**Exhibit 10.447**

 

PURCHASE AND SALE AGREEMENT AND ESCROW INSTRUCTIONS

 

THIS PURCHASE AND SALEAGREEMENT AND ESCROW INSTRUCTIONS (this “Agreement”) is made and entered intoas of August   , 2004, between GATEWAY PAVILIONS, L.L.C., anArizona limited liability company (“Seller”), and INLAND REAL ESTATEACQUISITIONS, INC., an Illinois corporation, or its assigns permitted under section 15.2,below (“Purchaser”), with reference to the following:

 

A.                                   Selleris the owner of the improved real property (the “Real Property”) described onExhibit A attached hereto together with certain personal property located uponor used in connection with such improved real property and certain other assetsrelating thereto, all as more particularly described in section 2, below.

 

B.                                     Sellerdesires to sell to Purchaser, and Purchaser desires to purchase from Seller,the Property (defined in section2, below) on the terms and subject to**the conditions contained in thisAgreement.

 

NOW, THEREFORE, for goodand valuable consideration, the receipt and sufficiency of which are herebyacknowledged, the parties hereto agree as follows:

 

1.                                       BASIC TERMS AND DEFINITIONS; REFERENCES

 

1.1                                 Basic Terms and Definitions.

 

(a)                                  Effective Date.  The effective date of this Agreement shall bethe date set forth above (“Effective Date”) .

 

(b)                                 Closing Date. The Close of Escrow shall occur on December 15, 2004 (the “ClosingDate”).

 

(c)                                  Title Review Period.  The “Title Review Period” shall end at 5:00p.m. on August 13, 2004.

 

(d)                                 Due Diligence Period.  The “Due Diligence Period” shall end on August 2,2004, at 5:00 p.m.

 

(e)                                  Escrow Holder.  The escrow holder shall be First AmericanTitle Insurance Company in Chicago, Illinois (“Escrow Holder”).

 

(f)                                    Title Company.  The**titlecompany shall be First American Title Insurance Company (“TitleCompany”).

 

1.2                                 References.  All references to Exhibits andSchedules refer to Exhibits and Schedules attached to this Agreement, and allsuch Exhibits and Schedules are incorporated herein by reference.

 

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2.                                       PURCHASE AND SALE.

 

Subject to the terms andconditions of this Agreement, Seller agrees to sell, assign and transfer toPurchaser and Purchaser agrees to purchase from Seller, for the purchase priceset forth in section 3 hereof, the following (collectively, the “Property”):

 

2.1                                 TheReal Property, together with the buildings located thereon, all associatedparking areas thereon and all other improvements located thereon (the buildingsand such other improvements are, collectively, the “Improvements”).  All references hereinafter made to the RealProperty shall be deemed to include, to the extent owned by Seller, all rights,privileges, easements and appurtenances benefiting the Real Property and/or theImprovements, including, without limitation, all mineral and water rights, andall easements, rights-of-way and other appurtenances used or connected with thebeneficial use or enjoyment of the Real Property;

 

2.2                                 Allof Seller’s right, title and interest in and to the personal property,equipment, supplies and fixtures (collectively, the “Personal Property”) listedon Exhibit B attached hereto or otherwise left on the Real Property at theClose of Escrow (as defined in section 8.1 hereof) to the extent owned bySeller;

 

2.3                                 Allof Seller’s right, title and interest in and to any intangible property used oruseful in connection with the foregoing, including, without limitation, allcontract rights, warranties, guaranties, licenses, permits, entitlements, thename “Gateway Pavilions,” governmental approvals and certificates of occupancywhich benefit the Real Property and/or the Personal Property;

 

2.4                                 Allof Seller’s right, title and interest in and to all leases affecting the RealProperty as of the Close of Escrow listed on the Rent Roll attached hereto asExhibit I (the “Rent Roll”), or approved or deemed approved by Purchaser under section 5.3,below (the “Leases”), together with all security deposits, letters of credit,guaranties and any other security for the obligations of the tenants under theLeases delivered to Seller and not theretofore applied to tenant obligationsunder the Leases; and

 

2.5                                 Allof Seller’s right, title and interest in, and to the contracts listed onExhibit C attached hereto, and all contracts hereafter entered into by Sellerto the extent permitted by the provisions of this Agreement (the “Contracts”).

 

Notwithstanding anythingto the contrary contained herein, but subject to the last sentence of section 10.1,below, the term “Property” shall expressly exclude: (a) any Rents (as definedin section 10.1, below) and any other amounts payable by tenants under theLeases for periods before the Close of Escrow, (b) any Rents or other amountspayable by any former tenants of the Property, (c) any payments owed to Sellerunder the Development Agreement (defined in section 4.l(f), below) or theSharing

 

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Agreement (defined in Section 4.5below) for periods or with respect to events occurring before or after theClose of Escrow, and (d) with respect to services or materials provided bySeller before the Closing Date: (i) any site, or monument or pylon signreimbursement costs, or similar costs, paid by any tenant or by any occupantafter the Close of Escrow, (ii) any judgments, stipulations, orders orsettlements with any tenants, any occupants, or former tenants or occupants,paid after the Close of Escrow, for periods or with respect to events occurringbefore the Close of Escrow, and (iii) any sums payable by third parties toSeller in respect of, or arising out of, the Property, paid after the Close ofEscrow for periods or with respect to events occurring before the Close ofEscrow.

 

3.                                    PURCHASE PRICE AND DEPOSIT.

 

3.1           PurchasePrice.  The purchase price for theProperty shall be $65,141,045 (the “Purchase Price”).

 

3.2           Paymentof Purchase Price.  The PurchasePrice shall be payable as follows :

 

3.2.1 Within threebusiness days after the Opening of Escrow (defined below), Purchaser shalldeposit in escrow with Escrow Holder, by check or in immediate, same-dayfederal funds, the sum of $1,500,000 (the “Deposit”). Immediately upon EscrowHolder’s receipt of the Deposit (the “Opening of Escrow”), Escrow Holder shallinvest the same in a federally insured interest-bearing account acceptable toSeller and Purchaser. All interest accruing on the Deposit shall be deemed partof the Deposit. Upon expiration of the Due Diligence Period, if Purchaser hasnot previously terminated this Agreement by its terms, the Deposit shall becomenonrefundable, except as expressly provided herein.

 

3.2.2 If all theconditions in section 7.1 hereof have been satisfied or waived byPurchaser, Purchaser shall deposit in current funds with Escrow Holder, atleast one business day before or, if it shall not delay the Close of Escrow on,the Closing Date, an amount equal to the Purchase Price minus the Deposit andall interest accrued thereon, and plus or minus applicable prorations pursuantto section 10 hereof.

 

3.3           Dispositionof Deposit Upon Failure to Close. If**theClose of Escrow fails to occur due to Purchaser’s default under this Agreement(all of the conditions to Purchaser’s obligation to close having been satisfiedor waived), the disposition of the Deposit and all interest accrued thereonshall be governed by section 13.1 hereof. If the Close of Escrow fails tooccur due to Seller’s default under this Agreement (all of the conditions toSeller’s obligation to close having been satisfied or waived), the Deposit andall interest accrued thereon shall promptly be refunded to Purchaser. If theClose of Escrow fails to occur due to the failure of any of the conditions setforth in sections 7.1 or 7.2, hereof other than as a result of Purchaser’s orSeller’s default under this Agreement, the disposition of the Deposit and

 

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allinterest accrued thereon shall be governed by section 9.3 hereof.

 

4.            PROPERTY INFORMATION; TITLE AND SURVEY REVIEW;INSPECTIONS AND DUE DILIGENCE; TENANT ESTOPPEL CERTIFICATES; CONFIDENTIALITY.

 

4.1           Property Information.  Ifnot delivered by Seller to Purchaser before the Effective Date, Seller shalldeliver to Purchaser within five business days after the Effective Date, to theextent in Seller’s possession, the following (collectively, the “PropertyInformation”):

 

(a)           the Leases;

 

(b)           [intentionally deleted];

 

(c)                                  the most current operating statements for theReal Property;

 

(d)                                 copies of the Contracts;

 

(e)                                  existing land title surveys, if any, for theReal Property;

 

(f)                                    Development Agreement dated November 5,2001, among Seller, Costco Wholesale Corporation, and Harkins Phoenix Cinemas,L.L.C., and all amendments thereto (the “Development Agreement”); and

 

(g)                                 any environmental, soils and/or engineering reportsprepared for Seller or Seller’s predecessors.

 

4.2           Title and Survey Review; Title Policy.

 

4.2.1Delivery of Title Commitment and Survey. Seller has, prior to theEffective Date, at Seller’s sole cost and expense, obtained and delivered toPurchaser: (i) a preliminary title commitment covering the Real Property (the “TitleCommitment”), together with legible photocopies of all documents (collectively,the “Title Documents”) referenced in the Title Commitment, which is intended tocomply with the Title Commitment Requirements specified in Schedule 1;and, (ii) a new or updated ALTA survey for the Real Property, dated not morethan thirty (30) days prior to the Effective Date (the “Survey”), which isintended to comply with the Survey Requirements specified in Schedule 2.  Notwithstanding the foregoing, Seller makes norepresentations or warranties, and Seller shall have no responsibility, withrespect to the completeness of the Title Documents made available to Purchaserby the Title Company, or the accuracy of the Survey.

 

4.2.2Title and Survey Review and Cure. On or before the end of the TitleReview Period, Purchaser shall deliver to Seller and Escrow Holder writtennotice (“Purchaser’s**Title andSurvey Notice”) of Purchaser’s approval or disapproval of the matters reflectedin the Title Commitment and Survey. The failure

 

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of Purchaser to deliverto Seller Purchaser’s Title and Survey Notice on or before the end of the TitleReview Period shall be deemed to constitute Purchaser’s approval of thecondition of title to the Real Property.  If Purchaser disapproves any matter of titleshown in the Title Commitment or Survey, Seller may, but shall have noobligation to, within five days after its receipt of the Purchaser’s Title andSurvey Notice (“Seller’s Election Period”), elect to eliminate or ameliorate toPurchaser’s reasonable satisfaction the disapproved title matters by givingPurchaser written notice (“Seller’s Title and Survey Notice”) of thosedisapproved title matters, if any, which Seller agrees to so eliminate orameliorate by the Closing Date.  Anytitle exception disapproved by Purchaser shall be deemed ameliorated toPurchaser’s reasonable satisfaction to the extent that Seller either causessuch exception to be removed from the Title Policy (as defined in section 4.2.3,below)  or to be affirmatively insuredover.  If Seller does not elect to, or isunable to, eliminate or ameliorate any disapproved title matters, if Purchaserreasonably disapproves Seller’s Title and Survey Notice, or if Seller fails totimely deliver Seller’s Title and Survey Notice, Purchaser shall have theright, upon delivery to Seller and Escrow Holder, on or before five daysfollowing the expiration of Seller’s Election Period, of a written notice, toeither: (a) waive its prior disapproval, in which event said disapprovedmatters shall be deemed approved; or (b) terminate this Agreement and theEscrow (as defined in section 9.1, below). Failure to take either one of the actions described in subsections (a)and (b), above, shall be deemed to be Purchaser’s election to take the actiondescribed in subsection (a), above.  If Purchaser elects to terminate thisAgreement as provided in subsection (b), above, this Agreement shall automaticallyterminate, the parties shall be released from all further obligations underthis Agreement (except pursuant to any provisions which by their terms survivea termination of this Agreement), the Deposit shall be immediately returned toPurchaser and Purchaser shall immediately return all Property Information toSeller.  Notwithstanding the foregoing,Seller shall cause to be released on or before the Close of Escrow allconsensual monetary liens encumbering the Property (other than Permitted Exceptions[defined in section 4.2.3, below], and those created by the actions ofPurchaser or its agents, representatives, contractors or employees), except formechanics’ and materialmen’s liens with respect to which Seller may, in lieu ofobtaining releases, at Seller’s sole cost and expense, take such actionnecessary to have such liens removed as exceptions to the Title Policy orobtain title insurance coverage for such liens.

 

If any encumbrance orother exception to title arises or is discovered after the delivery of theTitle Commitment and Survey (an “Additional Encumbrance”), the partydiscovering such Additional Encumbrance shall promptly give written noticethereof to the other. No later than five days after delivery of the notice ofsuch Additional Encumbrance, Purchaser shall deliver a new Purchaser’s Titleand Survey Notice to Seller specifying whether the Additional Encumbrance isapproved or disapproved. In

 

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addition, Seller maypropose Additional Encumbrances to Purchaser, for Purchaser’s approval. NoAdditional Encumbrance may be disapproved by Purchaser unless it materially andadversely affects the value of the Real Property, or its use or development asa retail shopping center. If Purchaser objects to the Additional Encumbrance,the parties shall proceed in the same manner as set forth above for disapprovedtitle matters arising from the Title Commitment and Survey. If Purchaser failsto deliver Purchaser’s new Title and Survey Notice within the time specified inthis paragraph, Purchaser shall be deemed to have approved the AdditionalEncumbrance(s).  After the EffectiveDate, Seller covenants not to cause Additional Encumbrances to be imposed onthe Real Property which shall encumber the Real Property after the Close ofEscrow without Purchaser’s prior written consent, not be unreasonably withheldor delayed. Not later than fifteen (15) days prior to the Closing, Seller shallobtain and deliver to Purchaser an updated Survey and updated Title Commitment,dated no earlier than 45 days before the Closing Date. Any new items shown onsuch updated Survey and/or Title Commitment shall, unless previously disclosedto Purchaser as an Additional Encumbrance, be deemed to be an AdditionalEncumbrance, which shall be resolved as provided above

 

4.2.3 Delivery ofTitle Policy at Closing.  As acondition precedent to the Close of Escrow, the Title Company shall have issuedand delivered to Purchaser, or shall have committed to issue and deliver toPurchaser, with respect to the Real Property, an Extended Coverage ALTA Owner’sPolicy of Title Insurance (1992 Form) (the “Title Policy”) issued by the TitleCompany as of the date and time of the recording of the Deed (as defined in section 6.1,below) conveying the Real Property, in the amount of the Purchase Price,insuring Purchaser as owner of good and marketable fee simple title to the RealProperty, subject only to the Permitted Exceptions, and in compliance with thetitle requirements described in Schedule 2.  “Permitted Exceptions” shall mean and include:(a) any lien to secure payment of real estate taxes, including specialassessments, not delinquent, (b) all matters which could be revealed ordisclosed by a physical inspection or a survey of the Real Property, andmatters affecting the Real Property which are created by or with the writtenconsent of Purchaser, (c) the rights of the tenants under the Leases affectingthe Real Property, (d) all exceptions disclosed by the Title Commitment orSurvey relating to the Real Property which are approved, or deemed approved, byPurchaser in accordance with section 4.2.2 hereof, and (e) all applicablelaws, ordinances, rules and governmental regulations (Including, withoutlimitation, those relating to building, zoning and land use) affecting thedevelopment, use, occupancy or enjoyment of the Real Property.

 

4.3                                 Inspections;Due Diligence Period.

 

4.3.1 Inspections inGeneral. Commencing from the Effective Date and continuing through andincluding the Closing Date, Purchaser, its agents and employees shall have alimited license (the “License”) to enter upon the Real Property for the

 

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purpose of makingnon-invasive inspections at Purchaser’s sole risk, cost and expense. Before anysuch entry, Purchaser shall provide Seller with a certificate of insurancenaming Seller as an additional insured, with an insurer and insurance limitsand coverage reasonably satisfactory to Seller. All of such entries upon theReal Property shall be at reasonable times during normal business hours andafter at least 48 hours’ prior notice to Seller, and Seller or Seller’s agentshall have the right to accompany Purchaser during any activities performed byPurchaser on the Real Property. Notwithstanding anything stated to the contraryherein, Purchaser’s right to inspect any of the occupied space in the RealProperty shall be subject to the terms and conditions of the Lease with respectto such space, and such inspections shall not interfere with the rights oftenants. If any inspection or test disturbs the Real Property, Purchaser shallrestore the Real Property to the same condition as existed before theinspection or test. Purchaser shall defend, indemnify Seller and hold Seller,Seller’s, shareholders, directors, members, managers, partners, officers,tenants, agents, contractors and employees and the Real Property harmless fromand against all losses, costs, damages, claims and liabilities, including butnot limited to, mechanics’ and materialmen’s liens and Seller’s attorneys’fees, arising out of or in connection with Purchaser’s inspection of the RealProperty. The License shall be deemed revoked upon termination of thisAgreement. The provisions of this section 4.3.1 shall survive the Close ofEscrow or the earlier termination of this Agreement. Notwithstanding anythingstated to the contrary herein, Purchaser’s rights under this Section 4.3.1to inspect the Real Property after the Due Diligence Deadline shall not bedeemed or construed to extend the Due Diligence Deadline, or give Purchaser anyadditional rights to terminate this Agreement.

 

4.3.2 EnvironmentalInspections. The inspections under section 4.3.1 may includenon-invasive Phase I environmental inspections of the Real Property, but noPhase II environmental inspections or other invasive inspections or sampling ofsoil or materials, including without limitation construction materials, eitheras part of the Phase I inspections or any other inspections, shall be performedwithout the prior written consent of Seller, which may be withheld in its soleand absolute discretion. If consented to by**Seller,the proposed scope of work and the party which shall perform the work shall besubject to Seller’s review and approval, which may be withheld in its sole andabsolute discretion.

 

4.3.3 TerminationDuring Due Diligence Period.  IfPurchaser determines, in its sole discretion, before the expiration of the DueDiligence Period, that the Real Property is unacceptable for Purchaser’spurposes, Purchaser shall have the right to terminate this Agreement by givingto Seller notice of termination (“Termination Notice”) before the expiration ofthe Due Diligence Period, in which event the Deposit shall be immediatelyrefunded to Purchaser, Purchaser shall immediately return all PropertyInformation to Seller and, except for those

 

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provisions of thisAgreement which expressly survive the termination of this Agreement, theparties hereto shall have no further obligations hereunder. If Purchaser failsto deliver a Termination Notice to Seller and Escrow Holder on or before theexpiration of the Due Diligence Period, Purchaser shall be deemed to besatisfied with all aspects of all of the Real Property (other than title andsurvey matters, which shall continue to be governed by the provisions of section 4.2),including, without limitation, the condition and suitability of all the RealProperty for Purchaser’s intended use, and Purchaser shall be obligated toacquire the Real Property in accordance with the provisions of this Agreement.

 

4.4                                 Tenantand REA Estoppel Certificates. It is a condition precedent to Purchaser’s**obligation to consummate this transactionthat Seller obtain and deliver to Purchaser, not less than tan (10) businessdays prior to the Closing Date, estoppel certificates (“Tenant EstoppelCertificates”), dated no earlier than 45 days before the Closing Date, in theform attached as Exhibit H or other form required under each particular Lease,executed by: (a) each of the following named tenants: Bed Bath & Beyond,Borders Books, Marshalls, Circuit City, Sports Authority, Mor Furniture,Carrabbas, Red Robin, Petco, Krispy Kreme, Paul Lee’s Chinese Kitchen (if alease has then been executed with Paul Lee’s Chinese Kitchen), Village Inn,McDonalds and Peter Piper Pizza and (b) tenants occupying at least 85% of theleased rental floor area of the Real Property, excluding the floor area leasedunder the leases described in subsection (a), above.  Seller shall diligently attempt to obtainTenant Estoppel Certificates from all tenants of the Property.

 

Only with respect toLeases described in subsection (b), above, for which Seller shall not havereceived and delivered to Purchaser Tenant Estoppel Certificates (not to exceed15% of the floor area thereof), Seller shall deliver to Purchaser not less thanten (10) business days prior to Closing, in lieu thereof, a Seller’scertificate substantially in the form of Exhibit E (“Seller’s Estoppel Certificate”),for each such Lease.

 

It is a conditionprecedent to Purchaser’s obligation to consummate this transaction that Sellerobtain and deliver to Purchaser, not less than ten (10) business days prior tothe Closing Date, estoppel certificates (“REA Estoppel Certificates”) from eachparty to any reciprocal easement agreement, declaration, or similar agreementrecorded against the Property (each, an “REA”) stating: (a) whether such partyknows of any default tinder the REA, and if there are known defaults,specifying the nature thereof; (b) whether to such party’s knowledge the REAhas been assigned, modified or amended in any way (and if it has, then statingthe nature thereof); and (c)whether to such party’s knowledge, the REA is infull force and effect.

 

4.5           Contracts. On or before theend of the Due Diligence Period, Purchaser shall notify Seller which of theContracts Purchaserwishes to assume at Closing, and which of the Contracts

 

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Purchaserwishes Seller to terminate as of the Closing Date. If Purchaser doeS not sonotify Seller, Purchaser shall be deemed to have elected to assume all of theContracts at Closing. Notwithstanding anything stated to the contrary herein,Purchaser shall not be obligated to assume any of Seller’s obligations under,and Seller shall terminate at Close of Escrow, the management and leasingagreement with respect to the Property, if any.

 

Purchaseracknowledges that Seller and Costco Wholesale Corporation are parties to a SharingAgreement, as amended (the “Sharing Agreement”), with respect to, interalia,the Development Agreement dated October 15, 2001, between the City ofAvondale and Costco Wholesale Corporation, as amended, recorded on November 5,2001, in the official records of Maricopa County, Arizona, as Instrument no.  2001-1034469. Neither the Sharing Agreementnor the Development Agreement is a Contract. All rights, duties and obligationsof Seller under the Development Agreement and the Sharing Agreement shall remainthe rights, duties and obligations of Seller following the Closing Date. Sellershall indemnify and hold Purchaser harmless from any asserted claims againstPurchaser arising out of or related to the Development Agreement and/or theSharing Agreement. Purchaser agrees to reasonably cooperate with Seller so thatSeller may exercise all of its rights, duties and obligations under theDevelopment Agreement and/or the Sharing Agreement.

 

4.6                                 Confidentiality. Before the Close of Escrow or if the Closeof Escrow never occurs, the Property Information and all other information,other than matters of public record or matters generally known to the public,furnished to, or obtained through inspection of the Real Property by,Purchaser, its affiliates, lenders, employees, attorneys, accountants and otherprofessionals and agents relating to the Real Property, shall be treated byPurchaser, its affiliates*,*lenders,employees*,*attorneys, accountantsand other professionals and agents as confidential, and shall not be disclosedto anyone (except as reasonably required in connection with Purchaser’sevaluation of the Real Property) except to Purchaser’s consultants who agree tomaintain the confidentiality of such information, and the Property Informationshall be returned to Seller by Purchaser if the Close of Escrow does not occur.The terms of this Agreement shall not be disclosed to anyone before the Closeof Escrow except to Purchaser’s and Seller’s consultants who agree to maintainthe confidentiality of such information. The confidentiality provisions of thissection 4.6 shall not apply to any disclosures made by Purchaser or Selleras required by law, by court order, or in connection with any subpoena servedupon Purchaser or Seller, although Purchaser and Seller shall provide eachother with written notice before making any such disclosure.

 

5.                                     OPERATIONS AND RISK OF LOSS

 

5.1           Ongoing Operations. During thependency of this Agreement, but subject to the limitations set forth below,Seller

 

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shall carry on itsbusinesses and activities relating to the Real Property in the same manner asit did before the Effective Date.

 

5.2                                 NewContracts.  Before the expiration ofthe Due Diligence Period, Seller may, without Purchaser’s consent, enter intocontracts relating to the Real Property, as long as Seller provides Purchaserwith written notice of the same not later than ten days prior to the end of theDue Diligence Period.  Following theexpiration of the Due Diligence Period, Seller shall not enter into anycontract that shall be an obligation affecting the Real Property subsequent tothe Close of Escrow (except contracts entered into in the ordinary course ofbusiness that are terminable without cause on 30-days’ notice), without theprior consent of the Purchaser. Purchaser’s consent shall not be unreasonably withheld, and Purchasershall respond to Seller’s request for Purchaser’s consent within ten days.

 

5.3                                 LeasingArrangements.  Before the expirationof the Due Diligence Period, Seller may, without Purchaser’s consent, enter intonew leases of space in the Real Property and amendments, expansions andrenewals of the Leases, as long as Seller provides Purchaser with prior writtennotice of the same not less than ten days prior to the end of the Due DiligencePeriod.  Following the expiration of theDue Diligence Period, Seller may enter into new leases of space in the RealProperty and amendments, expansions and renewals of Leases, only with Purchaser’sprior written consent, which shall not be unreasonably withheld or delayed. Notwithstandingthe foregoing, Purchaser’s failure to consent to a proposed tenant will not bedeemed unreasonable if:  (a) the proposedtenant’s use would violate any REA, any existing exclusive or any prohibiteduse in any tenant Lease, or otherwise be incompatible with a first classshipping center;  (b)  the proposed minimum rent is less than theminimum rent specified for such space in the Rent Roll; or (c) the proposedlease contains sent concessions which extend beyond the Closing Date which are notreflected on the Rent Roll (unless Seller agrees to give Purchaser a credit atthe Close of Escrow for such unexpired concession).  Purchaser shall be deemed to have consentedto any new Lease or any Lease amendment, expansion or renewal if it has notnotified Seller specifying with particularity the matters to which Purchaserreasonably objects, within five days after its receipt of Seller’s writtenrequest for consent, together with a copy of the Lease amendment, expansion orrenewal, or the new Lease.  Purchaseracknowledges that Seller is currently in negotiations (including negotiationsof letters of intent) for those leases (the “Pending Leases”) described on Schedule 3.Purchaser expressly consents to Seller entering into each of the PendingLeases, provided that the final version of each Pending Lease contains economicterms which are no less favorable to the landlord than those shown on Schedule 3.  At the Close of Escrow, Purchaser shall, withrespect to all new Leases that were entered into pursuant to this section 5.3,and with respect to all other Lease amendments, expansions, assume in writing(pursuant to the Assignment of Leases and Contracts and Bill of Sale) Seller’s obligationsarising on or after the Closing Date under such new 

 

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Leases and Leaseamendments, expansions or renewals.

 

5.4                                      Damageor Condemnation. Risk of loss resulting from any condemnation or eminentdomain proceeding which is commenced or has been threatened against the RealProperty before the Close of Escrow, and risk of loss to the Real Property dueto fire, flood or any other cause before the Close of Escrow, shall remain withSeller, If before the Close of Escrow the Real property or any portion thereofshall be materially damaged, or if the Real Property or any material portionthereof shall be subjected to a bona fide threat of condemnation orshall become the subject of any proceedings, judicial, administrative orotherwise, with respect to taking by eminent domain or condemnation, Purchasermay elect not to acquire the Real Property by delivering written notice of suchelection to Seller within five days after Purchaser learns of the damage ortaking, in which event Purchaser shall no longer be obligated to purchase, andSeller shall no longer be obligated to sell, the Real Property. If the ClosingDate is within the said five-day period, the Close of Escrow shall be extendedto the next business day following the expiration of said five-day period. Ifno such election is made or if the damage is not material, this Agreement shallremain in full force and effect, the purchase contemplated herein, less anyinterest taken by eminent domain or condemnation, shall be effected with nofurther adjustment, and upon the Close of Escrow, Seller shall assign, transferand set over to Purchaser all of the right, title and interest of Seller in andto any awards that have been or that may thereafter be paid for such taking,and Seller shall assign, transfer and set over to Purchaser any insuranceproceeds that may thereafter be paid for such damage or destruction givingPurchaser a credit at the Close of Escrow for any deductible under suchpolicies.  For purposes of this section 5.4,(i) “Material damage” or “Materially damaged” means damage exceeding$250,000.00, (ii) “material portion” means any portion of the Real Propertythat has a fair market value exceeding $250,000.00.

 

The provisions of this section 5.4hereof shall govern their obligations in the event of damage or destruction tothe Real Property or condemnation of all or part of the Real Property.

 

6.                                     SELLER’S AND PURCHASER*’*S DELIVERIES

 

6.1                                 Seller’sDeliveries into Escrow. No later than one business day before or, if itshall not delay the Close of Escrow on, the Closing Date, Seller shall deliverinto Escrow (as defined in section 9, below) to the Escrow Holder thefollowing, all in form and substance reasonably acceptable to Purchaser:

 

(a)                                  Deed.  A special warranty deed (the “Deed”), executedand acknowledged by Seller, conveying to Purchaser Seller’s title to the RealProperty;

 

(b)                                 Assignmentof Leases and Contracts and Bill of Sale. An Assignment of Leases and Contracts and Bill of Sale (“Assignment ofLeases and Contracts and Bill of Sale”);

 

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(c)                                  StateLaw Disclosures.  Any**such disclosures and reports as arerequired by applicable state and local law in connection with the conveyance ofthe Real Property;

 

(d)                                 Non-ForeignCertificate.  A Non-foreign Certificateexecuted by Seller;

 

(e)                                  Certificatesof Insurance.  Certificates of insuranceof tenants under the Leases, as required by the Leases;

 

(f)                                    VacancyEscrow Agreement.  Three (3)counterparts of a Vacancy Escrow Agreement (as defined in section 7.1(f)),executed by Seller;

 

(g)                                 Obligationto Purchase and Right of First Refusal Agreement.  An Obligation to Purchase and Right of FirstRefusal Agreement executed by Seller, in the form of Exhibit G, attached hereto(the “Pad Agreement”);

 

(h)                                 Noticeto Other Owners.  Five counterpartsof a Notice to Other Owners, executed by Seller, which shall, under section 11.17of the Construction, Operation and Easement Agreement among Seller, CostcoWholesale Corporation and Harkins Phoenix Cinemas, L.L.C., recorded on November 5,2001, in the official records of Maricopa County, Arizona, as instrument no.2001-1034470, as amended by the First Amendment of Construction, Operation andReciprocal Agreement dated December 31, 2003, recorded on January 6,2004, in the official records of Maricopa County, Arizona, as instrument no.2004-0013091 (collectively, the “OEA”), release Seller from unaccruedobligations under the OEA from and after the Closing Data (the “Notice to Owners”);and

 

(i)                                     AdditionalDocuments.  Any additional documentsthat Escrow Holder or the Title Company may reasonably require for the properconsummation of the transaction contemplated by this Agreement.

 

6.2                                 Purchaser’sDeliveries into Escrow.  No less thanone business day before or, if it shall not delay the Close of Escrow on, theClosing Date, Purchaser shall deliver into Escrow to the Escrow Holder thefollowing:

 

(a)                                  PurchasePrice.  The Purchase Price, less the Depositthat is applied to the Purchase Price, plus or minus applicable prorations,deposited by Purchaser with the Escrow Holder in immediate, same-day federalfunds wired for credit into the Escrow Holder’s escrow account;

 

(b)                                 Assignmentof Leases and Contracts and Bill of Sale. An Assignment of Leases and Contracts and Bill of Sale executed byPurchaser;

 

(c)                                  VacancyEscrow Agreement.  Three (3)counterparts of a Vacancy Escrow Agreement, executed by Purchaser;

 

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(d)                                 PadAgreement.  Pad Agreement, executedby Purchaser;

 

(e)                                  Noticeto Owners.  Five counterparts of theNotice to Owners, executed by Purchaser;

 

(f)                                    StateLaw Disclosures.  Any such**disclosures and reports as are requiredby applicable state and local law to be provided by purchasers in connectionwith the conveyance of the Real Property; and

 

(g)                                 AdditionalDocuments.  Any additional documents thatEscrow Holder or the Title Company may reasonably require for the properconsummation of the transaction contemplated by this Agreement.

 

6.3                                 ClosingStatements/Escrow Fees; Tenant Notices.  Concurrently with the Close of Escrow, Sellerand Purchaser shall deposit with the Escrow Holder executed closing statements consistentwith this Agreement in the form required by the Escrow Holder.  Seller and Purchaser shall execute, at theClose of Escrow, and Purchaser shall deliver to each tenant immediately afterthe Close of Escrow, tenant notices regarding the sale of the Real Property.

 

6.4                                 Post-ClosingDeliveries.  Immediately after theClose of Escrow, to the extent in Seller’s possession, Seller shall deliver toPurchaser:  the original Leases; copiesor originals of the Contracts, receipts for deposits, and unpaid bills; allkeys, if any, used in the operation of the Real Property; and, if in Seller’spossession or control, any “as-built” plans and specifications of theImprovements.  Seller shall instruct its propertymanager to deliver to Purchaser any of the foregoing which is in its propertymanager’s possession or control.

 

7.                                     CONDITIONS TOPURCHASER’S AND SELLER’S OBLIGATIONS.

 

7.1                                 Conditionsto Purchaser’s Obligations. The Close of Escrow and Purchaser’s obligationto consummate the transaction contemplated by this Agreement are subject to thesatisfaction of the following conditions for Purchaser’s benefit (or Purchaser’swaiver thereof, as Purchaser may waive any or all of such conditions) on orbefore the Closing Date or on the dates designated below for the satisfactionof such conditions:

 

(a)                                  Allof Seller’s representations and warranties contained in this Agreement shall betrue and correct in all material respects as of the Effective Date and as ofthe Closing Date, subject to any qualifications hereafter made to any of Seller’srepresentations as provided for in section 11.1 hereof;

 

(b)                                 Asof the Closing Date, Seller shall have performed its obligations hereunder andall deliveries to be made at Close of Escrow by Seller shall have beentendered, including

 

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but not limited to Sellerhaving obtained and delivered to Purchaser the Tenant Estoppel Certificates,Seller Estoppel Certificate and REA Estoppel Certificates described in section 4.4,above and Seller having delivered to Purchaser the audit representation letterdescribed in section 15.19;

 

(c)                                  Thereshall exist no actions, suits, arbitrations, claims, attachments, proceedings,assignments for the benefit of creditors, insolvency, bankruptcy,reorganization or other proceedings, pending or threatened against Seller, thatwould materially and adversely affect Seller’s ability to perform itsobligations under this Agreement;

 

(d)                                 Thereshall exist no pending or threatened action, suit or proceeding with respect toSeller before or by any court or administrative agency which seeks to restrainor prohibit, or to obtain damages or a discovery order with respect to, this Agreementor the consummation of the transaction contemplated hereby; and

 

(e)                                  Asof the Closing Date, construction which is landlord’s obligation with respectto the Leases therefor shall have been completed as required under such Leases.  Said construction shall be completed inaccordance with all the plans and specifications therefor as accepted by theCity of Avondale, Arizona.  If and to theextent of landlord’s obligation under the pertinent Lease, Seller shall besolely liable for any and all “punch list” items.  If such items are not completed as of the ClosingDate, Seller shall deposit into the Vacancy Escrow Account an amount reasonablyestimated by Seller and Purchaser for completion of such items, to be disbursedupon completion of such work and delivery to Purchaser and the Escrow Agent ofestoppel certificates, certificates of occupancy and other evidence reasonablyrequested by Seller, Purchaser and/or Escrow Holder.

 

(f)                                    Asof the Closing Date, one hundred percent (100%) of the gross leasable area ofthe Property is leased to tenants who have commenced and are current in theirpayment of minimum rent under their respective Leases, and have not filed for bankruptcyor other relief from creditors (the “Minimum Occupancy Level”).  Notwithstanding the foregoing, if, on theClosing Date, the Minimum Occupancy Level is not met, the requirements of the precedingsentence shall be deemed to be satisfied if all of the following requirementsare met:  (i) at least eighty fivepercent (85%) of the gross leaseable area of the Property is leased to tenantswho have commenced and are current in their payment of minimum rent under theirrespective Leases, and have not filed for bankruptcy or other relief fromcreditors; and (ii) on the Closing Date, Seller shall deposit into an accountto be held and administered by the Escrow Holder (the “Vacancy Escrow Account”)pursuant to a Vacancy Escrow Agreement in the form attached as Exhibit G**(the “Vacancy Escrow Agreement”) anamount for each square foot of the Property which doesn’t meet the Minimum OccupancyLevel, equal to the sum of :

 

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(A)                Eighteen (18)months of minimum rent calculated at the minimum rent rates for each such spaceas shown on the Rent Roll;

 

(B)                  Eighteen (18)months of real estate tax, common area expenses, and insurance calculated at$4.00 per square foot;

 

(C)                  Leasingcommissions, calculated at $5.00 per square foot; and

 

(D)                 Tenantimprovement allowances*,* calculatedat $25.00 per square foot (if the vacant space is raw) or $5.00 per square foot(if the vacant space has previously been improved).

 

Notwithstanding theforegoing, if, as of the Closing Date, there are tenant spaces for which Leaseshave been executed but the tenant has not yet commenced payment of minimum rentunder its respective Lease, then the amounts specified in items (A)–(D) aboveshall be adjusted to reflect the actual amounts of such items per the tenant’sLease.  If any such Lease provides forconcessions (such as abated rent) which is not reflected on the Rent Roll, andwhich concession hasn’t been fully earned prior to the Closing Date, Purchasershall receive a credit equal to the portion of the concession which is unearnedas of the Closing Date. Following the Closing Date, the amounts deposited intothe Vacancy Escrow Account shall be disbursed by the Escrow Holder pursuant tothe terms and conditions of the Vacancy Escrow Agreement.

 

(g)                  As of theClosing Date, all of the tenants listed on the Rent Roll whose demised premisesare 14,000 or**more square feet(the “Major Tenants”) shall be open for business in all or substantially all oftheir demised premises, have commenced and are current in their payment ofminimum rent under their respective Leases, and have not filed for bankruptcyor other relief from creditors.

 

(h)                  As of theClosing Date, the updated Survey and updated Title Commitment to be deliveredby Seller to Purchaser shall disclose no Additional Encumbrances which have notbeen resolved pursuant to section 4.2.2, above.

 

(i)                      If the RealProperty cannot be legally conveyed to Purchaser without first obtainingapproval by the City of Avondale, County of Maricopa or other municipalauthority of a “Final Plat,” “Plat of Subdivision,” “lot line adjustment” orsimilar document (in each case, a “Subdivision Plat”) then it is a conditionprecedent to Purchaser’s obligation to consummate this transaction that Sellerobtain final and unconditional approval of the Subdivision Plat, at Seller’ssole cost and expense, prior to the Closing Date. Purchaser shall fullycooperate with Seller’s efforts to obtain municipal approval of the SubdivisionPlat, at no cost or expense to Purchaser.  Seller shall provide Purchaser

 

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with copies of allcorrespondence, applications and other submissions to the municipalauthorities, and shall otherwise regularly apprise Purchaser of the status ofapproval of the Subdivision Plat.

 

If, notwithstanding thenonsatisfaction of any such condition, the Close of Escrow occurs, there shallbe no liability on the part of Seller for breaches of representations andwarranties of which Purchaser had knowledge as of the Close of Escrow.

 

7.2                                 Conditionsto Seller*’*s Obligations. TheClose of Escrow and Seller’s obligations to consummate the transactioncontemplated by this Agreement are subject to the satisfaction of the followingconditions for Seller’s benefit (or Seller’s waiver thereof, as Seller maywaive any or all of such conditions) on or before the Closing Date or the datesdesignated below for the satisfaction of such conditions:

 

(a)                                  Allof Purchaser’s representations and warranties contained in this Agreement shallbe true and correct in all material respects as of the Effective Date and as ofthe Closing Date;

 

(b)                                 Asof the Closing Date, Purchaser has performed its obligations hereunder and alldeliveries to be made at Close of Escrow by Purchaser shall have been tenderedincluding, without limitation, the deposit with Escrow Holder of the amountsset forth in section 6.2(a) hereof;

 

(c)                                  Thereshall exist no actions, suits, arbitrations, claims, attachments, proceedings,assignments for the benefit of creditors, insolvency, bankruptcy,reorganization or other proceedings, pending or threatened against Purchaser,that would materially and adversely affect Purchaser’s ability to perform its obligationsunder this Agreement; and

 

(d)                                 Thereshall exist no pending or threatened action, suit or proceeding with respect toPurchaser before or by any court or administrative agency which seeks to restrainor prohibit, or to obtain damages or a discovery order with respect to, this Agreementor the consummation of the transaction contemplated hereby.

 

8.                                    CLOSE OF ESCROW; POSSESSION.

 

8.1                                 “Closeof Escrow” shall mean the recording of the Deed in the official records ofMaricopa County, and Seller’s receipt of the Purchase Price and the otheramounts due Seller in accordance with the provisions of section 9.1(b)hereof.  The Escrow and Purchaser’s rightto purchase the Real Property shall terminate automatically if the Close ofEscrow does not occur on or before the Closing Date.

 

8.2                                 Soleexclusive possession of the Real Property, subject

 

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only to the PermittedExceptions, shall be delivered to Purchaser on the Closing Date.

 

9.                                 ESCROW.

 

9.1                                 Closing.The escrow (the “Escrow”) for the consummation of this transaction shall beestablished, with Escrow Holder at the address indicated in section 15.1hereof by the deposit of a fully executed counterpart of this Agreement withEscrow Holder.  Escrow Holder shallimmediately execute and date the acceptance by Escrow Holder attached to thisAgreement and deliver a counterpart thereof to Purchaser and Seller, specifyingthe date Escrow is opened.  ThisAgreement shall constitute both an agreement between Purchaser and Seller, andescrow instructions for Escrow Holder. If Escrow Holder requires separate oradditional escrow instructions which it deems necessary for its protection,Seller and Purchaser shall promptly, upon request by Escrow Holder, execute anddeliver to Escrow Holder such separate or additional escrow instructions (the “AdditionalInstructions”). In the event of any conflict or inconsistency between thisAgreement and the Additional Instructions, this Agreement shall prevail andgovern. The Additional Instructions shall not modify or amend the provisions ofthis Agreement unless otherwise agreed to in writing by Seller and Purchaser.

 

On the Closing Date, ifthe conditions set forth in sections 7.1 and 7.2 hereof have been satisfied orwaived, Escrow Holder shall take the following actions in the order indicatedbelow:

 

(a)                                  Withrespect to all closing documents delivered to Escrow Holder hereunder, to theextent necessary, Escrow Holder is authorized to insert, into all blanksrequiring the insertion of dates, the date of the recordation of the Deed orsuch other date as Escrow Holder may be instructed in writing by Seller and Purchaser;

 

(b)                                 Simultaneously,record the Deed in the official records of Maricopa County, and deliver toSeller, in immediate, same-day federal funds, the Purchase Price, plus orminus, as the case may be, the amounts determined in accordance with the provisionsof section 10 hereof, Purchaser’s signed counterparts of the Assignment ofLeases and Contracts and Bill of Sale, the Vacancy Escrow Agreement and the PadAgreement, and a conformed copy of the recorded Deed;

 

(c)                                  Deliverto Purchaser a counterpart of those items referred to in section 6.1hereof and a conformed copy of the recorded Deed;

 

(d)                                 Causethe Title Company to issue the Title Policy for the Real Property in accordancewith the provisions of section 4.2.3 hereof;

 

(e)                                  Deliverto Seller and Purchaser a final closing statement which has been certified byEscrow Holder to be true and

 

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correct; and

 

(f)                                    Deliveran original counterpart of the Owner’s Notice to each of Costco, Harkins, Bankof America and Desert Taco, in the manner required under the QEA.

 

9.2                                 Escrowand Title Charges.

 

(a)                                  Uponthe Close of Escrow, escrow charges, title charges and other closing costsshall be allocated between Seller and Purchaser as follows:

 

(i)                                     Sellershall pay:  (A) the premium for astandard ALTA title policy, (B) the cost of recording the Deed, (C) one-half ofany escrow fees or similar charges of Escrow Holder, (D) all sales, grossreceipts, compensating, stamp, excise, documentary, transfer, deed or similartaxes or fees (City, County and State) payable in connection with theconsummation of the transactions contemplated by this Agreement, and (E) allcosts incurred in connection with obtaining, updating or recertifying theSurvey.

(ii)                                  Purchasershall pay:  (A) one-half of any escrowfees or similar charges of Escrow Holder, (B) the premium and any additionalcosts (including any survey costs) for extended ALTA coverage (additional tothe premium for standard ALTA coverage) and the cost of any endorsements to theTitle Policy, if required by Purchaser, and (C) all costs incurred inconnection with Purchaser’s environmental or other inspections of the RealProperty.

 

(iii)                               Except to the extentotherwise specifically provided herein, all other expenses incurred bySeller and Purchaser with respect to the negotiation, documentation and closingof this transaction, including, without limitation, Purchaser’s and Seller’sattorneys’ fees, shall be borne and paid by the party incurring same.

 

(b)                                 Ifthe Close of Escrow does not occur by reason of Purchaser’s or Seller’s defaultunder this Agreement, all escrow and title charges (including cancellationfees) shall be borne by the party in default.

 

9.3                                 ProceduresUpon Failure of**Condition.Except as otherwise expressly provided herein, if any condition set forth insections 7.1 or 7.2 hereof is not timely satisfied or waived for a reason otherthan the default of Purchaser or Seller in the performance of its respectiveobligations under this Agreement:

 

(a)                                  ThisAgreement, the Escrow and the respective rights and obligations of Seller andPurchaser hereunder shall terminate (other than the indemnity and insuranceobligations of Purchaser set forth in sections 4.3.1 and 14 hereof, and theconfidentiality provisions of section 4*.*6hereof which shall survive such termination) at the written election of theparty for

 

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whose benefit suchcondition was imposed, which written election must be made (i) within five daysafter the date such condition was to be satisfied, or (ii) on the date theClose of Escrow occurs, whichever occurs first;

 

(b)                                 EscrowHolder shall promptly return to Purchaser all funds of Purchaser in itspossession, including the Deposit and all interest accrued thereon, and shallpromptly return and to Seller and Purchaser all documents deposited by themrespectively, which are then held by Escrow Holder;

 

(c)                                  Purchasershall return to Seller the Property Information; and

 

(d)                                 Anyescrow cancellation and title charges shall be borne equally by Seller andPurchaser.

 

10.                           PRORATIONS.

 

Each prorationhereinafter provided to be made as of the Close of Escrow shall be made as ofthe end of the day before the Closing Date. In each proration set forth below,the portion thereof applicable to periods beginning as of Close of Escrow shallbe credited to Purchaser or charged to Purchaser as applicable, and the portion thereof applicable to periods ending as ofClose of Escrow shall be credited to Seller or charged to Seller as applicable.

 

10.1                           Rent.All rent (including, without limitation, all minimum rents, additional rentsand retroactive rents, but excluding tenant reimbursements for Operating Costs(as defined in section 10.2, below)) and all other income (collectively,the “Rents”) collected under Leases in effect on the Closing Date shall beprorated as of the Close of Escrow on an accrual basis. Any Rents which are inarrears as of the Close of Escrow to the extent payable for the period beforethe Close of Escrow, shall remain the property of Seller.  Purchaser shall apply Rent from tenants thatare collected within 12 months after the Close of Escrow, (a) first, to Rentswhich are due to Purchaser after the Close of Escrow, and (b) second, to Rentswhich were due to Seller on or before the Close of Escrow.  Purchaser shall make reasonable efforts,without suit, to collect any Rents applicable to the period before the Close ofEscrow including, without limitation, sending to tenants bills for the paymentof past-due Rents during the first 12-month period following the ClosingDate.  Seller may pursue collection ofany Rents that were past-due as of the Closing Date, but Seller shall have noright to terminate any Lease or any tenant’s occupancy under any Lease inconnection therewith.

 

10.2                           OperatingCosts and Additional Rent Reconciliation. Seller, as landlord under theLeases, is currently collecting from tenants under the Leases additional rentto cover taxes, insurance, utilities (to the extent not paid directly bytenants), common area maintenance and other operating costs and expenses

 

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(collectively, “OperatingCosts”) in connection with the ownership, operation, maintenance and managementof the Real Property. To the extent that any additional rent (including,without limitation, estimated payments for Operating Costs) is paid by tenantsto the landlord under the Leases based on an estimated payment basis (monthly,quarterly or otherwise) for which a future reconciliation of actual OperatingCosts to estimated payments is required to be performed at the end of areconciliation period, Purchaser and Seller shall make an adjustment at theClose of Escrow for the applicable reconciliation period (or periods, if theLeases do not have a common reconciliation period) based on a comparison of theactual Operating Costs as of the Close of Escrow to the estimated payments asof the Close of Escrow. If, as of the Close of Escrow, Seller has receivedadditional rent payments in excess of the amount that tenants shall be requiredto pay, based on the actual Operating Costs as of the Close of Escrow,Purchaser shall receive a credit in the amount of such excess. If, as of theClose of Escrow, Seller has received additional rent payments that are lessthan the amount that tenants would be required to pay based on the actualOperating Costs as of the Close of Escrow, Seller shall receive a credit in theamount of such deficiency. Operating Costs that are not payable by tenantseither directly or reimbursable under the Leases shall be prorated betweenSeller and Purchaser and shall be reasonably estimated by the parties if finalbills are not available.

 

10.3                           Taxesand Assessments.  Real estate taxesand personal property taxes on the Property, including without limitation installmentsof general, special or betterment assessments on the Property (“Taxes”), shallbe prorated based upon the period (i.e., calendar or other tax fiscal year) towhich some are attributable, regardless of whether or not any such Taxes arethen due and payable or are a lien. Seller shall pay at or prior to Closing (or Purchaser shall receivecredit for) any unpaid Taxes attributable to periods prior to the Closing Date(whether or not than due and payable or a lien as aforesaid) . Seller shallreceive credit for any previously paid or prepaid Taxes attributable to periodsfrom and after the Closing Date. In the event that as of the Closing Date theactual tax bills for the tax year or years in question are not available andthe amount of Taxes to be prorated as aforesaid cannot be ascertained, thenrates, millages and assessed valuation of the previous year, with knownchanges, shall be used; and after the Closing Date and when the actual amountof Taxes for the year or years in question shall be determinable, such Taxeswill be reprorated between the parties to reflect the actual amount of suchTaxes.

 

10.4                           [IntentionallyOmitted.]

 

10.5                           TenantDeposits.  All tenant security depositsreflected in Leases or disclosed in Tenant Estoppel Certificates and nottheretofore applied to tenant obligations under the Leases shall be transferredor credited to Purchaser at the Close of Escrow.  As of the Close of Escrow, Purchaser shallassume

 

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Seller’s obligationsrelated to tenant security deposits. Purchaser shall indemnify, defend and holdSeller harmless from and against all demands and claims made by tenants arisingout of the transfer or disposition of any security deposits and shall reimburseSeller for all attorneys’ fees incurred or that may be incurred as a result ofany such claims or demands as well as for all losses, expenses, verdicts, judgments,settlements, interest, costs and other expenses incurred or that may beincurred by Seller as a result of any such claims or demands by tenants.

 

10.6                           Utilitiesand Utility Deposits.  Utilities forthe Real Property (excluding utilities for which payment is made directly bytenants), including, without limitation, water, sewer, electric and gas, basedupon the last reading of meters before the Close of Escrow, shall beprorated.  Seller shall endeavor toobtain meter readings on the day before the Closing Date.  If such readings are obtained, there shall beno proration of such items, Seller shall pay at Close of Escrow the billstherefor for the period to the day before the Close of Escrow, and Purchasershall pay the bills therefor for the period subsequent thereto.  If the utility company shall not issueseparate bills, Purchaser shall receive a credit against the Purchase Price forSeller’s portion and shall pay the entire bill before delinquency after Closeof Escrow.  If Seller has paid utilities nomore than 30 days in advance in the ordinary course of business, Purchasershall be charged its portion of such payment at Close of Escrow.  Purchaser shall be responsible for paying anysecurity deposits required by utility companies providing service to the RealProperty.

 

10.7                           December StubPeriod.  Purchaser shall receive acredit at the Close of Escrow for the “December Stub Period” amounts for minimumrent and CAM Expenses for the Unoccupied Spaces, as all such terms are definedin the Vacancy Escrow Agreement.

 

10.8                           PercentageRents.  Percentage rents (“PercentageRents”) actually collected for the month in which the Close of Escrow occursshall be prorated as of the Closing Date. Percentage Rents due after the Closeof Escrow shall not be prorated. Nevertheless, after Purchaser has completed any reconciliation of actualPercentage Rents payable and estimated Percentage Rents paid by tenants, andall reconciled amounts have been paid by tenants, a reconciliation shall bemade between Seller and Purchaser with respect to such Percentage Rents. Pursuantto such reconciliation, Seller and Purchaser shall each be entitled to itsproportionate share of all Percentage Rents paid for the subject Lease yearused to calculate each tenant’s Percentage Rents (less any out-of-pocket costsincurred in collecting said amounts, which shall belong to Purchaser) based on thenumber of days of such year during which Seller and Purchaser owned theProperty (and adjusted for any amount of Percentage Rent prorated at Close ofEscrow or received by Seller or Purchaser). As used in this section, “PercentageRents” shall not include and shall have deducted from such Percentage Rentamount any “base” or “minimum” rent component which is payable each month(regardless of actual sales), “base” or “minimum” rent component shall

 

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be prorated or otherwisehandled in the manner provided in this Agreement. Purchaser shall makereasonable efforts, without suit, to collect all Percentage Rents payable afterthe Close of**Escrow and relatingto the period before the Close of Escrow, and all Percentage Rents which aredelinquent as of the Close of Escrow, including, without limitation, sending totenants bills for the payment of the same. Seller may pursue collection of allPercentage Rents payable after the Close of Escrow and relating to the periodbefore the Close of Escrow and all Percentage Rents which are delinquent as ofthe Close of Escrow, although Seller shall have no right to terminate any Leaseor any tenant’s occupancy under any Lease in connection therewith.

 

10.9                           FinalAdjustment After Closing.  If finalprorations cannot be made at the Close of Escrow for any item being proratedunder this section 10, as long as Purchaser or Seller identifies any suchproration (“Post-Closing Proration”) in writing before the Close of Escrow,Purchaser and Seller shall allocate such items on a fair and equitable basis assoon as invoices or bills are available and applicable reconciliation withtenants have been completed, with final adjustment to be made as soon asreasonably possible after the Close of Escrow (but in no event later than 90days after the Close of Escrow, except that adjustments arising from PercentageRants under section 10.8 hereof shall not be subject to such 90-daylimitation, but shall be made as soon as reasonably possible).  Operating Costs shall be a Post-ClosingProration. Payments in connection with the final adjustment shall be due nolater than 100 days after the Close of Escrow, except that adjustments arisingfrom Percentage Rents under section 10.8 hereof shall not be subject tosuch 100-day limitation, but shall be made as soon as reasonably possible.Seller shall have reasonable access to, and the right to inspect and audit,Purchaser’s books to confirmthe final prorations for a period of one year after the Close of Escrow.Notwithstanding anything to the contrary stated in this section 10, exceptfor any reconciliation arising out of Percentage Rents under section 10.8hereof and except for any Post-Closing Prorations (which must be determined andpaid within 100 days after the Close of Escrow), all prorations made under thissection 10 shall be final as of the Close of Escrow and shall not besubject to further adjustment (whether due to an error or for any other reason)after the Close of Escrow.

 

11.                               SELLER’S REPRESENTATIONS AND WARRANTIES; AS-IS.

 

11.1                           Seller’sRepresentations and Warranties. In consideration of Purchaser’s enteringinto this Agreement and as an inducement to Purchaser to purchase the RealProperty from Seller, Seller makes the following representations and warrantiesto Purchaser, as of the Effective Date:

 

(a)   (i)       Sellerhas the legal right, power and authority to enter into this Agreement and theinstruments described herein, and to consummate the transaction contemplatedhereby;

 

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(ii)       All requisite action (corporate, trust,partnership or otherwise) has been taken by Seller in connection with theentering into this Agreement and the instruments described herein, and theconsummation of the transaction contemplated hereby. No consent of any partner,shareholder, trustee, member, manager, trustor, beneficiary, creditor,investor, judicial or administrative body, governmental authority or otherparty is required;

 

(iii)      The individuals executing this Agreementand the instruments described herein on behalf of Seller and the partners ofSeller, if any, have the legal power, right and actual authority to bind Sellerto the terms and conditions hereof and thereof;

 

(iv)     This Agreement and all documents requiredhereby to be executed by Seller are and shall be valid, legally bindingobligations of, and enforceable against, Seller in accordance with their terms;and

 

(v)      The execution and delivery of thisAgreement and the documents and instruments described herein, the incurrence ofthe obligations set forth herein, the consummation of the transactioncontemplated herein, the compliance with the terms of this Agreement and thedocuments and instruments referenced herein do not and shall not conflict withor result in the material breach of any term, condition or provision of, orconstitute a default under, any bond, note or other evidence of indebtedness orany contract, indenture, mortgage, deed of trust, loan, partnership agreement,articles of organization, operating agreement, lease or other agreement orinstrument to which Seller is a party, affecting Seller or affecting theProperty;

 

(b)                   To Seller’sactual knowledge, Seller has not received any written notice that either theProperty or Seller, or both, are subject to any existing, pending or threatenedinvestigation or inquiry by any governmental authority or to any remedialobligations under any applicable laws pertaining to health or the environment;

 

(c)                    To Seller’sactual knowledge, the Rent Roll and the copies of the Leases delivered toPurchaser are true, current and complete copies thereof.  There may, however, be minor variances in thecopies of Leases resulting from copier errors. Seller shall correct anymistakes in the Lease copies due to copier errors within a reasonable timeafter becoming aware of such errors;

 

(d)                   Seller has noactual knowledge that the Real Property has been contaminated by, or used forthe storage or disposal of, any hazardous substances, hazardous waste or petroleumwhich, as of the Effective Date, is required by any governmental entity to beremediated;

 

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(e)                                  Sellerhas no actual knowledge of any pending litigation (including, withoutlimitation, any condemnation or notice of condemnation) affecting or related tothe Property;

 

(f)                                    Sellerhas no actual knowledge of any governmental violations with respect to the Property,or that the interior and exterior structures are not in a good state of repair,free of leaks, structural problems and mold, or that the Property is not incompliance with federal, state, city and county ordinances, environmental lawsand concerns*;*

 

(g)                                 notenant under a Lease has a lease term that exceeds the lease term stated in itsLease, nor does any tenant under a Lease, except as set forth in its Lease,have an option or right of first refusal to purchase or extend; and

 

(h)                                 Purchasershall have no obligation whatever regarding the construction described in section 7.1(e),above.

 

For purposes of this section 11.1,the phrase “To Seller’s Actual Knowledge” shall mean the actual (and notimplied, imputed or constructive) knowledge of Jeff Allen (whom the Sellerrepresents is the vice president of the managing member of the managing memberof Seller), without any inquiry or investigation of any other parties,including, without limitation, the tenants and the property manager of the RealProperty.

 

The representations andwarranties made by Seller in this Agreement shall survive the recordation ofthe Deed for a period of 12 months and any action for a breach of Seller’srepresentations or warranties must be made and filed within said 12-month period.If, after the Effective Date, but before the Close of Escrow, Seller becomesaware of any facts or changes in circumstances that would cause any of itsrepresentations and warranties in this Agreement to be untrue at Close ofEscrow, Seller may notify Purchaser in writing of**such fact. In such case, or if Purchaser obtainsinformation which would cause any of Seller’s representations and warranties tobe untrue at Close of Escrow, Purchaser, as its sole and exclusive remedy,shall have the right, chosen in a writing from Purchaser to Seller no laterthan three business days after Seller shall have so notified Purchaser orPurchaser shall have obtained such information, to either (i) terminate thisAgreement, in which case the Deposit shall be immediately returned to Purchaserand neither party shall have any rights or obligations under this Agreement(except for sections 4.3.1 and 15.5 which survive termination of thisAgreement), or (ii) accept a qualification to Seller’s representations andwarranties as of the Close of Escrow and complete the purchase and sale of theProperty without any rights to recovery for breach of the unqualifiedrepresentation and warranty. Failure of Purchaser so to elect either subsection (i)or (ii), above, shall be deemed to be Purchaser’s election to take the actiondescribed in subsection (ii), above. If, however, Seller’s representationsand warranties shall be untrue at the Close of Escrow because of Seller’sintentional misrepresentation,

 

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in lieu of the remediesdescribed in subsections (i) and (ii)*,*above,within three business days after Purchaser’s becoming aware of the same, uponwritten notice from Purchaser to Seller, Seller shall be in default under thisAgreement. Other than as set forth in the three immediately precedingsentences, if Purchaser proceeds with the Close of**Escrow, Purchaser shall be deemed to have expressly waivedall remedies for the breach of any representation or warranty discovered byPurchaser before the Close of Escrow.

 

11.2                           As-Is.  As of the expiration of the Due DiligencePeriod, Purchaser shall have:

 

(a)                                  examinedand inspected the Property, and shall know and be satisfied with the physicalcondition, quality, quantity and state of repair of the Property in allrespects (including, without limitation, the compliance of the Real Propertywith the Americans With Disabilities Act of 1990 Pub.L. 101-336, 104 Stat. 327(1990), and any comparable local or state laws, as amended (collectively, the “ADA”)),and by proceeding with this transaction following the expiration of the Due DiligencePeriod shall be deemed to have determined that the same is satisfactory toPurchaser;

 

(b)                                 reviewedthe Property Information and all instruments, records and documents whichPurchaser deems appropriate or advisable to review in connection with this transaction,including, without limitation, all architectural drawings, plans,specifications, surveys, building and occupancy permits, and any licenses,leases, contracts, warranties and guaranties relating to the Real Property orthe business conducted thereon, and Purchaser, by proceeding with thistransaction following the expiration of the Due Diligence Period, shall be deemedto have determined that the same and the information and data contained thereinand evidenced thereby are satisfactory to Purchaser;

 

(c)                                  reviewedall applicable laws, ordinances, rules and governmental regulations (including,but not limited to, those relating to building, zoning and land use) affectingthe development, use, occupancy or enjoyment of the Real Property, andPurchaser, by proceeding with this transaction following the expiration of theDue Diligence Period, shall be deemed to have determined that the same aresatisfactory to Purchaser; and

 

(d)                                 atits own cost and expense, made its own independent investigation respecting theProperty and all other aspects of this transaction, and shall have reliedthereon and on the advice of its consultants in entering into this Agreement,and Purchaser, by proceeding with this transaction following the expiration ofthe Due Diligence Period, shall be deemed to have determined that the same aresatisfactory to Purchaser.

 

TOTHE MAXIMUM EXTENT PERMITTED BY APPLICABLE LAW, AND EXCEPT FOR SELLER’SREPRESENTATIONS AND WARRANTIES IN SECTION 11.1 OF

 

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THISAGREEMENT AND ANY WARRANTIES OF TITLE CONTAINED IN THE DEED DELIVERED AT THECLOSE OF ESCROW (“SELLER’S WARRANTIES”), THIS SALE IS MADE AND SHALL BE MADEWITHOUT REPRESENTATION, COVENANT OR WARRANTY OF ANY KIND (WHETHER EXPRESS,IMPLIED OR, TO THE MAXIMUM EXTENT PERMITTED BY APPLICABLE LAW, STATUTORY) BYSELLER. AS A MATERIAL PART OF THE CONSIDERATION FOR THIS AGREEMENT, PURCHASERSHALL ACCEPT THE PROPERTY ON AN “AS IS” AND “WHERE IS” BASIS, WITH ALL FAULTS,AND WITHOUT ANY REPRESENTATION OR WARRANTY, ALL OF WHICH SELLER HEREBYDISCLAIMS, EXCEPT FOR SELLER’S WARRANTIES. EXCEPT FOR SELLER’S WARRANTIES, NOWARRANTY OR REPRESENTATION IS MADE BY SELLER AS TO FITNESS FOR ANY PARTICULARPURPOSE, MERCHANTABILITY, DESIGN, QUALITY, CONDITION, OPERATION OR INCOME,COMPLIANCE WITH DRAWINGS OR SPECIFICATIONS, ABSENCE OF DEFECTS, ABSENCE OFHAZARDOUS OR TOXIC SUBSTANCES, ABSENCE OF FAULTS, FLOODING, OR COMPLIANCE WITHLAWS AND REGULATIONS INCLUDING, WITHOUT LIMITATION, THOSE RELATING TO HEALTH,SAFETY AND THE ENVIRONMENT (INCLUDING, WITHOUT LIMITATION, THE ADA) . PURCHASERACKNOWLEDGES THAT, EXCEPT FOR SELLER’S WARRANTIES, PURCHASER HAS ENTERED INTOTHIS AGREEMENT WITH THE INTENTION OF MAKING AND RELYING UPON ITS OWNINVESTIGATION OF THE PHYSICAL, ENVIRONMENTAL, ECONOMIC USE, COMPLIANCE ANDLEGAL CONDITION OF THE PROPERTY AND THAT PURCHASER IS NOT NOW RELYING, ANDSHALL NOT LATER RELY, UPON ANY REPRESENTATIONS AND WARRANTIES MADE BY SELLER ORANYONE ACTING OR CLAIMING TO ACT, BY, THROUGH OR UNDER OR ON SELLER’S BEHALFCONCERNING THE PROPERTY. ADDITIONALLY, PURCHASER AND SELLER HEREBY AGREE THAT(A) EXCEPT FOR SELLER’S WARRANTIES, PURCHASER IS TAKING THE PROPERTY “AS IS”WITH ALL LATENT AND PATENT DEFECTS AND THAT EXCEPT FOR SELLER’S WARRANTIES,THERE IS NO WARRANTY BY SELLER THAT THE PROPERTY IS FIT FOR A PARTICULARPURPOSE, (B) EXCEPT FOR SELLER’S WARRANTIES, PURCHASER IS SOLELY RELYING UPONITS EXAMINATION OF THE PROPERTY, AND (C) PURCHASER TAKES THE PROPERTY UNDERTHIS AGREEMENT UNDER THE EXPRESS UNDERSTANDING THAT THERE ARE NO EXPRESS ORIMPLIED WARRANTIES, EXCEPT FOR SELLER’S WARRANTIES.

 

WITHRESPECT TO THE FOLLOWING, PURCHASER FURTHER ACKNOWLEDGES AND AGREES THAT SELLERSHALL NOT HAVE ANY LIABILITY, OBLIGATION OR RESPONSIBILITY OF ANY KIND AND THATSELLER HAS MADE NO REPRESENTATIONS OR WARRANTIES OF ANY KIND:

 

THECONTENT OR ACCURACY OF ANY REPORT, STUDY, OPINION OR CONCLUSION OF ANY SOILS,TOXIC, ENVIRONMENTAL OR OTHER ENGINEER OR OTHER PERSON OR ENTITY WHO HASEXAMINED THE PROPERTY OR ANY ASPECT THEREOF;

 

THECONTENT OR ACCURACY OF ANY OF THE ITEMS (INCLUDING, WITHOUT LIMITATION, THEPROPERTY INFORMATION) DELIVERED TO PURCHASER PURSUANT TO PURCHASER’S REVIEW OFTHE CONDITION OF THE PROPERTY; AND

 

THECONTENT OR ACCURACY OF ANY PROJECTION, FINANCIAL OR MARKETING ANALYSIS OR OTHERINFORMATION GIVEN TO PURCHASER BY SELLER OR REVIEWED BY PURCHASER WITH RESPECTTO THE PROPERTY.

 

PURCHASER IS ASOPHISTICATED REAL ESTATE INVESTOR AND IS, OR

 

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SHALLBE AS OF THE CLOSE OF ESCROW, FAMILIAR WITH THE REAL PROPERTY AND ITSSUITABILITY FOR PURCHASER’S INTENDED USE. THE PROVISIONS OF THIS SECTION 11.2SHALL SURVIVE INDEFINITELY ANY CLOSING OR TERMINATION OF THIS AGREEMENT ANDSHALL NOT BE MERGED INTO THE DOCUMENTS EXECUTED AT CLOSE OF ESCROW.

 
|   | /s/ [ILLEGIBLE]            |   |
|--------|----------------------------|--------|
|   | PURCHASER’S  INITIALS |   |

 

12.                             PURCHASER’SCOVENANTS, REPRESENTATIONS AND WARRANTIES; RELEASE.

 

In consideration of Sellerentering into this Agreement and as an inducement to Seller to sell the RealProperty to Purchaser, Purchaser makes the following covenants, representationsand warranties;

 

12.1                           Authority.  Purchaser has the legal right, power and authorityto enter into this Agreement and to consummate the transactions contemplatedhereby, and the execution, delivery and performance of this Agreement have beenduly authorized and no other action by Purchaser is requisite to the valid andbinding execution, delivery and performance of this Agreement, except as otherwiseexpressly set forth herein.  There is noagreement to which Purchaser is a party or to Purchaser’s knowledge binding on Purchaserwhich is in conflict with this Agreement.

 

12.2                           Release.  By proceeding with this transaction followingthe expiration of the Due Diligence Period, Purchaser shall be deemed to havemade its own independent investigation of the Property, the PropertyInformation and the presence of Hazardous Materials on the Real Property as Purchaserdeems appropriate. Accordingly, subject to the representations and warrantiesof Seller expressly set forth in section 11.1 hereof, Purchaser, on behalf ofitself and all of its officers, directors, partners, shareholders, members,managers, employees, representatives and affiliated entities (collectively, the“Releasors”), hereby expressly waives and relinquishes all rights and remedies Releasorsmay now or hereafter have against Seller, its successors and assigns, officers,directors, partners, shareholders, members, managers, employees,representatives and affiliated entities (the “Seller Parties”), whether knownor unknown, which may arise from or be related to:  (a) the physical condition, quality, quantityand state of repair of the Real Property, and the prior management andoperation of the Real Property, (b) the Property Information, (c) the RealProperty’s compliance or lack of compliance with any federal, state or locallaws or regulations, and (d) any past, present or future presence or existenceof Hazardous Materials on, under or about the Real Property, and with respectto any past, present or future violation of any rules, regulations or laws, nowor hereafter enacted, regulating or governing the use, handling, storage ordisposal of Hazardous Materials, including, without limitation, (i)  all rights and remedies Raleasors may now or hereafterhave under the Comprehensive Environmental Response Compensation and LiabilityAct of 1980 (“CERCLA”), the Superfund

 

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Amendments andReauthorization Act of 1986, the Resource Conservation and Recovery Act, andthe Toxic Substance Control Act, each as amended, and any similar state, localor federal environmental law, rule or regulation, and (ii) all claims, whetherknown or unknown, now or hereafter existing, with respect to the Real Propertyunder section 107 of CERCLA (42 U.S.C.A. §9607) . As used herein, the term“Hazardous Material (s)” includes, without limitation, any hazardous or toxicmaterials, substances or wastes, such as (1) any materials, substances orwastes which are toxic, ignitable, corrosive or reactive, and which areregulated by any local governmental authority or any agency of the UnitedStates government, (2) any other material, substance or waste which is definedor regulated as a hazardous material, extremely hazardous material, hazardouswaste or toxic substance pursuant to any laws, rules, regulations or orders ofthe United States government, or any local governmental body, (3) asbestos, (4)petroleum and petroleum based products, (5) formaldehyde, (6) polychlorinatedbiphenyls (PCBs), and (7) freon other chlorofluorocarbons.

 

WITHOUTLIMITING THE GENERALITY OF THE FOREGOING, PURCHASER, ON BEHALF OF ITSELF ANDTHE OTHER RELEASORS, HEREBY ASSUMES ALL RISK AND LIABILITY RESULTING OR ARISINGFROM, OR RELATING TO THE OWNERSHIP, USE, CONDITION, LOCATION, MAINTENANCE, REPAIROR OPERATION OF THE PROPERTY.

 

THEFOREGOING WAIVERS, RELEASES AND AGREEMENTS BY PURCHASER, ON BEHALF OF ITSELFAND THE RELEASORS, SHALL SURVIVE THE CLOSE OF ESCROW AND THE RECORDATION OF THEDEED, AND SHALL NOT BE DEEMED MERGED INTO THE DEED UPON ITS RECORDATION.

 

13.                             DEFAULT AND DAMAGES.

 

13.1                           DEFAULT BY PURCHASER.  PURCHASER AND SELLER HEREBY ACKNOWLEDGE AND AGREETHAT IF THE CLOSE OF ESCROW FAILS TO OCCUR DUE TO A PURCHASER DEFAULT (ALL OFTHE CONDITIONS TO PURCHASER’S OBLIGATIONS TO CLOSE HAVING BEEN SATISFIED OR WAIVED), SELLER SHALL SUFFER DAMAGESIN AN AMOUNT WHICH SHALL, DUE TO THE SPECIAL NATURE OF THE TRANSACTIONCONTEMPLATED BY THIS AGREEMENT AND THE SPECIAL NATURE OF THE NEGOTIATIONS WHICHPRECEDED THIS AGREEMENT, BE IMPRACTICAL OR EXTREMELY DIFFICULT TO ASCERTAIN. INADDITION, PURCHASER WISHES TO HAVE A LIMITATION PLACED UPON THE POTENTIALLIABILITY OF PURCHASER TO SELLER IF THE CLOSE OF ESCROW FAILS TO OCCUR DUE TO APURCHASER DEFAULT, AND WISHES TO INDUCE SELLER TO WAIVE OTHER REMEDIES WHICHSELLER MAY HAVE IN THE EVENT OF A PURCHASER DEFAULT. PURCHASER AND SELLER,AFTER DUE NEGOTIATION, HEREBY ACKNOWLEDGE AND AGREE THAT THE AMOUNT OF THEDEPOSIT REPRESENTS A REASONABLE ESTIMATE OF THE DAMAGES WHICH SELLER SHALLSUSTAIN IN THE EVENT OF SUCH PURCHASER DEFAULT. PURCHASER AND SELLER HEREBYAGREE THAT SELLER MAY, IF THE CLOSE OF ESCROW FAILS TO OCCUR DUE TO A PURCHASERDEFAULT, TERMINATE THIS AGREEMENT BY WRITTEN NOTICE TO PURCHASER AND ESCROWHOLDER, CANCEL THE ESCROW AND RECEIVE OR RETAIN THE DEPOSIT AS LIQUIDATEDDAMAGES, AND ESCROW HOLDER SHALL IMMEDIATELY DELIVER (UNLESS IT HAS ALREADYDONE SO) THE DEPOSIT TO SELLER. SUCH RETENTION OF THE DEPOSIT BY

 

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SELLERIS INTENDED TO CONSTITUTE LIQUIDATED DAMAGES TO SELLER AMD SHALL NOT BE DEEMEDTO CONSTITUTE A FORFEITURE OR PENALTY.

 

NOTHINGIN THIS SECTION 13.1 SHALL (A) PREVENT OR PRECLUDE ANY RECOVERY OPATTORNEYS’ FEES OR OTHER COSTS INCURRED BY SELLER PURSUANT TO SECTION 15.5,OR (B) IMPAIR OR LIMIT THE EFFECTIVENESS OR ENFORCEABILITY OF THEINDEMNIFICATION OBLIGATIONS OF PURCHASER CONTAINED IN SECTION 4.3.1HEREOF. SELLER AND PURCHASER ACKNOWLEDGE THAT THEY HAVE READ AND UNDERSTAND THEPROVISIONS OF THIS SECTION 13.1 AND BY THEIR INITIALS IMMEDIATELY BELOWAGREE TO BE BOUND BY ITS TERMS.
|   | SELLER’S  INITIALS:   | /s/ [ILLEGIBLE] |   |
|--------|----------------------------|-----------------|--------|
|   |                       |
|   | PURCHASER’S INITIALS: | /s/ [ILLEGIBLE] |   |
|        |                            |                 |        |  |

 

 

13.2                           Defaultby Seller.  If Seller defaults in itsobligations to sell and convey the Property to Purchaser pursuant to thisAgreement, Purchaser’s sole and exclusive remedy shall be to elect one of thefollowing: (a) to terminate this Agreement, in which event Purchaser shall beentitled to the return by the Escrow Holder to Purchaser of the Deposit, or (b)to bring a suit for specific performance, but any suit for specific performancemust be brought within 180 days of Seller’s default, with Purchaser waiving theright to bring suit at any later date to the extent permitted by law, ThisAgreement confers no present eight, title or interest in the Property toPurchaser, and Purchaser shall not file a lie pendens or other similarnotice against the Real Property except in connection with, and after, theproper filing of a suit for specific performance.

 

14.                                BROKER’S COMMISSIONS.

 

Except for KitchellDevelopment Company, Seller’s broker, and Escee Commercial, Purchaser’s broker,both of which shall be paid by Seller, neither party hereto has had any contactor dealing regarding the Real Property, or any communication in connection withthe subject matter of this transaction, through any licensed real estate brokeror other person who can claim a right to a commission or finder’s fee as aprocuring cause of the sale contemplated herein. If any other broker or finderperfects a claim for a commission or finder’s fee, the party responsible forthe contact or communication on which the broker or finder perfected such claimshall indemnify, save harmless and defend the other party from said claim, andall costs and expenses (including reasonable attorneys’ fees) incurred by theother party in defending against the same.

 

15.                                MISCELLANEOUS PROVISIONS.

 

15.1                           Notices. All written notices or demands of anykind which either party hereto may be required or may desire to serve on theother in connection with this Agreement shall be served by personal service, byregistered or certified mail, recognized overnight courier service or facsimiletransmission. Any such

 

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notice or demand so to beserved by registered or certified mail, recognized overnight courier service orfacsimile transmission shall be delivered with all applicable delivery chargesthereon fully prepaid and, if the party so to be served be Seller, addressed toSeller as follows:

 

Gateway Pavilions,L.L.C.,

c/o Kitchell DevelopmentCompany

1707 E. Highland, Suite100

Phoenix, Arizona 85016

Attention:  Mr. Jeff Allen

Fax No.: (602) 264-6133

 

with a copy thereof to:

 

Martin L. Flicker, Esq. 1000 Quail Street, Suite 210 Newport Beach, California 92660 Fax No.: (949) 252-9335

 

and, if the party so tobe served be Purchaser, addressed to Purchaser as follows:

 

Inland Real StateAcquisitions, Inc.

2901 Butterfield Road

Oak Brook, Illinois  60523

Attention: Mr. LouQuilici

Fax No.: (630) 218-4935

 

with a copy thereof to:

 

Robin Rash, Esq.

The Inland Real EstateGroup, Inc./Law Department

2901 Butterfield Road

Oak Brook, Illinois 60523

Fax No.: (630) 218-4900

 

and, if the party to beserved be Escrow Holder, addressed to Escrow Holder as follows:

 

First American TitleCompany National Commercial Services 30 N. LaSalle Street, Suite 310 Chicago, IL 60602 Attention: Steven Zellinger Fax No.: (312) 553-0480

 

Service of any suchnotice or demand so made by personal delivery, registered or certified mail,recognized overnight courier or facsimile transmission shall be deemed givenand received on the date of actual delivery as shown by the addressee’sregistry or certification of receipt or, as to facsimile transmissions, by “answerback confirmation” (as long as a copy of such notice or demand is delivered byany of the other methods provided above within one business day followingreceipt of such facsimile

 

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transmission), asapplicable, or at the expiration of the third business day after the date ofdispatch, whichever is earlier. Either party hereto may from time to time, bynotice in writing served upon the other as aforesaid, designate a differentmailing address to which or a different person to whose attention all suchnotices or demands are thereafter to be addressed.

 

15.2                           Assignment;Binding on Successors and Assigns.  Purchasermay assign its rights and obligations under this Agreement to an entitysponsored by Inland Retail Real Estate Trust, Inc., Inland Western Retail RealEstate Trust, Inc. or Inland Real Estate Investment Corporation, or theiraffiliates, without the consent of Seller, provided Purchaser (a) provides writtennotice to Seller and Escrow Holder not later than five (5) days prior to theClosing Date; and (b) Purchaser remains liable to Seller for all obligations ofPurchaser under this Agreement. Except as described in the previous sentence,Purchaser shall not assign, transfer or convey its rights or obligations underthis Agreement or with respect to the Property without the prior writtenconsent of Seller, which consent Seller may withhold in its sole and absolutediscretion.  Any such attested assignmentwithout the prior written consent of Seller shall be void and Purchaser shallbe deemed in default hereunder.  Sellershall not assign, transfer or convey its rights or obligations under this Agreementor with respect to the Property without the prior written consent of Purchaser,which consent Purchaser may withhold in its sole and absolute discretion.  Any such attempted assignment without theprior written consent of Purchaser shall be void and Seller shall be deemed indefault hereunder.  Subject to theforegoing, and except as provided to the contrary herein, the terms, covenants,conditions and warranties contained herein, and the powers granted hereby,shall inure to the benefit of and bind all parties hereto and their respectivesuccessors and assigns, and all subsequent owners of the Property.  Any assignment shall not relieve theassigning party from its liability under this Agreement.

 

15.3                           [IntentionallyOmitted.]

 

15.4                           FurtherAssurances.  In addition to the actsand deeds recited herein and contemplated to be performed, executed or deliveredby Seller or Purchaser, Seller and Purchaser shall perform, execute anddeliver, or cause to be performed, executed and delivered, on the Closing Dateor thereafter, all such further acts, deeds and assurances as Purchaser orSeller, as the case may be, may reasonably require in order to consummate fullythe transactions contemplated hereunder.

 

15.5                           Attorneys’Fees.  If any legal action or any arbitrationor other proceeding is brought, or if an attorney is retained for theenforcement of this Agreement or any portion thereof, or because of any allegeddispute, breach, default or misrepresentation in connection with any of the provisionsof this Agreement, the prevailing party shall be entitled to recover from theother party reimbursement for the reasonable fees of attorneys

 

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and other costs(including court costs and witness fees) incurred by it, in addition to anyother relief to which it may be entitled. The term “prevailing party” means theparty obtaining substantially the relief sought, whether by compromise,settlement or judgment.

 

15.6                           Survivalof Representations, Warranties and Agreements.  Unless otherwise expressly stated in thisAgreement, (a) each of the covenants, obligations, representations, andagreements contained in this Agreement shall survive the Close of Escrow and theexecution and delivery of the Deed only for a period of six months immediatelyfollowing the Closing Date, and (b) any claim based upon a misrepresentation ora breach of a warranty contained in this Agreement shall be actionable orenforceable only if notice of such claim is given to the party which allegedlymade such misrepresentation or breached such covenant, obligation, warranty oragreement within six months after the Closing Date. Notwithstanding anythingstated to the contrary in this Agreement, the indemnification provisions ofsections 4.3.1, 10.5 and 14 hereof and the provisions of sections 4.5, 4.6,10.1, 10.3, 10.8, 10.9, 11.2, 12.2, 13.2, 15.5, 15.16 and 15.17 hereof shallsurvive the termination of this Agreement or the Close of Escrow without limitation,and shall not be merged with the recording of the Deed.

 

15.7                           EntireAgreement.  This Agreement containsthe entire agreement and understanding of the parties in respect to the subjectmatter hereof.  The literal words of thisAgreement shall govern, and all prior negotiations, drafts and other extrinsic communications,whether oral or written, shall have no significance or evidentiary effect.  Neither this Agreement nor any of itsprovisions may be changed, amended, discharged, waived or otherwise modifiedorally, but only by an instrument in writing duly executed by the party to bebound thereby.  This Agreement accuratelyreflect the agreements and understandings of the parties hereto with respect tothe subject matter hereof.

 

15.8                           GoverningLaw. This Agreement shall be governed by the laws of the State of Arizona.

 

15.9                           Counterparts. This Agreement may be executedsimultaneously in one or more counterparts, each of which shall be deemed anoriginal but all of which together shall constitute one and the sameinstrument.

 

15.10                     Headings;Construction.  The various headingsof this Agreement are included for convenience only and shall not affect themeaning or interpretation of this Agreement or any provision hereof. When thecontext and construction so require, all words used in the singular hereinshall be deemed to have been used in the plural, the masculine shall includethe feminine and the neuter, and viceversa. The use in thisAgreement of the term “including” and related terms such as “include” shall inall cases mean “without limitation.”**All references to “days” in thisAgreement shall be construed to mean calendar days unless

 

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otherwise expresslyprovided, and all references to “business days” shall be construed to mean dayson which national banks are open for business.

 

15.11                     Time ofEssence. Time is strictly of the essence with respect to each and everyterm, condition, obligation and provision hereof, and the failure to performtimely any of the terms, conditions, obligations or provisions hereof by eitherparty shall constitute a material breach of, and non-curable (but waivable)default under, this Agreement by the party so failing to perform.

 

15.12                     PartialValidity; Severability. If any term or provision of this Agreement or theapplication thereof to any person or circumstance shall, to any extent, be heldinvalid or unenforceable, the remainder of this Agreement, or the applicationof such term or provision to persons or circumstances, other than those as towhich it is held invalid or unenforceable, shall not be affected thereby, andeach such term and provision of this Agreement shall be valid and be enforcedto the fullest extent permitted by law.

 

15.13                     No ThirdParty Beneficiaries. This Agreement is for the sole and exclusive benefitof the parties hereto and their respective permitted successors and assigns,and no third party is intended to, or shall have, any rights hereunder.

 

15.14                     JointProduct of Parties. This Agreement is the result of arms-length negotiationsbetween Seller and Purchaser and their respective attorneys.  Accordingly, neither party shall be deemed tobe the author of this Agreement and this Agreement shall not be construedagainst either party.

 

15.15                     Calculationof Time Periods. If the last day of any period of time hereunder is not abusiness day, the period shall run until the end of the next business day. Thelast day of any period of time described herein shall be deemed to end at 5:00p.m., Mountain Standard Time.

 

15. 16                  Waiver ofJury Trial. To the extent permitted by applicable law, the parties herebywaive any right to trial by jury in any legal proceeding arising out of orrelating to this Agreement or the transactions contemplated hereby.

 

15.l7                        NoPersonal Liability.  Notwithstandinganything stated to the contrary herein, Seller’s liability under this Agreementshall be limited to Seller’s interest in the Property and neither Seller,Seller’s constituent partners, Seller’s asset manager, nor Seller’s directors,officers, shareholders, partners, members, managers, employees or agents shallhave any personal liability hereunder.

 

15.18                     Section 1031Exchange.  Seller may consummate thesale of the Real Property as part of a so-called like kind exchange (the “Exchange”)pursuant to Section 1031 of the Internal Revenue

 

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Code of 1986, as amended(the “Code”), but only if the Close of Escrow shall not be delayed or affectedby reason of the Exchange. The consummation or accomplishment of the Exchangeshall not be a condition precedent or condition subsequent to Seller’sobligations under this Agreement. Purchaser shall not, as a result of this section 15.18:(i) have its rights under this Agreement increased or diminished, or (ii) be responsiblefor compliance with, or be deemed to have warranted to Seller that, theExchange in fact complies with Section 1031 of the Code.

 

15.l9                        Cooperationwith Purchaser’s Audit. Seller agrees to cooperate fully with Purchaser andPurchaser’s representatives to facilitate Purchaser’s evaluations and reports,including at least a one (1) year audit of the books and records of theProperty that qualify, comply with and can be used in a public offering and anaudit representation letter to be delivered by Seller prior to the ClosingDate.

 

IN WITNESS WHEREOF, theparties hereto have executed this Agreement the day and year first abovewritten.

 

               PURCHASER 

 
| INLAND REAL ESTATE  ACQUISITIONS, INC.,  an Illinois corporation |
|------------------------------------------------------------------|
|                                                             |
| By:                                                              |   |   |
|                                                             |   |
|                                                             | Name: |   |   |
|                                                             |   |
|                                                             | Title: |   |   |
|                                                                  |  |  |  |  |  |

 

 

SELLER

 
| GATEWAY PAVILIONS, L.  L. C.,  an Arizona limited liability  company |
|----------------------------------------------------------------------|
|                                                                 |
|                                                                 |
| By:                                                                  | KDC-GP Partners,  L.L.C., |
|                                                                 | an Arizona limited  liability  company, Manager and Member |
|                                                                 |   |
| By:                                                                  | Kitchell Development |
|                                                                 | Company, an Arizona |
|                                                                 | corporation, Managing  Member |
|                                                                 |   |
|                                                                 |   |
| By:                                                                  | /s/ Jeff Allen |   |
|                                                                 | Jeff Allen, |
|                                                                 | Vice  President |
|                                                                      |  |  |  |  |

 

Acceptance by Escrow Holder:

 

First American Title Company herebyacknowledges that it has

 

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PURCHASER

 
| INLAND REAL ESTATE  ACQUISITIONS, INC.,  an Illinois corporation |
|------------------------------------------------------------------|
|                                                             |
| By:                                                              | /s/ [ILLEGIBLE] |   |
|                                                             |   |   |   |
|                                                             | Name: | [ILLEGIBLE] |   |
|                                                             |   |
|                                                             | Title: | SRVP |   |
|                                                                  |  |  |  |  |

 

 

SELLER

 
| GATEWAY  PAVILIONS, L.L.C.,  an Arizona limited liability  company |
|--------------------------------------------------------------------|
|                                                               |
|                                                               |
| By:                                                                | KDC-GP  Partners, L.L.C., |
|                                                               | an  Arizona limited liability |
|                                                               | company,  Manager and Member |
|                                                               |   |
| By:                                                                | Kitchell  Development |
|                                                               | Company,  an Arizona |
|                                                               | corporation,  Managing |
|                                                               | Member |
|                                                               |   |
|                                                               |   |
| By:                                                                |   |   |
|                                                               | Jeff Allen, |
|                                                               | Vice President |
|                                                                    |  |  |  |  |  |

 

Acceptance by EscrowHolder:

 

FirstAmerican Title Company hereby acknowledges that it has received a fullyexecuted original or originally executed counterparts of the foregoingAgreement of Purchase and Sale Agreement and Escrow Instructions, agrees to actas Escrow Holder thereunder, and agrees to be bound by and strictly perform theterms thereof as such terms apply to Escrow Holder.

 

 
| Dated: 8-11-04, 2004. |   | FIRST  AMERICAN TITLE  COMPANY |
|----------------------------|--------|--------------------------------|
|                       |   |                           |
|                       |   | By:                            | /s/ Elizabeth Rune |   |
|                       |   |                           | Its Authorized Agent |

 

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