**Exhibit 10.3****PURCHASE AGREEMENT FOR PURCHASE OF OFFICE BUILDING**     **THIS PURCHASE AGREEMENT FOR PURCHASE OF OFFICE BUILDING**(this “**Agreement**”) is made andentered into as of the ___day of August, 2005, by and among **JB MANAGEMENT L.P.**, a Californialimited partnership (“**Seller**”) and **HINES REIT PROPERTIES, L.P.**, a Delaware limited partnership, orits assigns (“**Buyer**”).**R E C I T A L S**A. Seller is the owner of the “**Property**” (defined below), which consists principally of anapproximately 400,000 square foot office building with a parking garage with approximately 774parking spaces located on several different legal parcels, in the City of Sacramento, California,having commonly known street addresses of 1515 R and 1515 S Street, Sacramento, California95814-7243, comprised of the following legal parcels: garage: 006-292-0014, 006-292-0015,006-292-0024, and 006-292-0025; building: 009-091-0001, 009-0091-0002, 009-0091-0003, 0090091-0004, 009-0091-0005, 009-0091-006 and 009-0091-0014.B. Buyer desires to purchase the Property on the terms and conditions hereinafter documented.     NOW, THEREFORE, in consideration of the mutual undertakings of the parties hereto, it ishereby agreed as follows:     1. Purchase and Sale. Seller shall sell to Buyer, and Buyer shall purchase fromSeller, the Property on the terms and conditions hereinafter set forth.          1.1 Property. As used herein, the “**Property**” means, collectively, all right, titleand interest of Seller in and to (i) that certain land described in Exhibit “A”, together with alleasements, rights-of-way, and appurtenances benefitting such land (the “**Land**”), (ii) any land lyingin the bed of any street, road, alley or right-of-way, open or closed, adjacent to or abutting theLand, (iii) any and all air rights, subsurface rights, development rights, entitlements, wastewatercapacities and credit reservations, and water rights pertaining to the Land or the Improvements (ashereinafter defined), (iv) all improvements, structures and fixtures now or on the “Closing Date”(as hereinafter defined) located upon the Land (the “**Improvements**”), (v) all machinery, equipment,gas and electric systems, lighting, heating, ventilating and air conditioning equipment andsystems, elevators, radiators, incinerators, furnaces, hot water heaters, water, sewage, andplumbing systems, fire protection and security systems, and all other tangible personal propertynow or on the Closing Date located on or used in connection with the Land and Improvements, in eachcase to the extent Seller has any right, title or interest therein (the “**Personal Property**”), and(vi) all “**Leases**” (as hereinafter defined), and (vii) all “**Service Agreements**” (as hereinafterdefined), (viii) to the extent assignable, all governmental permits, certificates of occupancy,licenses and approvals, (ix) all warranties and guarantees that Seller has received in connectionwith any work or services performed with respect to, or equipment installed in or on, theImprovements or the Land, and (x) all tenant lists, advertising material, telephone exchangenumbers and other intangible personal property related to the Land,
1

 
Improvements or Personal Property, in each case to the extent Seller has any right, title orinterest therein (the “**Intangible Property**”). The Property includes the items specified on Exhibit“B” and, notwithstanding the foregoing, excludes any items of personal property owned by tenants orany other third parties not affiliated with Seller (provided, however, Seller shall assign to Buyerany right, title, interest or claim of Seller [e.g., landlord’s liens] in and to any such excludeditems of personal property).     2. Purchase Price. The purchase price (the “**Purchase Price**”) shall be SIXTY-NINEMILLION AND NO/100 DOLLARS ($69,000,000.00).     3. Payment of Purchase Price. The Purchase Price shall be paid to Seller by Buyer asfollows:          3.1 Escrow Deposit. Within ten (10) calendar days after the Effective Date (asdefined in Section 4.1.1 below), Buyer shall deliver the sum of FIVE HUNDRED THOUSAND AND NO/100DOLLARS ($500,000.00) to First American Title Insurance Company at its offices at 899 PacificStreet, San Luis Obispo, California 93402- Attention: Lisa Blasquez; Telephone No. (805) 786-2038,which company, in its capacity as escrow holder hereunder, is called “**Escrow Agent**” (this amount,together with all interest earned thereon, are collectively herein called the “**Initial EscrowDeposit**”). If Buyer does not terminate this Agreement prior to the expiration of the Due DiligencePeriod (as hereinafter defined), then on or prior to the last day of the Due Diligence Period,Buyer shall deposit an additional Five Hundred Thousand Dollars ($500,000.00) (the “**AdditionalEscrow Deposit**”) with Escrow Agent; the Initial Escrow Deposit and, if made, the Additional EscrowDeposit (as hereinafter defined), together with all interest earned thereon, are referred tocollectively in this Agreement as the “**Escrow Deposit**”. The Escrow Deposit shall be delivered toEscrow Agent by wire transfer of immediately available federal funds or by bank or cashier’s checkdrawn on a national bank reasonably satisfactory to Seller. The Escrow Deposit shall be held byEscrow Agent as a deposit against the Purchase Price in accordance with the terms and provisions ofthis Agreement. At all times that the Escrow Deposit is being held by the Escrow Agent, the EscrowDeposit shall be invested by Escrow Agent in the following investments (“**Approved Investments**”):(i) United States Treasury obligations, (ii) United States Treasury-backed repurchase agreementsissued by a major national money center banking institution reasonably acceptable to Seller andBuyer, or (iii) such other manner as may be reasonably agreed to by Seller and Buyer. The EscrowDeposit shall be disposed of by Escrow Agent only as provided in this Agreement.          3.2 Closing Payment. The Purchase Price, as adjusted by the application of the EscrowDeposit and by the prorations and credits specified herein, shall be paid to Escrow Agent by wiretransfer or immediately available federal funds (through the escrow described in Section 5) on theClosing Date (the amount to be paid under this Section 3.2 being herein called the “**ClosingPayment**”).     4. Conditions Precedent. The obligation of Buyer to purchase as contemplated by thisAgreement is subject to Seller’s satisfaction of each of conditions precedent set forth in thisAgreement (any of which may be waived in writing by Buyer) on or before the applicable datespecified for satisfaction of the applicable condition. If any of such conditions is not fulfilled(or
2

 
so waived) pursuant to the terms of this Agreement, then Buyer may terminate this Agreement and, inconnection with any such termination made in accordance with this Section 4, Seller and Buyer shallbe released from further obligation or liability hereunder (except for those obligations andliabilities which, pursuant to the terms of this Agreement, survive such termination and withoutreleasing any party for a breach or default occurring prior to such termination), and the EscrowDeposit shall be immediately returned to Buyer.          4.1 Limited Due Diligence Period               4.1.1 Information To Be Reviewed. Buyer, or its lender, shall have from the date ofexecution of this Agreement (the “**Effective Date**”) through the date which is SIXTY (60) days afterthe Effective Date (the “**Due Diligence Period**”) within which to perform and complete all of Buyer’sdue diligence/feasibility examinations, title and survey and other reviews and inspections of allmatters pertaining to the Property (keeping all information confidential; subject, however to theprovisions of Section 4.1.2 hereof). In particular, the following may be reviewed by Buyer or itslender:     (a) a current ALTA title commitment covering the Property, together with complete and bestavailable copies of all exception and other documents or instruments referenced therein(collectively, the “**Preliminary Title Report**”) from First American Title Insurance Company (whichcompany, in its capacity as title insurer hereunder, is herein called the “**Title Company**”), settingforth the current status of title to the Property and committing to insure the same for the fullamount of the Purchase Price;     (b) a true, correct and complete copy of the most recent existing ALTA survey of the Property(the “**Existing Survey**”), which Buyer may have updated and/or recertified at Buyer’s expense;     (c) true, correct and complete copies of all Leases (and all modifications and amendmentsthereto, all related correspondence, side letters, indemnity and/or reimbursement agreements,letters of credit and other documents and materials relating thereto, and, to the extent inSeller’s possession, copies of all subleases and other occupancy agreements affecting the Property)(including a current certified rent roll, which shall be re-certified and updated at Closing) andService Agreements;     (d) all physical, environmental, seismic and compliance matters and conditions respecting theProperty, but excluding any confidential information; provided, however, in the case of anyconfidential information that would be material to Buyer in deciding whether to purchase theProperty or make a loan thereon, Seller shall notify Buyer in writing of the existence of the sameand shall either (i) give Buyer the right to terminate this Agreement or (ii) disclose the same toBuyer on the condition that Buyer executes a confidentiality agreement reasonably satisfactory toBuyer and Seller. During the Due Diligence Period, Seller shall provide Buyer with reasonableaccess to the Property and its files relating to the Property (excluding confidential information,except as aforesaid) upon reasonable advance notice and shall also provide to Buyer copies of suchleases and service contracts and other items as Buyer shall request, all upon reasonable advancenotice;
3

 
     (e) copies of all existing as-built architectural, structural, civil, mechanical, electrical,and plumbing plans and specifications, and as-built drawings of tenant improvements in place forthe Property within Seller’s possession or control, and, to the extent in Seller’s possession orcontrol, all space plans, stacking plans and area calculations (provided such are within Seller’spossession or control);     (f) copies of any soil, groundwater contamination, seismic, environmental, physical conditionor other assessments, evaluations, reports, studies or test results to the extent the same havebeen prepared;     (g) true, correct and complete copies of all operating statements (year to date and for aperiod of the prior three (3) years), budgets and all appraisals, maintenance records, repairrecords, tax and utility bills, operational records and other such records pertaining to theacquisition, construction, ownership, condition and operation of the Property within Seller’spossession or control;     (h) true, correct and complete copies of all licenses, approvals, certificates and permits(including certificates of occupancy), agreements with adjacent or nearby landowners or occupants,or other such agreements pertaining to the ownership, construction, operation, leasing ormaintenance of the Property within Seller’s possession or control; and     (i) the other matters specifically listed on Exhibit “U” attached hereto.     Notwithstanding the foregoing, Buyer acknowledges that Seller’s maintenance records, repairrecords, tax and utility bills and operational records are voluminous in nature, and, therefore,Seller shall make such documentation available for Buyer’s review. Within ten (10) days after theEffective Date, Seller shall deliver (or cause to be delivered) to Buyer the documents and othermaterials described in clauses (a), (b), (d) and (f) and (i) and shall have otherwise made thematerials described in clause (d), (e), (g) and (h) available for Buyer’s review and inspection atthe Property. Without in any manner limiting the foregoing, Seller covenants and agrees that,commencing on the Effective Date, Buyer and its accountants, auditors and other representativesshall have access to all of Seller’s financial and accounting information within Seller’spossession or control and relating to the operation of the Property, including all supportingdocumentation relating thereto.               4.1.2. Review Standards. Buyer shall at all times conduct its due diligence review,inspections and examinations in a manner so as to not cause liability, damage, loss, cost orexpense to Seller or the Property (other than that arising from the discovery of preexistingconditions) and so as to not unreasonably interfere with or disturb any tenant at the Property, andBuyer will indemnify, defend, and hold Seller and the Property harmless from and against any suchliability, damage, loss, cost or expense, except to the extent based on any such preexistingconditions or on the negligence or willful misconduct of Seller or its employees or agents (theforegoing obligation surviving any termination of this Agreement). Without limitation on theforegoing, without the prior written consent of Seller (which consent shall not be unreasonablywithheld or delayed), in no event shall Buyer make any intrusive physical testing
4

 
(environmental, structural or otherwise) at the Property (such as soil borings, water samplings orthe like). Seller shall have the right, at its option, to cause a representative of Seller to bepresent at all inspections, reviews and examinations of the Property conducted hereunder. In theevent of any termination hereunder, Buyer shall return all documents and other materials furnishedby Seller hereunder and at Seller’s written request, Buyer shall promptly deliver to Seller,without warranty, copies of any written reports relating to the Property prepared for or on behalfof Buyer by any third party engaged by Buyer. Prior to Closing, Buyer shall keep all informationor data received or discovered in connection with any of the inspections, reviews or examinationsstrictly confidential; provided, however, that (i) such information or data may be disclosed byBuyer (a) to the extent required by law, (b) to Buyer’s lender and to Buyer’s and such lender’srespective representatives, agents and affiliates (including attorneys and accountants) to theextent such representatives and agents need to know such information for the purpose of evaluatingthe purchase contemplated hereby and any loan made in connection therewith and are instructed tomaintain such confidentiality, (c) as may otherwise be necessary for Buyer or Buyer’srepresentatives or affiliates, Hines Interests Limited Partnership (“**Hines**”) or its affiliates orany other entities advised by Hines or its affiliates to comply with applicable laws, including,without limitation, governmental, regulatory, disclosure, tax and reporting requirements (includingwithout limitation, the requirements of the Securities and Exchange Commission, the New York StockExchange and/or any similar body or agency), to comply with other requirements and requests ofregulatory and supervisory authorities and self-regulatory organizations having jurisdiction overBuyer or Buyer’s representatives or affiliates, Hines or its affiliates or any other entitiesadvised by Hines or its affiliates, (d) to comply with regulatory or judicial processes, or (d) tosatisfy reporting procedures and inquiries of credit rating agencies in accordance with customarypractices of Buyer or its affiliates; and (ii) the foregoing confidentiality restriction shall notapply to any information or data that is available to Buyer from any other source (other than byreason of a breach by Buyer of such confidentiality restriction).          4.1.3 ***CONFIDENTIAL NATURE, AND LIMITED ACCESS, OF DUE DILIGENCEACTIVITIES***          ***Buyer recognizes and acknowledges that the primary tenant in the Property is the State ofCalifornia. Hence, in order not to create any confusion or misunderstandings on said tenant’s partwhile Buyer is performing its Due Diligence, Buyer agrees to (a) except as otherwise permitted bySection 4.1.2, hold confidential the possible sale of the Property by Seller, and not to discusssuch with any third parties information which could in any way be learned, directly or indirectly,by the State of California, (b) only make inquires of representatives of any tenants in theProperty through individuals identified in writing by Seller, and (c) discuss the possible sale ofthe Property with said individuals in the presence of authorized representatives of Seller (asidentified by Seller in writing).***          Initial  Initial                 4.1.4 Termination Right. If (a) on or before the expiration of the Due DiligencePeriod, Buyer shall determine that it no longer intends to acquire the Property for any reason orno reason at all and at Buyer’s sole discretion, then Buyer shall have the right to terminate thisAgreement by so notifying Seller of such determination in writing (such notice
5

 
being herein called the “**Termination Notice**”), whereupon this Agreement, and the obligationsof the parties hereunder, shall terminate (other than those obligations that expressly survive atermination of this Agreement), or (ii) in the event Buyer fails to deposit the Additional EscrowDeposit with Escrow Agent prior the expiration of the Due Diligence Period in accordance withSection 3.1 hereof, then Buyer shall be deemed to have elected to terminate this Agreement, and theobligations of the parties hereunder shall terminate (other than those obligations that expresslysurvive a termination of this Agreement), and upon any such termination or deemed termination, theEscrow Deposit shall be immediately returned to Buyer. In the event Buyer fails to terminate (oris not deemed to have terminated) this Agreement prior to the expiration of the Due DiligencePeriod, the Escrow Deposit shall become non-refundable, except in the event of a Seller default,upon the failure of a closing condition, or as may otherwise be provided to the contrary in thisAgreement (e.g., in connection with casualty, condemnation, certain tenant estoppel issues, certainleases entered into by Seller over Buyer’s disapproval, etc.).          4.2 Title and Survey Review/Objections. Buyer shall have until the date (the“**Title/Survey Objection Date**”) that is fifteen (15) days prior to the expiration of the DueDiligence Period to give written notice to Seller of such objections as Buyer may have to anyexceptions to title or survey matters disclosed in the Preliminary Title Report or in the ExistingSurvey (or any update or recertification thereof) or otherwise in Buyer’s examination of title.Seller shall have the right, but not the obligation (except as provided in Section 4.3 below), toremove, satisfy or otherwise cure any title or survey matters to which Buyer objects hereunder.Within five (5) days after receipt of Buyer’s objection notice, Seller shall give written notice toBuyer informing Buyer of Seller’s election with respect to such objections. If Seller fails togive written notice of such election within such 5-day period, Seller shall be deemed to haveelected not to cure the objections. If Seller elects, or is deemed to have elected, not to cureany title or survey matters to which Buyer has objected or if, after electing to attempt to cure,Seller fails to cure any such objections prior to Closing, Buyer may either (i) waive suchobjections and accept title to the Property subject thereto, or (ii) terminate this Agreement,whereupon the Escrow Deposit (together with all interest earned thereon) shall be immediatelyreturned to Buyer. Any title or survey matter (other than the matters described in Section 4.3which shall in all events be cured, satisfied and discharged at or prior to Closing whether or notBuyer objects to same) reflected in the Preliminary Title Report or the Existing Survey as to whichBuyer fails to object on or prior to the Title/Survey Objection Date and any other title or surveymatter as to which Buyer (in its sole discretion) elects to waive its objection as provided above,shall be deemed “**Permitted Exceptions**”.          4.3 Existing Loan. The Property is currently encumbered by a certain deed of trustand other loan documents securing a loan to Seller (the “**Existing Loan**”). The Existing Loan willcome due upon the sale contemplated hereby and a portion of the Purchase Price will be used bySeller to repay the Existing Loan (and any related prepayment or defeasance penalties, premiums,costs or other charges) in full. Additionally, Seller shall cure, satisfy, discharge and release,at or prior to Closing, any other mortgage, deed of trust or similar security instrumentencumbering all or any part of the Property, any mechanic’s, materialman’s or similar lien (unlessresulting from any act or omission of Buyer or any of its agents), any delinquent taxes,assessments and governmental charges affecting all or any portion of the Property, and any judgmentof record affecting the Property.
6

 
          4.4 Tenant Estoppel Certificates. Receipt of estoppel certificates (“**Tenant EstoppelCertificates**”) from all the tenants of the Property occupying not less than ninety percent (90%) ofthe total net rentable square footage of the Property covered by Leases in effect as of the ClosingDate, shall be a condition precedent to Buyer’s obligation to acquire the Property hereunder. EachTenant Estoppel Certificate shall be substantially in the applicable form provided in Exhibit “D”;provided, however, that with respect to any tenant of the Property which is the State of Californiaor a division thereof, any such Tenant Estoppel Certificate shall be in the then current form ofestoppel customarily provided by the State of California or such division thereof and not in theform of Exhibit “D”. Seller shall deliver to Buyer fully executed original Estoppel Certificatesno later than ten (10) calendar days prior to the Closing Date (as hereinafter defined) (the"**Tenant Estoppel Certificate Deadline**”), which Estoppel Certificates shall be re-certified bySeller prior to the Closing Date in order to conform with the requirements of Buyer’s lender. Buyershall have until five (5) calendar days prior to the Closing Date (the “**Estoppel Objection Period**”)to examine the Tenant Estoppel Certificates and to notify Seller in writing specifying Buyer’sobjections (the “**Buyer’s Estoppel Notice**”); provided that if Buyer fails to give Seller the Buyer’sEstoppel Notice before the expiration of the Estoppel Objection Period, the Buyer shall be deemedto have accepted the Estoppel Certificates and to have waived any matters reflected thereon. IfBuyer has timely delivered to Seller the Buyer’s Estoppel Notice, then Seller shall prior to theexpiration of the Estoppel Objection Period deliver to Buyer written notice specifying the itemsset forth in the Buyer’s Notice which Seller, in its sole discretion, shall elect to cure (the"**Seller’s Estoppel Notice**”). In connection with any items set forth in the Seller’s EstoppelNotice, Seller agrees to use its reasonable good faith efforts to cause such defects set forth inthe Seller’s Estoppel Notice to be cured by the Closing Date. If, for any reason, on or before theClosing Date, Seller does not cause: (i) any matters which are set forth in the Seller’s EstoppelNotice to be removed at no cost or expense to Buyer; or (ii) any new material adverse mattersreflected in any re-certified Estoppel Certificate as objected to in writing by Buyer within two(2) days from receipt of any such re-certified Estoppel Certificate to be cured at no cost orexpense to Buyer, the obligation of Buyer to buy the Property as herein provided shall terminate(and no party hereto shall have any further obligations in connection herewith except under thoseprovisions that expressly survive a termination of this Agreement), and the Escrow Deposit(together with all interest earned thereon) shall be immediately returned to Buyer.          4.5 Performance by Seller. The performance and observance, in all material respects,by Seller of all covenants and agreements of this Agreement to be performed or observed by Sellerprior to or on the Closing Date shall be a condition precedent to Buyer’s obligation to purchasethe Property. Without limitation on the foregoing, in the event that the “Seller ClosingCertificate” (as hereinafter defined) shall disclose any material adverse changes in therepresentations and warranties of Seller contained in this Agreement or any certificate deliveredby Seller in connection herewith which are not otherwise permitted or contemplated by the terms ofthis Agreement, then Buyer shall have the right to terminate this Agreement, whereupon the EscrowDeposit (together with all interest earned thereon) shall be immediately returned to Buyer.     5. Closing Procedure. Subject to Section 5.5 below, the sale and purchase hereinprovided shall be consummated (the “**Closing**”) at a closing conference (“**Closing Conference**”),
7

 
which shall be held on the Closing Date by mail or at a mutually satisfactory location. Asused herein, “**Closing Date**” shall be that date which is the thirtieth (30th) day from and after theexpiration of the Due Diligence Period, or such earlier date as may be agreed upon by Seller andBuyer. The Closing Date is subject to extension as set forth in Section 5.1.          5.1 Escrow. On or before 1:00 p.m. Pacific time on the Closing Date, the partiesshall deliver to Escrow Agent the following: (i) by Seller, a duly executed and acknowledgedoriginal grant deed (the “**Deed**”) in the form of Exhibit “E”, subject only to the PermittedExceptions, and (ii) by Buyer, the Closing Payment in immediately available federal funds. If theClosing Payment is received on the Closing Date but after 1:00 p.m. Pacific time, then the ClosingDate shall be changed to the next business day. Such delivery shall be made pursuant to escrowinstructions (“**Escrow Instructions**”) to be executed among Buyer, Seller and Escrow Agent in theform of Exhibit “F”. The conditions to the closing of such escrow shall include the Escrow Agent’sreceipt of the Closing Payment and a notice from each of Buyer and Seller authorizing Title Companyto close the transactions as contemplated herein (each of Buyer and Seller being obligated todeliver such authorization notice on the Closing Date as soon as it is reasonably satisfied thatthe other party is in a position to deliver the items to be delivered by such other party underSection 5.2 below and all conditions to Buyer’s obligations hereunder shall have been satisfied orwaived by Buyer in writing).          5.2 Delivery to Parties. Upon the satisfaction of the conditions set forth in theEscrow Instructions (including all conditions to Buyer’s obligation to close hereunder), then (i)the Deed shall be delivered to Buyer by Escrow Agent’s depositing the same for recordation, (ii)the Closing Payment (and the Escrow Deposit) shall be delivered by Escrow Agent to satisfy theExisting Loan (and any other matters which Seller is obligated by Sections 4.2 or 4.3 or any otherprovision of this Agreement to pay, satisfy or discharge at Closing) and any balance shall be paidto Seller and (iii) on the Closing Date, the following items shall be delivered:               5.2.1 Seller Deliveries. Seller shall deliver to Buyer the following:                    (a) A duly executed bill of sale, assignment and assumption agreement (“**Assignment andAssumption Agreement**”) from Seller with respect to the tangible and intangible personal propertyincluded in the Property (including the Leases and Service Agreements) in the form of Exhibit “G,”together with any and all consents as may be required to effect the assignment of any tangible orintangible personal property;                    (b) A duly executed certificate of Seller (the “**Seller Closing Certificate**”) in the form ofExhibit “I” updating the representations and warranties contained in Section 7.1 hereof to theClosing Date and noting any changes thereto (subject, however, to Buyer’s right to terminate asprovided herein with respect to any such changes);                    (c) Notices to each of the tenants under the Leases (“**Tenant Notices**”), duly executed bySeller in the form of Exhibit “K”, addressed to each of such tenants;
8

 
                    (d) Evidence reasonably satisfactory to Buyer and Title Company respecting the dueorganization and good standing of Seller and the due authorization and execution of this Agreementand the documents required to be delivered hereunder;                    (e) To the extent they are then in Seller’s possession, and have not heretofore been deliveredto Buyer: (i) any plans and specifications for all Improvements on the Property; (ii) allunexpired warranties and guarantees which Seller has received in connection with any work orservices performed with respect to, or equipment installed in, the improvements on the Property;(iii) all keys for all improvements on the Property; (iv) all documents of Seller relating to theProperty; (v) originals of all Leases (and all modifications and amendments thereto, side letters,indemnity and/or reimbursement agreements, letters of credit and other documents and materialsrelating thereto), copies of all subleases and other occupancy agreements affecting the Property,all correspondence to or from any tenants, relating to the Leases; and (vi) originals of allService Agreements that will remain in effect after the Closing and all correspondence and recordsrelating to the on-going operations (including tenant billings) and maintenance of the Property(which materials under this clause (e) may be either delivered at Closing or left at the managementoffice at the Property). In addition, Seller shall direct its property management company, if any,to deliver any documents or other files of Seller in such management company’s possession to Buyerat the Closing or to be left at the offices of the Property;                    (f) A Certificate of Non-Foreign Status;                    (g) A California Franchise Tax Board Form 590RE certifying that Seller is exempt fromwithholding requirements under Revenue & Taxation Code Section 18662;                    (h) Any customary owner’s affidavit and indemnities for mechanics’ liens and similar mattersas may be required by the Title Company to issue the Title Policy (defined below) to Buyer; and                    (i) Such additional documents as may be reasonably required by Buyer and Title Company inorder to consummate the transactions hereunder (provided the same do not increase in any materialrespect the costs to, or liability or obligations of, Seller in a manner not otherwise provided forherein).               5.2.2 Buyer Deliveries. Buyer shall deliver to Seller the following:                    (a) A duly executed and acknowledged Assignment and Assumption Agreement;                    (b) A certificate of Buyer (the “**Buyer Closing Certificate**”) in the form of Exhibit “L”updating the representations and warranties contained in Section 7.2 hereof to the Closing Date andnoting any changes thereto;
9

 
                    (c) Evidence reasonably satisfactory to Seller and Title Company respecting the dueorganization of Buyer and the due authorization and execution of this Agreement and the documentsrequired to be delivered hereunder; and                    (d) Such additional documents as may be reasonably required by Seller and Title Company in orto consummate the transactions hereunder (provided the same do not increase in any material respectthe costs to, or liability or obligations of, Buyer in a manner not otherwise provided for herein).          5.3 Closing Costs. Seller shall pay (i) all state, county and city transfer taxespayable, (including any sales taxes thereon) if any, in connection with the transfer contemplatedherein, (ii) the title insurance premium for the CLTA portion of the Owner’s Policy, (iii) 50% ofall escrow charges, (iv) 50% of any costs incurred in recording the Deed or any other instrumentswith respect to the transfer contemplated herein, and (v) all costs to satisfy, release anddischarge any Existing Loan, including, without limitation, any prepayment or defeasance penalty,premium or charge, and any of the other matters which Seller is obligated to remove, discharge orcure pursuant to Sections 4.2 or 4.3 hereof. Buyer shall pay (i) 50% of all escrow charges, (ii)the costs of extended coverage and any endorsements to the Owner’s Policy, (iii) the costs, if any,to update the Existing Survey, (iv) 50% of any costs incurred in recording the Deed or any otherinstrument with respect to the transfer contemplated herein, and (v) all fees, costs or expenses inconnection with Buyer’s due diligence reviews hereunder. Any other closing costs shall beallocated in accordance with local custom. Seller and Buyer shall pay their respective shares ofprorations as hereinafter provided.          5.4 Prorations.               5.4.1 Items to be Prorated. The following shall be prorated between Seller and Buyeras of 11:59 p.m. the day prior to the Closing Date (on the basis of the actual number of dayselapsed over the applicable period):                    (a) All real estate taxes, assessments, bond assessments and personal property taxes on theProperty for the tax year (the “**Current Tax Year**”) in which the Closing occurs (with Seller andBuyer each being responsible for a pro rata share of such taxes and assessments based upon thenumber of days in such tax year occurring before the Closing Date, in the case of Seller, and on orafter the Closing Date, in the case of Buyer). However, in no event shall Seller be charged withor be responsible for any increase in the taxes on the Property resulting from the salecontemplated hereby or from any improvements made or leases entered into on or after the Closing.If any assessments on the Property are payable in installments, then the installment for thecurrent period shall be prorated (with Buyer being allocated the obligation to pay any installmentsdue after the Closing Date).                    (b) All fixed and additional rentals under the Leases, security deposits (including anyutility deposits posted by Seller and assigned to Buyer with the approval of the utility serviceprovider) and other tenant charges. Seller shall provide a credit in an amount equal to allprepaid rentals for periods after the Closing Date and all refundable security deposits (to theextent the foregoing were made by tenants under the Leases and are not applied
10

 
or forfeited prior to the Closing Date) to Buyer on the Closing Date. To the extent anysecurity deposits are in the form of a letter of credit Seller, at Closing and at its sole cost andexpense, shall cause such letters of credit to be reissued with Buyer as the named beneficiarythereof. Rents which are delinquent (or payable but unpaid) as of the Closing Date shall not beprorated on the Closing Date. Buyer shall not waive any delinquent (or unpaid) rents or modify aLease so as to reduce or otherwise affect amounts owed thereunder for any period with respect towhich Seller is entitled to receive a share of charges or amounts without first obtaining Seller’swritten consent. After the Closing, Buyer shall include such delinquencies (or unpaid amounts) inits normal billing and diligently pursue the collection thereof in good faith after the ClosingDate (but Buyer shall not be required to litigate or declare a default under any Lease).Notwithstanding any provision to the contrary contained herein, from and after the Closing Date, inno event will Seller have the right to threaten or institute any legal or arbitration proceeding tocollect any delinquent rents or other amounts from, or threaten the termination of, or any otheraction with respect to, any Lease of, any tenants who are tenants of the Property as of the ClosingDate; provided, however, in the event more than one (1) year has passed since the Closing Date withno collection of any such delinquent rents having been made by Buyer, Seller shall have the rightto institute legal or arbitration proceedings to collect any such delinquent rents to which Selleris entitled hereunder, but in no event shall Seller threaten the termination of any Lease or of anytenant’s rights thereunder. Additionally, with respect to delinquent rents and any other amountsor other rights of any kind respecting tenants who are no longer tenants of the Property as of theClosing Date, Seller shall retain all rights relating thereto.                    (c) All operating expenses; however, there will be no prorations for debt service, insurancepremiums or payroll (because Buyer is not acquiring Seller’s financing, insurance or employees).               5.4.2 Calculation. The prorations and payments shall be made on the basis of awritten statement submitted to Buyer and Seller by Escrow Agent prior to the Close of Escrow andapproved by Buyer and Seller. Any item which cannot be finally prorated because of theunavailability of information shall be tentatively prorated on the basis of the best data thenavailable and reprorated when the information is available. In the event any prorations orapportionments made under this Section 5.4.2 shall prove to be incorrect for any reason, then anyparty shall be entitled to an adjustment to correct the same provided a written request identifyingthe error in reasonable detail is given to the other parties no later than one (1) year after theClosing. At Closing, Buyer shall receive a credit against the Purchase Price for all proratedamounts of the items set forth in Section 5.4.1 above which shall be Seller’s obligation to pay.               5.4.3 Tenant Inducements and Leasing Commissions. Seller shall pay (or provide Buyerwith a credit at Closing) for all tenant improvement costs, free rent or other inducements and allleasing commissions due under or with respect to all Leases in effect as of Closing.          5.5 Specific Conditions to Buyer’s Obligation to Close. The obligations of Buyerpursuant to this Agreement shall be subject to the following additional conditions precedent (anyof which may be waived in writing by Buyer in its sole discretion):
11

 
     (a) All of the representations, warranties and agreements of Seller set forth in thisAgreement shall be true and correct in all material respects;     (b) Seller shall have terminated any existing property management and listingagreements for the Property and to the extent such agreements exist shall have providedBuyer with satisfactory evidence of such termination thereof;     (c) There shall be no material adverse change in the matters reflected in thePreliminary Title Report (as approved or deemed approved by Buyer prior to the expiration ofthe Due Diligence Period), and there shall not exist any material adverse encumbrance ortitle defect affecting the Property except for the Permitted Exceptions;     (d) The Title Company shall have irrevocably committed to issue to Buyer at Closing aForm B 1970 ALTA Extended Coverage Owner’s Policy of Title Insurance for the Property in anamount equal to the Purchase Price insuring fee simple title to the Property in Buyer (the“**Title Policy**”), subject only to the Permitted Exceptions, and containing such endorsementsas the Title Company shall have committed to issue as of the end of the Due Diligence Period(said commitment to be evidenced by a pro forma policy containing such endorsements providedto Seller); and     (e) No other material adverse change shall occur with respect to the Property or anytenant of the Property (including any default under such tenant’s Lease or any bankruptcy orsimilar proceeding) from the expiration of the Due Diligence Period through the ClosingDate.     6. Condemnation or Destruction of Property.          6.1 Condemnation. In the event any proceeding should be commenced for the taking incondemnation or under the power of eminent domain or any offer made in lieu thereof for any portionof the Property (“Condemnation Proceeding”), Seller shall promptly give notice of and fullinformation concerning such Condemnation Proceeding to Buyer and shall thereafter keep Buyer fullyinformed concerning such Condemnation Proceeding. Within twenty (20) days after receipt of suchnotice, if the portion of the Property that is the subject of the Condemnation Proceeding is of avalue greater than $100,000.00, or is otherwise a material portion of the Property, then Buyer mayterminate this Agreement. Should Buyer elect to terminate this Agreement, the Escrow Deposit shallbe immediately returned to Buyer and both parties shall be released from any further obligationshereunder except as otherwise provided herein. If Buyer does not elect to terminate thisAgreement, and the Property is purchased while such Condemnation Proceeding is pending, then Buyershall be substituted for Seller as the defendant/land owner in such proceedings. In the event suchCondemnation Proceeding is concluded while Seller is still the owner of the Property and Sellerreceives the condemnation award or payment in lieu thereof, then the Purchase Price shall bereduced by the amount of such condemnation award or payment in lieu thereof actually received bySeller, if any. If Seller has not received the condemnation award or payment in lieu thereof atthe time of Closing, then the Purchase Price shall remain unchanged and Seller shall assign toBuyer all of the right, title and interest of Seller in such condemnation award or payment in lieuthereof . Seller agrees that
12

 
Buyer shall have the right, at its expense, to participate and assist Seller in any suchCondemnation Proceeding.          6.2. Casualty. All risk of loss with respect to the Property shall be with Selleruntil Closing. If any portion of the Property is damaged or destroyed prior to Closing, Sellershall promptly give notice thereof to Buyer. If any portion of the Property is damaged ordestroyed prior to Closing and the cost to repair such damage is less than $100,000.00, then theparties shall proceed to closing, and Seller shall either (i) complete the repair of the damageprior to Closing at Seller’s sole cost and expense, or (ii) give Buyer a credit against thePurchase Price in the amount required to repair the damage, which amount shall be agreed upon byBuyer and Seller. If any portion of the Property is damaged or destroyed prior to Closing, and thecost to repair such damage is at least $100,000.00, then Buyer may, within fifteen (15) days afterreceipt from Seller of written notice thereof, elect to terminate this Agreement, in which eventthe Escrow Deposit shall be immediately returned to Buyer and neither party shall have any furtherrights or obligations hereunder. If Buyer does not elect to terminate this Agreement , then Sellershall either (i) commence the repair of the damage at Seller’s sole cost and expense, and pursuethe completion of the repair in a timely, diligent, and commercially reasonable manner, and theClosing Date shall be extended until the final completion of such repairs; or (ii) provided thatBuyer, Seller, and Seller’s insurance carrier reach a satisfactory agreement with regard to therelease of the insurance proceeds and the repair of the damage, Seller shall assign to Buyer atClosing all insurance proceeds (including rent loss and business interruption proceeds) payable inconnection with such damage and shall provide Buyer with a credit against the Purchase Price in anamount equal to the sum of any applicable deductibles under Seller’s insurance policies plus anyamount of the estimated repair costs (or loss of rents) which are not covered by Seller’s insurancepolicies.     7. Representations and Warranties.          7.1 Representations and Warranties of Seller.               7.1.1 General Disclaimer. Except as specifically set forth in Section 7.1.2 below orin the Deed and the Assignment and Assumption Agreement, the sale of the Property hereunder is andwill be made on an “as is” basis.               7.1.2 Limited Representations and Warranties of Seller. Seller hereby represents andwarrants to Buyer as follows:                    (a) Leases. There are no leases of space in the Property which will be in force onthe Closing Date and under which Seller is the landlord (whether by entering into the leases oracquiring the Property subject to the leases) other than the Leases. As used herein, “**Leases**”means, collectively, (i) the leases listed in Exhibit “O” (the “**Lease Exhibit**”) and (ii) the leasesentered into in accordance with this Agreement. Seller has provided Buyer with true, correct andcomplete copies of all Leases (and all modifications and amendments thereto, all relatedcorrespondence, side letters, indemnity and/or reimbursement agreements, letters of credit andother documents and materials relating thereto, and, to the extent in Seller’s possession, copiesof all subleases and other occupancy agreements affecting the Property).
13

 
None of the Leases has been amended except as set forth in the Lease Exhibit. There are nosecurity deposits under the Leases except as set forth in the Lease Exhibit. As of the Closing,there shall be no commissions or tenant improvement cost obligation owing by Seller with respect toany Leases in effect as of the Closing, except for (1) extensions, expansions, options or renewalsof existing Leases (provided that such obligations are set forth in the applicable Lease or inExhibit “P”) or (2) in connection with new Leases which are permitted hereunder. To Seller’sknowledge, (i) all of the Leases are in full force and effect, (ii) neither Seller nor any tenantis in monetary default or material non-monetary default under any of the Leases, except as setforth on Exhibit “Q”, and (iii) no tenant under any Lease has filed for bankruptcy. Additionally,Seller hereby represents and warrants to Buyer that attached to this Agreement as Exhibit “O-1” isa rent roll of the Leases which correctly sets forth the name of each tenant, the space affected,the rent, the term (including any options to renew), the security deposit, if any, and any specialconcessions, prepaid rent, options to purchase or rights of first refusal.                    (b) Litigation. To Seller’s knowledge, there is no pending (and Seller has notreceived any written notice of any threatened) action, litigation, condemnation or other proceeding(collectively, “**Proceeding**”) involving any portion of the Property or against Seller (other thanroutine slip and fall claims covered by insurance). Seller has no knowledge of any contemplatedcondemnation involving any portion of the Property.                    (c) Intentionally omitted.                    (d) Compliance. To Seller’s knowledge, and except with respect to the Property’snon-compliance with Sacramento Planning Commission Resolution No. 1653 as more particularlydescribed in Exhibit “T” attached hereto and made a part hereof, the Property is in compliance withall applicable laws and regulations (including zoning and building codes) and Seller has receivedno written notice from any governmental authority having jurisdiction over the Property to theeffect that the Property is not in compliance with such applicable laws and ordinances.                    (e) Service Agreements. Seller has not entered into any service agreements, equipmentleasing contracts or other contracts relating to the Property which will be in force after theClosing, except for the Leases, the Service Agreements and contracts described in this Agreement.As used herein, the “**Service Agreements**” means, collectively, (a) contracts described in Exhibit“R”, and (b) contracts entered into in accordance with this Agreement. To Seller’s knowledge,there is no monetary default or material non-monetary default under the Service Agreements.                    (f) Due Authority. This Agreement and all agreements, instruments and documentsherein provided to be executed or to be caused to be executed by Seller is and on the Closing Datewill be duly authorized, executed and delivered by and are binding upon Seller. Seller is alimited partnership, duly organized and validly existing and in good standing under the laws of theState of California, and is qualified to do business in the State of California. Seller has thecapacity and authority to enter into this Agreement and consummate the transactions herein providedwithout the consent or joinder of any other party.
14

 
                    (g) Consents; No Conflict. To Seller’s knowledge, Seller has obtained all consentsand permissions related to the transactions herein contemplated and required under any covenant,agreement, encumbrance, or applicable laws. To Seller’s knowledge, neither this Agreement nor anyagreement, document or instrument executed or to be executed in connection with the same, noranything provided in or contemplated by this Agreement or any such other agreement, document orinstrument, does now or shall hereafter breach, invalidate, cancel, make inoperative or interferewith, or result in the acceleration or maturity of, any agreement, document, instrument, right orinterest, affecting or relating to the Property.                    (h) Environmental Matters. To Seller’s knowledge, except as set forth in the reportsdescribed in Exhibit “S” (the “**Environmental Reports**”), there is (and have been) no “HazardousMaterial” at or upon to the Property. The term “**Hazardous Material**” shall mean asbestos, petroleumproducts, and any other hazardous waste or substance which has, as of the date hereof, beendetermined to be hazardous or a pollutant by the U.S. Environmental Protection Agency, the U.S.Department of Transportation, or any instrumentality authorized to regulate substances in theenvironment which has jurisdiction over the Property, provided, however, that the term “HazardousMaterial” shall not include (i) motor oil and gasoline contained in or discharged from ordinarypassenger vehicles (not used primarily for the transport of motor oil or gasoline), or (ii)materials which are stored or used in the ordinary course of a tenant’s occupancy at (or Seller’s,or Seller’s managing agents’ operation of) the Property, and which are stored and used incompliance with all applicable environmental laws and which do not pose any material threat to theenvironment or person or property.                    (i) Patriot Act Representations. Neither Seller nor any of its constituents oraffiliates, and to Seller’s knowledge, none of the tenants of the Property, is (i) a persondesignated by the U.S. Department of Treasury’s Office of Foreign Assets Control from time to timeas a “specially designated national or blocked person” or similar status, or (ii) a persondescribed in Section 1 of U.S. Executive Order 13224, issued on September 23, 2001 or listed on theAnnex (as amended to date) of such Executive Order, or (iii) a person otherwise identified by anygovernment or legal authority as a person with whom Buyer or any of its constituents or affiliatesare prohibited from transacting business.          As used herein, the term “to Seller’s knowledge”, or like phrases shall mean the actualpresent and conscious awareness or knowledge of James Gately, Seller’s property manager; providedthat such qualification of Seller’s knowledge shall in no event give rise to any personal liabilityon part of the foregoing persons or any other officer in or employees of Seller on account of anybreach of any representation or warranty made by Seller herein.          7.2 Representations and Warranties of Buyer. (a) Buyer hereby represents and warrantsto Seller: (i) this Agreement and all agreements, instruments and documents herein provided to beexecuted or to be caused to be executed by Buyer are and on the Closing Date will be dulyauthorized, executed and delivered by and are binding upon Buyer; (ii) Buyer is a limitedpartnership, duly organized and validly existing and in good standing under the laws of the Stateof Delaware; and Buyer is duly authorized and qualified (or as of Closing will be qualified) to doall things required of it under this Agreement; and (iii) Buyer has the capacity and authority to
15

 
enter into this Agreement and consummate the transactions herein provided without the consent orjoinder of any other party (except as otherwise may be set forth in this Agreement).               (a) ***Without limiting the generality of the foregoing, except for Seller’s representations andwarranties expressly set forth in this Agreement, in the Deed or in the Assignment and AssumptionAgreement, Buyer hereby acknowledges and agrees that it is purchasing the Property in its present“AS IS/WHERE IS” condition and with all defects and neither Seller nor any employee or agent ofSeller has made or will make, either expressly or impliedly, any representations, guaranties,promises, statements, assurances or warranties of any kind concerning any of the Property except asexpressly provided in this Agreement, in the Deed or in the Assignment and Assumption Agreement.***               Buyer has or will conduct, its own inspection and investigation of the condition of theProperty and has been further encouraged to obtain, and has or will obtain, at its sole expense,expert advice as to such matters from professional inspectors and others. Buyer and Selleracknowledge that prior to the expiration of the Due Diligence Period, Buyer will have been giventhe full opportunity to inspect and investigate the condition of the Property to Buyer’s ownsatisfaction. ***Buyer represents to Seller that, except for Seller’s representations and warrantiesexpressly set forth in this Agreement, in the Deed or in the Assignment and Assumption Agreement,it is relying solely upon such inspections and investigations in connection with its purchase ofthe Property and each portion thereof, and not upon any implied representations, guaranties,promises, statements, assurances or warranties of Seller or any of Seller’s employees or agents asto the condition of the Property.***Buyer also understands and agrees that it is purchasing theProperty without any obligation on the part of Seller to make any repairs, changes or alterationswith respect to the Property (except as may be required by Section 6.2 hereof).          7.3 Survival. Any cause of action of a party (the “**Benefitting Party**”) for a breachof the representations and warranties or any other provision in this Agreement (including Buyer’sobligation to maintain the confidentiality of this transaction) or any certificate delivered inconnection herewith by the other party (the “**Obligated Party**”) shall survive until the date that istwelve (12) months after the Closing Date (the period beginning on the date hereof and ending onsuch date being herein called the “**Survival Period**”), at which time such representations andwarranties and other provisions (and any cause of action resulting from a breach thereof) shallterminate except as to any breach with respect to which the Benefitting Party gives the ObligatedParty written notice (identifying such breach with reasonable detail) on or before the date that istwelve (12) months after the Closing Date. Notwithstanding the foregoing: (i) if a BenefittingParty shall have knowledge prior to the expiration of the Due Diligence Period that any of therepresentations or warranties of the Obligated Party contained herein or in any certificatedelivered in connection herewith are false or inaccurate, and in the event any such BenefittingParty shall not provide written notice to the Obligated Party of the same prior to the expirationof the Due Diligence Period, then, upon the expiration of the Due Diligence Period, the ObligatedParty shall not have any liability or obligation respecting such false or inaccuraterepresentations or warranties (and any cause of action resulting therefrom shall terminate upon theDue Diligence Period); (ii), subject to subparagraph (i), if a Benefitting Party shall have actualknowledge at any time after the expiration of the Due Diligence Period and prior to the ClosingDate that any of the representations or warranties of the Obligated Party contained herein or inany certificate
16

 
delivered in connection herewith are false or inaccurate, and in the event any suchBenefitting Party shall not provide written notice to the Obligated Party of the same prior to theClosing, then, upon Closing the Obligated Party shall not have any liability or obligationrespecting such false or inaccurate representations or warranties (and any cause of actionresulting therefrom shall terminate upon Closing) and (iii) to the extent any representation andwarranty of Seller hereunder is confirmed by a Tenant Estoppel Certificate with respect to anyparticular Lease, such representation and warranty shall be deemed stricken from this Agreement(and from any certificate delivered in connection herewith), insofar as such Lease is concerned(and Seller shall not have any obligation or liability with respect thereto).     8. Interim Covenants of Seller. After execution of this Agreement, and through theClosing Date or the sooner termination of this Agreement:          8.1 Maintenance and Operation. Seller shall maintain and operate the Property in thesame manner as prior hereto pursuant to its normal course of business (such maintenance obligationsnot including extraordinary capital expenditures or expenditures not incurred in such normal courseof business), subject to reasonable wear and tear and further subject to destruction by casualty orother events beyond the reasonable control of Seller. Without limitation of the foregoing, Sellershall use reasonable efforts to maintain its current insurance.          8.2 Service Agreements. Seller shall not enter into any additional service contractsor other similar agreements relating to the Property or material modifications to the ServiceAgreements without the prior consent of Buyer, except for those deemed reasonably necessary bySeller after written notice thereof to Buyer which are cancelable on not more than 30 days’ noticewithout penalty. Seller shall deliver notices of termination on the Closing Date with respect toany Service Agreements identified by Buyer in a written notice from Buyer to Seller prior toClosing stating Buyer’s intention to have such contracts terminated.          8.3 Leases. Seller shall have the right, prior to the expiration of the Due DiligencePeriod, to continue to offer the Property for lease in the same manner as prior hereto pursuant toits normal course of business and Seller shall keep Buyer reasonably informed as to the status ofleasing prior to the Closing Date. At least five (5) days prior to the expiration of the DueDiligence Period, Seller shall give Buyer written notice of all new Leases and any amendments,modifications, terminations, renewals or extensions of any existing Leases then or theretoforeentered into during the Due Diligence Period. After the expiration of the Due Diligence Period(unless Buyer shall have theretofore delivered a Termination Notice hereunder), Seller shall notenter into any new Leases or any amendments, modifications, terminations, renewals or extensions ofany existing Leases without Buyer’s prior written consent, which may be withheld in Buyer’s soleand absolute discretion. Buyer shall advise Seller, in writing, whether Buyer approves ordisapproves any proposed New Lease or any such proposed modification, amendment or termination,within three (3) days after Buyer’s receipt of Seller’s written request therefor, each of whichrequests shall be accompanied by (i) a term sheet describing the material terms of the proposedtransaction, and (ii) appropriate financial information on the applicable tenant and such otherinformation as Buyer may reasonably require. If Buyer fails to notify Seller within such 3-dayperiod, Buyer shall be deemed to have
17

 
disapproved the proposed transaction. If Buyer timely disapproves of any proposed new Leaseor any proposed modification, amendment, termination, renewal or extension of an existing Lease,Seller may nevertheless enter into such transaction; provided, however, if Seller enters into suchtransaction notwithstanding Buyer’s disapproval, Buyer may terminate this Agreement, whereupon theEscrow Deposit (together with all interest earned thereon) shall be immediately returned to Buyer.     However, Buyer recognizes and acknowledges that Seller is currently in the process offinalizing amendments/addendums to several leases, and Seller will keep Buyer apprised of thestatus thereof and prior to the execution thereof will obtain Buyer’s approval in accordance withthe provisions of the immediately preceding paragraph.          8.4 Access to the Property. Seller shall continue to give Buyer access to theProperty in accordance with and subject to the provisions of Section 4.1.          8.5 Mortgages. Seller shall not further encumber the Property with any mortgages ordeeds of trust.**9.****DISPOSITION OF ESCROW DEPOSIT****.**          **9.1 IF THE TRANSACTION HEREIN PROVIDED SHALL NOT BE CLOSED BY REASON OF SELLER’S DEFAULT UNDERTHIS AGREEMENT OR THE FAILURE OF SATISFACTION OF THE CONDITIONS BENEFITTING BUYER UNDER SECTION 4OR SECTION 6, THEN THE ESCROW DEPOSIT SHALL BE RETURNED TO BUYER, AND NO PARTY SHALL HAVE ANYFURTHER OBLIGATION OR LIABILITY TO THE OTHER (EXCEPT UNDER THOSE PROVISIONS OF THIS AGREEMENT THATEXPRESSLY SURVIVE A TERMINATION OF THIS AGREEMENT); PROVIDED, HOWEVER, IF THE TRANSACTIONSHEREUNDER SHALL FAIL TO CLOSE BY REASON OF SELLER’S DEFAULT, THEN BUYER SHALL BE ENTITLED TO EITHER(1) SPECIFICALLY ENFORCE THIS AGREEMENT OR (2) TERMINATE THIS AGREEMENT AND OBTAIN A RETURN OF THEESCROW DEPOSIT AND UPON SUCH TERMINATION BUYER SHALL BE ENTITLED TO RECOVER FROM SELLER ALL OFBUYER’S REASONABLE, OUT-OF-POCKET, DOCUMENTED COSTS AND EXPENSES ACTUALLY INCURRED IN CONNECTIONWITH THE NEGOTIATION AND DELIVERY OF THIS AGREEMENT, ALL DUE DILIGENCE PERFORMED BY OR ON BEHALF OFBUYER IN CONNECTION WITH THE PROPERTY AND ALL COSTS INCURRED IN CONNECTION WITH BUYER’S EFFORTS TOOBTAIN FINANCING FOR THE PROPERTY; PROVIDED, THAT SELLER’S OBLIGATION TO REIMBURSE BUYER FOR SUCHCOSTS AND EXPENSES SHALL NOT EXCEED $150,000.00. NO OTHER ACTION, FOR DAMAGES OR OTHERWISE, SHALLBE PERMITTED, AND BUYER SPECIFICALLY WAIVES THE RIGHT TO RECOVER EITHER CONSEQUENTIAL OR EXEMPLARYDAMAGES, AND FURTHER WAIVES THE RIGHT TO A JURY TRIAL.**
18

 
          **9.2 IN THE EVENT THE TRANSACTION HEREIN PROVIDED SHALL NOT CLOSE FOR ANY REASON OTHER THAN THEFAILURE OF SATISFACTION OF THE CONDITIONS BENEFITTING BUYER UNDER SECTION 4 OR SECTION 6 OR THEDEFAULT OF SELLER, THEN THE ESCROW DEPOSIT SHALL BE DELIVERED TO SELLER AS FULL COMPENSATION ANDLIQUIDATED DAMAGES UNDER AND IN CONNECTION WITH THIS AGREEMENT, AND IN SUCH EVENT, BUYER SHALL NOTBE LIABLE TO SELLER FOR MONETARY DAMAGES EXCEPT FOR FORFEITURE OF THE ESCROW DEPOSIT (AND ASPROVIDED UNDER THOSE PROVISIONS OF THIS AGREEMENT THAT EXPRESSLY SURVIVE A TERMINATION OF THISAGREEMENT). IN CONNECTION WITH THE FOREGOING, THE PARTIES RECOGNIZE THAT SELLER WILL INCUR EXPENSEIN CONNECTION WITH THE TRANSACTION CONTEMPLATED BY THIS AGREEMENT AND THAT THE PROPERTY WILL BEREMOVED FROM THE MARKET; FURTHER, THAT IT IS EXTREMELY DIFFICULT AND IMPRACTICABLE TO ASCERTAIN THEEXTENT OF DETRIMENT TO SELLER CAUSED BY THE BREACH BY BUYER UNDER THIS AGREEMENT AND THE FAILURE OFTHE CONSUMMATION OF THE TRANSACTION CONTEMPLATED BY THIS AGREEMENT OR THE AMOUNT OF COMPENSATIONSELLER SHOULD RECEIVE AS A RESULT OF BUYER’S BREACH OR DEFAULT. IN THE EVENT THE SALE CONTEMPLATEDHEREBY SHALL NOT BE CONSUMMATED ON ACCOUNT OF BUYER’S DEFAULT, THEN THE RETENTION OF THE ESCROWDEPOSIT SHALL BE SELLER’S SOLE AND EXCLUSIVE REMEDY UNDER THIS AGREEMENT BY REASON OF SUCH DEFAULT,SUBJECT TO THE PROVISIONS OF THIS AGREEMENT THAT EXPRESSLY SURVIVE A TERMINATION OF THIS AGREEMENTAND THE PARTIES SHALL TAKE SUCH ACTION AS MAY BE REQUIRED TO CAUSE THE ESCROW DEPOSIT TO BEDELIVERED TO SELLER.**     ** Seller’s Initials** ** Buyer’s Initials**            **9.3 IN THE EVENT THE TRANSACTION HEREIN PROVIDED SHALL CLOSE, THE ESCROW DEPOSIT SHALL BEAPPLIED AS A PARTIAL PAYMENT OF THE PURCHASE PRICE.**     10. Miscellaneous.          10.1 Brokers.               10.1.1 Except as provided in Section 10.1.2 below, Seller represents and warrants to Buyer,and Buyer represents and warrants to Seller, that no broker or finder has been engaged by it, inconnection with the sale contemplated by this Agreement. In the event of a claim for broker’s orfinder’s fee or commissions in connection with the sale contemplated by this Agreement, then Sellershall indemnify, defend and hold harmless Buyer from the same if it shall
19

 
be based upon any statement or agreement alleged to have been made by Seller, and Buyer shallindemnify, defend and hold harmless Seller from the same if it shall be based upon any statement oragreement alleged to have been made by Buyer. The indemnification obligations under this Section10.1.1 shall survive the closing of the transactions hereunder or the earlier termination of thisAgreement until the expiration of the Survival Period, at which time such obligations (and anycause of action hereunder not then in litigation) shall terminate.               10.1.2 If and only if the sale contemplated herein closes, (a) Seller has agreed to pay abrokerage commission, pursuant to a separate agreement, to Murray Wachtel/Cornish & Carey, and (b)Buyer has agreed to pay a brokerage commission, pursuant to a separate agreement, to Dan Macke dbaThe Macke Company.          10.2 Survival. Except as otherwise expressly provided herein, all warranties,representations, covenants, obligations and agreements contained in this Agreement shall survivethe closing hereunder and the transfer and conveyance of the Property hereunder and any and allperformances hereunder.          10.3 Further Instruments. Each party will, whenever and as often as it shall berequested so to do by the other, cause to be executed, acknowledged or delivered any and all suchfurther instruments and documents as may be necessary or proper, in the reasonable opinion of therequesting party, in order to carry out the intent and purpose of this Agreement.          10.4 Cumulative Remedies. No remedy conferred upon a party in this Agreement isintended to be exclusive of any other remedy herein or by law provided or permitted, but each shallbe cumulative and shall be in addition to every other remedy given hereunder or now or hereafterexisting at law, in equity or by statute (except as otherwise expressly herein provided).          10.5 No Waiver. No waiver by a party of any breach of this Agreement or of anywarranty or representation hereunder by the other party shall be deemed to be a waiver of anyother breach by such other party (whether preceding or succeeding and whether or not of the same orsimilar nature), and no acceptance of payment or performance by a party after any breach by theother party shall be deemed to be a waiver of any breach of this Agreement or of any representationor warranty hereunder by such other party, whether or not the first party knows of such breach atthe time it accepts such payment or performance. No failure or delay by a party to exercise anyright it may have by reason of the default of the other party shall operate as a waiver of defaultor modification of this Agreement or shall prevent the exercise of any right by the first partywhile the other party continues to be so in default.          10.6 Consents and Approvals. Except as otherwise expressly provided herein, anyapproval or consent provided to be given by a party hereunder must be in writing to be effectiveand may be given or withheld in the absolute discretion of such party.          10.7 Press Releases. Any press release issued with respect to the transactionscontemplated by this Agreement shall be subject to the prior approval of Buyer and Seller.
20

 
          10.8 Modification. This Agreement may not be modified or amended except by writtenagreement signed by all parties.          10.9 Matters of Construction.               10.9.1 Incorporation of Exhibits. All exhibits attached and referred to in thisAgreement are hereby incorporated herein as fully set forth in (and shall be deemed to be a partof) this Agreement.               10.9.2 Entire Agreement. This Agreement contains the entire agreement between theparties respecting the matters herein set forth and supersedes all prior agreements between theparties hereto respecting such matters.               10.9.3 Time Periods/Business Days. If the time period or date by which any right,option, notice or election provided under this Agreement must be exercised, or by which any actrequired hereunder must be performed, or by which the Closing must be held, expires or occurs on aday other than a business day, then such time period or date shall be automatically extendedthrough the close of business on the next regularly scheduled business day. As used herein,“business day” shall mean any day other than a Saturday, Sunday or other day on which nationalbanking institutions in the Sacramento, California are authorized by law or executive action toclose.               10.9.4 Severability. If any term or provision of this Agreement or the applicationthereof to any person or circumstance shall, to any extent, be invalid or unenforceable, theremainder of this Agreement, or the application of such term or provision to persons orcircumstances other than those as to which it is held invalid or unenforceable, shall not beaffected thereby, and each such term and provision of this Agreement shall be valid and be enforcedto the fullest extent permitted by law.               10.9.5 Interpretation. Words used in the singular shall include the plural, andvice-versa, and any gender shall be deemed to include the other. Whenever the words “including”,“include” or “includes” are used in this Agreement, they shall be interpreted in a non-exclusivemanner. The captions and headings of the Sections of this Agreement are for convenience ofreference only, and shall not be deemed to define or limit the provisions hereof. Except asotherwise indicated, all Exhibit and Section references in this Agreement shall be deemed to referto the Exhibits and Sections in this Agreement. Each party acknowledges and agrees that thisAgreement (i) has been reviewed by it and its counsel, (ii) is the product of negotiations betweenthe parties, and (iii) shall not be deemed prepared or drafted by any one party. In the event ofany dispute between the parties concerning this Agreement, the parties agree that any ambiguity inthe language of the Agreement is to not to be resolved against Seller or Buyer, but shall be givena reasonable interpretation in accordance with the plain meaning of the terms of this Agreement andthe intent of the parties as manifested hereby.               10.9.6 Governing Law. THIS AGREEMENT SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCEWITH THE INTERNAL LAWS OF THE STATE OF CALIFORNIA (WITHOUT REGARD TO CONFLICTS OF LAW).
21

 
               10.9.7 Third Party Beneficiaries. Except as otherwise expressly provided in thisAgreement, Seller and Buyer do not intend by any provision of this Agreement to confer any right,remedy or benefit upon any third party, and no third party shall be entitled to enforce orotherwise shall acquire any right, remedy or benefit by reason of any provision of this Agreement.               10.9.8 No Recordation. In no event shall this Agreement or any document or memorandumrelated to the subject matter of this Agreement be recorded without the prior written consent ofSeller.               10.9.9 Effectiveness of Agreement. In no event shall any draft of this Agreementcreate any obligations or liabilities, it being intended that only a fully executed and deliveredcopy of this Agreement will bind the parties hereto.          10.10 No Joint Venture. This Agreement does not and shall not be construed to createa partnership, joint venture or any other relationship between the parties hereto except therelationship of the seller and buyer specifically established hereby.          10.11 Successors and Assigns. Buyer may not assign or transfer its rights orobligations under this Agreement without the prior written consent of Seller (in which event suchtransferee shall assume in writing all of the transferor’s obligations hereunder, but suchtransferor shall not be released from its obligations hereunder). Seller hereby consents to theassignment by Buyer of its interest in this Agreement to an entity controlling, controlled by orunder common control with Buyer or Hines, provided Buyer gives Seller prior written notice of thesame. No consent given by Seller to any transfer or assignment of Buyer’s rights or obligationshereunder shall be construed as a consent to any other transfer or assignment of Buyer’s rights orobligations hereunder. No transfer or assignment in violation of the provisions hereof shall bevalid or enforceable. Subject to the foregoing, this Agreement and the terms and provisions hereofshall inure to the benefit of and be binding upon the successors and assigns of the parties.          10.12 Notices. Any notice which a party is required or may desire to give the othershall be in writing and shall either (1) be sent by personal delivery, (2) by mail (either (i) byUnited States registered or certified mail, return receipt requested, postage prepaid, or (ii) byFederal Express or similar generally recognized overnight carrier regularly providing proof ofdelivery), or (iii) by facsimile ***with a copy by overnight mail for delivery the next day,***addressedas follows (subject to the right of a party to designate a different address for itself by noticesimilarly given):       TO BUYER:         Hines REIT Properties, L.P.    c/o Hines Interests Limited Partnership    2800 Post Oak Boulevard, Suite 5000    Houston, Texas 77056-6118    **Attention: Charles N. Hazen**    FAX: 713. 966.7851
22

 
            With Copy To:         Hines Interests Limited Partnership    101 California Street, suite 1000    San Francisco, CA 94111-5894    **Attention: Paul Paradis**    PH: 415.982.6200    FAX: 415.398.1442       And With Copy To:         Baker Botts L.L.P.    2001 Ross Avenue, Suite 600    Dallas, Texas 75201-2980    **Attention: Joel M. Overton, Jr.**    PH: 214.953.6938    FAX: 214 661.4938       TO SELLER:         JB Management L.P.    1825 Bell Street, Suite 100    Sacramento, California 95825    **Attention: James Gately**    PH: 916.929.3003    FAX: 916.929.2890       With Copy To:         Watson, Khachadourian & Iams, LLP    1000 G Street, Second Floor    Sacramento, California 95814    **Attention: Franklin T. Watson, Esq.**    PH: 916.498.6240    FAX: 916.498.6245Any notice so given by mail shall be deemed to have been given as of the date of delivery (whetheraccepted or refused) established by U.S. Post Office return receipt or the overnight carrier’sproof of delivery, as the case may be. Any such notice not so given (including notices byfacsimile) shall be deemed given upon receipt of the same by the party to whom the same is to begiven.          10.13 Legal Costs. The parties hereto agree that they shall pay directly any and alllegal costs which they have incurred on their own behalf in the preparation of this Agreement, allother agreements pertaining to this transaction and that such legal costs shall not be part of theclosing costs. In addition, if any party hereto brings any suit or other proceeding with respectto the subject matter or the enforcement of this Agreement, the prevailing party (as determined by
23

 
the court, agency or other authority before which such suit or proceeding is commenced), inaddition to such other relief as may be awarded, shall be entitled to recover reasonable attorneys’fees, expenses and costs of investigation actually incurred from the non-prevailing party. Theforegoing includes attorneys’ fees, expenses and costs of investigation (including those incurredin appellate proceedings), costs incurred in establishing the right to indemnification, or in anyaction or participation in, or in connection with, any case or proceeding under Chapter 7, 11 or 13of the Bankruptcy Code (11 United States Code Sections 101 et seq.), or any successorstatutes. This Section shall survive any termination of this Agreement.          10.14 Counterparts. This Agreement may be executed in one or more counterparts, eachof which shall be deemed an original, but all of which shall constitute one and the same document.          10.15 1031 Exchange. Notwithstanding any terms in this Agreement to the contrary,Seller (hereinafter referred to as the “**Exchangor**”) shall have the right to enter into an exchangetransaction with respect to the Property (hereinafter referred to as the “**Relinquished Property**”)to cause the sale of the Relinquished Property to Buyer to qualify as a tax deferred exchange underthe provisions of Section 1031 of the Internal Revenue Code of 1986, as amended (the “**Code**”) andthe Treasury Regulations promulgated thereunder. If for whatever reason either in this Agreementor in other agreements related to the relinquishment of the Relinquishment Property the word“Seller” appears, said word shall be substituted with the word “Exchangor.” Buyer agrees to usereasonable efforts to cooperate with Exchangor with respect to such tax deferred exchange,including the execution at the time of Closing of all documents required to be executed by Buyerpursuant to the provisions of Section 1031 of the Code and the Treasury Regulations thereunder inconnection with such exchange, provided that: (a) Buyer incurs no additional cost or expense inconnection with such exchange; (b) Exchangor agrees to indemnify and hold Buyer harmless from andagainst any liability arising out of its cooperation in effecting such exchange as requested byExchangor, provided, however, that such indemnification shall in no way affect the rights of Buyerunder any other provision of this Agreement or in any other contract or agreement connected withthe exchange of the Relinquished Property; and (c) Buyer shall have no liability with respect tothe tax deferred exchange and shall not be required to purchase any property (the “**ReplacementProperty**”).          Exchangor and Buyer acknowledge that all agreements and documents solely in connection withperforming the exchange shall be prepared by Exchangor’s expense by Exchangor’s counsel.          Exchangor is granted the authority to transfer its rights to this Agreement but not itsobligations hereunder pursuant to an Assignment of Rights Under Contract to be signed by Exchangorand Exchangor’s Qualified Intermediary, and acknowledged by Buyer prior to Closing. At the requestof Exchangor, Buyer will sign the written Assignment referred to in this paragraph with the clearunderstanding that all obligations under this Agreement remain with Exchangor and that Exchangorshall directly deed the legal title to the Property over to the Buyer as noted in the Assignment ofRights Under Contract and in accordance with the provisions of this Agreement.
24

 
          10.16 Audit Cooperation. Prior to and after the Closing Date, Seller shall provide toBuyer (at Buyer’s expense) copies of, or shall provide Buyer access to, such factual information asmay be reasonably requested by Buyer, and in the possession or control of Seller, or its propertymanager or accountants, to enable Buyer (or Hines or an affiliate of Hines) to allow Buyer’sauditor (Deloitte & Touche LLP or any successor auditor selected by Buyer) to conduct an audit ofthe income and expense statements of the Property up to the date of Closing, plus up to the three(3) prior calendar years. Buyer shall be responsible for all out-of-pocket costs associated withthis audit. Seller shall cooperate (at no cost to Seller) with Buyer’s auditor in the conduct ofsuch audit. In addition, Seller agrees to provide to Buyer’s auditor historical financialstatements for the Property, including income and balance sheet data for the Property, for up tothree (3) years prior to the year in which the Closing Date occurs. Without limiting theforegoing, (i) Buyer or its designated independent or other auditor may audit Seller’s operatingstatements of the Property, at Buyer’s expense, and Seller shall provide such documentation asBuyer or its auditor may reasonably request in order to complete such audit, and (ii) Seller shallfurnish to Buyer such financial and other information as may be reasonably required by Buyer or anaffiliate of Buyer to make any required filings with the Securities and Exchange Commission orother governmental authority; provided, however, that (i) the foregoing obligations of Seller shallbe limited to providing such information or documentation as may be in the possession of, orreasonably obtainable by, Seller, its property manager or accountants, at no cost to Seller, and inthe format that Seller (or its property manager or accountants) have maintained such information,and (ii) while Seller will make such documentation and information available, any informationdiscovered by Buyer or its agents which is believed to be inaccurate or inconsistent withinformation provided to Buyer during the Due Diligence Period in any event will not afford Buyer abasis for any legal action against Seller.
25

 
     **IN WITNESS WHEREOF,**the parties hereto have executed this Agreement as of the date first abovewritten.**SELLER:****JB MANAGEMENT L.P.**, a Californialimited partnership       By: B & B Enterprises, Inc., a California    corporation, its general partner       By:           Joseph Benvenuti, President**BUYER:****HINESREIT PROPERTIES, L.P.**,