution and delivery of this Agreement, the consummation of
the transactions contemplated by this Agreement, nor the compliance with the
terms and conditions hereof will violate, in any material respect, any statute,
regulation, rule, injunction, judgment, order, decree, ruling, charge or other
restrictions of any government, governmental agency or court to which Seller is
subject or any contract, instrument or other agreement by which Seller is bound.
 
(d) Seller is not required to obtain the consent or approval of any government
agency, department or other government body, or any lender, partner, investor or
other third party, to enter into this Agreement or if required, any such
required consents or approvals have been obtained.
 
(e) There are no general assignments for the benefit of creditors, or voluntary
or involuntary proceedings in bankruptcy, existing, pending or, to Seller’s
knowledge, threatened against Seller.
 
(m) (i) The Leases listed on Schedule 4.3(f)(1) attached hereto constitute all
the Leases in effect as of the Effective Date relating to the Property (other
than any subleases under such Leases), the same have not been modified except as
referenced in Schedule 1.1(a)(1), and Seller has provided true, correct and
complete copies of the same to Buyer for its review pursuant to
Section 3.1(e)(v) above. (ii) Except for the tenants listed on
Schedule 1.1(a)(2), no tenant has given or received a written notice of default
within the twelve (12) month period prior to the Effective Date, which default
remains uncured as of the Effective Date. (iii) Except as set forth on the aged
receivables report attached hereto as Schedule 1.1(a)(3), no Tenant is
delinquent in the
 

 

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payment of any rent as of the date of such aged receivables report. (iv) the
amount of the security deposit held by Seller under each Lease is as set forth
on Schedule 1.1(d)(4).
 
(n) To Seller’s knowledge, the reports, studies, assessments, investigations and
other materials to be made available to Buyer for its review pursuant to
Section 1.1(d)(i) above, shall constitute all written materials in the
possession, custody or control of Seller or its property manager related to the
presence of Hazardous Materials at, on or under the Property and the compliance
of the Property with Hazardous Materials Laws; provided that Seller makes no
representation or warranty as to whether Buyer is entitled to rely on any such
reports, studies, assessments, investigations or other materials, and if Buyer
desires to rely on the same, Buyer shall be responsible for obtaining, at its
sole cost and expense, written permission from the preparer of any such items.
 
(h) There are no service, maintenance, management, parking, brokerage or other
agreements or contracts relating to the Property that will bind Buyer or the
Property after the Closing except for the Permitted Exceptions and the
Miscellaneous Agreements.
 
(i) Seller has received no written notice of any litigation or other legal
action, suit or proceeding that pertains to the Property, or with respect to
Seller that impair Seller’s ability to perform its obligations under this
Agreement, and which remains pending, except for any personal injury or property
damage actions covered by insurance.
 
(j) Seller has received no written notice of any uncured violation of any law
applicable to the Premises (including, without limitation, any Hazardous
Materials Law).
 
(k) Seller has not received written notice of any pending condemnation or
eminent domain proceeding affecting the Premises, and to Seller’s knowledge, no
such action is threatened or contemplated.
 

 
4.4
Seller’s Knowledge

 
As used in this Agreement or in any documents delivered pursuant hereto, the
phrases “to Seller’s knowledge”, “known to Seller”, “Seller has not received any
notice”, or “Seller has not received any written notice” (or similar words),
shall mean that the representations and warranties (or other provisions)
qualified by any of such phrases are made without investigation of the matters
stated therein and are based solely on the current actual knowledge of
Mr. A. Corey Hansen, the employee of Seller’s property manager, or Jim
Christian, asset manager for Seller, either or both of whom would be expected to
have the knowledge and would be expected to have received any notice with
respect to the existence or non-existence of the matters referenced in
Section 4.3 above.
 

 
4.5
Survival of and Limitations on Seller’s Representations and Warranties

 
All representations and warranties contained in Section 4.3 and all
representations contained within any Seller’s Lease Certificate provided to
Buyer pursuant to Section 1.1(q) below, are qualified by any information
contained in any documents or other material made available to Buyer in
connection with its review of matters pertaining to the Property pursuant to
Section 3 above, including any title report or survey made available to Buyer.
All representations and
 

 

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warranties of Seller set forth in Section 4.3 are made as of the Effective Date.
In addition, as of Closing Date, Seller shall provide Buyer with a certification
regarding the accuracy of such representations and warranties as of such date,
including any exceptions or qualifications thereto as of such date (“Seller’s
Closing Certification”). If any exceptions or qualifications to such
representations and warranties set forth in Seller’s Closing Certification are
material, were not known to Buyer as of the expiration of the Investigation
Period, and are not acceptable to Buyer in its sole discretion, Buyer may
terminate this Agreement and receive a refund of the Deposit, but Seller shall
have no liability to Buyer as a result of such qualification and exceptions. In
addition, in the event Buyer is actually aware prior to the Closing that any of
the representations or warranties set forth in Section 4.3 or any of the
representations contained within any Seller’s Lease Certificate are not true,
correct or complete, and Buyer nonetheless proceeds with the purchase of the
Property, such representations and warranties shall be deemed to be qualified by
all matters of which Buyer is actually aware, and Buyer shall have no claim for
breach of any such representation or warranty to the extent it is actually aware
prior to the Closing of any inaccuracies therein. The representations and
warranties of Seller set forth in Section 4.3, as qualified by all matters of
which Buyer is actually aware as of the Closing and by any exceptions and
qualifications set forth on Seller’s Closing Certification, and all
representations contained within any Seller’s Lease Certificate, as qualified by
all matters of which Buyer is actually aware as of the Closing, shall survive
the Closing of the transaction contemplated in this Agreement and the delivery
of the Deed from Seller to Buyer for a period of nine (9) months from and after
the Closing Date (the “Survival Period”); provided, however, that Buyer must
give Seller written notice of any claim Buyer may have against Seller for breach
of any such representations and warranties set forth in Section 4.3 (as modified
by any exceptions and qualifications set forth on Seller’s Closing
Certification) or for breach of any representations contained within any
Seller’s Lease Certificate, prior to the expiration of the Survival Period. Any
such claim which Buyer may have which is not so asserted prior to the expiration
of the Survival Period shall not be valid or effective, and Seller shall have no
liability with respect thereto. Notwithstanding any provision of this Agreement
to the contrary, in no event shall Seller’s liability for any breach of any
representation or warranty under this Agreement, or pursuant to Seller’s Closing
Certification or a Seller’s Lease Certificate exceed Two Million Dollars
($2,000,000.00), in the aggregate.
 

 
4.6
Representations and Warranties of Buyer

 
Buyer represents and warrants to Seller as follows:
 
(a) Buyer is a limited partnership, duly organized, validly existing and in good
standing under the laws of Maryland, and qualified to transact business and in
good standing in the State of California.
 
(b) Buyer has the power and authority to enter into this Agreement and to
execute and deliver the other documents referred to herein and to perform
hereunder and thereunder on behalf of Buyer. This Agreement has been duly
authorized, executed and delivered by Buyer.
 
(c) Neither the execution and delivery of this Agreement, the consummation of
the transactions contemplated by this Agreement, nor the compliance with the
terms and conditions hereof will violate, in any material respect, any statute,
regulation, rule, injunction, judgment,
 

 

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order, decree, ruling, charge or other restrictions of any government,
governmental agency or court to which Buyer is subject, or any contract,
instrument or other agreement by which Buyer is bound.
 
(d) Buyer is not required to obtain the consent or approval of any government
agency, department or other government body, or any lender, partner, investor or
other third party, to enter into this Agreement or if required, any such
required consents or approvals have been obtained.
 
(e) There are no general assignments for the benefit of creditors, or voluntary
or involuntary proceedings in bankruptcy, existing, pending or, to Buyer’s
knowledge, threatened against Buyer.
 

 
4.7
Survival of Buyer’s Representations and Warranties

 
All representations and warranties of Buyer set forth in Section 4.6 are made as
of the Effective Date. In addition, as of Closing Date, Buyer shall provide
Seller with a certification regarding the accuracy of such representations and
warranties as of such date, including any exceptions or qualifications thereto
as of such date (“Buyer’s Closing Certification”). If the exceptions or
qualifications to such representations and warranties as of the Closing Date are
material and are not acceptable to Seller in its sole discretion, Seller may
refuse to consummate this transaction and exercise the remedy set forth in
Section 1.1(s) below. The representations and warranties of Buyer set forth in
Section 4.6, as qualified by any exceptions and qualifications set forth on
Buyer’s Closing Certification, shall survive the Closing of the transaction
contemplated in this Agreement and the delivery of the Deed from Seller to Buyer
for the Survival Period; provided, however, that Seller must give Buyer written
notice of any claim Seller may have against Buyer for breach of any such
representations and warranties set forth in Section 4.6 (as modified by any
exceptions and qualifications set forth on Buyer’s Closing Certification), prior
to the expiration of the Survival Period. Any such claim which Seller may have
which is not so asserted prior to the expiration of the Survival Period shall
not be valid or effective, and Buyer shall have no liability with respect
thereto.
 
5.
Interim Operation of the Property

 

 
5.1
Lease Matters

 
(o) Provided that Buyer is not in default under this Agreement (after notice
from Seller thereof), Seller shall not execute any new leases of the Property or
modify, renew or extend any existing leases, in a manner which will reduce the
rent payable thereunder, change the expiration date thereof, increase Seller’s
obligations or adversely affect Seller’s rights or interest as landlord
thereunder, or decrease the Tenant’s obligations or increase the Tenant’s rights
as tenant thereunder, or execute any other agreements affecting the Property
that will survive the Closing, without first obtaining Buyer’s written consent
(or deemed consent pursuant to this Section 5.1(a)) thereto, which consent shall
not be unreasonably withheld or delayed. If Buyer fails to respond within
three (3) business days after receipt of a written request from Seller for
Buyer’s consent to any of the foregoing (which request shall be accompanied by a
copy of the proposed lease, lease modification or other agreement), Buyer shall
be deemed to have consented
 

 

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to the same. If Seller, with Buyer’s consent (or deemed consent) as described
above, enters into any leases of the Property or modifies any existing leases
after the Effective Date and before the Closing Date, then, provided the Closing
occurs, any Tenant Improvement Costs, any leasing commissions, and any other
monetary concessions (excluding free rent) incurred in connection with such new
leases or lease modifications shall be allocated between Seller and Buyer on a
pro rata basis based on the relative duration of the portion of the term of a
new lease (or the relative portion of a modified lease from and after the
effective date of the modification in the case of a lease modification)
occurring prior to or after the Closing. Any free rent shall be borne by the
party that owns the Property during the period(s) to which free rent is
applicable. Seller shall be given a credit at Closing for all amounts paid by
Seller for Tenant Improvement Costs, leasing commissions or other monetary
concessions (excluding free rent) in connection with such new leases or lease
modifications to the extent such payments exceed Seller’s share of such items as
determined pursuant to the immediately preceding sentence. In addition, if any
leasing commissions, Tenant Improvement Costs or other monetary concessions
(excluding free rent) are payable after the Closing Date with respect to such
new leases or lease modifications, Buyer shall assume the obligation to pay the
same (subject to a credit in favor of Buyer at the Closing for Seller’s share,
if any, of such costs as determined above to the extent Seller has not paid an
amount equal to or in excess of its share of such costs), and any contracts
pursuant to which any such obligations are incurred shall be assigned to, and
assumed by, Buyer at the Closing. Notwithstanding the foregoing, in no event
shall Seller have any obligation to undertake or cause Burnham or Landmark to
undertake any efforts or activity to lease any portion of the Property after the
Effective Date, and Seller may instead refer any parties interested in leasing
the Property to Buyer.
 
(b) Provided that Buyer is not in default under this Agreement (after notice
from Seller thereof), Seller shall not, without Buyer’s prior written consent,
grant consent or approval to any request made by a Tenant unless Seller is
obligated under the applicable lease to grant such consent or approval (without
the right to exercise judgment or discretion) or unless such consent or approval
would not materially increase the obligations of Seller or adversely affect
Seller’s rights or interest as landlord under the lease. Buyer agrees to advise
Seller, within three (3) business days after Buyer’s receipt of Seller’s notice
of a Tenant’s request for such consent or approval (or, if earlier, three (3)
days before the date when such response is required under the applicable lease,
so long as Seller’s notice identifies such earlier deadline), whether Buyer
elects that such Tenant’s request be granted or denied (and provide, in
reasonable detail, the reasons for any denial), which election shall be made
pursuant to the reasonableness requirements, if any, set forth in the applicable
lease or implied under California law, or in Buyer’s judgment if no such
requirements are set forth in such lease or implied under California law. If
Buyer fails to timely respond to Seller’s notice, Seller may grant or deny
consent to the Tenant’s request in Seller’s sole discretion, and Seller shall
have no liability to Buyer therefor.
 

 
5.2
Certain Leases and Other Agreements

 
(p) Except as provided in the immediately following sentence Seller agrees to
pay (and shall not receive a credit at the Closing for any amounts paid for) the
Tenant Improvement Costs, leasing commissions and any other monetary concessions
(excluding free rent) associated with any leases, or any modification, renewal
or extension entered into (or exercised, in the case of an option) prior to the
Effective Date, but without giving effect to any renewals or modifications
 

 

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thereof after the Effective Date (which modifications, renewals or extensions
after the Effective Date shall be governed by Section 1.1(b)). Notwithstanding
the foregoing, Buyer shall be responsible for the payment of any leasing
commissions, Tenant Improvement Costs or other monetary concessions (excluding
free rent) identified on Schedule 1.1(p), regardless of when the same become
payable, and to the extent the rights and obligations with respect to the
payment of the same have not been paid as of the Closing and are set forth in
agreements, such rights and obligations shall be assigned to, and assumed by,
Buyer at the Closing. To the extent Seller pays any leasing commissions, Tenant
Improvement Costs or other monetary concessions (excluding free rent) identified
on Schedule 1.1(p) before the Closing, provided the Closing occurs, Seller shall
be given a credit at Closing for the same. Any free rent shall be borne by the
party that owns the Property during the period(s) to which free rent is
applicable.
 

 
5.3
Operation of Property

 
Seller agrees to keep substantially similar insurance coverage in effect with
respect to the Property as is in effect on the Effective Date until the Closing.
During the period from the Effective Date through the Closing, Seller shall
operate, manage, maintain and repair the Property in a manner consistent with
Seller’s practices in effect prior to the Effective Date, provided that Seller
shall not make any capital improvements to the Property except as required under
the term of any Lease.
 

 
5.4
Survival

 
The provisions of this Section 5 pertaining to the payment of leasing
commissions, Tenant Improvement Costs and any other monetary concessions with
respect to Leases shall survive the Closing.
 
6.
Conditions to Closing

 

 
6.1
Conditions to Buyer’s Obligations to Close

 
The obligation of Buyer to consummate the purchase of the Property as
contemplated by this Agreement is subject to the fulfillment of each of the
following conditions (in addition to such other items as are set forth elsewhere
in this Agreement as conditions to Buyer’s obligations to close), any or all of
which may be waived in whole or in part by Buyer to the extent permitted by
applicable law:
 
(a) Delivery of Documents. Seller shall have deposited into Escrow all
instruments and documents to be delivered by Seller to Buyer at the Closing
under the provisions of this Agreement.
 
(q) Title Policy. The Title Company shall be committed to issue at Closing an
owner’s title insurance policy, or an irrevocable binder to issue the same,
dated as of the Closing Date, in the full amount of the Purchase Price, showing
title to the Premises in the name of Buyer, the form of which shall be CLTA
standard coverage; provided that if Buyer obtains an updated ALTA survey of the
Property, in form sufficient to satisfy the requirements of the Title Company
for the issuance of an ALTA owner’s policy of title insurance, then the form
shall be ALTA (10/17/92) Standard Form B, with extended coverage, (the “Title
Policy”), which Title Policy
 

 

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shall be subject only to the standard exclusions from coverage contained in such
policy and the Permitted Exceptions, together with such endorsements as
specified in Section 1.1(f) above.
 
(r) Estoppel Certificates. Seller agrees to use its commercially reasonable
efforts to obtain and deliver to Buyer an estoppel certificate substantially in
the form of Exhibit A (except where the lease of such Tenant specifies a
different form, in which case such different form shall be used) dated not more
than forty-five (45) days prior to the original Closing Date specified in
Section 1.1(a) below from each Tenant; provided, however, that with respect to
any Lease with the United States General Services Administration (the “GSA”) or
the State of California (the “State”) as Tenant, an estoppel certificate on the
standard form used by the GSA or the State shall be permitted, whether or not
such form is attached to the Lease. The condition to the obligation of Buyer to
consummate the Closing shall be the delivery to Buyer of estoppel certificates
satisfying the provisions of this Section 1.1(r) from the following Tenants:
(i) each Tenant under a Lease pertaining to more than 20,000 rentable square
feet of space (each, a “Major Tenant”), and (ii) such other Tenants that in the
aggregate with the Major Tenants lease not less than eighty percent (80%) of the
square footage of the Improvements currently leased to Tenants. The estoppel
certificates to be delivered to Buyer shall be consistent in all material
respects with the terms of the applicable Lease as previously delivered to
Buyer, and shall disclose no material defaults or alleged material defaults by
either Seller or the Tenant under such Lease or any Tenant bankruptcy or any
dispute between Seller and a Tenant except for any defaults, bankruptcies or
disputes disclosed to Buyer prior to the expiration of the Investigation Period.
Buyer’s failure to notify Seller of any objections to any estoppel certificate
within three (3) business days of Buyer’s receipt of the same shall constitute
Buyer’s acknowledgement that such estoppel certificate satisfies the
requirements of this Section 1.1(r). To the extent Seller is unable, despite the
exercise of reasonable diligence, to obtain the number of estoppel certificates
required under this subparagraph (r), at Seller’s option Seller shall have the
right with respect to any Leases other than Leases with Major Tenants that in
the aggregate do not pertain to more than five percent (5%) of the square
footage of the Improvements currently leased to Tenants, to submit in lieu
thereof, at Seller’s option, a certificate signed by Seller with respect to the
applicable Lease and otherwise complying with the requirements of this
subparagraph (r), but the matters described in paragraphs 8, 9, 10 and 12 of
Exhibit A shall be qualified to Seller’s knowledge (a “Seller’s Lease
Certificate”). The representations in any such Seller’s Lease Certificate shall
survive the Closing until the expiration of the Survival Period or such earlier
date as the same shall be replaced by an estoppel certificate for the applicable
Tenant meeting the requirements set forth above.
 
(d) Seller’s Compliance. Seller shall have performed and satisfied all material
covenants and material obligations of Seller under this Agreement to the extent
such covenants and obligations are to be performed or satisfied as of the
Closing Date.
 
The conditions set forth in this Section 6.1 are solely for the benefit of Buyer
and may be waived only by Buyer. Buyer shall at all times have the right to
waive any condition. Any such waiver or waivers shall be in writing and shall be
delivered to Seller and Escrow Holder. If any of the conditions in this
Section 6.1 is not satisfied or has not been so waived by Buyer prior to the
Closing Date, Buyer shall deliver written notice to Seller describing the
condition that has not been satisfied or waived, and if such condition remains
unsatisfied as of the Closing Date, then Buyer shall have the right to terminate
this Agreement and the Escrow by written notice to Seller
 

 

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and Escrow Holder. If Buyer terminates this Agreement in accordance with the
foregoing, the Deposit shall be refunded to Buyer, all documents deposited into
Escrow shall be returned to the party depositing such documents, and neither
party shall have any further rights or obligations under this Agreement, except
for those rights or obligations which expressly survive the termination of this
Agreement. Further, if the failure of such condition also constitutes a default
of Seller under this Agreement, then in lieu of terminating this Agreement,
Buyer may elect to proceed under either of the options provided under clauses (
) or (i) of Section 1.1(b).
 

 
6.2
Conditions to Seller’s Obligations to Close

 
The obligation of Seller to consummate the sale of the Property as contemplated
by this Agreement is subject to the fulfillment of each of the following
conditions (in addition to such other items as are set forth elsewhere in this
Agreement as conditions to Seller’s obligations to close), any or all of which
may be waived in whole or in part by Seller to the extent permitted by
applicable law:
 
(a) Deposit of Funds. Buyer shall have deposited into Escrow the Purchase Price,
subject to adjustment for any prorations and credits provided hereunder, and all
other monies required to be deposited by Buyer hereunder.
 
(b) Delivery of Closing Documents. Buyer shall have deposited into Escrow all
instruments and documents to be delivered by Buyer to Seller at the Closing
under the provisions of this Agreement.
 
(c) Buyer’s Compliance. Buyer shall have performed and satisfied all material
covenants and material obligations of Buyer under this Agreement to the extent
such covenants and obligations are to be performed or satisfied as of the
Closing Date.
 
The conditions set forth in this Section 6.2 are solely for the benefit of
Seller and may be waived only by Seller. Seller shall at all times have the
right to waive any condition. Any such waiver or waivers shall be in writing and
shall be delivered to Buyer and Escrow Holder. If any of the conditions in this
Section 6.2 is not satisfied or has not been so waived by Seller prior to the
Closing Date, Seller shall deliver written notice to Buyer describing the
condition that has not been satisfied or waived, and if such condition remains
unsatisfied as of the Closing Date, then Seller shall have the right to
terminate this Agreement and the Escrow by written notice to Buyer and Escrow
Holder. If Seller terminates this Agreement in accordance with the foregoing,
the Deposit shall be returned to Buyer or paid over to Seller, as required by
the terms of this Agreement, all documents deposited into Escrow shall be
returned to the party depositing such documents, and neither party shall have
any further rights or obligations under this Agreement, except for those rights
or obligations which expressly survive the termination of this Agreement;
provided, however, if the failure of such condition also constitutes a default
of Buyer under this Agreement, then the provisions of Section 1.1(t) shall
apply, and the Deposit shall be paid to Seller as liquidated damages, rather
than being returned to Buyer. Without limiting the foregoing, in the event of
Buyer’s default, Seller’s termination of this Agreement pursuant to this
Section 6.2 shall not constitute a waiver of Seller’s right to recover
liquidated damages from Buyer pursuant to Section 1.1(t).
 
 

 

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7.
Closing and Transfer of Title

 

 
1.1
Closing Date

 
(s) Provided that all of the conditions precedent to the Closing have been
satisfied or waived, the Closing 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 Escrow Holder at 10:00 a.m. California time on January 30, 2006, or
such earlier date and time as Buyer and Seller may mutually agree upon in
writing (the “Closing Date”). Notwithstanding the foregoing, Seller shall have
the right, by written notice to Buyer, given no later than three (3) business
days prior to the then-scheduled Closing Date, to extend the Closing Date one or
more times, but not for a period of longer than thirty (30) days in the
aggregate, (i) if additional time is necessary for Seller to complete any
Curative Action, or (ii) if the condition set forth in Section 1.1(r) has not
been satisfied by the originally scheduled Closing Date.
 
(t) Pursuant to the provisions of this Section 7.1(b), Buyer shall have two (2)
options to extend the Closing Date for fifteen (15) days each (each referred to
as an “Extension Option”). In order to exercise the first Extension Option (the
“First Extension Option”), Buyer shall deliver, no later than two (2) business
days prior to the then-scheduled Closing Date, (i) written notice to Seller and
Escrow Holder (which may be given by electronic mail, so long as receipt is
confirmed telephonically with Janine Roberts or Craig Etlin at the phone numbers
listed for such persons in Section 14 below) that Buyer is exercising the First
Extension Option, (ii) immediately available funds in an amount equal to One
Million Five Hundred Thousand Dollars ($1,500,000.00) (the “First Extension
Deposit”) to Escrow Holder, and (iii) written instructions to the Escrow Holder,
with a copy to Seller, to immediately release to Seller the entire amount of the
Initial Deposit then being held by Escrow Holder. If Buyer exercises the First
Extension Option, Buyer shall be deemed to have waived any liability of Seller
and any right to refuse to consummate the Closing by reason of any condition
known to Buyer as of the date Buyer exercises the First Extension Option, except
to the extent the cure of any such condition is an express condition to Closing
pursuant to another section of this Agreement. Provided that Buyer timely and
properly exercises the First Extension Option, then in order to exercise the
second Extension Option (the “Second Extension Option”), Buyer shall deliver, no
later than two (2) business days prior to the then-scheduled Closing Date,
(i) written notice to Seller and Escrow Holder (which may be given by electronic
mail, so long as receipt is confirmed telephonically with Janine Roberts or
Craig Etlin at the phone numbers listed for such persons in Section 14 below)
that Buyer is exercising the Second Extension, and (ii) immediately available
funds in an amount equal to One Million Five Hundred Thousand Dollars
($1,500,000.00) (the “Second Extension Deposit”) to Escrow Holder. If Buyer
exercises the Second Extension Option, Buyer shall be deemed to have waived any
liability of Seller and any right to refuse to consummate the Closing by reason
of any condition known to Buyer as of the date Buyer exercises the Second
Extension Option, except to the extent the cure of any such condition is an
express condition to Closing pursuant to another section of this Agreement. In
the event Buyer exercises the First Extension Option, the Deposit (including the
First Extension Deposit and, if applicable, the Second Extension Deposit) shall
not be refundable except in the event of termination of this Agreement by Buyer
pursuant to Sections 4.5 (unless such termination is due solely to any
exceptions or qualifications of one or more of the representations and
warranties set forth in the following Sections: (1) Section 1.1(d)(ii), except
for a material
 

 

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landlord default; (2) Section 1.1(d)(iii) and (iv); (3) Section 4.3(i);
(4) Section 4.3(j), except to the extent caused by Seller, its agents, employees
or contractors; and (5) Section 4.3(k)), 6.1, 9.2 (but only in the case of an
uninsured casualty), or 10(b)(ii). No interest shall accrue on any portion of
the Deposit following payment or release thereof to Seller.
 

 
1.2
Seller’s Deliveries

 
At the Closing, or at such later date as may be indicated below for any specific
item, Seller shall deliver or cause to be delivered to Buyer through the Escrow
or otherwise, each of the following instruments and documents, duly executed and
acknowledged by Seller, as appropriate:
 
(a) One (1) original of a Grant Deed in the form attached hereto as Exhibit B
(the “Deed”), subject only to the Permitted Exceptions.
 
(b) Four (4) originals of a Bill of Sale in the form attached hereto as
Exhibit C.
 
(c) Fully executed originals (or copies thereof in the event the originals are
not available) of all Leases (which may delivered within five (5) days after the
Closing), and four (4) originals of an Assignment and Assumption of Leases in
the form attached hereto as Exhibit D.
 
(d) Fully executed originals (or copies thereof in the event the originals are
not available) of all Miscellaneous Agreements (which may be delivered within
five (5) days after the Closing), and four (4) originals of an Assignment and
Assumption of Miscellaneous Agreements with respect thereto in the form attached
hereto as Exhibit E.
 
(e) Originals (or, if originals are unavailable, copies), of all assignable
Permits and Warranties (which may be delivered within five (5) days after the
Closing), unless the same are posted at the Property, and four (4) originals of
an Assignment and Assumption of Permits, Intangible Property and Warranties with
respect thereto in the form attached hereto as Exhibit F.
 
(f) Four (4) originals of a Seller’s Closing Certification, in the form attached
hereto as Exhibit G.
 
(g) Any required real estate transfer tax declarations or any other similar
documentation required to evidence the payment of any tax imposed by the state,
county and city on the transaction contemplated hereby.
 
(h) Four (4) originals of an affidavit pursuant to Section 1445(b)(2) of the
United States Internal Revenue Code (the “Federal Code”), and on which Buyer is
entitled to rely, from Seller that it is not a “foreign person” within the
meaning of Section 1445(f)(3) of the Federal Code, in the form attached hereto
as Exhibit H attached hereto (the “FIRPTA Affidavit”).
 
(i) Four (4) originals of a properly executed certificate (herein, a “Qualifying
Certificate”) under Section 18662 of the California Revenue and Taxation Code
(“CALFIRPTA”) certifying that Seller is not an “individual” seller under
CALFIRPTA and either (i) has a permanent place of business in California, or
(ii) is qualified to do business in California or (iii) is exempt from
 

 

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the CALFIRPTA withholding requirements (if so, such certificate shall specify
the applicable exemption).
 
(j) Five (5) originals of a Designation Agreement in the form attached hereto as
Exhibit I.
 
(k) A Letter to Tenants in the form attached hereto as Exhibit J, advising of
the sale of the Premises and the address to which future rent should be
delivered (which will be delivered to the tenants by Seller or its property
manager unless otherwise mutually agreed to by Seller and Buyer).
 
(l) A Notice to Vendors in the form attached hereto as Exhibit K (which may be
delivered to the vendors by Seller or its property manager unless otherwise
mutually agreed to by Seller and Buyer).
 
(m) To the extent in Seller’s possession or reasonable control, all keys and
combinations to all locks on the Improvements.
 
(n) Such other customary documents and instruments as may be required by any
other provision of this Agreement or as may reasonably be required to carry out
the terms and intent of this Agreement; provided that Seller shall not be
obligated to cause the delivery of any such instrument or document that would
increase or expand Seller’s obligations or liability under this Agreement.
 
(o) Copies of all books, records, and files of Seller in Seller’s possession
relating to the Premises and operations thereof, including Tenant files
(excluding any proprietary matters, such as appraisals and tax returns), and, to
the extent in Seller’s possession or available to Seller at no material cost,
architects’ drawings, blueprints and as-built plans for the Improvements (all of
which may be delivered within five (5) days after the Closing).
 

 
1.3
Buyer’s Deliveries

 
At the Closing, Buyer shall deliver or cause to be delivered to Seller each of
the following instruments and documents, duly executed and acknowledged by
Buyer, as appropriate:
 
(u) Counterparts of the closing documents referenced in Sections 1.1(c), (t),
(t), (t) and (t) above.
 
(b) Four (4) originals of a Buyer’s Closing Certification, in the form attached
hereto as Exhibit L.
 
(c) Such other documents and instruments as may be required by any other
provision of this Agreement or as may reasonably be required to carry out the
terms and intent of this Agreement; provided that Buyer shall not be obligated
to cause the delivery of any such instrument or document that would increase or
expand Buyer’s obligations or liability under this Agreement.
 
 

 

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1.4
Possession of the Property

 
At the Closing, possession of the Property shall be delivered to Buyer, subject
to the Permitted Exceptions.
 
8.
Prorations and Adjustments

 

 
1.1
General

 
The following adjustments shall be made with respect to the Property, and the
following procedures shall be followed:
 
(a) Preparation of Prorations. At least five (5) days before the Closing Date,
Seller shall prepare and deliver, or cause Escrow Holder to prepare and deliver,
to Buyer an unaudited statement for the Property (the “Preliminary Proration
Statement”) showing prorations for the items set forth below, calculated as of
12:01 a.m. on the Closing Date, on the basis of a 365-day year. Buyer and its
representatives shall be afforded reasonable access to Seller’s books and
records with respect to the Property and Seller’s work papers pertaining to the
Preliminary Proration Statement to confirm the accuracy of the Preliminary
Proration Statement. Buyer and Seller shall agree upon any adjustments to be
made to the Preliminary Proration Statement before the Closing, and at the
Closing, Buyer or Seller, as applicable, shall receive a credit equal to the net
amount due Buyer or Seller, as applicable, pursuant to the Preliminary Proration
Statement as finally agreed upon by Buyer and Seller. The items to be covered by
the Preliminary Proration Statement are as follows:
 
(i) rents, including percentage rents, escalation charges for real estate taxes,
parking charges, marketing fund charges, operating expense prepayments and
reimbursements from Tenants, maintenance escalation rents or charges,
cost-of-living increases or other charges of a similar nature, if any, and any
additional charges and expenses payable under the Leases (but only to the extent
collected before the Closing Date); provided that if any of the foregoing are
not finally adjusted between the landlord and Tenant under any Lease until after
the preparation of the Preliminary Proration Statement then proration of such
items shall be subject to adjustment pursuant to Section 1.2 below;
 
(ii) non-delinquent real property taxes and assessments; provided that if the
real property tax assessment for the fiscal year in which the Closing occurs has
not been issued as of the Closing Date, real property taxes shall be prorated
based on the most recent assessed value of the Property, multiplied by the
current tax rate, and such tax proration shall be subject to adjustment pursuant
to subparagraph (v) of this Section 1.1;
 
(iii) the current installment (only) on any improvement bonds which are a lien
on the Property; Buyer shall take the Property subject to all future
installments of any improvement bonds;
 
(iv) water, sewer and utility charges;
 
(iii) amounts payable under the Miscellaneous Agreements (including crediting
Seller any amount to be credited pursuant to Section 5.1 above); and
 
 

 

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(vi) any other expenses normal to the operation and maintenance of the Property.
 
(v) Principles of Prorations; Collections and Payments. Subject to the
prorations to be made pursuant to this Section 8, after the Closing Buyer shall
collect all revenues and pay all expenses with respect to the Property, even if
such revenues and expenses relate to periods before the Closing; provided,
however, if any Tenant sends payments to Seller after the Closing, Seller shall
deposit such payments to its bank account, and promptly after such payment has
cleared, pay to Buyer any portion of such payment to which Buyer is entitled
under the provisions of this Section 8. Buyer shall use reasonable efforts
consistent with prudent business practices to collect rents or other amounts
payable under the Leases that were delinquent as of the Closing Date and that
relate to a period before the Closing, provided that Buyer shall not be required
to commence an action for unlawful detainer or otherwise bring legal action
against any such Tenant. To the extent such delinquent rents and other amounts
are collected by Buyer, Buyer may deduct from the amount owed to Seller an
amount equal to the out-of-pocket third-party collection costs (including
attorneys’ fees and costs) actually incurred by Buyer in collecting such rents
and other amounts due to Seller. Subject to the foregoing sentence, any rent or
other payment collected after the Closing from any Tenant which owed rent that
was delinquent as of the Closing Date shall be applied first, to such Tenant’s
unpaid monetary obligations under the applicable Lease with respect to any
periods from the Closing Date through the end of the month in which such payment
is made, in such order as Buyer may elect, until such monetary obligations have
been paid in full; any remaining amount of such payment shall be paid over to
Seller, for application against such Tenant’s delinquent monetary obligations
under the applicable Lease with respect to any periods before the Closing Date,
in such order as Seller may elect, until such delinquent monetary obligations
have been paid in full; and any remaining amount of such payment shall be
retained by Buyer for application against such Tenant’s future obligations under
the applicable Lease. Notwithstanding the foregoing, or the provisions of
Section 1.1(a) above, if any Tenant pays rent in arrears and as of the Closing
such Tenant is not then in default in the payment of base rent under such
Tenant’s Lease, then rent due for such Tenant for the month in which the Closing
occurs shall be prorated between Buyer and Seller at Closing, whether or not the
same has been paid by the Tenant. In addition, in calculating the prorations
pursuant to this Section 8, Seller shall receive a credit in the amount of any
utility, municipality or other deposits relating to the Property made by Seller
and which are assigned to Buyer at the Closing. Seller shall be entitled to seek
a refund of any deposits not assigned to Buyer and Buyer shall cooperate with
Seller’s efforts to obtain such refund.
 
(c) Security Deposits. At the Closing, Seller shall assign and deliver to Buyer
all prepaid rent, security deposits, letters of credit and other collateral
actually received by Seller pursuant to any of the Leases, less any portions
thereof applied in accordance with the respective Lease (together with a
statement regarding such applications).
 
(w) Post-Closing Adjustments. Notwithstanding anything to the contrary contained
in this Section 8, (i) if the amount of the real property taxes and assessments
payable with respect to the Property for any period before Closing is determined
to be more than the amount of such real property taxes and assessments that is
prorated herein (in the case of the current year) or that was paid by Seller (in
the case of any prior year), due to a reassessment of the value of the Property
or otherwise, Seller and Buyer shall promptly adjust the proration of such real
property taxes and assessments after the determination of such amounts, and
Seller shall pay to Buyer any increase
 

 

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in the amount of such real property taxes and assessments applicable to any
period before Closing; provided, however, that Seller shall not be required to
pay to Buyer any portion of such increase that is payable by Tenants under their
respective Leases; and (ii) if the amount of the real property taxes and
assessments payable with respect to the Property for any period before Closing
is determined to be less than the amount of such real property taxes and
assessments that is prorated herein (in the case of the current year) or that
was paid by Seller (in the case of any prior year), due to an appeal of the
taxes by Seller, a reassessment of the value of the Property or otherwise,
Seller and Buyer shall promptly adjust the proration of such real property taxes
and assessments after the determination of such amounts (net of any costs
incurred by Seller in connection with pursuing any appeal thereof), and
(A) Buyer shall pay to Seller any refund received by Buyer representing such a
decrease in the amount of such real property taxes and assessments applicable to
any period before Closing; provided, however, that Buyer shall not be required
to pay to Seller any portion of such refund which is payable to Tenants under
their respective Leases (other than a portion of such refund equal to the amount
of all costs incurred by Seller in connection with pursuing any appeal thereof
that the landlord is entitled to deduct from the refunds payable to Tenants
under the terms of their respective Leases); and (B) Seller shall be entitled to
retain any refund received by Seller representing such a decrease in the amount
of such real property taxes and assessments applicable to any period before
Closing; provided, however, that Seller shall pay to Buyer that portion of any
such refund, after first deducting any and all costs incurred by Seller in
connection with pursuing such refund, that is payable to Tenants under their
respective Leases. Each party shall give notice to the other party of any
adjustment of the amount of the real property taxes and assessments payable with
respect to the Property for any period before Closing within thirty (30) days
after receiving notice of any such adjustment.
 

 
1.2
Post Closing Reconciliation

 
(x) Certain Delayed Prorations. If any Tenants are required to pay percentage
rents, escalation charges for real estate taxes, parking charges, marketing fund
charges, operating expenses, maintenance escalation rents or charges,
cost-of-living increases or other charges of a similar nature (“Additional
Rents”), then, with respect to those Additional Rents which are not finally
adjusted between the landlord and Tenant under any Lease until after the
preparation of the Preliminary Proration Statement pursuant to Section 1.1(a)
above, Buyer shall submit to Seller, no later than March 31, 2007, an unaudited
statement for the Property (a “Supplemental Proration Statement”) covering any
such Additional Rents or any other items which have been finally adjusted
between Buyer and such Tenants for the 2006 calendar year, containing a
calculation of the prorations of such Additional Rents and such other items,
prepared based on the principles set forth in Section 1.1(a) above, provided
that in making such adjustment, the parties shall exclude any Additional Rents
arising from increased real property taxes for the Property to the extent such
increase results from Buyer’s purchase of the Property. In order to enable Buyer
to make any year-end reconciliations of Additional Rents with Tenants for the
2006 calendar year, following the Closing, Seller shall deliver to Buyer a final
statement of (i) all operating expenses for the Property which are actually paid
by Seller and permitted to be passed through to Tenants pursuant to the terms of
each Tenant’s respective Lease, with respect to the portion of the 2006 calendar
year occurring prior to the Closing (“Seller’s 2006 Actual Operating Expenses”),
together with copies of all documentation evidencing Seller’s 2006 Actual
Operating Expenses, including copies of third-party invoices and copies of
Seller’s books and records
 

 

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applicable thereto, and (ii) all estimated payments of Additional Rents received
by Seller from Tenants with respect to the portion of the 2006 calendar year
occurring prior to the Closing. If Additional Rents for the 2005 calendar year
have not finally adjusted between Seller and any Tenant as of the Closing,
Seller shall retain all rights and obligations with respect to the adjustment
thereof directly with the Tenant following the Closing, subject to the
provisions of Section 1.1(w) above. Without limiting the generality of the
foregoing, but subject to the provisions of Section 1.1(w) above, Seller shall
retain all rights to bill and collect any additional amounts owing by any Tenant
with respect to Additional Rents for the 2005 calendar year, and shall remain
obligated to pay any refund owing to any Tenant for overpayment of Additional
Rents for the 2005 calendar year.
 
(b) Audit Rights for Supplemental Proration Statements. Seller and its
representatives shall be afforded the opportunity to review all underlying
financial records and work papers pertaining to the preparation of all
Supplemental Proration Statements, and Buyer shall permit Seller and its
representatives to have full access to the books and records in the possession
of Buyer or any party to whom Buyer has given custody of the same relating to
the Property to permit Seller to review the Supplemental Proration Statements.
Any Supplemental Proration Statement prepared by Buyer shall be final and
binding for purposes of this Agreement unless Seller shall give written notice
to Buyer of disagreement with the prorations contained therein within sixty (60)
days following Seller’s receipt of such Supplemental Proration Statement,
specifying in reasonable detail the nature and extent of such disagreement. If
Buyer and Seller are unable to resolve any disagreement with respect to any
Supplemental Proration Statement within ten (10) business days following receipt
by Buyer of the notice referred to above, either party may pursue any remedy
available for the resolution of such dispute.
 
(y) Payments for Adjustments. Any net credit due Seller or Buyer, as the case
may be, shall be paid to Seller or Buyer, as the case may be, within
seventy-five (75) days after the delivery of a Supplemental Proration Statement
to Seller, unless Seller approves any such statement before the expiration of
the applicable sixty (60) day period provided in Section 1.1(b) above, in which
case such payment shall be made within fifteen (15) days after Seller notifies
Buyer of such approval, or unless Seller notifies Buyer of a disagreement with
respect to any such statement as provided in Section 1.1(b) above, in which case
such payment (less a hold back sufficient to cover the amount of the
disagreement) shall be made within fifteen (15) days after Seller notifies Buyer
of such disagreement, and any further payment due after such disagreement is
resolved shall be paid within fifteen (15) days after the resolution of such
disagreement.
 

 
1.3
Survival

 
The obligations of Seller and Buyer under this Section 8 shall survive the
Closing.
 
9.
Risk of Loss and Insurance Proceeds

 

 
1.1
Minor Loss

 
Except in the case of a Major Loss (as defined in Section 1.2 below), Buyer
shall be bound to purchase the Property for the full Purchase Price as required
by the terms hereof, without
 

 

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regard to the occurrence or effect of any damage to the Property or destruction
of any Improvements or condemnation of any portion of the Property, and 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 (which, for purposes of this Article 9 shall
also include the insured’s share of any co-insurance), less any sums expended by
Seller toward the restoration or repair of the Property as a result of such
casualty or condemnation; provided, however, with respect to the deductible
under any policy of earthquake insurance, Seller shall have no obligation to
give Buyer a credit in excess of Twenty-Five Thousand Dollars ($25,000.00). If
the proceeds or awards have not been collected as of the Closing, then such
proceeds or awards shall be assigned to Buyer at Closing, and Buyer shall
receive a credit from Seller at Closing equal to the amount of the deductible
under any policy of insurance pursuant to which such assigned proceeds will be
paid; provided that if Seller shall have expended any sums before the Closing to
repair or restore the Property, the amount expended by Seller shall first be
deducted from any credit due Buyer for the deductible under any insurance
policy, and if the amount expended by Seller exceeds the total amount of such
deductible(s), Seller shall reserve from the assignment of insurance proceeds to
Buyer, the amount of such excess. If damage due to an earthquake occurs and the
cost to repair the damage exceeds Twenty-Five Thousand Dollars ($25,000.00),
then unless Seller notifies Buyer within twenty (20) days after the occurrence
thereof that it will waive the Twenty-Five Thousand Dollar ($25,000.00)
limitation on the credit to Buyer, then such loss or damage shall be governed by
Section 1.2.
 

 
1.2
Major Loss

 
If (i) the cost to repair such damage or destruction to Property exceeds Three
Million Dollars ($3,000,000), or(ii) in the case of condemnation, if either the
value of the portion of the Property taken exceeds Three Million Dollars
($3,000,000) or the portion of the Property that is taken causes the Property to
be in violation of any existing laws or governmental regulations or would permit
any Tenant(s) occupying in the aggregate more than ten percent (10%) of the
rentable area of the Improvements to terminate their Leases, or (iii) in the
case of damage due to an earthquake which, under the terms of Section 1.1 above,
is to be governed by this Section 1.2 (any event in clause (i), (ii) or (iii)
above referred to herein as a “Major Loss”), then Buyer may, at its option to be
exercised by written notice to Seller within twenty (20) days after Seller’s
notice to Buyer of the occurrence of the damage or destruction or the
commencement of condemnation proceedings, either (a) elect to terminate this
Agreement, in which case the Deposit shall be refunded to Buyer, and neither
party shall have any further obligations under this Agreement, except for
obligations which expressly state that they shall survive termination of this
Agreement, or (b) consummate the purchase of the Property for the full Purchase
Price as required by the terms hereof, subject to the credits against the
Purchase Price provided below. If Buyer elects to proceed with the purchase of
the Property, then, upon the Closing, Buyer shall be given 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 damage or destruction
or condemnation, plus the amount of any insurance deductible, less any sums
expended by Seller toward the restoration or repair of the Property as a result
of such casualty or condemnation; provided, however, with respect to the
deductible under any policy of earthquake insurance, Seller shall have no
obligation to give Buyer a credit in excess of Twenty-Five Thousand Dollars
 

 

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($25,000.00). If the proceeds or awards have not been collected as of the
Closing, then such proceeds or awards shall be assigned to Buyer at Closing, and
Buyer shall receive a credit from Seller at Closing equal to the amount of the
deductible under any policy of insurance pursuant to which such assigned
proceeds will be paid; provided that if Seller shall have expended any sums
before the Closing to repair or restore the Property, the amount expended by
Seller shall first be deducted from any credit due Buyer for the deductible
under any insurance policy, and if the amount expended by Seller exceeds the
total amount of such deductible(s), Seller shall reserve from the assignment of
insurance proceeds to Buyer, the amount of such excess. If Buyer fails to give
Seller notice within such 20-day period, then Buyer will be deemed to have
elected to proceed in accordance with clause (b) above.
 
10.
Default

 
(z) Buyer’s Default. If the Closing does not occur as a result of Buyer’s
default hereunder, Seller’s sole and exclusive remedy shall be to terminate this
Agreement by giving written notice thereof to Buyer, whereupon the Deposit
(which for purposes of this Section 1.1(a) shall mean the portion of the Deposit
that has been previously delivered by Buyer to either Escrow Holder or Seller)
shall be paid to Seller as liquidated damages, as Seller’s sole and exclusive
remedy on account of such default hereunder by Buyer; provided, however, that
this provision will not limit Seller’s right to receive reimbursement for
attorneys’ fees pursuant to Section 1.1 below, nor waive or affect any
provisions of this Agreement which expressly state that they shall survive the
termination of this Agreement, and neither party shall have any further
liability or obligation to the other hereunder, except for provisions of this
Agreement which expressly state that they shall survive the termination of this
Agreement. The parties acknowledge and agree that Seller’s actual damages in the
event of Buyer’s default 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 that Seller would incur in such event.
The payment of the Deposit to Seller as liquidated damages under the
circumstances provided for herein is not intended as a forfeiture or penalty
within the meaning of Sections 3275 or 3369 of the California Civil Code, but is
intended to constitute liquidated damages to Seller pursuant to Sections 1671,
1676 and 1677 of the California Civil Code. By placing their initials below,
each party specifically confirms the accuracy of the statements made above, the
reasonableness of the amount of liquidated damages agreed upon, 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.
 
Initials:
DL
ML
 
Seller
Buyer

 

 

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(b) Seller’s Default. If the Closing does not occur as a result of Seller’s
default hereunder, then, Buyer may, at its sole election, proceed with one of
the following mutually exclusive alternatives:
 
(i) waive such default and proceed with the Closing with no reduction in the
Purchase Price; provided, however, that this provision will not waive or affect
any of Seller’s other obligations under this Agreement to be performed after the
Closing with respect to any matter other than such default;
 
(ii) terminate this Agreement, (A) whereupon the Deposit shall be returned and
paid to Buyer, (B) Seller shall pay to Buyer the out-of-pocket third party
expenses incurred by Buyer in connection with the negotiation of this Agreement,
the review, testing and analysis of the Property, the acquisition of a loan to
fund the Purchase Price, and/or other matters in preparation or furtherance of
the consummation of Closing, not to exceed One Hundred Fifty Thousand Dollars
($150,000.00) in the aggregate, and (C) neither party shall have any further
liability or obligation to the other hereunder, except for provisions of this
Agreement which expressly state that they shall survive the termination of this
Agreement; or
 
(i) file in any court of competent jurisdiction an action for specific
performance to cause Seller to convey the Property to Buyer pursuant to the
terms and conditions of this Agreement; but Buyer shall not be entitled to
recover monetary damages from Seller in connection with such default; provided,
however, that this provision will not limit Buyer’s right to receive
reimbursement for attorneys’ fees pursuant to Section 1.1 below, nor waive or
affect any of Seller’s other obligations under this Agreement to be performed
after the Closing with respect to any matter other than such default.
 
11.
Expenses

 
(a) All documentary stamp taxes and county transfer taxes shall be borne and
paid by Seller, and all recording fees shall be borne and paid one-half by
Seller and one-half by Buyer.
 
(b) All Escrow and Closing costs charged by Escrow Holder, and any investment
charges or escrow fees incurred with respect to the Escrow shall be borne and
paid one-half by Seller and one-half by Buyer.
 
(c) Seller shall pay the cost of a CLTA owner’s title insurance policy in the
amount of the Purchase Price and the cost of any endorsements obtained in
connection with a Curative Action undertaken by Seller. Buyer shall pay any
additional cost of the Title Policy (including the cost of ALTA extended
coverage and the cost of all endorsements, except for endorsements obtained in
connection with a Curative Action undertaken by Seller).
 
(aa) Buyer shall pay its due diligence expenses (including, but not limited to,
the cost of any updated survey obtained by Buyer pursuant to Section 3.1(a)
above), and each party shall pay its own attorneys’ fees in connection with the
negotiation, documentation and consummation of the transactions contemplated
hereunder. Each party shall pay its own costs of preparing and/or reviewing the
Preliminary Prorations Statement and any Supplemental Prorations Statement in
connection with this Agreement. The provisions of this Section 1.1(aa) shall
survive any termination of this Agreement.
 
 

 

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(e) Other costs, charges, and expenses shall be borne and paid as provided in
this Agreement, or in the absence of such provision, in accordance with the
custom in the county where the Premises are located.
 
12.
Brokers

 
(a) Seller represents to Buyer, and Buyer represents to Seller that (except for
Secured Capital Corp and Burnham Real Estate Services, Inc. (“Broker”), whose
commission will be paid by Seller pursuant to the terms of a separate agreement
between Broker and Seller), there is no broker, finder, or intermediary of any
kind with whom such party has dealt in connection with this transaction.
 
(b) Seller agrees to indemnify and hold harmless Buyer, the partners, members,
trustees, shareholders, directors and officers of Buyer, any party owning a
direct or indirect interest in Buyer, the affiliates of Buyer, and the partners,
members, trustees, shareholders, directors, officers, employees and agents of
each of the foregoing parties (the “Buyer-Related Parties”), from and against
all claims, demands, causes of action, judgments, and liabilities which may be
asserted or recovered for brokerage or finders fees, commissions, or other
compensation in connection with the transaction contemplated under this
Agreement claimed by any party other than Broker to be owing to such party due
to any dealings between Seller and the party claiming such fee, commission or
compensation, including costs and reasonable attorneys’ fees incident thereto.
Buyer agrees to indemnify and hold harmless the Seller-Related Parties, from and
against all claims, demands, causes of action, judgments, and liabilities which
may be asserted or recovered for brokerage or finders fees, commissions, or
other compensation in connection with the transaction contemplated under this
Agreement claimed by any party other than Broker to be owing to such party due
to any dealings between Buyer and the party claiming such fee, commission or
compensation, including costs and reasonable attorneys’ fees incident thereto.
The parties hereto agree that the foregoing obligations of indemnification shall
survive the Closing hereunder or the expiration or termination of this
Agreement, however caused.
 
13.
Assignment

 
Original Buyer may, upon written notice (an “Assignment Notice”) to Seller, not
later than five (5) business days before the Closing, assign its right to
purchase the Property hereunder to any other entity that is (and as of the
Closing shall continue to be) (i) controlled by Original Buyer through the
control by the Original Buyer of the managing general partner of the assignee’s
partnership or the managing member of the assignee’s limited liability company,
as the case may be, and (ii) an entity in which Original Buyer shall own,
directly or indirectly, more than twenty percent (20%) of the stock or other
equity interest, provided that such entity shall assume all obligations of Buyer
hereunder in a written agreement (the “Assignment”) reasonably acceptable to
Seller, including, specifically, reaffirmation of the release and
indemnification set forth in Section 4.2 above. Any Assignment Notice must
include the proposed form of the Assignment and the name and jurisdiction of
organization of the assignee. In addition, Buyer must deliver to Seller a copy
of the fully executed Assignment prior to the Closing Date. Except in compliance
with the preceding three sentences, Buyer may not assign this Agreement to any
other party without Seller’s prior written consent, which consent may be
granted, conditioned or denied in Seller’s sole and absolute discretion.
Notwithstanding anything herein to the contrary,
 

 

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Buyer shall not in any event be released from any of its obligations or
liabilities hereunder in the event of any assignment by Buyer, including, but
not limited to, any obligations which survive the Closing, whether contained in
this Agreement or any document to be delivered by Buyer at the Closing, even if
such document is signed by the assignee of Buyer only. Subject to the
limitations described herein, this Agreement shall be binding upon and shall
inure to the benefit of the parties hereto, and their respective successors and
assigns.
 
14.
Notices

 
Any and all notices or other communications required or permitted to be given
under this Agreement shall be in writing and either (i) personally delivered, in
which case notice shall be deemed delivered upon receipt, (ii) sent by
facsimile, in which case notice shall be deemed delivered upon the sender’s
receipt of confirmation of transmission of such facsimile notice produced by the
sender’s facsimile machine, (iii) sent by any nationally recognized overnight
courier service with provisions for proof of delivery, in which case notice
shall be deemed delivered on the next business day after the sender deposits the
same with such delivery service, or (iv) sent by United States Mail, postage
prepaid, certified mail, return receipt requested, in which case notice shall be
deemed delivered on the date of delivery as shown on the return receipt or the
date of the addressee’s refusal to accept delivery as indicated by the United
States Postal Service, and in any case such notices or other communication shall
be addressed to the following addresses:
 
Buyer:
 
Maguire Properties, L.P.
333 South Grand Avenue, Suite 400
Los Angeles, California 90071
Attention: Robert F. Maguire III and Mark Lammas
Telephone: (213) 626-3300
Telecopy: (213) 533-5107 and (213) 533-5198
 
with a copy to:
 
Munger, Tolles & Olson LLP
355 South Grand Avenue, Suite 3500
Los Angeles, California 90071
Attention: Jeffrey A. Heintz, Esq.
Telephone: (213) 683-9185
Telecopy: (213) 683-5185
 
Seller:
 
DL Pacific Center LP
c/o DRA Advisors, LLC
220 East 42nd Street, 27th Floor
New York, New York 10017
Attention: Ms. Janine Roberts
Telephone: (212) 697-4740
Telecopy: (212) 697-7403
 

 

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with a copy to:
 
Landmark Asset Management Group
100 Bayview Circle, Suite 200
Newport Beach, California 92660
Attention: Mr. A. Corey Hansen
Telephone: (949) 856-3100
Telecopy: (949) 856-3232
 
and a copy to:
 
Morrison & Foerster llp
425 Market Street
San Francisco, California 94105
Attention: Craig B. Etlin, Esq.
Reference: 23573/128
Telephone: (415) 268-7000
Telecopy: (415) 268-7522
 

Either party may change its address for notice from time to time by notice to
the other party in writing to the other in the manner aforesaid; provided that
any such notice of change of address shall only be effective upon actual receipt
by the other party.
 
15.
Miscellaneous

 

 
1.1
Attorneys’ Fees

 
In the event of any litigation between the parties with respect to the Property,
this Agreement, the Escrow, the performance of their obligations hereunder or
the effect of a termination under this Agreement, the losing party shall pay all
costs and expenses incurred by the prevailing party in connection with such
litigation including, without limitation, reasonable attorneys’ fees and
disbursements. Any such attorneys’ fees and other expenses incurred by either
party in enforcing a judgment in its favor under this Agreement shall be
recoverable separately from and in addition to any other amount included in such
judgment, and such attorneys’ fees obligation is intended to be severable from
the other provisions of this Agreement and to survive and not be merged into any
such judgment. Notwithstanding any provisions of this Agreement to the contrary,
the obligations of the parties under this Section 1.1 shall survive any
termination of this Agreement and the Closing.
 

 
1.2
Gender

 
Words of any gender used in this Agreement shall be held and construed to
include any other gender, and words in the singular number shall be held to
include the plural, and vice versa, unless the context requires otherwise.
 

 
1.3
Captions

 
The captions in this Agreement are inserted only for the purpose of convenient
reference and in no way define, limit or prescribe the scope or intent of this
Agreement or any part hereof.
 
 

 

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1.4
Construction

 
(a) No provision of this Agreement shall be construed by any Court or other
judicial authority against any party hereto by reason of such party’s being
deemed to have drafted or structured such provisions.
 
(b) As used herein, the terms “include”, “including” and similar terms shall be
construed as if followed by the phrase “but not limited to”. The terms “hereof”,
“herein” and “hereunder”, and words of similar import, shall be construed to
refer to this Agreement as a whole, and not to any particular article or
provision, except as expressly so stated.
 
(c) It is the intent of the parties that all indemnification obligations of the
either party set forth in this Agreement shall apply without regard to whether
or not (i) the indemnifying party is negligent or otherwise at fault in any
respect with regard to the existence or occurrence of any of the matters covered
by any such indemnification obligation, or (ii) the indemnifying party otherwise
caused or created, or is claimed to have caused or created, the existence or
occurrence of any of the matters covered by any such indemnification obligation,
whether through its own acts or omissions or otherwise.
 

 
1.5
Business Days; Deadlines

 
As used in this Agreement and any document executed by any party hereto to
another party hereto at the Closing, the term “business days” means all days of
the year except Saturdays, Sundays, and holidays recognized by the Federal
Reserve Bank of San Francisco. If a deadline provided in this Agreement or any
document executed by any party hereto to another party hereto at the Closing
falls on a day other than a business day, such deadline shall be extended until
the first business day thereafter.
 

 
1.6
Entire Agreement

 
This written Agreement, including all Schedules and Exhibits attached hereto
(including, but not limited to, the Access Agreement) and documents to be
delivered pursuant hereto, shall constitute the entire agreement and
understanding of the parties, and there are no other prior or contemporaneous
written or oral agreements, undertakings, promises, warranties, or covenants not
contained or merged herein. The Schedules and Exhibits attached hereto are
hereby incorporated in and made part of this Agreement.
 

 
1.7
Recording

 
The parties agree that this Agreement shall not be recorded. If Buyer causes
this Agreement or any notice or memorandum thereof to be recorded, this
Agreement shall be null and void at the option of Seller.
 

 
1.8
No Continuance

 
Buyer acknowledges that there shall be no assignment, transfer or continuance of
Seller’s insurance coverage after the Closing.
 
 

 

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1.9
Time of Essence

 
Time is of the essence of this Agreement. In the computation of any period of
time provided for in this Agreement or by law, the day of the act or event from
which said period of time runs shall be excluded, and the last day of such
period shall be included, unless it is not a business day, in which case the
period shall be deemed to run until the next day which is a business day.
 

 
1.10
Original Document

 
This Agreement may be executed by all parties in counterparts in which event
each shall be deemed an original, and all of which shall constitute one and the
same agreement.
 

 
1.11
Governing Law

 
This Agreement shall be governed by and construed in accordance with the laws of
the State of California.
 

 
1.12
Acceptance of Offer

 
In the event this Agreement is executed only by Buyer or Seller, this Agreement
shall be regarded only as an offer to purchase or sell, as applicable, and shall
not obligate either Buyer or Seller until this offer is accepted by execution
hereof by the other party (the “Second Party”) and delivered to the party that
first executed this Agreement (the “First Party”). If the Second Party has not
accepted this offer and delivered a fully executed copy of this Agreement to the
First Party within five (5) business days after its submission by the First
Party, this offer shall be of no force or effect.
 

 
1.13
Confidentiality

 
Buyer and Seller shall each maintain as confidential the terms of this Agreement
(including the Purchase Price) and any and all material or information about the
other, and, in the case of Buyer and its agents, employees, consultants and
contractors, about the Property, and shall not disclose such terms or
information to any third party, except, in the case of information about the
Property, to Buyer’s lender or prospective lenders, equity investors or
prospective equity investors, insurance and reinsurance firms, attorneys,
accountants, environmental assessment firms and other consultants, as may be
reasonably required for the consummation of the transaction contemplated
hereunder and/or as required by law; provided that Buyer shall inform such
parties as to the confidentiality of such materials and information and use all
reasonable efforts to cause such parties to abide by the confidentiality
provisions of this Agreement. In addition to, and without limiting the
generality of, the foregoing, with respect to any environmental assessment firm
employed directly or indirectly by Buyer for the purpose of reviewing or
analyzing the condition of the Property, Buyer shall obtain from any such party
a confidentiality agreement in the form attached hereto as Exhibit M for the
benefit of Seller. Buyer shall notify Seller, by facsimile, with a copy by
regular mail, at least three (3) business days before Buyer or Buyer’s agents,
employees or contractors make any disclosure that such party believes is
required by law; provided that, if a court order of a court of law with
appropriate jurisdiction requires disclosure within a period of less than
three (3) business days,
 

 

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Buyer shall notify Seller by facsimile immediately upon receipt of such order.
Further, Buyer agrees not to use or to allow to be used any such information for
any purpose other than to determine whether to proceed with the contemplated
purchase or to obtain a loan in connection therewith or to obtain insurance.
This provision shall survive the Closing or any termination of this Agreement,
provided that Buyer shall not be obligated to maintain as confidential any
material about the Property after the Closing. However, after Closing, Buyer
shall not make any public disclosures mentioning Seller or regarding the
provisions of this Agreement or the transaction accomplished at Closing without
the prior written consent of Seller. If the purchase and sale of the Property
pursuant hereto does not close for any reason, Buyer shall return to Seller all
agreements, documents, studies, reports and other materials pertaining to the
Property either delivered by Seller or Seller’s agents to Buyer pursuant hereto,
or, if requested by Seller, obtained by or on behalf of Buyer during Buyer’s
investigation of the Property (excluding any proprietary materials, such as
valuation or asset analysis, projections, software and other materials
constituting the work product of Buyer or its agents or consultants).
Notwithstanding anything herein to the contrary, each party shall have the right
to disclose information relating to the Property to its partners and their
direct and indirect owners, and their respective officers, employees, directors
and representatives, and the provisions of this Section 1.13 shall in no event
apply to information which is or becomes generally available to the public other
than as a result of disclosure by such party. The provisions of this
Section 15.13 shall not restrict Buyer from disclosures required to comply with
federal or state securities laws or other governmental laws or regulations.
 

 
1.14
Section 1031 Exchange

 
Each party agrees to cooperate with the other party (the “Exchanging Party”) and
any escrow holder or exchange facilitator selected by the Exchanging Party in
effecting a qualifying exchange or exchanges under Section 1031 of the Federal
Code undertaken by the Exchanging Party with respect to the Property, either
through assignment of this Agreement by the Exchanging Party to a qualified
intermediary or through other means determined by the Exchanging Party, and the
non-Exchanging Party shall execute such documents as may be reasonably requested
by the Exchanging Party provided that such documents shall not materially
increase the non-Exchanging Party’s obligations over those otherwise contained
in this Agreement. Neither party makes any representation regarding
qualification of any exchange under Section 1031 of the Federal Code and shall
not be liable to the Exchanging Party in any manner whatsoever if the exchange
completed in accordance with this Section 1.14 should not qualify for any reason
under Section 1031 of the Federal Code. The Exchanging Party hereby agrees to
indemnify, defend and hold the non-Exchanging Party harmless from and against
all costs, expenses and liabilities incurred by the non-Exchanging Party in
connection with any such exchange, to the extent the same would not have been
incurred by the non-Exchanging Party in the absence of such exchange.
Notwithstanding anything in this Section 1.14 to the contrary, it is a condition
precedent to the non-Exchanging Party’s obligation to cooperate with the
Exchanging Party in any such exchange that: (i) no material change to the terms
of this Agreement results therefrom, (ii) the non-Exchanging shall not be
required to acquire or hold title to any other real property for the purpose of
consummating the exchange, and (iii) consummation or accomplishment of such an
exchange shall not be a condition precedent or a condition subsequent to either
party’s obligations under this Agreement and shall not delay the Closing.
 
 

 

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1.15
Amendment

 
This Agreement may be amended or modified only by a written agreement
subsequently executed by Buyer and Seller.
 

 
1.16
Waiver

 
No waiver of any provision or condition of this Agreement by any party shall be
valid unless in writing signed by such party. No such waiver shall be taken as a
waiver of any other or similar provision or of any future event, act, or
default.
 
In Witness Whereof, the parties have executed this Agreement as of the date
first above written.
 
Buyer:
     
Maguire Properties, L.P.,
a Maryland limited partnership
     
By:
Maguire Properties, Inc.
 
a Maryland corporation
 
its General Partner
       
By:
/s/ Mark Lammas
 
Name:
Mark Lammas  
Title:
SVP      
Date signed:
 

 
Seller:
     
DL Pacific Center LP,
a Delaware limited partnership
     
By:
G&I III Investment Pacific Center Corp.,
 
a Delaware corporation,
 
its General Partner
       
By:
/s/ David Luski
 
Name:
David Luski  
Title:
Vice President      
Date signed:
 

 
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