EXHIBIT
10.40


 


AGREEMENT
OF SALE AND PURCHASE


AND
JOINT ESCROW INSTRUCTIONS


 


CALYPSO APARTMENTS AND LOFTS


 


THIS AGREEMENT OF SALE AND PURCHASE
AND JOINT ESCROW INSTRUCTIONS (this “Agreement”), dated as of November 25,
2009 (the “Agreement Date”), is
between CALYPSO LOFTS, LLC, a
California limited liability company (“Seller”),
and BEHRINGER HARVARD MULTIFAMILY OP I LP, a
Delaware limited partnership  (“Buyer”).


 


ARTICLE 1


 


CERTAIN DEFINITIONS


 


1.1                  Definitions.  The parties hereby agree that the following
terms shall have the meanings hereinafter set forth, such definitions to be
applicable equally to the singular and plural forms, and to the masculine and
feminine forms, of such terms:


 


1.1.1       “AAA” shall have the meaning ascribed in Section 10.22.2.


 


1.1.2       “Additional
Deposit” shall have the meaning ascribed in Section 2.3.2.


 


1.1.3       “Affiliate”, except as set forth in Section 10.4
with respect to an “affiliate of Buyer”, shall mean any person or entity that
directly, or indirectly through one or more intermediaries, controls, is
controlled by or is under common control with Buyer or Seller, as the case may
be.  For the purposes of this definition,
“control” means the possession, direct or indirect, of the power to direct or
cause the direction of the management and policies of a person, whether through
the ownership of voting securities, by contract, or otherwise, and the terms “controlling”
and “controlled” have the meanings correlative to the foregoing.


 


1.1.4       “Agreement
Date” shall have the meaning ascribed in the
introductory paragraph of this Agreement.


 


1.1.5       “Approved
Contract” shall have the meaning
ascribed in Section 4.6.


 


1.1.6       “Assignment and Assumption of Contracts”
shall have the meaning ascribed in Section 9.5.1(d).


 


1.1.7       “Assignment and Assumption of Leases” shall
have the meaning ascribed in Section 9.5.1(c).


 


1.1.8       “Bill of Sale” shall have the meaning
ascribed in Section 9.5.1(b).


 


1.1.9       “Buyer’s
Conditions Precedent” shall have the meaning ascribed in Section 9.3.


 

















 


1.1.10     “Certificate
of Insurance” shall have the meaning ascribed in Section 3.4.


 


1.1.11     “Closing” shall have the meaning ascribed in
Section 9.4.1.


 


1.1.12     “Closing Date” shall mean the date set forth
in Section 9.4.1.


 


1.1.13     “Closing Statement” shall have the meaning
ascribed in Section 9.7.1(a).


 


1.1.14     “Code” shall have the meaning ascribed in Section 2.3.4.


 


1.1.15     “Commissions” shall mean all commissions,
referral or locator fees, payments and obligations of Seller or the Property
Manager to make payments to third party leasing agents, leasing brokers or
other parties (not affiliated with the Property Manager) with respect to the
leasing of all or any of the Property, whether such agreements are contained in
a Lease or in any separate Commission Agreement.


 


1.1.16     “Commission Agreements” shall mean all
written agreements and documents entered into by Seller or the Property Manager
to pay Commissions that are not contained in a Lease, together with all
amendments thereto or modifications thereof.


 


1.1.17     “Computer
Equipment” means all word processing and computing equipment
including, without limitation, all CPUs, monitors, printers, hubs, switches,
firewalls, networking equipment and modems unless specifically listed on
attached Exhibit H.


 


1.1.18     “Contracts” shall mean
the service contracts described in Exhibit B
and all other service contracts entered into by Seller after the
Effective Date with respect to the Property in accordance with Section 8.3.


 


1.1.19     “Deed” shall have the meaning ascribed in Section 9.5.1(a).


 


1.1.20     “Deposit” shall have the meaning ascribed in
Section 2.3.2.


 


1.1.21     “Deposit
Date” shall have the meaning ascribed in Section 2.3.1.


 


1.1.22     “Disapproval
Notice”  shall
have the meaning ascribed in Section 3.8.


 


1.1.23     “Disclosure Items” shall have the meaning
ascribed in Section 6.1.


 


1.1.24     “Dispute” shall have the
meaning ascribed in Section 10.22.


 


1.1.25     “Due Diligence” shall have the meaning
ascribed in Section 3.1.


 


1.1.26     “Due Diligence Items” shall have the meaning
ascribed in Section 3.2.


 


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1.1.27     “Due Diligence Period” shall mean the time
period provided for in Section 3.1 of this Agreement.


 


1.1.28     “Effective Date” shall mean the first date
on which Escrow Agent has in its possession a
fully executed original or copy of this Agreement.  Escrow Agent shall promptly notify Buyer and
Seller in writing of the Effective Date.


 


1.1.29     “Environmental Laws” means all Federal,
state and local environmental laws, rules, statutes, directives, binding written
interpretations, binding written policies, ordinances and regulations issued by
any Governmental Entity and in effect as of the date of this Agreement with
respect to or which otherwise pertain to or affect the Real Property or the
Improvements, or any portion thereof, the use, ownership, occupancy or
operation of the Real Property or the Improvements, or any portion thereof, or
any owner of the Real Property, and as same have been amended, modified or
supplemented from time to time prior to the date of this Agreement, including
but not limited to the Comprehensive Environmental Response, Compensation and
Liability Act of 1980 (42 U.S.C. § 9601 et seq.), the Hazardous Substances
Transportation Act (49 U.S.C. § 1802 et seq.), the Resource Conservation and Recovery
Act (42 U.S.C. § 6901 et seq.), the Water Pollution Control Act (33 U.S.C. §
1251 et seq.), the Safe Drinking Water Act (42 U.S.C. § 300f et seq.), the
Clean Air Act (42 U.S.C. § 7401 et seq.), the Solid Waste Disposal Act (42
U.S.C. § 6901 et seq.), the Toxic Substances Control Act (15 U.S.C. § 2601 et
seq.), the Emergency Planning and Community Right-to-Know Act of 1986 (42
U.S.C. § 11001 et seq.), the Radon and Indoor Air Quality Research Act (42
U.S.C. § 7401 note, et seq.), the Superfund Amendment Reauthorization Act of
1986 (42 U.S.C. § 9601 et seq.), comparable state and local laws, and any and
all rules and regulations which have become effective prior to the date of
this Agreement under any and all of the aforementioned laws.


 


1.1.30     “Escrow Agent” shall mean Partners Title
Company, Houston, Texas.


 


1.1.31     “Excluded Materials” shall have the meaning
ascribed in Section 3.2.3.


 


1.1.32     “Fixtures” shall mean the fixtures that are
located at and affixed to any of the Improvements as of the Closing Date, but
specifically excluding any fixtures owned by any of the Tenants.


 


1.1.33     “Governmental Entity” means the various
governmental and quasi- governmental bodies or agencies having jurisdiction
over Seller, the Real Property or any portion thereof.


 


1.1.34     “Hazardous Materials” means any pollutants,
contaminants, hazardous or toxic substances, materials or wastes (including
petroleum, petroleum by-products, radon, asbestos and asbestos containing
materials, polychlorinated biphenyls (“PCBs”),
PCB-containing equipment, radioactive elements, infectious agents, and urea
formaldehyde), as such terms are used in any Environmental Laws (excluding
solvents, cleaning fluids and other lawful substances used in the ordinary
operation and maintenance of the Real Property, to the extent in closed
containers).


 


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1.1.35     “Improvements” shall mean all buildings,
structures and improvements located on the Land not owned by a Tenant or any
other third party including, without, limitation, one hundred seventy seven
(177) apartment units.


 


1.1.36     “Indemnitor” shall have the
meaning ascribed in Section 7.3.4.


 


1.1.37     “Initial
Deposit” shall have the meaning ascribed in Section 2.3.1.


 


1.1.38     “Land” shall mean that certain parcel or
parcels of land and appurtenances thereto located at 2801 Alton Parkway,
Irvine, California, and more particularly described on Exhibit A, including Seller’s
right, title and interest, if any, in and to all rights-of-way, open or
proposed streets (public or private), alleys, easements, strips or gores of
land adjacent thereto.


 


1.1.39     “Laws” shall mean all  applicable federal, state or local
statutes, ordinances, codes, regulations, decrees, orders, laws, rulings,
judgment or other governmental or judicial requirements affecting the Property.


 


1.1.40     “Leases” shall mean all
unexpired leases, subleases, occupancy agreements, and any other agreements,
including all modifications or amendments thereto, for the use, possession, or
occupancy of any portion of the Property as of the Closing Date.


 


1.1.41     “Licensee Parties” shall mean
those authorized agents, contractors, consultants and representatives of Buyer
who shall inspect, investigate, test or evaluate the Property on behalf of
Buyer in accordance with this Agreement.


 


1.1.42     “Licenses and Permits” shall
mean, collectively, to the extent assignable, all licenses, permits, approvals,
certificates of occupancy, dedications, subdivision maps and entitlements now
or hereafter issued, approved or granted by any Governmental Entity in
connection with the Real Property, together with all renewals and modifications
thereof.


 


1.1.43     “Liens” shall have the meaning
ascribed in Section 4.2.


 


1.1.44     “Losses” means claims,
actions, causes of action, suits, proceedings, costs, expenses (including,
without limitation, reasonable attorneys’ fees and costs), liabilities,
damages, demands, rights and/or liens of any type, whether known or unknown,
direct or indirect, absolute or contingent.


 


1.1.45     “New Leases” or “New Lease” shall mean, collectively, or
singularly, any Lease entered into after the Effective Date and before the
Closing Date.


 


1.1.46     “Non-Terminable
Contract” shall have the meaning ascribed in Section 4.6.


 


1.1.47     “Permitted Exceptions” shall
mean and include all of the following:  (a) applicable
zoning and building ordinances and land use regulations; (b) such state of
facts as would be disclosed by a physical inspection of the Property; (c) the
lien of taxes and assessments not yet due and payable (it being agreed by Buyer
and Seller that if any tax or


 


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assessment
is levied or assessed with respect to the Property after the date hereof and
the owner of the Property has the election to pay such tax or assessment either
immediately or under a payment plan with interest, Seller may elect to pay
under a payment plan, which election shall be binding on Buyer); (d) any
exclusions from coverage set forth in the jacket of any Owner’s Policy of Title
Insurance, but excluding all specific title exceptions in Schedules B and C of
the Title Commitment on any standard printed exceptions in the Title
Commitment; (e) any exceptions caused by Buyer, any Licensee Parties and
their respective agents, representatives or employees; (f) such other
exceptions as the Title Company shall commit to insure over, without any
additional cost to Buyer, whether such insurance is made available in
consideration of payment, bonding, indemnity of Seller or otherwise; (g) the
rights of the Tenants under the Leases, as tenants only; and (h) any
matters deemed to constitute Permitted Exceptions under Section 4.2
hereof.


 


1.1.48     “Permitted Outside Parties”
shall have the meaning ascribed in Section 3.7.


 


1.1.49     “Personal Property” shall mean
all of the right, title, and interest of Seller in and to the tangible personal
property, which is located at and used exclusively in connection with the
Property as of the Closing Date a specific list thereof as of the Effective
Date being attached hereto as Exhibit H,
but specifically excluding (a) any personal property owned, financed or
leased by any Tenant under any Lease, (b) the Computer Equipment, (c) any
tangible personal property owned by the Property Manager, and (d) any
tangible personal property owned by a third party.  Personal Property shall not include the
Excluded Materials.


 


1.1.50     “Pre-Effective Date Leases” or
“Pre-Effective Date Lease” shall
mean, collectively, or singularly, any Lease in effect as of the Effective
Date.


 


1.1.51     “Private
Restrictions” shall mean (as they may exist from time to time) any
and all covenants, conditions and restrictions, private agreements, easements,
and any other recorded documents or instruments affecting the use of the
Property.


 


1.1.52     “Property” shall mean the
Land, the Improvements, the Personal Property, the Leases, the Approved
Contracts, and to the extent transferable, all of Seller’s right, title and
interest in and to all tangible and intangible assets of any nature relating to
the Property, including without limitation, (a) all warranties upon the
Improvements or the Personal Property, (b) rights to any plans,
specifications, engineering studies, reports, drawings, and prints relating to
the construction, reconstruction, modification, and alteration of Improvements,
(c) all works of art, graphic designs, and other intellectual or
intangible property owned and used by Seller exclusively in connection with the
Property, including any trade name associated with the Improvements, (d)  any website
material belonging to the Property, including, but not limited to, the Property
description and any floor plans, photographs and location maps, (e) all claims and causes of action arising out of or in
connection with the Property after the Closing Date, and (f) the Licenses
and Permits.


 


1.1.53     “Property Manager” shall mean
those individuals or entities which manage the Property.


 


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1.1.54     “Proration Items” shall have
the meaning ascribed in Section 9.7.1(a).


 


1.1.55     “Proration Time” shall have
the meaning ascribed in Section 9.7.1(a).


 


1.1.56     “Purchase Price” shall have
the meaning ascribed in Section 2.2.


 


1.1.57     “Reimbursable Lease Expenses”
shall mean any Commissions and locator fees payable pursuant to a Commission Agreement
or a Lease or a New Lease with respect to Tenants who are scheduled to take
occupancy after Closing.


 


1.1.58     “Rent Roll” shall have the
meaning ascribed in Section 3.2.1.


 


1.1.59     “Rent” or “Rents” shall mean and include fixed monthly
rentals, additional rentals, escalation rentals, retroactive rentals, all
administrative charges, utility charges, vending machine receipts and other
sums and charges payable by Tenants under the Leases.


 


1.1.60     “Rent
Ready Condition” shall have the meaning ascribed in Section 8.4.


 


1.1.61     “Reporting Person” shall have
the meaning ascribed in Section 2.3.4.


 


1.1.62     “Representative” shall have the
meaning ascribed in Section 10.22.1.


 


1.1.63     “Survey” shall have the
meaning ascribed in Section 4.4 and means an ALTA/ACSM survey of
the Land prepared by a surveyor licensed by the State of California.


 


1.1.64     “Survey
Objections” shall  have the
meaning ascribed in Section 4.4.


 


1.1.65     “Telecommunications
Lease” shall have the meaning ascribed in Section 10.25.


 


1.1.66     “Tenant” or “Tenants” means all persons or entities occupying or
entitled to possession of any portion of the Real Property pursuant to the
Lease, including tenants, subtenants, and licensees.


 


1.1.67     “Tenant
Deposit” means all refundable deposits (whether cash or non-cash
and whether designated as security or otherwise) paid or deposited by a Tenant
to Seller, as landlord, or any other person on Seller’s behalf pursuant to a
Lease (together with any interest which has accrued thereon as required by the
terms of such Lease, but only to the extent such interest has accrued for the
account of the respective Tenant or as required by law).


 


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1.1.68     “Tenant
Notice” shall have the meaning ascribed in Section 9.5.1(f).


 


1.1.69     “Title Commitment” shall have
the meaning ascribed in Section 4.1.


 


1.1.70     “Title
Commitment Update” shall have the meaning ascribed in Section 4.3.


 


1.1.71     “Title
Commitment Update Review Period” shall have the meaning
ascribed in Section 4.3.


 


1.1.72     “Title Company” shall mean
Chicago Title Company.


 


1.1.73     “Title Documents” shall have
the meaning ascribed in Section 4.1.


 


1.1.74     “Title Objections” shall have
the meaning ascribed in Section 4.2.


 


1.1.75     “Title Policy” shall have the
meaning ascribed in Section 4.5.


 


1.2                  Rules of
Construction. 
Article and Section captions used in this Agreement are for
convenience only and shall not affect the construction of this Agreement.  All references to “Article” or “Sections”
without reference to a document other than this Agreement, are intended to
designate articles and sections of this Agreement, and the words “herein,” “hereof,”
“hereunder,” and other words of similar import refer to this Agreement as a
whole and not to any particular Article or Section, unless specifically
designated otherwise.  The use of the
term “including” shall mean in all cases “including but not limited to,” unless
specifically designated otherwise.  No rules of
construction against the drafter of this Agreement shall apply in any interpretation
or enforcement of this Agreement, any documents or certificates executed
pursuant hereto, or any provisions of any of the foregoing.  Any deletion of language from this Agreement
prior to its execution by Buyer and Seller shall not be construed to raise any
presumption, canon of construction or implication, including, without
limitation, any implication that the parties intended thereby to state the
converse of the deleted language.


 


ARTICLE 2


 


AGREEMENT OF
PURCHASE AND SALE; PURCHASE PRICE


 


2.1                  Agreement
of Purchase and Sale. 
Seller agrees to sell, transfer, assign and convey to Buyer, and Buyer
agrees to purchase, accept and assume subject to the terms and conditions
stated herein, all of Seller’s right, title and interest in and to the Property.


 


2.2                  Purchase
Price.  Buyer shall
pay Seller the purchase price of FORTY NINE MILLION DOLLARS ($49,000,000.00) (“Purchase Price”) at Closing in cash or
other immediately available federal funds. 
The Purchase Price and such other funds as may be necessary to pay Buyer’s
expenses hereunder, subject to closing adjustments, shall be deposited with the
Escrow Agent no later than one (1) business day prior to the Closing Date
in accordance


 


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with this
Agreement and paid to Seller upon satisfaction of all conditions precedent to
the Closing as described herein.


 


2.3                  Deposits;
Designation of Reporting Person & Contract Consideration.


 


2.3.1       Initial Deposit. Within two (2) business
days after the Effective Date (the “Deposit Date”),
Buyer shall deposit via wire transfer the sum of ONE MILLION DOLLARS
($1,000,000.00) in immediately available U.S. funds as a deposit (the “Initial Deposit”)
with Escrow Agent whose address is as indicated in Section 10.3,
below.  If Buyer fails to make the
Initial Deposit on or before 5:00 p.m. Pacific Time on the Deposit Date,
then this Agreement shall terminate and shall be of no further force and effect
and the parties shall have no further obligations to one another except to the
extent expressly stated otherwise herein.


 


2.3.2       Additional Deposit.  Unless Buyer terminates this Agreement before
the expiration of the Due Diligence Period pursuant to Section 3,
below, then by 5:00 p.m. Pacific Time on the last day of the Due Diligence
Period, Buyer shall deposit with Escrow Agent via wire transfer an additional
ONE MILLION DOLLARS ($1,000,000.00) (the “Additional
Deposit”) in immediately available funds.  Once made, the Initial Deposit and the
Additional Deposit (collectively, the “Deposit’) shall
be non-refundable in all instances except (a) if the Closing fails to
occur solely as a result of a material default by Seller hereunder that is not
cured within all applicable notice and cure periods, (b) if the Closing
fails to occur solely as a result of the failure of a condition precedent in
Buyer Conditions Precedent (set forth in Section 9.3 hereof)
through no fault of Buyer, and (c) as otherwise expressly stated otherwise
in this Agreement.  If Buyer fails to
make the Additional Deposit on or before 5:00 p.m. Pacific Time on the
last day of the Due Diligence Period, then this Agreement shall terminate and
shall be of no further force and effect and the parties shall have no further
obligations to one another except to the extent expressly stated otherwise
herein.


 


2.3.3       Investment of Deposit.  If and when made, each portion of the Deposit
shall be held by Escrow Agent in accordance with the following.   The Escrow Agent shall invest the amount in
escrow, including without limitation the Deposit, in accounts which are
federally insured or which invest solely in government securities and shall be
applied in accordance with the terms of this Agreement.  Interest earned on the Deposit shall be
considered part of the Deposit and shall be deemed to have been earned by, and
constitute income of, Buyer.


 


2.3.4       Designation
of Reporting Person. 
In order to assure compliance with the requirements of Section 6045
of the Internal Revenue Code of 1986, as amended (for purposes of this Section 2.3.4,
the “Code”), and any related
reporting requirements of the Code, Seller and Buyer hereby designate Escrow
Agent as the person to be responsible for all information reporting under Section 6045(e) of
the Code (the “Reporting Person”).  In connection with the foregoing appointment,
Seller and Buyer hereby agree: (a) to provide to the Reporting Person all
information and certifications regarding such party, as reasonably requested by
the Reporting Person or otherwise required to be provided by a party to the
transaction described herein under Section 6045 of the Code; and (b) to
provide to the Reporting Person such party’s taxpayer identification number and
a statement (on Internal Revenue Service Form W-9 or an acceptable
substitute form, or on any other form the applicable current or future Code


 


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sections
and regulations might require and/or any form requested by the Reporting
Person), signed under penalties of perjury, stating that the taxpayer
identification number supplied by such party to the Reporting Person is
correct.  Each party hereto agrees to
retain this Agreement for not less than four years from the end of the calendar
year in which the Closing occurred, and to produce it to the Internal Revenue
Service upon a valid request therefor.


 


2.3.5       Contract Consideration.  Notwithstanding anything in this Agreement to
the contrary, in any event where the Deposit, or any part thereof, is to be
returned to Buyer, ONE HUNDRED DOLLARS ($100.00) thereof shall be paid by
Escrow Agent to Seller as consideration for the rights and privileges granted
to Buyer herein thus making this Agreement the valid and binding obligation of
Buyer and Seller even though Buyer may have certain unilateral termination
rights during certain periods under this Agreement.


 


2.4                  General
Assumption.  As
additional consideration for the purchase and sale of the Property, at Closing
Buyer will: (a) assume and perform (i) all of the covenants and
obligations of Seller, Seller’s predecessors in title and Seller’s Affiliates
pursuant to the Leases and Approved Contracts (including, without limitation,
those relating to any Tenant Deposits) which arise on or after the Closing
Date, and (ii) all obligations under the Leases and Approved Contracts
relating to the physical and environmental condition of the Property arising on
or after the Closing Date including, without limitation, any obligations that
run with the Property including, without limitation, the obligation to complete
any off-site improvements that were a condition of approval of the subdivision
map(s) affecting the Property; provided, however, that such
off-site improvements shall not cost more than $100,000; and (b) assume
and agree to discharge, perform and comply with each and every liability, duty,
covenant, debt or obligation of Seller or any of its Affiliates resulting from,
arising out of, or in any way related to any Licenses and Permits and arising
on or after the Closing Date.  By closing
under this Agreement, Buyer hereby indemnifies, defends, and holds Seller,
Seller’s Affiliates and their respective partners, members, shareholders,
officers, directors, managers, employees and agents harmless from and against
any and all claims, liens, damages, demands, causes of action, liabilities,
lawsuits, judgments, losses, costs and expenses (including but not limited to
reasonable attorneys’ fees and expenses) asserted against or incurred by Seller
and arising out of the failure of Buyer to perform its obligations pursuant to
this Section 2.4.  The
provisions of this Section 2.4 shall survive the Closing.


 


ARTICLE 3


 


BUYER’S DUE

DILIGENCE/CONDITION OF THE PROPERTY


 


3.1                  Buyer’s
Inspections and Due Diligence.  Buyer acknowledges that commencing on the
Effective Date and continuing until 5:00 p.m. Pacific Time on December 10,
2009 (the period of time from the Effective Date until such time shall be
referred to herein as the “Due Diligence Period”),
Buyer shall conduct its examinations, inspections, testing, studies and
investigations of the Property, review information regarding the Property and
such documents applicable to the Property, including, without limitation, the
documents that Seller delivers or makes available, as set forth in Section 3.2
below (collectively, the “Due Diligence”).  Except for any limitations as may be imposed
by this Article 3 below, Buyer may conduct such due


 


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diligence
activities, inspections, and studies of the Property as it deems necessary or
appropriate, and examine and investigate to its full satisfaction all facts,
circumstances, and matters relating to the Property (including the physical
condition and use, availability and adequacy of utilities, access, zoning,
compliance with applicable laws, environmental conditions, accessibility
matters, engineering and structural matters), title and survey matters, and any
other matters it deems necessary or appropriate for purposes of consummating
this transaction.  The Due Diligence shall
be at Buyer’s sole cost and expense.


 


3.2                  Delivery
Period.


 


3.2.1       Due
Diligence Items. 
By executing and delivering this Agreement, Buyer acknowledges and
agrees that as of the Effective Date hereof, Seller delivered to Buyer the
following: (i) the most recent rent roll statement (the “Rent Roll”) with respect to the Property
prepared by Seller, in the form and containing such information as maintained
by Seller from time to time; (ii) any title commitments or surveys
relating to Property as described in the last sentence of Section 4.1
hereof; (iii) copies of all Contracts (including any Commission
Agreements); and (iv) copies of any of the following items pertaining to
the Property to the extent they exist and are in Seller’s or Property Manager’s
possession: plans and specifications; “as-built” plans and specifications;
structural, seismic or geological investigations and/or reports prepared by
third parties; environmental investigations and/or reports prepared by third
parties; warranties; income and expense statements for the prior three (3) years;
current tax bill, and the Licenses and Permits (collectively, the “Deliverable Due
Diligence Items”).  Seller
shall also make available to Buyer for inspection at Seller’s primary office,
the primary office of the Property Manager or the Property Manager’s on-site
office the following:  (i) copies of
all Leases referenced on the Rent Roll and copies of any subleases or
amendments relating thereto and Tenant correspondence in Seller’s possession; (ii) maintenance
and renovations records; and (iii) subject to Section 3.2.3
hereof, all other information relating to the operation of the Property
(collectively, the “Other Due Diligence Items”).  The Deliverable Due Diligence Items and Other
Due Diligence Items are all collectively referred to herein as the “Due Diligence Items”.


 


3.2.2       No
Warranty. 
Buyer acknowledges that many of the Due Diligence Items were prepared by
third parties other than Seller.  Buyer
further acknowledges and agrees that (a) except as specifically set forth
in this Agreement, neither Seller nor any of Seller’s respective agents,
employees, contractors or any other party has made any warranty or
representation regarding the truth, accuracy or completeness of the Due
Diligence Items or the source(s), and (b) Seller has not undertaken any
independent investigation as to the truth, accuracy or completeness of the Due
Diligence Items, and Seller is providing the Due Diligence Items or making the
Due Diligence Items available to Buyer solely as an accommodation to Buyer.  Buyer acknowledges that the Due Diligence
Items are subject to the confidentiality provisions of Section 3.5
below.


 


3.2.3       Excluded Materials.  Notwithstanding any terms to the contrary in
this Agreement, (a) Seller shall not be obligated or otherwise required to
furnish or make available to Buyer any of the following (collectively, “Excluded Materials”):  (i) any appraisals or other economic
evaluations of, or projections with respect to, all or any portion of the
Property, including, without limitation, budgets, prepared by or on behalf of
Seller or any Affiliate of Seller or any other party, (ii) any documents,
materials or information which are


 


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subject to
attorney/client, work product or similar privilege, which constitute attorney
communications with respect to the purchase of the Property by Seller, (iii) any
information which Seller, in good faith, considers proprietary and not related
to the operation of the Property, and (iv) any information which is
subject to any other confidentiality obligations; (b) Due Diligence Items
shall not include any Excluded Materials; and (c) Seller shall have no
obligation or liability of any kind to Buyer as a result of Seller not
furnishing or making available to Buyer the Excluded Materials.


 


3.3                  Site
Visits.  During the
pendency of this Agreement, Buyer and its Licensee Parties shall have
reasonable access to the Property at agreed upon times for agreed upon purposes
on at least one (1) business day prior notice to Seller.  Such notice shall describe the scope of the
Due Diligence Buyer intends to conduct during Buyer’s access to the
Property.  Seller shall have the right to
have a representative present during any visits to or inspections of the
Property or any meetings or discussions with any Tenant by Buyer or any
Licensee Parties or any Governmental Entity. 
Buyer will conduct its Due Diligence in a manner so as to minimize, to
the extent reasonably possible to do so, any interference with the operations
and occupancy of the Property and to minimize, to the extent reasonably
possible to do so, any disturbance to Tenants. 
Buyer will not enter the Property or contact any leasing agents or the
Property Manager of the Property or any Governmental Entity without Seller’s
prior written consent, which consent shall not be unreasonably withheld or
delayed.  Neither Buyer nor any Licensee
Parties may contact any Tenants or make any inquiries of such Tenants including,
without limitation, those which in any way relate to the Property, without
Seller’s prior written consent which consent may be withheld in Seller’s sole
and absolute discretion.  In the event
Buyer desires to conduct any physically intrusive Due Diligence, such as
sampling of soils, other media, building materials, or the like, Buyer will
identify in writing exactly what procedures Buyer desires to perform and
request Seller’s express written consent. 
Seller may withhold or condition consent to any physically intrusive Due
Diligence in Seller’s sole and absolute discretion.  Upon receipt of Seller’s written consent,
Buyer and all Licensee Parties shall, in performing such Due Diligence, comply
with any agreed upon procedures and with any and all Laws including, without
limitation, any Environmental Laws.


 


3.4                  Insurance
Requirements. 
As a condition precedent to any entry onto the Property by Buyer or any
Licensee Parties prior to the Closing, Buyer or any such Licensee Parties shall
carry worker’s compensation insurance in compliance with applicable law,
liability insurance covering bodily injury, property damage, with a combined
single limit of $2,000,000, and automobile liability insurance in an amount not
less than $1,000,000.00 covering all automobile and equipment owners and/or
operated by Buyer and any Licensee Parties in connection with the license
granted herein.  The liability policies
described herein shall name Seller and those reasonably designated by Seller as
additional insured.  All such insurance
shall: (a) be primary and no insurance of Seller or any of the additional
insured shall be called upon to contribute to a loss and (b) not be
cancelled or materially modified without first giving Seller thirty (30) days’
advance written notice of cancellation or material modification.  Before entering the Property pursuant to this
Section 3.4, Buyer shall deliver copies of the policies or
certificates of insurance issued by the insurance carrier(s) to Seller
demonstrating compliance with the terms of this Section.  In the event that, during the Due Diligence
Period or at any other time during the pendency of this Agreement that Buyer or
any Licensee Parties are entering the Property, Buyer or any Licensee Parties
fail to procure or maintain the insurance requirements as set forth in this


 


11

















 


Section or
such insurance is modified such that it does not provide coverage to Seller and
its additional insured as required herein neither Buyer nor any Licensee
Parties shall be permitted to enter the Property and if Buyer does not cure
such failure within three (3) days of notice thereof from Seller, then
Seller shall thereafter have the right to terminate this Agreement upon
twenty-four (24) hours written notice to Buyer whereupon Buyer shall
immediately cease all operations on the Property and promptly remove all
Licensee Parties from the Property (unless the subject insurance requirements
are satisfied and evidence thereof delivered to Seller before the expiration of
said twenty-four (24) hour notice).


 


3.5                  Restoration;
No Liens. 
Buyer shall promptly pay when due the costs of all entry and inspections
and examinations done with regard to the Property and repair and/or restore the
Property to the condition in which the same were found before any such entry
upon the Property and inspection or examination was undertaken.  Buyer shall not permit any mechanics’ or
other liens to be filed against the Property as a result of labor or materials
furnished in connection with its Due Diligence. 
If any such lien is filed against the Property as a result of the
activities of Buyer or any Licensee Parties, then within ten (10) days
after receipt of written demand from Seller or any other notice of such lien,
Buyer shall either cause the same to be discharged of record by payment of the
claim or posting of a bond, or will take such other action as may be reasonably
acceptable to protect Seller, Seller’s Affiliates and the Property from any
loss or damage arising from such lien. 
In the event Buyer fails to release any lien by payment, bond or
otherwise as set forth herein, Seller may pay such amounts necessary to cause
the release of the lien and Buyer shall promptly reimburse Seller one hundred
percent (100%) of the amount so paid, in addition to Seller’s other costs
(including, but not limited to attorneys’ fees) necessary to discharge the
lien(s)).  Buyer’s obligations under this
Section 3.5 shall expressly survive the Closing or, if the purchase
and sale is not consummated, any termination of this Agreement.  The provisions of this Section 3.5
shall survive the Closing or, if the purchase and sale is not consummated, any
termination of this Agreement.


 


3.6                  Due
Diligence Indemnity. 
Buyer shall defend, protect, indemnify, and hold harmless Seller, Seller’s
Affiliates and their respective partners, shareholders, members, officers,
directors, employees and agents, as applicable, and the Property Manager from
and against all Losses (whether arising out of injury or death to persons or
damage to the Property or otherwise) including, but not limited to, costs of
remediation, restoration and other similar activities, mechanic’s and
materialmen’s liens and attorneys’ fees, arising out of or in connection with
Buyer’s Due Diligence, Buyer’s breach of its obligations under Section 3.7
or Buyer’s or any Licensee Parties’ entry upon the Property; provided, however,
that Buyer shall have no obligations under this Section 3.6 to the
extent the Losses are caused solely by the negligence or willful misconduct of
Seller, Seller’s Affiliates, Seller’s partners, shareholders, members,
officers, directors, employees and agents, as applicable, and/or the Property
Manager or result from the mere discovery by Buyer of pre-existing conditions
at the Property and the Buyer promptly notifies Seller in writing of such
discovery.  The provisions of this Section 3.6
shall survive the Closing or, if the purchase and sale is not consummated, any
termination of this Agreement.


 


3.7                  Confidentiality.  Buyer agrees that any information
obtained by Buyer or its Affiliates or their respective attorneys, partners,
accountants, brokers, property


 


12

















 


management companies, third party
consultants, lenders or investors (collectively, for purposes of this Section 3.7,
the “Permitted Outside Parties”)
in the conduct of its Due Diligence shall be treated as confidential pursuant
to Section 10.11 of this Agreement and shall be used only to
evaluate the acquisition of the Property from Seller.  Buyer further agrees that within its
organization, or as to the Permitted Outside Parties, the Due Diligence Items
and all other information obtained by Buyer pursuant to its Due Diligence will
be disclosed and exhibited only to those persons within Buyer’s organization or
to those Permitted Outside Parties who are involved in determining the
feasibility of Buyer’s acquisition of the Property.  Buyer further acknowledges that the Due
Diligence Items, all information relating to the leasing arrangements between
Seller and any Tenant or prospective tenants, and all other information
obtained by Buyer pursuant to its Due Diligence are proprietary and
confidential in nature.  Buyer agrees not
to divulge the contents of such Due Diligence Items or any other information
except in strict accordance with this Section 3.7 and Section 10.11
of this Agreement.  In permitting Buyer
and the Permitted Outside Parties to review the Due Diligence Items and other
information to assist Buyer, Seller has not waived any privilege or claim of
confidentiality with respect thereto, and no third party benefits or
relationships of any kind, either express or implied, have been offered,
intended or created by Seller and any such claims are expressly rejected by
Seller and waived by Buyer and the Permitted Outside Parties, for whom, by its
execution of this Agreement, Buyer is acting as an agent with regard to such
waiver.  The provisions of this Section 3.7
shall survive the Closing or, if the purchase and sale is not consummated, any
termination of this Agreement.


 


3.8                  Due
Diligence Period. 
Except as set forth in Section 2.3.1 hereof, unless Buyer
delivers to Seller and Escrow Agent written notice terminating this Agreement
on or before the end of the Due Diligence Period which notice may be for any
reason, or no reason, (the “Disapproval Notice”),
this Agreement shall continue in full force and effect.  If Buyer fails to give Seller the Disapproval
Notice, then Buyer shall be deemed to have approved all of the matters described
in Sections 3.1 and 3.2. 
If the Agreement is terminated hereunder, then Buyer shall be entitled
to the immediate return of the Initial Deposit and Buyer shall return all Due
Diligence Items in its possession to Seller and provide to Seller, promptly
after receipt of a request from Seller, originals of any third party reports,
studies and appraisals relating to the Property in its possession, without
representation or warranty and at no cost to Seller.  The foregoing obligation shall survive any termination
of this Agreement.  Subject to the terms
of this Agreement, provided that Buyer has not delivered the Disapproval
Notice, Buyer, after the expiration of the Due Diligence Period, may continue
to conduct further physical Due Diligence or other examinations, inspections,
tests, studies and investigations regarding the Property; provided, however,
that except as otherwise expressly provided in Sections 5.1 and 10.2.2,
in no event shall Buyer have any right to terminate or otherwise modify its
obligations hereunder after the end of the Due Diligence Period as a result of
any such further Due Diligence or other examinations, inspections, tests,
studies or investigations regarding the Property, and the provisions of this Article 3,
including, without limitation, the indemnification provisions, shall continue
to apply.


 


3.9                  Delivery of Buyer’s Due Diligence Materials.  Buyer agrees that if Buyer
terminates this Agreement for any reason permitted hereunder, including Buyer’s
disapproval of its Due Diligence within the Due Diligence Period, then Buyer
shall, at Seller’s request and at no cost to Seller, assign to Seller all of
its rights, interest and title to copies of all third party drafts and final
surveys, environmental site assessments, appraisals, examinations,


 


13

















 


inspections,
tests, studies and investigations of the Property or any other similar
documents or materials applicable to the Property, obtained by Buyer during the
Due Diligence Period (collectively, “Buyer’s Due Diligence
Materials”).  Buyer’s
obligations under this Section shall expressly survive the termination
and/or expiration of this Agreement.


 


ARTICLE 4


 


TITLE, SURVEY &
CONTRACTS


 


4.1                  Title
to Real Property. 
Buyer shall obtain (a) a preliminary report or commitment to issue
an owner’s policy of title insurance with respect to the Property issued by the
Title Company (the “Title Commitment”),
and (b) copies of all recorded documents referred to on Schedule B of the
Title Commitment as exceptions to coverage (the “Title Documents”). 
Buyer shall instruct Escrow Agent to deliver a copy of the Title
Commitment and the Title Documents to Seller concurrent with its delivery of
the same to Buyer.  Seller agrees to
deliver any preliminary reports, title commitments and Surveys in its
possession to the extent the same exist; provided, however, that the delivery
of such materials shall be subject to the terms and conditions of Section 3.2.2,
above.


 


4.2                  Certain
Exceptions to Title. 
Buyer shall have the right to object in writing to any title matters
that are not Permitted Exceptions and that are disclosed in the Title
Commitment (herein collectively called “Liens”)
on or before the second (2nd) day prior to the
expiration of the Due Diligence Period. 
Buyer’s failure to disapprove the Liens in writing within such period
shall constitute Buyer’s approval of all such Liens.  All such Liens which are timely objected to
by Buyer shall be herein collectively called the “Title Objections”. 
Seller, in its sole and absolute discretion, may elect (but shall not be
obligated) to remove or cause to be removed, or insured over, at its expense,
any Title Objections, and shall be entitled to a reasonable adjournment of the
Closing for the purpose of such removal, which removal will be deemed effected
by, among other things, the issuance of title insurance reasonably acceptable
to Buyer eliminating or insuring against the effect of the Title
Objections.  Seller shall notify Buyer in
writing no later than the day prior to the expiration of the Due Diligence
Period (the “Title Cure Period”), whether
Seller elects to remove the same.  If
Seller is unable to remove or endorse over any Title Objections prior to the
expiration of the Title Cure Period, or if Seller elects not to remove one or
more Title Objections by the expiration of the Title Cure Period, Buyer may
elect, as its sole and exclusive remedy therefore, to either (a) terminate
this Agreement on or before the end of the Due Diligence Period and Buyer shall
be entitled to the immediate return of the Initial Deposit and, thereafter, the
parties shall have no further rights or obligations hereunder except for those
obligations which expressly survive the termination of this Agreement, or (b) waive,
in writing, such Title Objections, in which event such Title Objections shall
be deemed additional “Permitted Exceptions” and the Closing shall occur as
herein provided without any reduction of or credit against the Purchase
Price.  If before the end of the Due
Diligence Period, Buyer elects to proceed with the transaction contemplated
herein, then Buyer shall be deemed to have elected to waive those Title
Objections Seller elected not to remove or endorse over and its right to
terminate this Agreement pursuant to this Section 4.2.  Notwithstanding the foregoing, Seller shall
be obligated at Closing to cause the release of the Liens of any financing
obtained by Seller which is secured by the Property.


 


14

















 


4.3                  Additional
Exceptions. 
In the event the Title Commitment is amended or updated after the
expiration of the Due Diligence Period and before the Closing (each, a “Title  Commitment
Update”), Buyer shall furnish Seller with a written statement of
approval or objections to any matter first raised in a Title Commitment Update
that affects title to the Real Property and that was not caused by Buyer or any
Licensee Parties within two (2) business days after its receipt of such
Title Commitment Update together with a legible copy of each new exception
raised therein (each, a “Title  Commitment Update Review Period”).  Should Buyer fail to notify Seller in writing
of any objections to any matter first disclosed in a Title Commitment Update
prior to the expiration of the applicable Title Commitment Update Review
Period, as applicable, Buyer shall be deemed to have approved such matters
whereupon they shall become Permitted Exceptions. If, however, Buyer objects to
such new exception, then Seller shall have until 5:00 p.m. Pacific Time on
the fifth (5th) business day after Seller’s receipt of Buyer’s written objection in which
to notify Buyer, in Seller’s sole discretion, either (a) that Seller will
remove the new disapproved exception(s) prior to the Close of Escrow and,
thereafter, Seller shall be entitled to a reasonable adjournment of the Closing
for the purpose of such removal, which removal will be deemed effected by,
among other things, the issuance of title insurance reasonably acceptable to
Buyer eliminating or insuring against the effect of the Title Objections, or (b) that
Seller will not remove the new disapproved exception(s).  If Seller does not elect to do either (a) or
(b), such silence shall be conclusively deemed to constitute Seller’s election
not to remove any new exception(s) disapproved by Buyer.  If Seller elects not to remove any new
disapproved exception(s), whether by giving notice thereof or by failing to
give notice, then Buyer shall have until 5:00 p.m. Pacific Time on the
fifth (5th) business day after Seller’s election (or deemed election) not to cure the
disapproved exception in which to elect (y) to terminate this Agreement by
written notice to Seller and Escrow Holder or (z) to waive in writing
Buyer’s previous disapproval of (and thereby accept) any items that Seller does
not elect to remove.  Buyer’s failure to
terminate this Agreement by delivering written notice of such election on or
before 5:00 p.m. Pacific Time on the fifth (5th) business
day after Seller’s election or deemed election not to remove the new
disapproved exception shall be deemed to constitute Buyer’s irrevocable
election to waive Buyer’s previous disapproval whereupon the disapproved
exception shall become a Permitted Exception. 
If, however, Buyer does elect to terminate this Agreement, then this
Agreement shall so terminate, the Deposit shall be returned to Buyer and
neither party shall have any further obligations to the other hereunder except
to the extent any such obligation expressly survives the termination of this
Agreement.


 


4.4                  Survey Objections.  Buyer shall have the right to obtain a new
survey or an update of any survey provided by Seller (the “Survey”)
at its sole cost and expense.  Promptly
upon receipt of the Survey, Buyer, at its sole cost and expense, shall deliver
a copy to Seller and to Escrow Agent.  No
later than the second (2nd) day prior to the expiration of
the Due Diligence Period, Buyer shall have the right to notify Seller, in
writing, of any matters disclosed on the Survey that are not Permitted
Exceptions and that affect Buyer’s title to the Property.  Buyer’s failure to obtain the Survey or
disapprove any matters disclosed by the Survey on or before such time shall
constitute Buyer’s approval of the matters disclosed by the Survey or matters
that would have been disclosed had Buyer obtained a Survey.  All such matters which are timely objected to
by Buyer shall be herein collectively called the “Survey
Objections”.  Seller, in its
sole and absolute discretion, may no later than the day prior to the expiration
of the Due Diligence Period (the “Survey Cure Period”),
elect to remove or cause to be removed, or insured over, at its expense, any
Survey Objections, and shall be entitled to a reasonable


 


15

















 


adjournment
of the Closing for the purpose of such removal, which removal will be deemed
effected by, among other things, the issuance of title insurance reasonably
acceptable to Buyer eliminating or insuring against the effect of the Survey
Objections.  Seller shall notify Buyer in
writing of such election within the Survey Cure Period.  If Seller is unable to cure or endorse over
any Survey Objections prior to the expiration of the Survey Cure Period, or if
Seller elects not to remove one or more Survey Objections, Buyer may elect, as
its sole and exclusive remedy therefore, to either (a) terminate this
Agreement by giving written notice to Seller and Escrow Agent on or before the
end of the Due Diligence Period and Buyer shall be entitled to the immediate
return of the Deposit and, thereafter, the parties shall have no further rights
or obligations hereunder except for those obligations which expressly survive
the termination of this Agreement, or (b) waive, in writing, such Survey
Objections, in which event the Closing shall occur as herein provided without
any reduction of or credit against the Purchase Price.  If before the end of the Due Diligence
Period, Buyer elects to proceed with the transaction contemplated herein, then
Buyer shall be deemed to have elected to waive those Survey Objections Seller
elected not to cure and its right to terminate this Agreement pursuant to this Section 4.4.


 


4.5                  Title
Insurance. 
At Closing, the Title Company shall issue to Buyer or be irrevocably
committed to issue to Buyer a CLTA standard coverage form title policy (the “Title Policy”) in the amount of the
Purchase Price, insuring that fee simple title to the Land is vested in Buyer
subject only to the Permitted Exceptions. 
Buyer shall be entitled to request that the Title Company provide ALTA
extended coverage and/or such endorsements (or amendments) to the Title Policy
as Buyer may reasonably require and/or increased liability as Buyer may
reasonably require, provided that the same shall (a) be at no cost to
Seller, (b) impose no additional liability on Seller, (c) not be a
condition to the Closing and, accordingly, if Buyer is unable to obtain any of
the foregoing, Buyer shall nevertheless be obligated to proceed to close the
transaction contemplated by this Agreement without reduction of or set off
against the Purchase Price, and (d) the Closing shall not be delayed as a
result of Buyer’s request.


 


4.6                  Contracts. 
On or before the second (2nd) day
prior to the expiration of the Due Diligence Period, Buyer shall have the right
to disapprove, by written notice to Seller, any of the Contracts that are not
terminable upon thirty (30) days or less prior notice.  If Buyer desires to have any Contract
terminated that is not expressly terminable upon thirty (30) days’ or less
notice (any, a “Non-Terminable Contract”), then
Buyer shall notify Seller in writing of any such Non-Terminable Contract that
it desires to have terminated.  Within
one (1) day following receipt of any such Buyer notice, Seller shall
notify Buyer in writing whether Seller, in its sole and absolute discretion, is
willing to terminate such Non-Terminable Contract.  If Seller notifies Buyer that it is unwilling
to terminate any such Non-Terminable Contracts, then Buyer shall have the right,
until the expiration of the Due Diligence Period, either to waive in writing
its prior disapproval of the corresponding Non-Terminable Contract(s) or
to terminate this Agreement by giving written notice to Seller and Escrow
Holder as Buyer’s sole and exclusive remedy, in which event the Deposit shall
be returned to Buyer.  If Buyer fails to
waive any such prior disapproval and does not terminate this Agreement before
the expiration of the Due Diligence Period, then Buyer shall be deemed to have
waived its prior disapproval of the corresponding Non-Terminable
Contract(s).  All of the Contracts which
are either terminable on thirty (30) days or less notice or which are not
disapproved by Buyer, or with respect to which


 


16

















 


Buyer’s
initial disapproval is waived or deemed to be waived hereunder, are referred to
herein as the “Approved Contracts.”


 


ARTICLE 5


 


REMEDIES


 


5.1                  Permitted
Termination; Seller Default.  If the sale of the Property is not
consummated due to the permitted termination of this Agreement by Buyer as
herein expressly provided, then the Deposit shall be returned to Buyer.  Upon such termination, Buyer will have no
liability hereunder except as otherwise expressly stated in this Agreement.  If the sale of the Property is not consummated
due solely to Seller’s material default hereunder that is not cured within all
applicable notice and cure periods, then Buyer shall have the right, to elect,
as its sole and exclusive remedy, to (a) terminate this Agreement by
written notice to Seller, promptly after which the Deposit shall be returned to
Buyer, (b) waive the default and proceed to close the transaction
contemplated herein, or (c) provided that all of the conditions to Seller’s
obligations to close have been satisfied and so long as Buyer is not then in
default of any of its material obligations under this Agreement, seek specific
performance of Seller’s obligations under this Agreement and record and
maintain against the Property a notice of lis pendens in accordance with
applicable law if Buyer further satisfies and continues to satisfy each of the
following obligations: (i) Buyer shall have reasonably demonstrated that
it is prepared to deliver into escrow all funds required by this Agreement in
order for the Closing to occur, Buyer shall have deposited all funds required
by this Agreement in order for the Closing to occur, and Buyer shall be ready
and willing in all other respects to close escrow in accordance with the terms
and conditions of this Agreement; and (ii) Buyer shall have filed an
action for specific performance (a “Specific Performance
Action”) within sixty (60) days of the date the Closing was to have
occurred.  Notwithstanding anything to
the contrary contained herein, Seller shall not be deemed in default unless and
until Buyer provides Seller with written notice of such default and Seller
fails to cure such default within three (3) business days of its receipt
of such written notice.


 


5.2                  Buyer
Default; Liquidated Damages.  IF THE SALE
IS NOT CONSUMMATED DUE TO ANY DEFAULT BY BUYER HEREUNDER AND
BUYER FAILS TO CURE SUCH BREACH WITHIN THREE (3) BUSINESS DAYS AFTER BUYER’S
RECEIPT OF WRITTEN NOTICE FROM SELLER SPECIFYING SUCH BREACH (PROVIDED, HOWEVER, THAT THE FOREGOING NOTICE AND CURE
RIGHTS SHALL NOT APPLY TO BUYER’S FAILURE TO CLOSE ON THE CLOSING DATE), THEN
SELLER SHALL RETAIN THE DEPOSIT AS LIQUIDATED DAMAGES, WHICH RETENTION SHALL
OPERATE TO TERMINATE THIS AGREEMENT AND RELEASE BUYER FROM ANY AND ALL
LIABILITY HEREUNDER, EXCEPT AS OTHERWISE EXPRESSLY PROVIDED IN THIS
AGREEMENT.  THE PARTIES HAVE AGREED THAT
SELLER’S ACTUAL DAMAGES, IN THE EVENT OF A FAILURE TO CONSUMMATE THIS SALE DUE
TO BUYER’S DEFAULT, WOULD BE EXTREMELY DIFFICULT OR IMPRACTICABLE TO
DETERMINE.  AFTER NEGOTIATION, THE
PARTIES HAVE AGREED THAT, CONSIDERING ALL THE CIRCUMSTANCES EXISTING ON THE
DATE OF THIS AGREEMENT, THE AMOUNT OF THE DEPOSIT IS A REASONABLE ESTIMATE OF
THE DAMAGES THAT SELLER WOULD INCUR IN


 


17

















 


SUCH EVENT.  BY PLACING THEIR
INITIALS BELOW, EACH PARTY SPECIFICALLY CONFIRMS THE ACCURACY OF THE STATEMENTS
MADE ABOVE AND THE FACT THAT EACH PARTY WAS REPRESENTED BY COUNSEL WHO
EXPLAINED, AT THE TIME THIS AGREEMENT WAS MADE, THE CONSEQUENCES OF THIS
LIQUIDATED DAMAGES PROVISION.  THE
PARTIES ACKNOWLEDGE THAT SUCH PAYMENT OF THE DEPOSIT IS NOT INTENDED AS A
FORFEITURE OR PENALTY WITHIN THE MEANING OF CALIFORNIA CIVIL CODE SECTIONS 3275
OR 3369, BUT IS INTENDED TO CONSTITUTE LIQUIDATED DAMAGES TO SELLER UNDER
CALIFORNIA CIVIL CODE SECTIONS 1671, 1676 AND 1677.  THE FOREGOING IS NOT INTENDED TO LIMIT BUYER’S
SURVIVING OBLIGATIONS UNDER THIS AGREEMENT INCLUDING, WITHOUT LIMITATION, ALL
OF BUYER’S INDEMNITIES IN THIS AGREEMENT.


 


	
  Initials:

  	
  Seller 

  	
  /s/ KR,
  /s/ SDS

  	
   

  	
  Buyer 

  	
  /s/ RTP

  	
   

  



 


ARTICLE 6


 


REPRESENTATIONS
AND WARRANTIES OF SELLER


 


6.1                  Representations
and Warranties of Seller.  Subject to the provisions of this Agreement
including, without limitation, Sections 6.2, 6.3, and Article 7,
Seller makes the following representations and warranties with respect to the
Property:


 


6.1.1       Status.  Seller is a limited liability
company organized or formed, validly existing and in good standing under the
laws of the State of California.


 


6.1.2       Authority.  The execution and delivery of this
Agreement and the performance of Seller’s obligations hereunder have been or
will be duly authorized by all necessary action on the part of Seller and this
Agreement constitutes the legal, valid and binding obligation of Seller,
subject to equitable principles and principles governing creditors’ rights
generally.


 


6.1.3       Non-Contravention.  The execution and delivery of this
Agreement by Seller and the consummation by Seller of the transactions
contemplated hereby will not, to Seller’s knowledge (i) violate any Laws
or (ii) conflict with, result in a breach of, or constitute a default
under the organizational documents of Seller, any note or other evidence of
indebtedness, any mortgage, deed of trust or indenture, or any lease or other
material agreement or instrument to which Seller is a party or by which Seller
may be bound and, in either case, that would have a material and adverse affect
on Seller’s ability to consummate the transactions contemplated by this
Agreement.


 


6.1.4       Non-Foreign
Entity.  Seller is
not a “foreign person” or “foreign corporation” as those terms are defined in
the Internal Revenue Code of 1986, as amended, and the regulations promulgated
thereunder.


 


6.1.5       Consents.  No consent, waiver, approval or
authorization is required from any person or entity (that has not already been
obtained or will be obtained) in


 


18

















 


connection
with the execution and delivery of this Agreement by Seller or the performance
by Seller of the transactions contemplated hereby.


 


6.1.6       Leases. 
To Seller’s knowledge, true, correct and complete copies of the Leases
in Property Manager’s files have been or will be delivered or made available to
Buyer in accordance with Section 3.2.1 above.  Except as set forth in the Rent Roll or
otherwise disclosed to Buyer by Seller in writing prior to the expiration of
the Due Diligence Period, to Seller’s knowledge, the Leases listed on the Rent
Roll are in full force and effect as of the date set forth on the Rent
Roll.  To Seller’s knowledge, Seller has
not received written notice of any uncured default of Seller, as landlord,
under any Lease.  Except as may be set
forth in the Rent Roll or otherwise disclosed to Buyer by Seller in writing
prior to the expiration of the Due Diligence Period, to Seller’s knowledge, no
Tenant has paid any rent, fees, or other charges for more than one month in
advance.  Seller is the landlord under
each of the Leases and, except for any security interests granted in connection
with any loan encumbering the Property that will be paid off at or prior to the
Closing, Seller has not assigned, mortgaged, pledged or otherwise encumbered
any of its rights or interests under the Leases.


 


6.1.7       Contracts. 
To Seller’s knowledge, there are no Contracts except for the Contracts
specifically designated in Exhibit B
attached hereto.  To Seller’s knowledge,
true, correct and complete copies of the Contracts in Property Manager’s files
have been or will be delivered to Buyer in accordance with Section 3.2.1,
above.  To Seller’s knowledge, Seller has
not received written notice of any uncured default of Seller under any
Contracts.


 


6.1.8       Notice of Violation.  Except as may be disclosed in the Due
Diligence Items, to Seller’s knowledge, Seller has not received written notice
from any Governmental Entity having jurisdiction over the Property that the
Property is in violation of any Law regulating the operation or use thereof.


 


6.1.9       Litigation.  To Seller’s knowledge, there is no legal
action, suit, proceeding or claim affecting Seller or the Land, Improvements or
Personal Property or any portion thereof relating to or arising out of the
ownership, operation, use or occupancy of the Property being prosecuted in any
court or by or before any federal, state, county or municipal department, commission,
board, bureau or agency or other Governmental Entity.


 


6.1.10     Special
Assessments.  To Seller’s
knowledge and except as may otherwise be disclosed by the Due Diligence Items
or the Title Documents, Seller has received no written notice of any pending improvement
liens or special assessments to be made against the Property by any
governmental authority.


 


6.1.11     No
Contracts.  Except for
this Agreement, there are no options, contracts or other obligations
outstanding for the sale, exchange or transfer of the Property or any portion
thereof or the business operated thereon.


 


6.1.12     Environmental
Issues.  To Seller’s knowledge, Seller
has not received any written notice from any Governmental Entity that there is
a presence, release, threat of release, placement on or in the Property, of any
Hazardous Materials in violation of any Laws.


 


19

















 


6.1.13     Prohibited Persons and Transactions.  Neither Seller, Shea Properties
Management, Inc., Shea Properties LLC nor J.F. Shea Co, Inc. are, nor
will they become, a person or entity with whom U.S. persons or entities are
restricted from doing business under regulations of the Office of Foreign Asset
Control (“OFAC”) of the Department
of the Treasury (including those named on OFAC’s Specially Designated and
Blocked Persons List) or under any statute, executive order (including the September 24,
2001, Executive Order Blocking Property and Prohibiting Transactions with
Persons Who Commit, Threaten to Commit, or Support Terrorism), or other
governmental action and is not and will not engage in any dealings or
transactions or be otherwise associated with such persons or entities.


 


6.2                  Seller’s
Knowledge. 
For purposes of this Agreement and any document delivered at Closing,
whenever the phrase “to Seller’s knowledge,” or the “knowledge” of Seller or
words of similar import are used, they shall be deemed to refer to facts within
the actual knowledge only of Steve Gilmore and Blake Bunker, the
representatives or employees of the Seller who are most knowledgeable as to the
status of the Property of Seller and no others, as of the Effective Date,
without duty of inquiry whatsoever. 
Buyer acknowledges that the individual named above is named solely for
the purpose of defining and narrowing the scope of Seller’s knowledge and not
for the purpose of imposing any liability on or creating any duties running
from such individuals to Buyer.  Buyer
covenants that it will bring no action of any kind against such individual, any
shareholder, partner or member of Seller related to or arising out of these
representations and warranties.


 


6.3                  Seller’s Maximum Aggregate Liability.  Notwithstanding any provision to the contrary
contained in this Agreement or any documents executed by Seller pursuant hereto
or in connection herewith, the representations and warranties of Seller set
forth in Section 6.1, together with Seller’s liability for any
breach of any of Seller’s interim operating covenants under Article 8,
shall survive the Closing and not be merged into the deed for a period of nine (9) months.  Buyer shall have no right to bring any action
against Seller as a result of any untruth or inaccuracy of such representations
and warranties, or any such breach, unless (a) Buyer serves a written
claim on Seller within such nine (9) month period, (b) Buyer
commences and serves an action against Seller within thirty (30) days after
Buyer gives such notice, and (c) the aggregate amount of all liability and
losses arising out of any such untruth or inaccuracy, or any such breach,
exceeds $25,000.  In addition, in no
event shall Seller’s liability for all such breaches exceed, in the aggregate,
$750,000.  Seller shall have no liability
with respect to any of Seller’s representations, warranties and covenants herein
if, prior to the Closing, Buyer has actual knowledge of any breach of a
representation, warranty or covenant of Seller herein, or Buyer obtains actual
knowledge (from whatever source, including, without limitation, any of the Due
Diligence Items, as a result of Buyer’s Due Diligence, the inclusion of any
information in or written disclosure by Seller or Seller’s agents and
employees) that contradicts any of Seller’s representations and warranties
herein, and Buyer nevertheless consummates the transaction contemplated by this
Agreement.  The provisions of this Section 6.3
shall expressly survive the Close of Escrow and shall not merge into the Deed
or any of the other closing documents hereunder.


 


20
















 


ARTICLE 7


 


REPRESENTATIONS
AND WARRANTIES OF BUYER


 


7.1                  Buyer’s Representations and Warranties.  Buyer represents and warrants to
Seller the following:


 


7.1.1       Status.  Buyer is a limited partnership organized or
formed, validly existing and in good standing under the laws of the State of
Delaware and has, or will have at Closing, the authority to transact business
in the State of California.


 


7.1.2       Authority.  The execution and delivery of this Agreement
and the performance of Buyer’s obligations hereunder have been or will be duly
authorized by all necessary action on the part of Buyer and this Agreement
constitutes the legal, valid and binding obligation of Buyer, subject to
equitable principles and principles governing creditors’ rights generally.


 


7.1.3       Non-Contravention.  The execution and delivery of this Agreement
by Buyer and the consummation by Buyer of the transactions contemplated hereby
will not, to Buyer’s knowledge, violate any Law or conflict with, result in a
breach of, or constitute a default under the organizational documents of Buyer,
any note or other evidence of indebtedness, any mortgage, deed of trust or
indenture, or any lease or other material agreement or instrument to which
Buyer is a party or by which it is bound and, in either case, that would have a
material and adverse affect on Buyer’s ability to consummate the transaction
contemplated by this Agreement.


 


7.1.4       Consents.  No consent, waiver, approval or authorization
is required from any person or entity (that has not already been obtained or
will be obtained) in connection with the execution and delivery of this
Agreement by Buyer or the performance by Buyer of the transactions contemplated
hereby.


 


7.1.5       Solvency.  Buyer will not be rendered insolvent in
connection with, or as a result of, the performance by Buyer of its obligations
hereunder or the consummation of the transactions contemplated hereby.


 


7.1.6       Prohibited Persons and Transactions.  Neither Buyer, BHMF, Inc.,
nor any assignee of Buyer’s interest in this Agreement is, nor will they
become, a person or entity with whom U.S. persons or entities are restricted
from doing business under regulations of OFAC (including those named on OFAC’s Specially Designated and
Blocked Persons List) or under any statute, executive order (including the September 24,
2001, Executive Order Blocking Property and Prohibiting Transactions with
Persons Who Commit, Threaten to Commit, or Support Terrorism), or other
governmental action and is not and will not engage in any dealings or transactions
or be otherwise associated with such persons or entities.


 


7.1.7       Sophisticated Buyer.  Buyer is an experienced purchaser, owner and
operator of multi-family housing communities and is familiar with the kinds of
legal, economic and other issues that typically impact one’s ability to own and
operate such communities.


 


21

















 


Seller
covenants that it will bring no action of any kind against any individual,
shareholder, partner or member of Buyer related to, or arising out of, these
representations and warranties.


 


7.2                  Buyer’s Independent Investigation.


 


7.2.1       Investigations.  By its election not to deliver the
Disapproval Notice, Buyer represents and warrants that it has been given a full
opportunity to inspect and investigate each and every aspect of the Property,
either independently or through agents of Buyer’s choosing, including, without
limitation:


 


(a)           All
matters relating to title, together with all governmental and other legal
requirements such as taxes, assessments, zoning, accessibility, rent control,
use permit requirements, and building codes;


 


(b)           The
physical condition and aspects of the Property, including, without limitation,
the interior, the exterior, the square footage within the Improvements, the
structure, the paving, the utilities, and all other physical and functional
aspects of the Property, including, without limitation, any seismic or
retrofitting requirements and an examination for the presence or absence of
Hazardous Materials, which shall be performed or arranged by Buyer at Buyer’s
sole expense;


 


(c)           Any
easements and/or access rights affecting the Property;


 


(d)           The Leases
and all matters in connection therewith;


 


(e)           The
Contracts, the Licenses and Permits, the Commission Agreements and any other
documents or agreements of significance affecting the Property; and


 


(f)            The ability to finance the Purchase Price, if necessary.


 


(g)           All other
matters of material significance affecting the Property or delivered to Buyer
by Seller in accordance with Article 3 of this Agreement.


 


7.2.2       AS-IS SALE. 
EXCEPT FOR THE EXPRESS REPRESENTATIONS AND
WARRANTIES OF SELLER UNDER SECTION 6.1, ABOVE, BUYER ACKNOWLEDGES
AND AGREES THAT NEITHER SELLER, NOR ANYONE ACTING FOR OR ON BEHALF OF SELLER,
HAS MADE ANY REPRESENTATIONS, WARRANTIES, OR PROMISES TO BUYER, OR TO ANYONE
ACTING FOR OR ON BEHALF OF BUYER, CONCERNING ANY ASPECT OF THE PROPERTY
INCLUDING, WITHOUT LIMITATION, (A) THE MANNER OR QUALITY OF THE
CONSTRUCTION OR MATERIALS, IF ANY, INCORPORATED INTO THE PROPERTY; (B) COMPLIANCE
WITH TITLE III OF THE AMERICANS WITH DISABILITIES ACT OF 1990 AND ALL SIMILAR
STATE AND LOCAL ACCESSIBILITY LAWS; (C) COMPLIANCE WITH THE FAIR HOUSING
ACT AND ALL SIMILAR STATE AND LOCAL LAWS; (D) COMPLIANCE WITH ANY “SOFT STORY”
RETROFIT STANDARDS; (E) COMPLIANCE WITH ANY ENVIRONMENTAL PROTECTION,
POLLUTION OR LAND USE LAWS, RULES, 


 


22

















 


REGULATION,
ORDERS OR REQUIREMENTS, INCLUDING, WITHOUT LIMITATION, CALIFORNIA HEALTH &
SAFETY CODE, THE FEDERAL WATER POLLUTION CONTROL ACT, THE FEDERAL RESOURCE
CONSERVATION AND RECOVERY ACT, THE U.S. ENVIRONMENTAL PROTECTION AGENCY
REGULATIONS AT 40 C.F.R., PART 261, THE COMPREHENSIVE ENVIRONMENTAL
RESPONSE, COMPENSATION AND LIABILITY ACT OF 1980, AS AMENDED, THE RESOURCE
CONSERVATION AND RECOVERY ACT OF 1976, THE CLEAN WATER ACT, THE SAFE DRINKING
WATER ACT, THE HAZARDOUS MATERIALS TRANSPORTATION ACT, THE TOXIC SUBSTANCE
CONTROL ACT, AND REGULATIONS PROMULGATED UNDER ANY OF THE FOREGOING; (F) THE
PRESENCE OR ABSENCE OF HAZARDOUS MATERIALS OR MOLD AT, ON, UNDER, OR ADJACENT
TO THE PROPERTY; (G) THE CONTENT, COMPLETENESS OR ACCURACY OF THE DUE
DILIGENCE ITEMS, TITLE COMMITMENT, SURVEY OR UPDATED SURVEY; (H) THE SIZE
AND/OR DIMENSIONS OF ANY OF THE IMPROVEMENTS, AND (I) THE CONFORMITY OF
THE IMPROVEMENTS TO ANY PLANS OR SPECIFICATIONS FOR THE PROPERTY, INCLUDING ANY
PLANS AND SPECIFICATIONS THAT MAY HAVE BEEN OR MAY BE PROVIDED TO
BUYER.  BUYER FURTHER ACKNOWLEDGES AND
AGREES THAT THE PROPERTY WILL BE INDEPENDENTLY INVESTIGATED BY BUYER TO ITS
FULL SATISFACTION PRIOR TO EXPIRATION OF THE DUE DILIGENCE PERIOD, OR THAT
BUYER WILL TERMINATE THIS AGREEMENT AS PROVIDED ABOVE, THAT BUYER WILL BE
ACQUIRING THE PROPERTY BASED SOLELY UPON AND IN RELIANCE ON ITS OWN
INSPECTIONS, EVALUATIONS, ANALYSES AND CONCLUSIONS, AND THAT SUBJECT TO
SELLER’S EXPRESS OBLIGATIONS HEREUNDER, BUYER WILL BE ACQUIRING THE PROPERTY IN
ITS “AS-IS” CONDITION AND STATE OF REPAIR INCLUSIVE OF ALL FAULTS AND DEFECTS,
WHETHER KNOWN OR UNKNOWN, AS MAY EXIST AS OF THE CLOSING, AND BUYER
EXPRESSLY ASSUMES THE RISK THAT ADVERSE PHYSICAL, ENVIRONMENTAL, FINANCIAL,
LEGAL AND OTHER CONDITIONS MAY NOT BE REVEALED BY BUYER’S INSPECTION OF
THE PROPERTY.


 


BY INITIALING BELOW, THE
BUYER ACKNOWLEDGES THAT IT HAS READ AND UNDERSTANDS THE MEANING AND
SIGNIFICANCE OF THIS SECTION 7.2.2 AND AGREES TO THE TERMS SET
FORTH HEREIN.


 


Buyer:


 


7.3                  Buyer’s Release of Seller; Indemnity.


 


7.3.1       Seller Released From Liability.  Seller is hereby released from all
responsibility and liability to Buyer regarding the condition (including,
without limitation, its physical condition and its compliance with applicable
laws, and the presence in the soil, air, structures and surface and subsurface
waters, of Hazardous Materials or substances that have been or may in the
future be determined to be toxic, hazardous, undesirable or subject to
regulation and that may need to be specially treated, handled and/or removed
from the Property under current or future federal, state and local laws,
regulations or guidelines), valuation, 


 


23

















 


salability
or utility of the Property, or its suitability for any purpose whatsoever
except to the extent that such responsibility or liability is the result of the
material inaccuracy (if any) of Seller’s representations under Section 6.1
hereof.


 


7.3.2       Buyer’s Waiver of Objections.  Buyer acknowledges that its
failure to deliver the Disapproval Notice shall constitute Buyer’s
representation and warranty to Seller that, prior to the expiration of the Due
Diligence Period, it will have inspected the Property, observed its physical
characteristics and existing conditions and had, or will have, the opportunity
to conduct such investigation and study on and of said Property and adjacent
areas as it deemed necessary, and subject to Seller’s responsibility for any
breach of the warranties and representations contained in Section 6.1
of this Agreement, hereby waives any and all objections to, claims, causes of action
or complaints (including but not limited to actions based on federal, state or
common law and any private right of action under CERCLA, RCRA or any other
state and federal law to which the Property is or may be subject) regarding
physical characteristics and existing conditions, including without limitation
structural and geologic conditions, subsurface soil and water conditions and
solid and hazardous waste and Hazardous Materials on, under, adjacent to or
otherwise affecting the Property.  Buyer
further hereby assumes the risk of changes in applicable laws and regulations
including, without limitation, those relating to past, present and future
environmental conditions on the Property, and subject to Seller’s specific
representations and warranties contained in Section 6.1 of this
Agreement, the risk that adverse physical characteristics and conditions,
including without limitation the presence of Hazardous Materials or other
contaminants, may not be revealed by its investigation.


 


7.3.3       Civil Code Section 1542 Waiver.  In connection with the releases
and waivers set forth in this Section 7.3, Buyer, on behalf of
itself, its successors, assigns and successors-in-interest and such other
persons and entities, waives the benefit of California Civil Code Section 1542,
which provides as follows:


 


“A general release does not extend to claims which the
creditor does not know or suspect to exist in his or her favor at the time of
executing the release, which if known by him or her must have materially
affected his or her settlement with the debtor.”


 


	
  Buyer’s Initials:

  	
  /s/ RTP

  



 


7.3.4       Indemnity.  Subject to Section 6.1 hereof,
Buyer and its successors and assigns (the “Indemnitor”)
agree to indemnify, protect, defend and hold Seller, Seller’s Affiliates and
each of their respective members, partners, shareholders, officers, directors,
managers, employees and agents harmless from any and all Losses, including
without limitation suits and claims brought by third parties related to, or in
any way connected to the condition of the Property arising from events
occurring subsequent to Closing, including, without limitation, (a) the
presence of Hazardous Materials thereon, (b) the matters released by Buyer
above, (c) Buyer’s use, ownership, development, and sale of the Property,
and (d) any claims or demands asserted or alleged by any purchasers or
tenants from Buyer of any portion of the Property or any successors or assigns
of any such persons.  In addition,
Indemnitor agrees to indemnify, protect, defend and hold Seller, Seller’s
Affiliates and each of their respective members, partners, shareholders,
officers, directors, managers, employees and agents harmless 


 


24

















 


from any
and all Losses, including suits and claims brought by third parties, related
to, arising from or in any way connected to any inaccuracy in or breach of any
representations or warranties of Buyer under this Agreement, or any breach or
default by Buyer under the provisions of this Agreement that state that they
are to survive the Closing or the earlier termination of this Agreement.  Indemnitor’s obligations under this Section shall
survive the Closing and the delivery of the Deed.


 


7.3.5       Survival.  The foregoing waivers, releases and
indemnities by Buyer shall survive either (a) the Closing and the
recordation of the Deed, and shall not be deemed merged into the Deed upon its
recordation, or (b) any termination of this Agreement.


 


ARTICLE 8


 


LEASES;
MAINTENANCE OF PROPERTY


 


From the date hereof until the Closing,
and except as otherwise consented to or approved by Buyer, Seller covenants and
agrees with Buyer as follows:


 


8.1                  New Leases; Lease Modifications.  After the Effective Date and prior
to the end of the Due Diligence Period, Seller, in its sole discretion, and
without Buyer’s consent shall have the right to enter into any New Lease or
amend, modify and/or extend any New Lease or any Pre-Effective Date Lease it
deems advisable.  Seller shall provide
Buyer with notice thereof and an executed copy of any such New Lease or
amendment, modification or extension promptly after the execution and delivery
thereof, but in no event later than the next to last day of the Due Diligence
Period.  Buyer’s sole remedy in the event
any New Lease is executed or if any New Lease or Pre-Effective Date Lease is
amended, modified or extended by Seller after the Effective Date and prior to
the end of the Due Diligence Period shall be to terminate this Agreement on or
before the end of the Due Diligence Period in accordance with Section 3.8.  No later than three (3) days after the
Effective Date, Seller shall provide Buyer with its then-current rent and
concession schedule (the “Lease Guidelines”).  The Lease Guidelines shall be in the form of Exhibit I attached hereto and
incorporated herein.  Provided that Buyer
does not elect to terminate this Agreement on or before the expiration of the
Due Diligence Period, after the end of the Due Diligence Period Seller shall
not enter into a New Lease unless such New Lease is on Seller’s standard
residential lease form and in compliance with the Lease Guidelines unless
Seller has obtained Buyer consent in accordance with Section 8.4 below;
modify or amend any Pre-Effective Date Lease or any New Lease entered into
prior to the end of the Due Diligence Period except pursuant to the exercise by
a Tenant of a renewal, extension or other right contained in such Tenant’s
Lease; consent to any assignment or sublease in connection with any
Pre-Effective Date Lease or New Lease; or remove a Tenant under any
Pre-Effective Date Lease or New Lease, whether by summary proceedings or
otherwise, except by reason of a default of the Tenant under the subject
Pre-Effective Lease or New Lease.


 


8.2                  Lease Expenses.  At Closing, Buyer shall reimburse Seller for
any and all Reimbursable Lease Expenses to the extent that the same have been
paid by Seller prior to Closing.  In
addition, at Closing, Buyer shall assume Seller’s obligations to pay, when due
(whether on a stated due date or by acceleration) any Reimbursable Lease
Expenses unpaid as of the Closing, and Buyer hereby agrees to indemnify, defend
and hold Seller harmless from and 


 


25

















 


against
any and all claims for such Reimbursable Lease Expenses which remain unpaid for
any reason at the time of Closing, which obligations of Buyer shall survive the
Closing and shall not be merged therein. 
Each party shall make available to the other all Commission Agreements,
records, bills, vouchers and other data in such party’s control verifying
Reimbursable Lease Expenses and the payment thereof.


 


8.3                  Lease Enforcement.  Subject to the provisions of Section 8.1
above, prior to the Closing Date, Seller shall have the right, but not the
obligation, to enforce the rights and remedies of the landlord under any
Pre-Effective Date Lease or New Lease, by summary proceedings or otherwise
(including, without limitation, the right to remove any Tenant), and to apply
all or any portion of any Tenant Deposits then held by Seller toward any loss
or damage incurred by Seller by reason of any defaults by Tenants, and the
exercise of any such rights or remedies shall not affect the obligations of
Buyer under this Agreement in any manner or entitle Buyer to a reduction in, or
credit or allowance against, the Purchase Price or give rise to any other claim
on the part of Buyer.


 


8.4                  Certain Interim Operating Covenants.  Seller covenants to Buyer
that  Seller will operate the Property,
from the Effective Date until Closing or earlier termination of this Agreement
as follows:  (i) continue to
operate, manage and maintain the Property in a good and workmanlike manner in
the ordinary course of Seller’s business and substantially in accordance with
Seller’s present practice, and will keep the Improvements and Personal Property
in good order and operating condition, subject to ordinary wear and tear and
further subject to Section 10.2 and cause all necessary repairs,
renewals and replacements to be promptly made 
which are required by the terms of the Leases; (ii) maintain
property insurance on the Property which is at least equivalent in all material
respects to the insurance policies covering the Property as of the Effective
Date; (iii) not enter into any new contract for the provision of goods or
services to or with respect to the Property other than in the ordinary course
of business or that is to terminate upon the Closing, or renew, extend, modify
or replace any of the Contracts unless such contract is an Approved Contract,
is a contract terminable as of the Closing Date or Buyer consents thereto in
writing, which approval shall not be unreasonably withheld, delayed or
conditioned; (iv) advise Buyer promptly of any change in any
applicable laws, regulations, restrictions, rulings, or orders that might have
a material adverse change on the value or use of the Property by Buyer of which
Seller obtains written notice after the Effective Date and also advise Buyer
promptly of any litigation, arbitration or administrative hearing concerning or
affecting the Property which would have a material adverse effect on the value
or use of the Property of which Seller obtains written notice after the
Effective Date; (v) subject to the
prorations prescribed herein, cause to be paid all trade accounts, costs and
expenses of operation and maintenance of the Property incurred and accruing or
due prior to Closing; (vi) not
knowingly take any action, which action would have the effect of materially
violating any of the representations and warranties of Seller set forth in Section 6.1
of the Agreement unless such action is required by any applicable Laws; (vii) without the prior written consent
of Buyer, not remove any equipment forming a part of the Property except such
as is replaced by Seller by an article of substantially equal suitability and
value, free and clear of any lien or security interest; (viii) if any apartment
unit is vacated more than five business (5) days prior to Closing, then
prior to Closing return such unit to rentable condition in accordance with Seller’s
customary cleaning, painting, and repair standards for vacant units (the
condition of such an apartment unit after cleaning is referred to herein as a “Rent Ready Condition”); provided if Seller fails to 


 


26

















 


return
any such vacated unit to a Rent Ready Condition prior to Closing, or a unit is
vacated within five (5) business days of Closing and Seller fails to
return such unit to Rent Ready Condition by Closing, then at Closing Seller
shall credit Buyer an amount equal to the reasonably estimated cost to return
each such unit to a Rent Ready Condition, up to, but not to exceed, $1,000; and (ix) Seller shall maintain its website and related material
through the Closing except that as soon after Closing as reasonably possible,
Seller shall remove all references to the Seller as Owner and its property
management company, as well as any internet lease concessions.  In addition, Seller shall terminate any
leasing and/or management agreement with the Property Manager or any affiliate
of Seller with respect to the Property effective as of the Closing Date and pay
any and all costs and expenses of termination thereof.


 


8.5                  Actions
Prohibited.  Provided
that Buyer elects not to terminate this Agreement on or before the expiration
of the Due Diligence Period, then from and after the expiration of the Due
Diligence Period Seller shall not, without the prior written approval of Buyer:


 


8.5.1       make any
material structural alterations or additions to the Property except as (a) in
the ordinary course of operating the Property, (b) required for
maintenance and repair which are required by the terms of the Leases, (c) required
by any of the Leases or the Contracts or (d) required by this Agreement;


 


8.5.2       sell, transfer
adversely encumber or adversely change the status of title of all or any
portion of the Property;


 


8.5.3       change or
attempt to change, directly or indirectly, the current zoning of the Land in a
manner materially adverse to it; or


 


8.5.4       cancel, amend
or modify, in a manner materially adverse to the Property, any License or
Permit held by Seller with respect to the Property or any part thereof which
would be binding upon Buyer after the Closing.


 


ARTICLE 9


 


CLOSING AND
CONDITIONS


 


9.1                  Escrow Instructions.  Upon execution of this Agreement, the parties
hereto shall deposit two executed counterparts of this Agreement with the
Escrow Agent, and this Agreement shall serve as escrow instructions to the
Escrow Agent as the escrow holder for consummation of the purchase and sale
contemplated hereby.  Seller and Buyer
agree to execute such reasonable additional and supplementary escrow
instructions as may be appropriate to enable the Escrow Agent to comply with
the terms of this Agreement; provided, however, that in the event of any
conflict between the provisions of this Agreement and any supplementary escrow
instructions, the terms of this Agreement shall control.


 


9.2                  Seller’s Conditions to Closing.  The Closing and Seller’s
obligations with respect to the transaction contemplated by this Agreement are
subject to the timely satisfaction or written waiver by the respective dates
designated below of the following conditions precedent for Seller’s benefit
(the “Seller Conditions Precedent”).


 


27

















 


9.2.1       Buyer’s Deliveries.  On or before the Closing Date, Buyer shall
have delivered to Escrow Holder all of the funds and documents as provided in Section 9.6
hereof.


 


9.2.2       Representations and Warranties.  All representations and warranties
of Buyer contained in this Agreement shall be true and correct in all material
respects as of the date made and as of the Closing Date with the same effect as
if those representations and warranties were made at and as of the Closing
Date.


 


9.2.3       Performance.  As of the Closing Date, Buyer shall not be in
material default in the performance of any material covenant or agreement to be
performed by Buyer under this Agreement.


 


Neither Buyer nor Seller shall
willfully or in bad faith act or fail to act for the purpose of permitting any
of Seller’s Conditions Precedent to fail. 
If any of the foregoing Seller Conditions Precedent are not satisfied
for any reason other than a default by Seller hereunder or failure of a Buyer’s
Condition Precedent under Section 9.3 below, this Agreement shall
terminate, the Seller shall be entitled to the Deposit under Section 5.2
hereof and neither party shall have any further rights or obligations under
this Agreement except for those which this Agreement expressly provides shall
survive any termination.  Seller shall
have the right to waive any of the Seller Conditions Precedent, and the
election by Seller to proceed with the Closing shall be deemed Seller’s waiver
of any unsatisfied Seller Conditions Precedent to the extent any such Seller
Condition(s) Precedent has(have) not been previously satisfied or waived.


 


9.3                  Buyer’s Conditions to Closing.  The Closing and Buyer’s obligation
to consummate the transaction contemplated by this Agreement are subject to the
timely satisfaction or written waiver by the respective dates designated below
of the following conditions precedent for Buyer’s benefit (the “Buyer Conditions Precedent”):


 


9.3.1       Seller’s Deliveries.  On or before the Closing Date, Seller shall
have delivered to Escrow Agent the documents described in Section 9.5.1
below.


 


9.3.2       Representations and Warranties.  All representations and warranties
of Seller contained in Article 6 of this Agreement shall be true and
correct in all material respects as of the date made and, subject to the
provisions of this Agreement, shall remain true and correct in all material
respects as of the Closing Date and remade as of the Closing Date.


 


9.3.3       Performance.  As of the Closing Date, Seller shall not be
in material default in the performance of any material covenant or agreement to
be performed by Seller under this Agreement beyond all applicable notice and
cure periods.


 


9.3.4       Title Policy.  As of the Closing Date, the Title Company
shall have issued or irrevocably committed to issue the Title Policy to Buyer
as provided in Section 4.5 above.


 


Neither Buyer nor Seller shall
willfully or in bad faith act or fail to act for the purpose of permitting any
of the Buyer Conditions Precedent to fail. 
If any of the Buyer Conditions 


 


28

















 


Precedent set forth in this
Agreement are not timely satisfied for any reason other than a default by Buyer
hereunder or failure of a Seller Condition Precedent under Section 9.2
above, this Agreement shall terminate, the Deposit shall be returned to Buyer
under Section 5.1 hereof and neither party shall have any further rights
or obligations under this Agreement with respect to the Property except for
those which this Agreement expressly provides shall survive any
termination.  Notwithstanding the
foregoing, Buyer shall have the right to waive, in its sole and absolute
discretion, any of the Buyer Conditions Precedent, and the election by Buyer to
proceed with the Closing with the actual knowledge that a Buyer Condition
Precedent has not been satisfied, shall be deemed Buyer’s waiver of such Buyer
Condition Precedent to the extent any such Buyer Condition Precedent has not
been previously satisfied or waived.


 


9.4                  Closing.


 


9.4.1       The closing hereunder (“Closing”)
shall be held and delivery of all items to be made at the Closing under the
terms of this Agreement shall be made through escrow at Escrow Agent’s office
on or before December 23, 2009 (the “Closing
Date”).


 


9.4.2       No later than the time required by Escrow Agent in order to disburse the
sales proceeds to Seller on the Closing Date without the requirement for any
so-called “gap” or other form of indemnity from Seller, Buyer shall deposit in
escrow with the Escrow Agent the Purchase Price (subject to adjustments
described in Section 9.7), together with all other costs and
amounts to be paid by Buyer at the Closing pursuant to the terms of this
Agreement, by Federal Reserve wire transfer of immediately available funds to
an account to be designated by the Escrow Agent.  On the Closing Date,  Buyer will cause the Escrow Agent to (i) pay
to Seller by Federal Reserve wire transfer of immediately available funds to an
account designated by Seller, the Purchase Price (subject to adjustments
described in Section 9.7 or otherwise hereunder), less any costs or
other amounts to be paid by Seller at Closing pursuant to the terms of this
Agreement, and (ii) pay all appropriate payees the other costs and amounts
to be paid by Buyer at Closing pursuant to the terms of this Agreement and  Seller will direct the Escrow Agent to pay to
the appropriate payees out of the proceeds of Closing payable to Seller, all
costs and amounts to be paid by Seller at Closing pursuant to the terms of this
Agreement as set forth on the Closing Statement.


 


9.5                  Seller’s Closing Documents and Other Items.


 


9.5.1       Not later than 3:00  p.m. Pacific Time, on the business day prior to
the Closing Date, Seller shall deposit into escrow the following items:


 


(a)           A duly
executed and acknowledged Grant Deed in the form attached hereto as Exhibit C (the “Deed”);


 


(b)           Two duly
executed counterparts of a Bill of Sale in the form attached hereto as Exhibit D (the “Bill of Sale”);


 


(c)           Two (2) duly
executed counterparts of an Assignment and Assumption of Leases in the form
attached hereto as Exhibit E
(the “Assignment and Assumption of Leases”);


 


29
















 


(d)           Two (2) duly
executed counterparts of an Assignment and Assumption of Contracts, Warranties
and Guaranties, Licenses and Permits and Other Intangible Property in the form
attached hereto as Exhibit F
(the “Assignment and Assumption of Contracts”);


 


(e)           An
affidavit pursuant to Section l445(b)(2) of the Code, and on which
Buyer is entitled to rely, stating that Seller is not a “foreign person” within
the meaning of Section l445(f)(3) of the Code and a California 597-W
Certificate;


 


(f)            A generic notice addressed to the Tenants and signed by Seller in the form
attached hereto as Exhibit G
(the “Tenant Notice”) that shall disclose
that the Property has been sold to Buyer and that, after the Closing, all rents
should be paid to Buyer;


 


(g)           If
applicable, duly completed and signed real estate transfer tax declarations;


 


(h)           Such other
documents as may be reasonably required by the Title Company or as may be
agreed upon by Seller and Buyer to consummate the purchase of the Property as
contemplated by this Agreement; and


 


(i)            Two (2) duly executed counterparts of the Closing Statement.


 


9.5.2       Seller’s Post Closing Deliveries.  As soon after the Closing as is reasonably
possible, Seller shall deliver to the offices of Buyer’s property manager: all
originals of the Leases and Approved Contacts (or copies if no originals are
available) and receipts for Tenant Deposits; all keys, if any, used in the
operation of the Property; and, if in Seller’s possession, a copy of any
“as-built” plans and specifications of the Improvements.  Seller shall remove from the Property prior
to the Closing all Computer Equipment, all active delinquency files (excluding
only those for current residents), all incident reports and all employment
files.


 


9.6                  Buyer’s Closing Documents and Other Items.  At or before Closing, Buyer shall
deposit into escrow the following items:


 


9.6.1       The balance of the Purchase Price and such additional funds as are
necessary to close this transaction;


 


9.6.2       Two (2) duly executed counterparts of the Bill of Sale;


 


9.6.3       Two (2) duly executed counterparts of the Assignment and Assumption of
Leases;


 


9.6.4       Two (2) duly executed counterparts of the Assignment and Assumption of
Contract;


 


9.6.5       Documentation to establish to Seller’s and Escrow Holder’s reasonable satisfaction
the due authority of Buyer’s acquisition of the Property and Buyer’s delivery
of the documents required to be delivered by Buyer pursuant to this Agreement 


 


30

















 


including,
but not limited to, the organizational documents of Buyer, as they may have
been amended from time to time, resolutions of Buyer and incumbency
certificates of Buyer;


 


9.6.6       If applicable, duly completed and signed real estate transfer tax
declarations;


 


9.6.7       Such other documents as may be reasonably required by the Title Company or
as may be agreed upon by Seller and Buyer to consummate the purchase of the
Property as contemplated by this Agreement; and


 


9.6.8       Two (2) duly executed counterparts of the Closing Statement.


 


9.7                  Prorations and Closing Costs.


 


9.7.1       Prorations.


 


(a)           Seller and
Buyer agree to adjust, as of 11:59 p.m. on the day immediately preceding
the Closing Date (the “Proration Time”)
on the then applicable six (6) month real property tax billing period, the
following (collectively, the “Proration Items”):  real estate and personal property taxes and
assessments (subject to the terms of Section 9.7.1(b) below),
utility bills (except as hereinafter provided), and collected Rents (subject to
the terms of Section 9.7.1(b) below) payable by the owner of
the Property.  Seller will be charged and
credited for the amounts of all of the Proration Items relating to the period
up to and including the Proration Time, and Buyer will be charged and credited
for all of the Proration Items relating to the period after the Proration Time.
Such preliminary estimated Closing prorations shall be set forth on a
preliminary closing statement to be prepared by Seller and submitted to Buyer
for Buyer’s approval prior to the Closing Date (the “Closing Statement”). Seller agrees that twenty-four (24) hours
prior to the Closing, Seller will discontinue data entry operations in the
on-site computer system, including making deposits of rental income and will
forward final reports as soon as practicable to Buyer’s representative so as to
enable Buyer and Seller to work together to transition the management of the
Property and complete work on prorations as set forth herein.   The Closing Statement, once agreed upon,
shall be signed by Buyer and Seller and delivered to the Escrow Agent for
purposes of making the preliminary proration adjustment at Closing subject to
the final cash settlement provided for below. 
The preliminary proration shall be paid at Closing by Buyer to Seller
(if the preliminary prorations result in a net credit to Seller) or by Seller
to Buyer (if the preliminary prorations result in a net credit to Buyer) by
increasing or reducing the cash to be delivered by Buyer in payment of the
Purchase Price at the Closing.  If the
actual amounts of the Proration Items are not known as of the Proration Time,
the prorations will be made at Closing on the basis of the best evidence then
available; thereafter, when actual figures are received (not to exceed 120 days
after closing), re-prorations will be made on the basis of the actual figures,
and a final cash settlement will be made between Seller and Buyer.  No prorations will be made in relation to
insurance premiums, and Seller’s insurance policies will not be assigned to
Buyer.  The provisions of this Section 9.7.1(a) will
survive the Closing for a period of twelve (12) months.


 


31

















 


(b)           Buyer will
receive a credit on the Closing Statement for the prorated amount (as of the
Proration Time) of all Rent previously paid to or collected by Seller and
attributable to any period following the Proration Time.  Rents are “Delinquent”
when they were due prior to the Closing Date, and payment thereof has not been
made on or before the Closing Date.  Delinquent
Rents will not be prorated.  All sums
collected by Buyer from and after Closing from each Tenant will be applied
first to current amounts owed by such Tenant and then to Delinquent Rent owed
by such Tenant to the extent not previously collected by Seller.  Buyer shall deliver to Seller all Delinquent
Rent collected hereunder on a monthly basis within five (5) days of the
end of each calendar month. Buyer shall not have an exclusive right to collect
any sums due Seller from Tenant under the Leases and Seller hereby retains the
right to collect any sums due Seller from Tenants under the Leases for any sums
due Seller for period attributable to Seller’s ownership of the Property;
provided, however, Seller shall not be permitted to commence or pursue any
legal proceedings including eviction against any current Tenant.  The provisions of this Section 9.7.1(b) will
survive the Closing.


 


(c)           All ad
valorem real estate and personal property taxes with respect to the Property
shall be prorated as of the Proration Time on a cash basis for the calendar
year in which the Closing occurs, regardless of the year for which such taxes
are assessed.


 


(d)           Water,
gas, steam, electricity and other public utility charges will be paid by the
Seller to the utility company to the Closing Date.  The Seller shall arrange for a final reading
of all utility meters (covering gas, water, steam and electricity) as of the
Closing.  To the extent required by the
applicable utility company to maintain continuity of service to the Property,
Seller and Buyer shall jointly execute a letter to each of such utility
companies advising such utility companies of the termination of the Seller’s
responsibility for such charges for utilities furnished to the Property as of
the date of the Closing and commencement of the Buyer’s responsibilities
therefor from and after such date.  If a
bill is obtained from any such utility company as of the Closing, then Seller
shall pay such bill on or before the Closing. 
If such bill shall not have been obtained on or before the Closing, then
Seller shall, upon receipt of such bill, pay all such utility charges as
evidenced by such bill or bills pertaining to the period prior to the Closing,
and the Buyer shall pay all such utility charges pertaining to the period
thereafter.  Any bill which shall be
rendered which shall cover a period both before and after the date of Closing
shall be apportioned between the Buyer and the Seller as of the Closing.  Seller will be entitled to all deposits
presently in effect with the utility providers, and Buyer will be obligated to
make its own arrangements for deposits with the utility providers.


 


(e)           Revenues
(but not up-front payments), if any, arising out of telephone booths, vending
machines, washing machines or other income-producing agreements shall be
adjusted and prorated on an if, as and when collected basis.


 


(f)            Buyer shall receive a credit against the Purchase Price at Closing for all
Tenant Deposits then outstanding under the Leases and for all Rent paid in
advance (to the extent not prorated as set forth in (b) above).  As of the Closing, Buyer shall assume
Seller’s obligations related to the Tenant Deposits.  Buyer shall indemnify, defend, and hold
Seller harmless from and against all demands and claims made by Tenants arising
out of the 


 


32

















 


transfer
or disposition of such Tenant Deposits transferred to Buyer.  The provisions of this Section 9.7.1(f) shall
expressly survive the Closing.


 


(g)           Buyer
shall receive a credit against the Purchase Price at Closing for all payments
due or owing under any Approved Contracts for periods prior to the Closing
Date, which amounts shall be prorated as of the Proration Time.  If Seller has paid any amounts under any
Approved Contracts for periods after the Proration Time, Buyer shall pay such
amounts to Seller at Closing in addition to the Purchase Price.


 


(h)           Seller
shall receive a credit for any and all Reimbursable Lease Expenses as set forth
in Section 8.2 of this Agreement, to the extent that the same have
been paid by Seller prior to Closing. 
Each party shall make available to the other all Commission Agreements,
records, bills, vouchers and other data in such party’s control verifying Reimbursable
Lease Expenses and the payment thereof.


 


9.7.2       Closing Costs.  Seller shall pay (a) the county and city
transfer taxes, (b) the CLTA portion of the premium associated with the
issuance of the Title Policy, (c) one-half of Escrow Agent’s costs and
fees, and (d) costs and charges customarily charged to sellers in
accordance with common escrow practices in the county in which the Property is
located, other than those costs and charges specifically required to be paid by
Buyer hereunder.  Buyer shall pay (a) the
premium associated with any extended coverage, any coverage in excess of the
Purchase Price and all endorsements Buyer may require in accordance with Section 4.4,
(b) one-half of Escrow Agent’s costs and fees, (c) the recording fees
required in connection with the transfer of the Property to Buyer, and (d) any
additional costs and charges customarily charged to buyers in accordance with
common escrow practices in the county in which the Property is located, other
than those costs and charges specifically required to be paid by Seller hereunder.


 


9.8                  Broker.  Buyer hereby represents and warrants to
Seller that Buyer has not employed any broker with respect to the this
transaction and Seller hereby represents and warrants to Buyer that Seller has
not employed any broker with respect to this transaction.  If any person brings a claim for a commission
or finder’s fee based upon any contact, dealings, or communication with Buyer
in connection with the transactions contemplated by this Agreement, then Buyer
shall defend Seller from such claim, and shall indemnify Seller and hold Seller
harmless from any and all costs, damages, claims, liabilities, or expenses
(including, without limitation, reasonable attorneys’ fees and disbursements)
incurred by Seller with respect to the claim. If any person brings a claim for
a commission or finder’s fee against Buyer based upon any contact, dealings, or
communication with Seller in connection with the transactions contemplated by
this Agreement, then Seller shall defend Buyer from such claim, and shall indemnify
Buyer and hold Buyer harmless from any and all costs, damages, claims,
liabilities, or expenses (including, without limitation, reasonable attorneys’
fees and disbursements) incurred by Buyer with respect to the claim.  The provisions of this Section 9.8
shall survive the Closing or, if the purchase and sale is not consummated, any
termination of this Agreement.


 


33

















 


ARTICLE 10



MISCELLANEOUS


 


10.1                Amendment and Modification.  This Agreement may be amended, modified, or
supplemented only by a written agreement signed by Buyer and Seller.


 


10.2                Risk of Loss and Insurance Proceeds.


 


10.2.1     Minor Loss.  Buyer shall be bound to purchase the Property
for the full Purchase Price as required by the terms hereof, without regard to
the occurrence or effect of any damage to the Property or destruction of any
improvements thereon or condemnation of any portion of the Property, provided
that: (a) the cost to repair any such damage or destruction, or the
diminution in the value of the remaining Property as a result of a partial
condemnation, equals $500,000 or less, and (b) upon the Closing, there
shall be a credit against the Purchase Price due hereunder equal to the amount
of any insurance proceeds (other than business interruption or rental loss
insurance applicable to the period prior to Closing) or condemnation awards
collected by Seller as a result of any such damage or destruction or
condemnation, plus the amount of any insurance deductible, less any sums expended
by Seller directly toward the restoration or repair of the Property.  If the proceeds or awards have not been
collected as of the Closing, then such proceeds (including business
interruption or rental loss insurance of Seller which would be applicable to any
period subsequent to Closing) or awards shall be assigned to Buyer, except to
the extent needed to reimburse Seller for sums expended prior to the Closing to
repair or restore the Property, without a reduction of the Purchase Price.


 


10.2.2     Major Loss.  If the amount of the damage or destruction or
condemnation as specified above exceeds $500,000, then Buyer may at its option,
to be exercised by written notice to Seller within ten (10) business days
of Seller’s notice of the occurrence of the damage or destruction or the
commencement of condemnation proceedings, terminate this Agreement.  Buyer’s failure to elect to terminate this
Agreement within said ten (10) business day period shall be deemed an
election by Buyer to consummate this purchase and sale transaction.  If Buyer elects to terminate this Agreement
within such ten (10) business day period, then the Deposit shall be
returned to Buyer and neither party shall have any further rights or
obligations hereunder except as expressly provided elsewhere in this
Agreement.  If Buyer elects or is deemed
to have elected to proceed with the purchase, then upon the Closing, there
shall be a credit against the Purchase Price due hereunder equal to the amount
of any insurance proceeds (other than business interruption or rental loss
insurance applicable to the period prior to Closing) or condemnation awards
collected by Seller as a result of any such damage or destruction or
condemnation, plus the amount of any insurance deductible, less any sums
expended by Seller directly toward the restoration or repair of the
Property.  If the proceeds or awards have
not been collected as of the Closing, then such proceeds (including business
interruption or rental loss insurance of Seller which would be applicable to
any period subsequent to Closing) or awards shall be assigned to Buyer, except
to the extent needed to reimburse Seller for sums expended prior to the Closing
to repair or restore the Property, without a reduction to the Purchase Price.


 


34

















 


10.2.3     Insurance Proceeds Assignment.  With respect to the
requirement of Seller under Sections 10.2.1 and 10.2.2 above, to
assign to Buyer the right to receive insurance awards and payments to be due
Seller, Seller agrees that in the event that Seller’s insurance carrier(s) do
not permit assignment thereof to Buyer, Seller agrees to request and obtain
from the insurance carrier(s) a “policy endorsement” whereby Buyer shall
be added as a “loss payee” under the Seller’s policies effective as of the
Closing Date.  Thereafter, Seller shall
use its good faith efforts to promptly pursue on behalf of Buyer and for
Buyer’s benefit such unpaid awards and payments including any payments under
business interruption or rental loss insurance applicable to any period
subsequent to Closing.


 


10.3                Notices.  All notices required or permitted hereunder
shall be in writing and shall be served on the parties at the following
address:


 


	
  If to Seller:

  	
   

  	
  Calypso Lofts, LLC  
 c/o Shea Properties

  130 Vantis, Ste. 200

  Aliso Viejo, CA 92656

  Attn: Kirk Roloff

  Facsimile: (949) 389-7434
 E-mail: kirk.roloff@sheaproperties.com

  
	
   

  	
   

  	
   

  
	
  With copies to:

  	
   

  	
  Calypso Lofts, LLC

  c/o Shea Properties

  130 Vantis, Ste. 200

  Aliso Viejo, CA 92656

  Attn: Julia Guizan, Esq.

  Facsimile: (949) 389-7466

  E-mail: julie.guizan@jfshea.com

  
	
   

  	
   

  	
   

  
	
  and to:

  	
   

  	
  Miller Starr Regalia
 1331 N. California Blvd., Fifth Flr.

  Walnut Creek, CA 94596
 Attn: Hans Lapping, Esq.

  Facsimile: (925) 933-4126

  E-mail: hl@msrlegal.com

  
	
   

  	
   

  	
   

  
	
  If to Buyer:

  	
   

  	
  Behringer Harvard Multifamily OP I LP

  15601 Dallas Parkway, #600

  Addison, Texas 75001

  Attn: Mark T. Alfieri, Senior Vice President

  Facsimile: (214) 655-1610

  E-mail: malfieri@behringerharvard.com

  
	
   

  	
   

  	
   

  
	
  with Copies to:

  	
   

  	
  Robert L. Abbott PC

  2828 Routh Street, Suite 500

  Dallas, Texas 75201

  Attn: Robert L. Abbott, Esq.

  



 


35

















 


	
   

  	
   

  	
  Facsimile: (214) 849-9823

  E-mail: abbott@rabbottpc.com

  
	
   

  	
   

  	
   

  
	
  If to Escrow Agent:

  	
   

  	
  Partners Title Company
 712 Main Street, Suite 2000E
 Houston, Texas 77002-3218

  Attn: Reno Hartfiel, Executive VP/

            General
  Counsel

  Facsimile: (713) 238-9199

  E-mail: rhartfiel@partnerstitle.com

  



 


Any such notices may be
sent by (a) certified mail, return receipt requested, in which case notice
shall be deemed delivered five (5) business days after deposit, postage
prepaid in the U.S. mail, (b) a nationally recognized overnight courier,
in which case notice shall be deemed delivered one (1) business day after
deposit for next business day delivery with such courier, (c) facsimile transmission,
in which case notice shall be deemed delivered upon electronic verification
that transmission to recipient was completed, (d) electronic mail
transmission, in which case notice shall be deemed delivered upon transmission
so long as the sender does not receive a notification of a delivery error and,
provided, further, that a copy of such transmission is concurrently sent to the
recipients by another of the methods for notice set forth above.  The above addresses, facsimile numbers and
e-mail addresses may be changed by written notice to the other party; provided
that no notice of a change of address or facsimile number shall be effective
until actual receipt of such notice.


 


10.4                Assignment.  Buyer shall not have the right to assign this
Agreement, without the prior written consent of Seller which consent Seller may
withhold in its sole and absolute discretion. 
Notwithstanding the foregoing or any other provision hereof, Buyer may
assign, upon written notice to Seller (a) its interests herein to an
affiliate of Buyer or direct or indirect subsidiary of Buyer, or (b) any
entity in which Buyer, or the principals thereof, have control as defined
herein, or (c) its rights (but not obligations) herein to any party which
is not an Affiliate for the purposes of effectuating an exchange of properties
under Section 1031 of the Code, provided that any such assignment does not
relieve Buyer of its obligations hereunder. 
For purposes of this Section 10.4, an “affiliate of Buyer”
means (i) any entity that controls, is controlled by, or is under common
control, with the entity in question, or (ii) any investment program or
any of its affiliates or direct or indirect subsidiaries, sponsored by
Behringer Harvard Holdings, LLC.  The term “control” means the possession,
directly or indirectly, of the power to direct or cause the direction of the
management and policies of an entity, whether through the ownership of voting
securities or otherwise.  This Agreement will be binding upon and inure to the
benefit of Seller and Buyer and their respective successors and permitted
assigns, and no other party will be conferred any rights by virtue of this
Agreement or be entitled to enforce any of the provisions hereof.  Whenever a reference is made in this
Agreement to Seller or Buyer, such reference will include the successors and
permitted assigns of such party under this Agreement.


 


36

















 


10.5                Governing Law and Consent to Jurisdiction.  THIS AGREEMENT SHALL BE GOVERNED
BY, AND CONSTRUED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF
CALIFORNIA, WITHOUT REGARD TO ANY OTHERWISE APPLICABLE PRINCIPLES OF CONFLICTS
OF LAWS OR CHOICE OF LAWS.  ANY ACTION
ARISING OUT OF THIS AGREEMENT MUST BE COMMENCED BY BUYER OR SELLER IN THE STATE
COURTS OF THE STATE OF CALIFORNIA OR IN U.S. FEDERAL COURT FOR THE NORTHERN
DISTRICT OF CALIFORNIA AND EACH PARTY HEREBY CONSENTS TO THE JURISDICTION OF
THE ABOVE COURTS IN ANY SUCH ACTION AND TO THE LAYING OF VENUE IN THE STATE OF
CALIFORNIA.  ANY PROCESS IN ANY SUCH
ACTION SHALL BE DULY SERVED IF MAILED BY REGISTERED MAIL, POSTAGE PREPAID, TO
THE PARTIES AT THEIR RESPECTIVE ADDRESS DESCRIBED IN SECTION 10.3
HEREOF.


 


10.6                Counterparts.  This Agreement may be executed in two or more
fully or partially executed counterparts, each of which will be deemed an
original binding the signer thereof against the other signing parties, but all
counterparts together will constitute one and the same instrument.


 


10.7                Exhibits; Entire Agreement.  The parties agree that all exhibits and
schedules attached hereto are incorporated herein. The parties further agree
that this Agreement and all other documents furnished or to be furnished
pursuant to the provisions hereof embody the entire agreement and understanding
of the parties hereto as to the subject matter contained herein.  There are no restrictions, promises,
representations, warranties, covenants, or undertakings other than those
expressly set forth or referred to in such documents.  This Agreement and such documents supersede
all prior agreements and understandings among the parties with respect to the
subject matter hereof.


 


10.8                Severability.  Any term or provision of this Agreement that
is invalid or unenforceable in any jurisdiction will, as to such jurisdiction,
be ineffective to the extent of such invalidity or unenforceability without
rendering invalid or unenforceable the remaining terms and provisions of this
Agreement, or affecting the validity or enforceability of any of the terms or
provisions of this Agreement.


 


10.9                Attorney Fees.  If any action is brought by any party to this
Agreement to enforce or interpret its terms or provisions, the prevailing Party
will be entitled to reasonable attorneys’ fees and costs incurred in connection
with such action prior to and at trial and on any appeal therefrom.  Except as expressly provided in this
Agreement, each party to this Agreement will be responsible for, and will pay,
all of its own fees and expenses, including those of its counsel and
accountants, incurred in the negotiation, preparation, and consummation of this
Agreement and the transaction contemplated hereunder including, without
limitation, in the case of Buyer, all third-party engineering and environmental
review costs and all other Due Diligence costs.


 


10.10              Waiver of Consequential and Punitive Damages.  NOTWITHSTANDING ANYTHING TO THE
CONTRARY CONTAINED HEREIN, IN NO EVENT SHALL EITHER SELLER OR BUYER OR ANY
AFFILIATE OF SELLER OR BUYER OR THEIR RESPECTIVE MEMBERS, PARTNERS,
SHAREHOLDERS, 


 


37

















 


DIRECTORS,
OFFICERS, MANAGERS, EMPLOYEES OR AGENTS BE LIABLE FOR ANY INDIRECT,
CONSEQUENTIAL, INCIDENTAL OR PUNITIVE DAMAGES (INCLUDING BUT NOT LIMITED TO
DAMAGES FOR LOST PROFITS AND LOSS OF BUSINESS INFORMATION) ARISING OUT OF THE
TRANSACTION CONTEMPLATED HEREIN, EVEN IF SELLER OR BUYER OR ANY SUCH PARTY HAS
BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES.


 


10.11              Confidential Information; Confidentiality.  The parties acknowledge that the transaction described herein is of a
confidential nature and, prior to Closing, shall not be disclosed except (a) with
the prior written consent of Seller (which consent may be withheld in Seller’s
sole and absolute discretion), (2) to the extent that such document or
information is or becomes publicly available other than the result of Buyer’s
breach of this Agreement, (b) to the Permitted Outside Parties; or (c) as
may be necessary for Buyer or Buyer’s representatives to comply with applicable
laws, including, without limitation, governmental regulatory, disclosure
(including SEC rules), tax and reporting requirements, to comply with other
requirements of regulatory and supervisory authorities and self-regulatory
organizations having jurisdiction over Buyer or Buyer’s representatives; or to
comply with regulatory or judicial processes. 
Except as set forth above, no party shall make any public disclosure of
the specific terms of this Agreement.  In
connection with the negotiation of this Agreement and the preparation for the
consummation of the transactions contemplated hereby, each party acknowledges
that it will have access to confidential information relating to the other
party.  Each party shall treat such
information as confidential, preserve the confidentiality thereof, and not
duplicate or use such information, except to Permitted Outside Parties in
connection with the transactions contemplated hereby.  In the event of the termination of this
Agreement for any reason whatsoever, Buyer shall return to Seller, all
documents relating to Seller, the Property or the transactions contemplated by
this Agreement including, without limitation, the Due Diligence Items, work
papers, engineering and environmental studies and reports and all other
materials (including all copies thereof obtained from Seller in connection with
the transactions contemplated hereby), and each party shall use its best
efforts, including instructing its employees and others who have had access to
such information, to keep confidential and not to use any such information.  Except as required by applicable law, neither
party shall issue any press release or make any statement to the media in
violation of the above restrictions without the other party’s consent, which
consent shall not be unreasonably withheld. 
The provisions of this Section shall survive the Closing or, if the
purchase and sale is not consummated, any termination of this Agreement.


 


10.12              No Joint Venture.  Nothing set forth in this Agreement shall be
construed to create a joint venture between Buyer and Seller.


 


10.13              Limited Liability.  Neither the members, managers, employees nor
agents of Seller, nor the shareholders, officers, directors, employees or
agents of any of them shall be liable under this Agreement and all parties
hereto shall look solely to the assets of Seller for the payment of any claim
or the performance of any obligation by Seller.


 


10.14              Governmental Approvals. Nothing
contained in this Agreement shall be construed as authorizing Buyer to apply
for a zone change, variance, subdivision maps, lot line adjustment, condominium
conversions or other discretionary governmental act, approval or 


 


38

















 


permit
with respect to the Property prior to the Close of Escrow, and Buyer agrees not
to do so without Seller’s prior written approval, which approval may be
withheld in Seller’s sole and absolute discretion.  Buyer agrees not to submit any reports,
studies or other documents, including, without limitation, plans and
specifications, impact statements for water, sewage, drainage or traffic,
environmental review forms, or energy conservation checklists to any
governmental agency, or any amendment or modification to any such instruments
or documents prior to the Close of Escrow unless first approved by Seller,
which approval Seller may withhold in Seller’s sole discretion.  Buyer’s obligation to purchase the Property
shall not be subject to or conditioned upon Buyer’s obtaining any variances,
zoning amendments, subdivision maps, lot line adjustment, or other
discretionary governmental act, approval or permit.


 


10.15              Time of Essence.  Time is of the essence of this Agreement.


 


10.16              No Waiver.  No waiver of any of the provisions of this
Agreement shall be deemed, or shall constitute, a waiver of any other
provision, whether or not similar, nor shall any waiver constitute a continuing
waiver, nor shall a waiver in any instance constitute a waiver in any
subsequent instance.  No waiver shall be
binding unless executed in writing by the party making the waiver.


 


10.17              Counting of Days.  Unless otherwise expressly specified in this
Agreement, in computing any period of time described in this Agreement, the day
of the act or event after which the designated period of time begins to run is
not to be included and the last day of the period so computed is to be
included, unless such last day is a Saturday, Sunday or legal holiday under the
laws of the State in which the Property is located, in which event the period
shall run until the end of the next day which is neither a Saturday, Sunday or
legal holiday.  The final day of any such
period shall be deemed to end at 5:00 p.m. Pacific Time.


 


10.18              Electronic Signatures.  Signatures to this Agreement, any amendment
hereof and any notice given hereunder, transmitted by telecopy or electronic
mail shall be valid and effective to bind the party so signing.  Each party agrees to promptly deliver an
execution original of this Agreement (and any amendment hereto) with its actual
signature to the other party, but a failure to do so shall not affect the
enforceability of this Agreement (or any amendment hereto), it being expressly
agreed that each party to this Agreement shall be bound by its own telecopied
or e-mailed signature and shall accept the telecopied or e-mailed signature of
the other party to this Agreement.


 


10.19              No Reservation of Property.  The preparation and/or delivery of unsigned
drafts of this Agreement shall not create any legally binding rights in the
Property and/or obligations of the parties, and Buyer and Seller acknowledge
that this Agreement shall be of no effect until it is duly executed by both
Buyer and Seller.


 


10.20              Natural Hazard Disclosure.  Buyer and Seller acknowledge that Seller may
be required to disclose if the property lies within the following natural
hazard areas or zones:  (i) a
special flood hazard area designated by the Federal Emergency Management Agency
(California Civil Code Section 1103(c)(1)); (ii) an area of potential
flooding (California Government Code Section 8589.4); (iii) a very
high fire hazard severity zone (California Government Code Section 51178
et seq.); (iv) a wild land area that may contain substantial 


 


39

















 


forest
fire risks and hazards (Public Resources Code Section 4135; (v) earthquake
fault zone (Public Resources Code Section 2622); or (vi) a seismic
hazard zone (Public Resources Code Section 2696) (sometimes all of the
preceding are herein collectively called the “Natural
Hazard Matters”). 
Accordingly, Seller shall provide Buyer with a natural hazard disclosure
report (the “Natural Hazard Disclosure Statement”)
prepared by a professional consulting firm (the “Natural
Hazard Expert”) relating to the Property no later than three (3) days
after the Effective Date.  Buyer
expressly acknowledges and agrees that (a) the Natural Hazard Disclosure
Statement prepared by the Natural Hazard Expert will fully and completely
discharge Seller from its disclosure obligations referred to herein, if and to
the extent any such obligations exist, (b) for the purpose of this
Agreement, the provisions of Civil Code section 1103.4 regarding non-liability
of Seller for errors or omissions not within its personal knowledge shall be
deemed to apply, and (c) the Natural Hazard Expert shall be deemed to be
an expert, dealing with matters within the scope of its expertise with respect
to the examination and written report regarding the natural hazards referred to
above.  Buyer agrees to provide Seller
with a written acknowledgment of its receipt of the Natural Hazard Disclosure
Statement.


 


10.21              Third Party Beneficiaries.  This Agreement is not intended to give or
confer any benefits, rights, privileges, claims, actions, or remedies to any
person or entity as a third party beneficiary or otherwise.


 


10.22              Resolution of Disputes.  With the exception of a Specific Performance
Action, any dispute, controversy or claim arising out of or relating to this
Agreement, including any dispute relating to interpretation of or performance
under this Agreement (“Dispute”),
shall be resolved in the manner set forth in this Section, which shall be in
lieu of any form of litigation in any court, and the parties specifically
waive, to the fullest extent permitted under Applicable Law, any right to a
jury trial of any Dispute between them.


 


10.22.1  Negotiation.  The parties will attempt in good faith to
resolve the Dispute promptly by negotiations between senior representatives of
the parties who have authority to settle the Dispute (each a “Representative”).


 


10.22.2  Mediation.  If the Representatives are unable to resolve
the Dispute through negotiation, the parties agree first to try in good faith
to resolve the dispute by mediation administered by the American Arbitration
Association (“AAA”) under its
Commercial Mediation Procedures then in effect before resorting to arbitration
pursuant to Section 10.22.3, below.


 


10.22.3  Judicial
Reference.  In the event
the Representatives are not able to resolve the Dispute within 30 days
following the date one party first notifies the other party of the Dispute in
writing, then the Dispute shall be resolved by general judicial reference
pursuant to Code of Civil Procedure Sections 638 and 641 through 645.1, or any
successor statutes thereto, and as modified or as otherwise provided in this
Section.  Subject to the limitations set
forth in this Section, the general referee shall have the authority to try all
issues, whether of fact or law, and to report a statement of decision to the
court.  The referee shall be the only
trier of fact or law in the reference proceeding, and shall have no authority
to further refer any issues of fact or law to any other party, without the
mutual consent of all parties to the judicial reference proceeding.


 


40
















 


(a)                                  Place.  The proceedings shall be heard in Orange
County, California.


 


(b)                                 Referee.  The referee shall be a retired judge with
experience in relevant real estate matters. 
The referee shall not have any relationship to the parties to the
Dispute or interest in the Property.  The
parties to the Dispute participating in the judicial reference shall meet to
select the referee within ten (10) days after service of the Notice of
Dispute or initial complaint on all defendants named therein.  Any dispute regarding the selection of the
referee shall be promptly resolved by the judge to whom the matter is assigned,
or if there is none, to the presiding judge of the Superior Court of Orange
County who shall select the referee.


 


(c)                                  Commencement
and Timing of Proceeding.  The
referee shall promptly commence the proceeding at the earliest convenient date
in light of all of the facts and circumstances and shall conduct the proceeding
without undue delay.


 


(d)                                 Pre-hearing
Conferences.  The referee
may require one or more pre-hearing conferences.


 


(e)                                  Discovery.  The parties to the judicial reference
proceeding shall be entitled only to limited discovery, consisting of the
exchange between such parties of only the following matters:  (i) witness lists; (ii) expert
witness designations; (iii) expert witness reports; (iv) exhibits; (v) reports
of testing or inspections of the property subject to the Dispute, including but
not limited to, destructive or invasive testing; and (vi) trial
briefs.  Any other discovery provided for
in the California Code of Civil Procedure shall be permitted by the referee
upon a showing of good cause or based on the mutual agreement of the parties to
the judicial reference proceeding.  The
referee shall oversee discovery and may enforce all discovery orders in the
same manner as any trial court judge


 


(f)                                    Motions.  The referee shall have the power to hear and
dispose of motions, including motions relating to provisional remedies,
demurrers, motions to dismiss, motions for judgment on the pleadings and
summary adjudication motions, in the same manner as a trial court judge, except
the referee shall also have the power to adjudicate summarily issues of fact or
law including the availability of remedies, whether or not the issue
adjudicated could dispose of an entire cause of action or defense.  Notwithstanding the foregoing, if prior to
the selection of the referee as provided herein, any provisional remedies are
sought by the parties to the Dispute, such relief may be sought in the Superior
Court of Orange County, California.


 


(g)                                 Rules of
Law.  The referee shall apply the
laws of the State of California except as expressly provided herein including
the rules of evidence, unless expressly waived by all parties to the
judicial reference proceeding.


 


(h)                                 Record.  A stenographic record of the hearing shall be
made, provided that the record shall remain confidential except as may be
necessary for post-hearing motions and any appeals.


 


41

















 


(i)                                     Statement
of Decision.  The
referee’s statement of decision shall contain findings of fact and conclusions
of law to the extent required by law if the case were tried to a judge.  The decision of the referee shall stand as
the decision of the court, and upon filing of the statement of decision with
the clerk of the court, judgment may be entered thereon in the same manner as
if the Dispute had been tried by the court.


 


(j)                                     Post-hearing
Motions.  The referee shall have the
authority to rule on all post-hearing motions in the same manner as a
trial judge.


 


(k)                                  Appeals.  The decision of the referee shall be subject
to appeal in the same manner as if the Dispute had been tried by the court.


 


(l)                                     Expenses.  The fees and costs of the referee in any
judicial reference proceeding hereunder shall be shared equally by the parties
to the judicial reference proceeding, subject to Section 10.9.


 


WAIVER OF LEGAL RIGHTS.  BY INITIALING IN THE SPACE BELOW, THE PARTIES
ACKNOWLEDGE AND AGREE TO HAVE ANY DISPUTE ARISING OUT OF THE MATTERS INCLUDED
OR DESCRIBED IN THIS ARTICLE DECIDED BY JUDICIAL REFERENCE AS PROVIDED UNDER
CALIFORNIA LAW AND THAT THEY ARE WAIVING ANY RIGHTS THEY MAY POSSESS TO
HAVE THE DISPUTE LITIGATED IN A COURT OR BY JURY TRIAL.  THE PARTIES FURTHER ACKNOWLEDGE AND AGREE
THAT THEY ARE WAIVING THEIR JUDICIAL RIGHTS TO DISCOVERY EXCEPT TO THE EXTENT
SUCH RIGHTS ARE SPECIFICALLY INCLUDED IN THIS ARTICLE.  IF EITHER PARTY REFUSES TO SUBMIT TO JUDICIAL
REFERENCE AFTER EXECUTION OF THIS AGREEMENT AND INITIALING BELOW, SUCH PARTY MAY BE
COMPELLED TO PROCEED WITH JUDICIAL REFERENCE UNDER THE AUTHORITY OF THE
CALIFORNIA CODE OF CIVIL PROCEDURE.  EACH
PARTY’S AGREEMENT TO THIS ARTICLE IS VOLUNTARY. 
THE PARTIES HAVE READ AND UNDERSTAND THE FOREGOING AND AGREE TO SUBMIT
DISPUTES ARISING OUT OF THE MATTERS INCLUDED OR DESCRIBED IN THIS ARTICLE TO
JUDICIAL REFERENCE.


 


	
   

  	
  /s/ KR,
  /s/ SDS

  	
   

  	
  Seller’s Initials

  	
   

  	
  /s/ RTP

  	
   

  	
  Buyer’s Initials

  



 


10.23                                         Prohibition
of Condominium Conversion. 
Buyer represents, warrants and covenants to Seller that, to the fullest
extent permitted by law, Buyer shall not, for a period of ten (10) years
from July 16, 2008, the date of completion of construction of the 


 


42

















 


Improvements (the “Completion Date”), convert the Property into condominiums or
similar forms of subdivided ownership. 
In connection with the foregoing, Buyer further agrees that (a) the
prohibition against condominium conversions is reasonable under the
circumstances existing as of the Effective Date, (b) if Buyer sells or
otherwise transfers the Property within ten (10) years of the Completion
Date, then Buyer shall notify its buyer in writing of this restriction and
include a similar prohibition against condominium conversions in any purchase
and sale or similar agreement to so transfer the Property, (c) Buyer shall
indemnify, defend, protect and hold Seller and its Affiliates harmless, from
any and all Losses resulting from Buyer’s breach of the representation,
warranty and covenant contained in this Section 10.23, (d) without
in any way limiting the materiality of the other provisions of this Agreement,
the provisions of this Section 10.23 are material and included as a
material portion of the consideration given by Buyer to Seller in exchange for
Seller’s performance under this Agreement, (e) Buyer acknowledges that
Seller has given Buyer material concessions regarding this transaction in
exchange for Buyer agreeing to the provisions of this Section 10.23,
and (f) Buyer’s obligations under this Section 10.23 shall
expressly survive the Closing and the deliver of the Deed.  In addition, Buyer acknowledges and agrees
that its breach of the terms and conditions of this Section 10.24
will constitute immediate and irreparable damage to the Seller, which cannot be
fully and adequately compensated in money damages and which will warrant
preliminary and other injunctive relief, an order for specific performance, and
other equitable relief.  In connection
with the foregoing, Buyer further agrees that no bond or other security shall
be required in obtaining such equitable relief and Buyer hereby consent to the
remedy of an injunction or specific performance to the extent Seller is
entitled thereto.  Buyer acknowledges
that Seller’s remedies hereunder are cumulative and other action may be taken
and remedies enforced against it in the event of a breach of this Section.  At the Closing, Buyer and Seller shall record
a memorandum of agreement (the “Memorandum”) evidencing Buyer’s
agreements set forth herein.


 


10.24                                         Rule 3-14
Audit.  Seller acknowledges that under
Rule 3-14 of Regulation S-X, Buyer is required to obtain certain
information in connection with reports Buyer is required to file with the
Securities and Exchange Commission. 
Accordingly, subject to the terms and conditions of this Section 10.24,
Seller agrees to use commercially reasonable efforts to cooperate with Buyer’s
auditors in the preparation of such audited financial statements.  In furtherance of the foregoing, (a) Seller
shall, during normal business hours and upon not less than three (3) business
days’ prior written notice, allow Buyer’s auditors reasonable access to such
books and records maintained by Seller and Property Manager exclusively in
respect of the Property solely to the extent necessary to prepare and file such
audited financial statements in compliance with Rule 3-14 of Regulation
S-X; and (b) if Seller has audited financial statements with respect to
the Property, Seller shall provide Buyer’s auditors with a copy of such audited
financial statements; provided, however, that Buyer expressly acknowledges and
agrees that if Seller does not have audited financial statements with respect
to the Property, Seller shall be under no obligation to cause such audited
financial statements to be prepared. 
Seller acknowledges that Buyer’s audit shall include a review of
Seller’s records for up to three (3) years prior to Closing.  In consideration of the foregoing, Buyer
agrees that Buyer shall indemnify, defend, protect and hold harmless Seller,
Property Manager and their respective Affiliates, partners, shareholders,
members, officers, directors, managers, agents, and employees from and against
any and all Losses of any kind or nature, arising out of or in any way
connected with Seller’s provision of the materials required by this Section 10.24,
including without limitation lawsuits by shareholders or regulators or any
other persons whatsoever.  


 


43

















 


Notwithstanding anything to
the contrary contained herein, Seller shall only be obligated to provide to
Buyer Seller’s accounting information at the Property level, and shall not be
obligated to provide any information concerning Seller’s capital structure or
non-property related debt or any of the following: (i) information
contained in Seller’s credit reports, credit authorizations, credit or
financial analyses or projections, investment analyses, account summaries or
other documents prepared solely for Seller’s internal purposes and not directly
related to the operation of the Property, including any valuation documents and
information regarding the value of the Property and the price paid by Seller
therefor; (ii) material which is subject to attorney-client privilege or
which is attorney work product; (iii) sales contracts, appraisal reports,
letters or loan matters; (iv) financial statements or information relating
to Seller or any Affiliate of Seller other than those at the Property level; (v) Seller’s
tax returns; or (vi) material which Seller is legally or contractually
required to maintain as confidential. 
Notwithstanding anything to the contrary set forth herein, Buyer
expressly agrees that Seller’s delivery of any information under this Section 10.24
(X) shall be subject to the terms and conditions of Section 10.11,
above; (Y) does not in any manner increase any liability of Seller under
this Agreement, or (Z) obviate or waive the “AS IS” provisions of Section 7.2.2,
above.  Subject to the terms of this Section 10.24,
Seller’s and Buyer’s respective obligation under this Section 10.24
shall expressly survive the Closing and the delivery of the Deed.


 


10.25                                         Telecommunications
Lease.  Buyer and Seller acknowledge
and agree that (a) Seller is currently negotiating a building and roof
lease agreement for the placement of certain telecommunications equipment on
the garage located on the Property for a five (5) year term with at least
two (2) five (5) year extension options with a rental in the amount
of no less than Thirty Thousand Dollars ($30,000.00) per year (the “Telecommunications Lease”), (b) Seller shall have the
exclusive right to continue to negotiate the terms and conditions of the
Telecommunications Lease during the pendency of this Agreement and a period of
six (6) months after the Closing, if applicable, (c) Seller will keep
Buyer reasonably informed of all material aspects of the negotiations of the
Telecommunications Lease, (d) subject to the receipt of Buyer’s prior
written consent (which consent shall not be unreasonably withheld, conditioned or
delayed and which consent shall be deemed given in Buyer does not respond
within five (5) business days of its receipt of Seller’s written notice
requesting such approval), Seller shall have the right to enter into the
Telecommunications Lease prior to the Closing and, at Closing, assign its
rights thereunder to Buyer, (e) if Seller has not entered into the
Telecommunications Lease prior to the Closing, then Seller shall continue to
have the right and authority to negotiate the terms and conditions of the
Telecommunications Lease for a period of nine (9) months after the Closing
and if Seller and the lessee thereunder agree on the terms and conditions of
the Telecommunications Lease and such terms and conditions are otherwise
acceptable to Buyer (with such acceptance not being unreasonably withheld,
conditioned and/or delayed), then Buyer shall promptly execute the
Telecommunications Lease and deliver the same to Seller for deliver to the
lessee thereunder, (f) the Purchase Price assumes that the Telecommunications
Lease is fully executed by and between Seller (or Buyer if it occurs
post-Closing) and the lessee thereunder and if the Telecommunications Lease is
not executed prior to the nine (9) month anniversary of the Closing, then
the Purchase Price shall be reduced by Five Hundred Thousand Dollars
($500,000.00) and Buyer shall be immediately entitled to the Lease Escrow
described below, (g) if the Closing occurs hereunder and the
Telecommunications Lease has not been executed, then Buyer shall provide Seller
with such instruments and/or other documents as reasonably requested by Seller
to evidence Seller’s authority to continue to 


 


44

















 


negotiate the
Telecommunications Lease and (ii) at Closing Seller shall escrow pursuant
to an escrow agreement with the Title Company the sum of $500,000.00 (the “Lease Escrow”) which Seller shall be immediately entitled to
upon full execution of the Telecommunications Lease provided it is executed
prior to nine (9) months from the Closing Date or, if not executed within
such nine (9) month period, Buyer shall be immediately entitled to be
distributed the Lease Escrow by the Title Company, and (h) the parties
obligations under this Section 10.25 shall expressly survive the
Closing and the delivery of the Deed.


 


 [Signature Page To Follow]


 


45

















 


IN WITNESS
WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the Agreement Date.


 


	
  SELLER:

  	
  CALYPSO LOFTS, LLC, a
  California limited liability company 

  
	
   

  	
   

  
	
   

  	
  By:

  	
  Shea
  Properties Management Co., Inc., 

  
	
   

  	
   

  	
  a
  Delaware corporation 

  
	
   

  	
  Its:

  	
  Manager
  

  
	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/
  Kirk Roloff 

  
	
   

  	
   

  	
  Name:

  	
  Kirk
  Roloff 

  
	
   

  	
   

  	
  Its:

  	
  Assistant
  Secretary 

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/
  Stephen D. Stambaugh 

  
	
   

  	
   

  	
  Name:

  	
  Stephen
  D. Stambaugh 

  
	
   

  	
   

  	
  Its:

  	
  Assistant
  Secretary

  



 


 


[Signature Page Continued On Following Page]


 


46

















 


	
  BUYER:

  	
  BEHRINGER HARVARD MULTIFAMILY OP I LP, a Delaware limited partnership

  
	
   

  	
   

  
	
   

  	
  By:  

  	
  BHMF, Inc., a Delaware corporation,

  
	
   

  	
   

  	
  its general partner

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:  

  	
  /s/ Robert T. Poynter

  
	
   

  	
   

  	
  Name: Robert T. Poynter

  
	
   

  	
   

  	
  Its: Vice President

  



 


47

















 


ESCROW AGENT:


 


The Escrow Agent is executing this
Agreement to evidence its agreement to hold the Deposit and act as escrow agent
in accordance with the terms and conditions of this Agreement.  Escrow Agent certifies that it is in
possession of a fully executed counterpart original or copy of the Agreement
this 3rd day of December, 2009 and that this date shall be deemed the
“Effective Date” for purposes of this Agreement.


 




	
   

  	
  PARTNERS
  TITLE COMPANY

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  Carol Gonzales

  
	
   

  	
  Name:

  	
  Carol
  Gonzales

  
	
   

  	
  Title:

  	
  Escrow
  Officer

  






 


48