Document:

G REIT, Inc.

 

EXHIBIT 10.02

REAL PROPERTY PURCHASE AND SALE AGREEMENT

AND ESCROW INSTRUCTIONS

     THIS REAL PROPERTY PURCHASE AND SALE AGREEMENT AND ESCROW INSTRUCTIONS
(this “Agreement") is made and entered into as of the 2nd day of July, 2003
(“Effective Date”), by and between Government Property Fund IV, LLC, a
California limited liability company (“Seller”), and Triple Net Properties,
LLC, a Virginia limited liability company (“Buyer”).

RECITALS

     A. Seller owns (i) that certain land (“Land”) in the County of Sacramento,
State of California, as more particularly described in Exhibit “A” attached
hereto and made a part hereof, together with all rights, easements and
appurtenances pertaining thereto, (ii) all improvements, structures and
fixtures located upon the Land, including approximately 138,000 square feet in
building improvements (collectively, “Improvements"). The Land and Improvements
are sometimes referred to herein collectively as the “Real Property.”

     NOW, THEREFORE, the parties hereto agree as follows:

     1. Purchase and Sale. Subject to, and on the basis of, the terms,
covenants and conditions set forth in this Agreement, Seller hereby agrees to
sell to Buyer, and Buyer hereby agrees to purchase from Seller, all right,
title and interest of Seller (a) in and to the Real Property, (b) in and to all
tangible personal property (“Tangible Personal Property”) located on, and used
solely in connection with, the management, maintenance or operation of, the
Real Property, (c) in and to all intangible personal property (“Intangible
Personal Property”) used solely in connection with, the management, maintenance
or operation of, the Real Property, including without limitation Seller’s
interest in the name “North Pointe Corporate Center” and all rights to
warranties or guaranties relating to the Improvements and/or the Tangible
Personal Property (to the extent assignable), and (d) all right, title and
interest of Seller in and to all tenant leases and occupancy agreements
affecting the Property now existing, which are listed in Exhibit “F” attached
hereto, and any amendments or modifications thereto, guarantees thereof and
security deposits related thereto (“Tenant Leases”), which shall be transferred
pursuant to a bill of sale and assignment and assumption of leases in the form
of Exhibit “E". The Real Property, the Tangible Personal Property, the
Intangible Personal Property, and the Tenant Leases are collectively referred
to herein as the “Property.”

     2. Purchase Price and Deposit.

          2.1 Purchase Price. The purchase price (“Purchase Price”) for the purchase
of the Property by Buyer from Seller pursuant to the provisions of this
Agreement shall be the sum of Twenty Four Million Two Hundred Five Thousand
Dollars ($24,205,000.00). The Purchase Price shall be payable to Seller by
Buyer as follows:

               2.1.1 Deposit.

 

 

          (a) Buyer shall deposit by wire transfer of immediately available funds
within two (2) business days of the Effective Date into the Escrow provided for
in Section 5 the sum of One Hundred Thousand Dollars ($100,000.00) (“Initial
Deposit"), which Initial Deposit shall be deposited by Escrow Holder (defined
below) into an interest-bearing account selected by Buyer.

          (b) If Buyer issues the both the Title Approval Notice and the Buyer’s Due
Diligence Notice on or before the Contingency Date (defined below), Buyer shall
deposit by wire transfer of immediately available funds within three (3)
business days after the Contingency Date (defined below) into the Escrow the
sum of Four Hundred Thousand Dollars ($400,000.00) (“Contingency Deposit"; the
Initial Deposit and the Contingency Deposit are sometimes hereinafter
collectively referred to as the “Deposit"), which Initial Deposit shall be
deposited by Escrow Holder (defined below) into an interest-bearing account
selected by Buyer.

               2.1.2 Closing Payment. The balance (the “Cash Balance") of the Purchase
Price shall be deposited by Buyer in Escrow in cash by wire transfer of
immediately available federal funds to Escrow Holder one (1) business day prior
to the Close of Escrow.

     3. Title.

          3.1 Title and Survey Matters.

               3.1.1 Receipt. Buyer acknowledges receipt prior to the Effective Date of
(i) First American Title Company (“Title Company") preliminary title report
number NCS-22649-SAC4 dated April 8, 2003, covering the Land, together with
complete copies of all instruments referred to therein as exceptions to title
(collectively, “PTR”).

               3.1.2 Approval. Buyer shall have until 5:00 p.m. Pacific Time on July 3,
2003 (the “Contingency Date") to review and approve (a) the PTR and all
supplements thereto delivered to Buyer prior to the Contingency Date, and all
exceptions to title referred to therein, (b) all additional matters, if any,
affecting title to the Property disclosed by Seller to Buyer in writing within
thirty (30) days after the date (“Execution Date") of full execution and
delivery of this Agreement, including, without limitation, the Unrecorded Title
Documents (defined in Section 4.1.1), if any, and (c) all matters which would
be disclosed by an ALTA survey of the Land prepared in accordance with the 1992
Minimum Detail Requirements for ALTA/ACSM Land Title Surveys (“ALTA/ACSM
Requirements") (collectively, “Title and Survey Matters"). Unless Buyer gives
written notice to the Escrow Holder and Seller (“Title Approval Notice") that
it approves all (or subject to the provisions of the immediately following
sentence) of the Title and Survey Matters on or before the Contingency Date,
Buyer shall be deemed to have disapproved all of the Title and Survey matters.
In the event Buyer desires to approve some, but not all, of the Title and
Survey Matters, Buyer shall describe in reasonable detail all Title and Survey
Matters so disapproved (“Disapproved Exceptions") in the Title Approval Notice
delivered on or before the Contingency Date; all Title and Survey Matters not
so disapproved in reasonable detail in such Title Approval Notice shall
automatically be deemed approved by Buyer. Seller shall provide to Buyer, at
Seller’s sole cost and expense and prior to the Contingency Date, any ALTA
survey required for issuance of the Owner’s Title Policy (defined below). In
the event that Buyer desires any endorsements to the Owner’s Title Policy,

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Buyer shall specify the same in Buyer’s Title Approval Notice and except
where the Title Company shall have irrevocably committed in writing to issue
the same prior to the Contingency Date, Seller may treat any such request as a
Disapproved Exception. If Buyer disapproves of one or more of the Title and
Survey Matters, Seller shall have a ten (10) day period after its receipt of
Buyer’s Title Approval Notice within which to notify Buyer in writing (which
writing shall describe the response selected) of its intention to attempt to
remove prior to the Close of Escrow the Disapproved Exceptions (or portions
thereof) as exceptions to title or to obtain endorsements to the Owner’s Title
Policy acceptable to Buyer with respect to the Disapproved Exceptions (Seller
having the right but not the obligation to do so). If for any reason, within
such ten (10) day period, Seller does not provide Buyer with such notice,
Seller shall be deemed to have elected to not remove (or obtain such
endorsements for) such Disapproved Exceptions. If Seller does not agree, or is
deemed not to have agreed, to so attempt to remove (and not obtain such
endorsements for) any Disapproved Exceptions, then Buyer shall have the right
either to waive such Disapproved Exceptions or to terminate this Agreement by
delivery of written notice to Seller and Escrow Holder within five (5) days
after the expiration of such ten (10) day period (“Waiver Notice"). Buyer’s
failure to deliver to Seller and Escrow Holder the Waiver Notice within such
five (5) day period shall be conclusively deemed Buyer’s election to terminate
this Agreement. In the event Buyer so terminates this Agreement, the
obligations of Seller to sell, and Buyer to buy, the Property as provided
herein, and each of the parties’ obligations under this Agreement, except for
those obligations hereunder which specifically survive such a termination,
shall terminate. Seller and Buyer shall have no further obligation in
connection herewith. Upon termination of this Agreement by Buyer pursuant to
this Section 3.1, each of Buyer and Seller shall pay one-half (1/2) of all of
Escrow Holder’s and Title Company’s cancellation fees, the Deposit and any
Deposit interest then held by Escrow Holder, if any, shall be returned to
Buyer, all Due Diligence Materials (defined below) shall be promptly delivered
by Buyer to Seller, and Buyer shall, without representation or warranty as to
the accuracy or completeness thereof, promptly deliver to Seller all surveys,
appraisals, investigative reports and other written materials developed by (or
for the benefit of) Buyer (“Buyer Prepared Due Diligence Materials") in
connection with its due diligence review as set forth in Section 4 of this
Agreement.

          3.2 Exceptions to Title. Buyer shall be obligated to accept title to the
Property subject only to the following exceptions to title (collectively, the
“Permitted Exceptions"): (a) real estate taxes and assessments not then
delinquent; (b) the lien of supplemental taxes assessed pursuant to Chapter
3.5, commencing with Section 75, of the California Revenue and Taxation Code
with respect to matters occurring on or after the Closing Date; (c) the printed
exceptions which appear in the Owner’s Title Policy issued by the Title
Company; all Title and Survey Matters approved or deemed approved by Buyer
pursuant to this Agreement; (d) the property interests created by the Tenant
Leases, (e) the Access Easement and (f) any matters affecting the Property
which are created by or with the consent of Buyer. Conclusive evidence of the
availability of such title shall be the irrevocable commitment of the Title
Company to issue to Buyer on the Closing Date an ALTA Owner’s Form B extended
coverage policy of title insurance (“Owner’s Title Policy") in the face amount
of the Purchase Price, which Owner’s Title Policy shall reflect that title to
the Land is vested of record in Buyer, subject only to the Permitted
Exceptions.

          3.3 Creation of Easement. Buyer acknowledges that Seller will retain
approximately 2.2 acres of undeveloped real property contiguous to that
Property, which property

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is more particularly described in Exhibit “A-1” attached hereto (the
“Retained Property”), which is not being conveyed to Buyer under this
Agreement, but which Seller will retain for future development. In order to
facilitate the future development, access and use of the Retained Property, and
as a condition to this Agreement, Seller and Buyer shall execute and
acknowledge a reciprocal easement and access easement (“Access Easement”) in
substantially the form of Exhibit “H” attached hereto and made a part hereof,
to provide the necessary access to the Retained Property (provided, however,
that the parties hereto agree on or before July 9, 2003 to negotiate in good
faith changes to the Access Agreement necessary or desirable in each party’s
good faith discretion, and if the parties hereto do not reach agreement on the
final form of the Access Agreement on or before July 9, 2003, such failure to
reach agreement shall be deemed the failure of a condition to each parties
obligations hereunder). The Access Easement will be submitted to Escrow Holder
with instructions to record the same in connection with, and as a condition to,
the consummation of this transaction and the conveyance of the Property. Buyer
further acknowledges and agrees that the Access Easement shall constitute and
acceptable matter affecting title along with the Permitted Exceptions, and will
be included in Owner’s Title Policy.

     4. Buyer’s Due Diligence.

          4.1 Delivery and Availability of Due Diligence Materials.

               4.1.1 Receipt. Buyer hereby acknowledges receipt of copies of all reports,
assessments and other written materials (“Initial Due Diligence Matters”)
described on Exhibit “B”.

               4.1.2 Delivery By Seller. Within five (5) business days of the Effective
Date, Seller shall deliver to Buyer copies of those unrecorded documents
(including service contracts, Tenant Leases, and equipment operation manuals)
which, to Seller’s actual knowledge, (i) exist, (ii) are in Seller’s
possession, (iii) relate to the ownership or operation of the Property and (iv)
will continue in effect following the Close of Escrow (“Unrecorded Title
Documents”).

          4.2 Examination of Records. Seller shall also make available at 7750
College Town Drive, #350, Sacramento, California (“Books and Records Location”)
for review and photocopying by Buyer or its representatives at all times prior
to the Contingency Date upon three (3) business days advance notice all of
Seller’s property income and expense reports for calendar years 2002 and 2003,
environmental assessments, environmental audits, existing notes and deeds of
trust (if any), as-built plans for the Real Property, engineering reports,
building permits and certificates of occupancies, insurance policies, service
contracts, tenant files (including correspondence), property tax bills,
calculations used to prepare statements of rental increases under the Tenant
Leases, statements of common area charges, insurance, property taxes and other
charges which are paid by tenants under the Tenant Leases, known to the actual
knowledge of Seller to be in the possession of Seller (collectively, “Books and
Records”). In the case of any such review by Buyer or its representatives,
Seller shall have the right to have a representative or agent of Seller present
at all times during Buyer’s review.

     The items described in Section 4.1 and 4.2 are hereinafter collectively
referred to as the “Due Diligence Materials.”

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          4.3 The Contingency. Buyer’s obligations to purchase the Property
hereunder are subject to Buyer’s written approval of the Due Diligence
Materials and Buyer’s inspections set forth in this Section 4.3 (or Buyer’s
written waiver thereof) no later than 5:00 p.m. Sacramento time on the
Contingency Date. Unless Buyer approves or waives all of the conditions
precedent set forth in this Section 4.3 by providing written notice of such
approval or waiver to Seller on or prior to 5:00 p.m. Los Angeles time on the
Contingency Date (“Buyer’s Due Diligence Notice"), Buyer shall be deemed to
have disapproved all such matters, whereupon (except for any rights and
obligations of the parties hereunder which specifically survive such a
termination) this Agreement, and the obligations of the parties hereunder,
shall terminate, each of Buyer and Seller shall pay one-half (1/2) of all of
Escrow Holder’s and Title Company’s cancellation fees, Escrow Holder shall
return to Buyer the Deposit and any Deposit interest then held by Escrow
Holder, and Buyer shall promptly return or deliver to Seller all Due Diligence
Materials and Buyer Prepared Due Diligence Materials in accordance with the
provisions of Section 3.1.2. If Buyer timely delivers Buyer’s Due Diligence
Notice, Buyer shall be deemed to have approved each and all of the conditions
set forth in this Section 4.3, and Buyer’s right to terminate this Agreement
pursuant to this Section 4.3 shall automatically expire and shall be of no
further force or effect.

          4.4 Physical Inspections.

          (a) Subject to the provisions of this Section 4.4 and to any applicable
notice requirements and access restrictions in the Tenant Leases, Seller hereby
grants to Buyer and Buyer’s agents, employees and contractors (collectively,
“Buyer Parties") the right to enter upon the Property upon one (1) business
day’s advance written notice to Seller at reasonable times of the day for the
sole purpose of conducting such physical reviews and investigations as Buyer
reasonably deems appropriate (collectively “Inspections") in accordance with
the provisions of this Section 4.4. Buyer may, without Seller’s consent (but
upon not less than one (1) Business day’s advance written notice to Seller),
conduct tenant interviews in connection with its Inspections; provided that
Seller may, in its sole discretion attend any such interviews. Buyer and the
Buyer Parties shall at all times conduct each Inspection in a manner so as (i)
to not unreasonably interfere with any of Seller’s activities or those of
tenants at the Property and (ii) to not cause any damage, loss, cost or expense
to Seller or the Property. Within a reasonable period following each
Inspection, Buyer shall, at its sole cost and expense, repair all damage
resulting in any way from such Inspection, restore any portion of the Property
adversely affected by such Inspection to its condition existing immediately
prior to such Inspection, and remove and dispose of all debris generated as a
result of such Inspection. Buyer shall, within five (5) days of preparation of
the same (without representation or warranty as to the accuracy or completeness
thereof), provide Seller with full and complete copies of any Buyer Prepared
Due Diligence Materials and all other data, results, conclusions and reports
generated as a result of or during the Inspections and shall keep all such data
strictly confidential in accordance with the provisions of Section 4.5.

          (b) Notwithstanding any provisions of this Agreement to the contrary, in
no case shall Buyer or any Buyer Party conduct any physical, soils,
groundwater, environmental or other sampling, drilling or coring or any other
form of work or investigation which may physically invade, alter, damage or
disturb any portion of the Improvements or the Land (or the soils or
groundwater thereunder) (collectively, “Physical Testing") without first

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(i)  submitting to Seller a written description of the general nature and
scope of the Physical Testing proposed, the protective measures to be utilized
by Buyer to avoid or minimize any damage to the Land or the Improvements, the
restoration activities proposed to be performed by Buyer to restore any
anticipated damage, the contractor(s) to be conducting such Physical Testing
(and a description of their qualifications and licensing), those portions of
the Property to be affected buy such Physical Testing and Buyer’s proposed
schedule for conducting such Physical Testing (collectively, a “Request for
Physical Testing") and (ii) obtaining the prior written approval of Seller to
Buyer’s Request for Physical Testing with respect thereto. Buyer acknowledges
and agrees that in approving a Request for Physical Testing, Seller may (i)
impose such reasonable conditions as it shall determine are appropriate with
respect to scheduling, access, provision of split samples of soils or
groundwater tests, or any other matter; (ii) require evidence of reasonable and
customary insurance by all contractors participating in the proposed Physical
Testing; and (iii) refuse to consent to testing of the groundwater underlying
the Property.

          (c) Buyer shall indemnify, protect, defend (with counsel satisfactory to
Seller) and hold Seller, the Property and each of Seller’s partners, employees,
directors, officers, shareholders, parents, subsidiaries, accountants, agents
and affiliates (collectively, “Seller Related Parties") harmless from and
against all claims, demands, actions, liabilities, damages, losses,
obligations, fines, penalties, costs and expenses, including, without
limitation, attorneys’ fees and all court costs asserted against or incurred by
Seller, the Property or any Seller Related Party in connection with any
exercise by Buyer or any Buyer Party of the Inspection rights granted to Buyer
under this Agreement. The foregoing indemnity shall survive the Closing and the
termination or cancellation of this Agreement. Prior to any Inspection of or
entry onto the Land by Buyer or any Buyer Party, Buyer shall (i) at its sole
cost and expense, procure and maintain in full force and effect at all times
prior to the Closing a customary commercial general liability insurance policy
with combined single limit coverage in an amount not less than $1,000,000.00,
issued by an insurance company qualified to do business in the State of
California, and having a Best’s rating of not less than A-/VII, naming Seller
and any other party reasonably designated by Seller as additional insureds with
respect to all of Buyer’s and the Buyer Parties’ activities in, on and about
the Property and including customary insurance against any assumed contractual
liability under this Agreement, and (ii) provide Seller with a certificate of
insurance evidencing the existence of such policy and coverage. The insurer
under such policy shall agree not to cancel, materially change or fail to renew
the coverage provided by such policy without giving Seller ten (10) business
days advance written notice, which agreement shall be reflected in Buyer’s
certificate of insurance.

          4.5 Confidentiality. The terms of the transfers contemplated in this
Agreement, including, without limitation, the Purchase Price and all other
financial terms, and with respect to disclosure by Buyer only, all other
nonpublic information relating to the Property, shall remain confidential and
shall not be disclosed by either party hereto without the written consent of
the other except (a) to such party’s directors, officers, partners, employees,
legal counsel, accountants, engineers, architects, financial advisors and
similar professionals and consultants to the extent such party deems it
necessary or appropriate in connection with the transaction contemplated
hereunder (and such party shall inform each of the foregoing parties of such
party’s obligations under this paragraph and shall secure the agreement of such
parties to be bound by the terms hereof), or (b) as otherwise required by law
or to enforce terms of this

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Agreement. If the transaction contemplated hereby fails to close, then the
confidentiality requirement set forth and described in this Section 4.5 shall
be binding upon both Seller and Buyer and shall survive any termination of this
Agreement.

          4.6 Tenant Lease Estoppel Certificates. Seller shall use reasonable
efforts to deliver to Buyer, at least three (3) business days prior to the
Closing Date, estoppel certificates (i) substantially in the form of Exhibit
“G-1” attached hereto with respect to that certain lease between North Pointe
Properties, Ltd., predecessor in interest to seller, as landlord, and the
United States General Services Administration (“GSA”), as tenant, dated on or
about January 6, 1987, as amended, and (ii) substantially in the form of
Exhibit “G-2” attached hereto with respect to that certain lease between AmerUs
Properties, Inc., predecessor in interest to seller, as landlord, and Kaplan
Higher Education f/k/a Quest Education Corporation (“Quest”), as tenant, dated
May 31, 1999, as amended; provided, however, that Seller shall have no
liability therefor if any or all of such tenants do not issue such
certificates. Buyer agrees to reasonably approve changes made by tenants to the
form of the tenant estoppel certificate, provided that such changes do not
reveal any defaults by the landlord under the Tenant Leases and are not
otherwise materially adverse to Buyer.

     5. Escrow and Closing. An escrow (“Escrow”) shall be opened with First
American Title Company, located at 1610 Arden Way, Suite 190, Sacramento
California, 95815, Attention: Lisa Blasquez (“Escrow Holder”) for the
consummation of the purchase and sale transaction contemplated herein by
delivery of a fully executed copy of this Agreement and the standard form
escrow instructions of Escrow Holder (to the extent not inconsistent with the
provisions hereof) to Escrow Holder within two (2) business days after the
execution of this Agreement (“Opening of Escrow”). Escrow shall close (the
“Close of Escrow”) on or before July 31, 2003. As used herein, “Closing Date”
shall mean and refer to the date the Deed (defined below) is actually recorded
by Escrow Holder in the Official Records of Orange County (“Official Records”)
pursuant to the terms and conditions contained herein.

          5.1 Delivery to Escrow. At least two (2) days prior to the Closing Date,
the parties shall deliver the following to Escrow Holder:

               5.1.1 By Seller. Seller shall deliver or cause to be delivered to Escrow
Holder: (a) a duly executed and acknowledged grant deed (“Deed”) in favor of
Buyer, conveying all of Seller’s right, title and interest in and to the Land
in the form of Exhibit “C” attached hereto; (b) a certification of the
“non-foreign” status of Seller (“FIRPTA Certificate”) in the form set forth in
Exhibit “D” attached hereto; (c) a duly executed and acknowledged counterpart
of a bill of sale and assignment of leases in the form of Exhibit “E” attached
hereto (“Bill of Sale”), covering the interest of Seller in the Tangible
Personal Property, the Intangible Personal Property and the Tenant Leases; (d)
a duly executed and acknowledged counterpart of the Access Easement; (e)
evidence reasonably satisfactory to Buyer that execution of the Deed and all
other instruments to be executed and delivered by Seller at the Close of Escrow
have been duly authorized; and (f) such customary documents and certificates as
Escrow Holder and/or the Title Company shall require to consummate the
transaction contemplated by this Agreement and to issue the Owner’s Title
Policy (provided that the foregoing shall not commit Seller to pay any amount,
give any indemnity or other agreement or to undertake any other liability or
continuing obligation which Seller shall not have specifically elected in its
sole

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discretion to agree to perform). In addition to the foregoing, at the
Close of Escrow, Seller shall deliver directly to Buyer (i) all Books and
Records (including without limitation, the Tenant Leases), (ii) all keys to the
Improvements in Seller’s possession, and (iii) a letter from Seller addressed
to each tenant under the Tenant Leases informing such tenant of the change in
ownership of the Property.

               5.1.2 By Buyer. Buyer shall deliver or cause to be delivered to Escrow
Holder: (a) the Cash Balance, together with any other sums payable by Buyer
hereunder at or prior to the Close of Escrow; (b) a duly executed preliminary
change of ownership report in the form requested by the Title Company (“PCOR”);
(c) a duly executed and acknowledged counterpart of the Bill of Sale; (e) a
duly executed and acknowledged counterpart of the Access Easement; (f) evidence
reasonably satisfactory to Seller that all necessary authorizations of the
transaction provided herein have been obtained by Buyer and by its constituent
general partners, shareholders and/or members; and (g) such customary documents
and certificates as Escrow Holder and/or the Title Company shall require to
consummate the transaction contemplated by this Agreement and to issue the
Owner’s Title Policy.

               5.1.3 Funds. Escrow Holder shall disburse all funds deposited with Escrow
Holder by Buyer in payment of the Purchase Price as follows (after the
recordation of the Deed and such other matters as the parties mutually direct,
pursuant to the provisions of Section 5.1.4): (a) deduct all items chargeable
to the account of Seller pursuant to the provisions of Section 5.2.1; (b) if,
as the result of the prorations and credits pursuant to Section 5.3, amounts
are to be charged to the account of Seller, deduct the total amount of such
charges; (c) if, as the result of the prorations and credits pursuant to
Section 5.3, amounts are to be charged to the account of Buyer, add the total
amount of such charges; (d) disburse the Purchase Price, as adjusted above, to
Seller promptly upon the Close of Escrow; and (e) disburse the remaining
balance of the funds, if any, to Buyer promptly upon the Close of Escrow.

               5.1.4 Recording. Escrow Holder shall deliver a completed PCOR to the
Sacramento County Recorder (“County Recorder") and cause the Deed (with
documentary transfer tax information to be affixed after recording), the Access
Easement, and any other documents which the parties hereto may mutually direct,
to be recorded in the Official Records and obtain conformed copies thereof for
distribution to Buyer and Seller.

               5.1.5 Owner’s Title Policy. Escrow Holder shall direct the Title Company
to issue the Owner’s Title Policy to Buyer.

               5.1.6 Delivery of Documents to Buyer. Escrow Holder shall deliver to
Buyer: (a) a conformed copy of the recorded Deed; (b) the original FIRPTA
Certificate; (c) duly executed counterparts of the Bill of Sale, and (d) the
Tenant Leases at (or promptly following) the Close of Escrow.

               5.1.7 Delivery of Documents To Seller. Escrow Holder shall deliver to
Seller at or promptly following the Close of Escrow: (i) duly executed
counterparts of the Bill of Sale; (ii) the evidence requested by Seller
pursuant to Section 5.1.2(e); and (iii) a conformed copy of the recorded Deed.

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          5.2 Closing Costs. The costs of closing the purchase and sale transaction
contemplated hereunder shall be allocated between Seller and Buyer as follows:

               5.2.1 Seller’s Closing Costs. Seller shall pay (a) that portion of the
premium for the Owner’s Title Policy allocable to the cost of a CLTA owner’s
standard coverage title policy, (b) the cost of all excise, deed or stamp taxes
and similar conveyance taxes or charges, and (c) subject to the provisions of
Section 3.1.2, one-half ( 1/2) of any recording fees, escrow fees or similar
charges of the Escrow Holder.

               5.2.2 Buyer’s Closing Costs. Buyer shall pay (a) the cost of recording the
Deed, the Access Easement and any other documents that buyer may choose to
record; (b) any costs associated with the issuance of an ALTA owner’s extended
coverage policy of title insurance as the Owner’s Title Policy (in excess of
the premium for a CLTA owner’s standard coverage title policy), (c) the cost of
any endorsements to the Owner’s Title Policy requested by Buyer, and (d)
subject to the provisions of Section 3.1.2, one-half ( 1/2) of any recording
fees, escrow fees or similar charges of the Escrow Holder.

               5.2.3 Other Closing Costs. All other expenses incurred by Seller or Buyer
with respect to the Close of Escrow, including, but not limited to, attorneys’
fees of Buyer and Seller, shall be borne and paid exclusively by the party
incurring the same, without reimbursement, except to the extent otherwise
specifically provided herein.

          5.3 Prorations.

               5.3.1 Items to be Prorated. The following shall be prorated between Seller
and Buyer as of the Closing Date: (a) All non-delinquent real estate taxes and
assessments on the Property for the current tax year, including refunds
thereof. All supplemental taxes and assessments attributable to the period
prior to the Closing Date for the tax year in which the Closing occurs shall be
prorated to the Closing Date regardless of when the bill for such supplemental
taxes or assessments is received by Buyer or Seller; provided, however, in no
event shall Seller be charged with or (and Buyer shall) be responsible for any
increase in any taxes or assessments on the Property resulting form the sale of
the Property from and after the Closing Date. In the event a tax bill is not
available for such year at the Closing Date, the required proration shall be
made on the bases of the most recent available tax bill and a further proration
shall be made between the parties within thirty (30) days of receipt of a tax
bill for the tax year in which the Closing occurs; (b) All operating expenses,
including, without limitation, all water, sewer, gas, electricity, telephone
and utility charges and deposits, maintenance charges, insurance, and other
operating costs which have accrued or are payable as of the Closing Date; (c)
Fees and charges under the service contracts not terminated effective as of or
prior to the Closing pursuant to this Agreement, on the basis of the periods to
which such contracts relate; and (d) the Tenant Lease rental payments. The
parties shall prorate such other items as are provided for in this Agreement or
as are normally prorated and adjusted in the sale of a comparable property. Any
net amount due to Seller under this Section 6.4 shall be added to the Purchase
Price due at Closing and any net amount due to Buyer shall be paid separately
by Seller at Closing and shall not be credited against the Purchase Price.

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                5.3.2 Rentals. Rental income, shall include, without limitation, any base
rent, additional rent calculated on the basis of an even 365 day year and all
other amounts including as rent to paid by tenants to the landlord under the
Tenant Leases. Delinquent rents shall not be prorated and shall be applied
first to rent unpaid under the applicable Tenant Leases post-Closing; provided
that Seller shall be entitled to delinquent rents to the extent Buyer receives
any delinquent rental payments after application of the same to rent unpaid and
due after the Close of Escrow which represent rent that was delinquent as of
the Close of Escrow, and Buyer shall pay such delinquent rent to Seller within
ten (10) days after the determination thereof. Buyer shall diligently pursue
collection of any such delinquent rent due to Seller. Seller shall have the
right to utilize legal and equitable recourse to collect any delinquent rents
or other amounts owing Seller with respect to tenants who are then tenants of
the Property without the prior written consent of Buyer.

               5.3.3 Security Deposits. Buyer shall receive a credit against the Purchase
Price in an amount equal to the amount of all tenant security deposits
identified in the Tenant Leases as being held by Seller or the landlord in
connection with the Tenant Leases.

               5.3.4 Calculation. The prorations and payments shall be made on the basis
of a written statement submitted to Buyer by Seller prior to the Closing Date
and approved by Buyer and Seller at or prior to the Close of Escrow. In the
event any prorations or apportionments made under this Section 5.3 shall prove
to be incorrect for any reason, then either party shall be entitled to an
adjustment to correct the same. With the exception of real property taxes and
assessments described in Section 5.3.1 above, any item which cannot be finally
prorated because of the unavailability of information shall be tentatively
prorated on the basis of the best data then available and re-prorated promptly
following the date accurate information becomes available.

     6. Representations and Warranties.

          6.1 Representations and Warranties of Buyer. Buyer hereby represents and
warrants to Seller, which representations and warranties shall be true and
correct as of the Effective Date and as of the Close of Escrow, that:

               6.1.1 Authority. Buyer has all requisite corporate power and authority to
execute and deliver and to perform all its obligations under this Agreement;
and

               6.1.2 Due Execution. Buyer is a limited liability company duly organized,
validly existing and in good standing under the laws of the State of Virginia.
The execution, delivery and performance of this Agreement has been duly
authorized by all necessary acts on the part of Buyer required under its
organizational and operating documents and does not and will not require any
consent or approval of any members or parties that have not been obtained.

          6.2 Representations and Warranties of Seller. Seller hereby represents and
warrants to Buyer, which representations and warranties shall be true and
correct as of the Effective Date and as of the Close of Escrow:

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               6.2.1 Authority. Seller has all requisite corporate power and authority to
execute and deliver, and to perform all of its obligations under, this
Agreement;

               6.2.2 Due Execution. Seller is a limited liability company duly organized,
validly existing and in good standing under the laws of the State of
California. The execution, delivery and performance of this Agreement have been
duly authorized by all necessary acts on the part of Seller required under its
organizational and operating documents and does not and will not require any
consent or approval of any members or parties that have not been obtained;

               6.2.3 Books and Records. From and after the Effective Date, Seller has
made available to Buyer for Buyer’s inspection at the Books and Records
Location all of the Books and Records.

               6.2.4 Employees. Following the Close of Escrow, Buyer shall have no
obligation to employ or continue to employ any individual employed by Seller or
it affiliates in connection with the Real Property.

          6.3 Survival of Representations, Warranties, and Indemnification Claims.
Notwithstanding any provision of this Agreement to the contrary, but subject to
the provisions of this Section 6.4, Seller shall not be liable to Buyer, or any
parent, subsidiary, or affiliate of Buyer (“Buyer Claimants") for any claim,
liability, obligation, demand or cause of action (a “Buyer Claim") against
Seller for (a) any breach of this Agreement, (b) any violation of any
obligation relating to this Agreement or to the Property, or (c) based on any
common law theory or claim relating to this Agreement or to the Property at any
time following the Closing Date.

          6.4 DISCLAIMER OF REPRESENTATIONS OR WARRANTIES BY SELLER. Except as
otherwise expressly provided in Section 6.2, Buyer hereby acknowledges and
agrees that the sale of the Property hereunder is and will be made on an “AS
IS, WHERE IS” BASIS AND THAT SELLER HAS NOT MADE, DOES NOT MAKE AND
SPECIFICALLY NEGATES AND DISCLAIMS ANY REPRESENTATIONS, WARRANTIES OR
GUARANTIES OF ANY KIND OR CHARACTER WHATSOEVER, WHETHER EXPRESS OR IMPLIED,
ORAL OR WRITTEN, PAST, PRESENT, FUTURE OR OTHERWISE, OF, AS TO, CONCERNING OR
WITH RESPECT TO, THE PROPERTY, INCLUDING, WITHOUT LIMITATION, (1) ENVIRONMENTAL
MATTERS RELATING TO THE PROPERTY OR ANY PORTION THEREOF, (2) GEOLOGICAL
CONDITIONS, INCLUDING, WITHOUT LIMITATION, SUBSIDENCE, SUBSURFACE CONDITIONS,
WATER TABLE CONDITIONS, UNDERGROUND WATER RESERVOIRS, AND LIMITATIONS REGARDING
THE WITHDRAWAL OF WATER AND FAULTING, (3) WHETHER OR NOT AND TO THE EXTENT TO
WHICH THE PROPERTY OR ANY PORTION THEREOF IS AFFECTED BY ANY STREAM (SURFACE OR
UNDERGROUND), BODY OF WATER, FLOOD PRONE AREA, FLOOD PLAIN, FLOODWAY OR SPECIAL
FLOOD HAZARD, (4) DRAINAGE ISSUES, CONDITIONS OR PROBLEMS, (5) SOIL CONDITIONS,
INCLUDING THE EXISTENCE OF INSTABILITY, PAST SOIL REPAIRS, SOIL ADDITIONS OR
CONDITIONS OF SOIL FILL, OR SUSCEPTIBILITY TO LANDSLIDES, OR THE SUFFICIENCY OF
ANY UNDERSHORING, (6) THE ZONING

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OR OTHER LAND USE RESTRICTIONS TO WHICH THE PROPERTY OR ANY PORTION
THEREOF MAY BE SUBJECT, (7) THE AVAILABILITY OF ANY UTILITIES TO THE PROPERTY
OR ANY PORTION THEREOF INCLUDING, WITHOUT LIMITATION, WATER, SEWAGE, GAS AND
ELECTRIC SERVICE, (8) USAGES OF ADJOINING PROPERTY, (9) ACCESS TO THE PROPERTY
OR ANY PORTION THEREOF, (10) THE VALUE, COMPLIANCE WITH THE PLANS AND
SPECIFICATIONS, SIZE, LOCATION, AGE, USE DESIGN, QUALITY, DESCRIPTION,
DURABILITY, STRUCTURAL INTEGRITY, OPERATION, TITLE TO, OR PHYSICAL OR FINANCIAL
CONDITION OF, THE PROPERTY, OR ANY PORTION THEREOF, OR ANY INCOME, EXPENSES,
CHARGES, LIENS, ENCUMBRANCES, RIGHTS, OR CLAIMS ON OR AFFECTING, OR PERTAINING
TO, THE PROPERTY OR ANY PART THEREOF, (11) THE PRESENCE OF HAZARDOUS SUBSTANCES
(DEFINED BELOW) IN OR ON, UNDER OR IN THE VICINITY OF THE PROPERTY, (12) THE
CONDITION OR USE OF THE PROPERTY OR COMPLIANCE OF THE PROPERTY WITH ANY OR ALL
PAST, PRESENT OR FUTURE FEDERAL, STATE OR LOCAL ORDINANCES, RULES, REGULATIONS
OR LAWS, BUILDING, FIRE OR ZONING ORDINANCES, CODES OR OTHER SIMILAR LAWS, (13)
THE EXISTENCE OR NON-EXISTENCE OF UNDERGROUND STORAGE TANKS, (14) ANY OTHER
MATTER AFFECTING THE STABILITY OR INTEGRITY OF THE LAND OR IMPROVEMENTS, (15)
THE POTENTIAL FOR FURTHER DEVELOPMENT OF THE PROPERTY, (16) THE EXISTENCE OF
VESTED LAND USE, ZONING OR BUILDING ENTITLEMENTS AFFECTING THE PROPERTY OR (17)
THE MERCHANTABILITY OF THE PROPERTY OR FITNESS OF THE PROPERTY FOR ANY
PARTICULAR PURPOSE (BUYER AFFIRMING THAT BUYER HAS NOT RELIED ON SELLER’S SKILL
OR JUDGMENT TO SELECT OR FURNISH THE PROPERTY FOR ANY PARTICULAR PURPOSE, AND
THAT SELLER MAKES NO WARRANTY THAT THE PROPERTY IS FIT FOR ANY PARTICULAR
PURPOSE). Buyer acknowledges that it has completed all physical and financial
examinations relating to the acquisition of the Property hereunder and, subject
to the express representations set forth in Section 6.2, will acquire the same
solely on the basis of such examinations and the title insurance protection
afforded by the Owner’s Policy and not on any information provided or to be
provided by Seller. Buyer further acknowledges and agrees that any information
provided or to be provided with respect to the Property including, without
limitation, the Due Diligence Materials, was obtained from a variety of sources
and that, except as expressly set forth in Section 6.2, Seller has not made any
independent investigation or verification of such information and makes no
representations as to the accuracy or completeness of such information. Seller
shall not be liable for any failure to investigate the Property nor shall
Seller be bound in any manner by any verbal or written statements,
representations, appraisals, environmental assessment reports, or other
information pertaining to the Property or the operation thereof, furnished by
Seller or by any real estate broker, attorney, agent, representative, employee,
servant or other person acting on Seller’s behalf, except for the express
representations and warranties of Seller set forth in Section 6.2. It is
expressly understood and agreed that the amount of the Purchase Price reflects,
and the Property is being sold by Seller and purchased by Buyer subject to, the
foregoing disclaimers.

          6.5 Release. Except for any claims relating to a breach of any of Seller’s
representations and warranties in Paragraph 6.2 (which shall be subject to the
provisions of

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Section 6.4) that are discovered by Buyer after the Closing, Buyer, on
behalf of itself and its successors and assigns, waives its right to recover
from, and forever releases and discharges Seller and Seller’s affiliates, and
the partners, trustees, shareholders, directors, officers, members, managers,
attorneys, employees and agents of each of them, and their respective heirs,
successors, personal representatives and assigns, from any and all demands,
claims, legal or administrative proceedings, losses, liabilities, damages,
penalties, fines, liens, costs or expenses whatsoever (including attorneys’
fees and costs), whether direct or indirect, known or unknown, foreseen or
unforeseen, regarding the condition (including its physical condition and its
compliance with applicable laws, and the presence in the soil, air, structures
and surface and subsurface waters, of Hazardous Substances or substances that
have been or may in the futures 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, salability or utility of
the Property, or its suitability for any purpose whatsoever.

     With respect to the waiver and release set forth herein relating to
unknown and unsuspected claims, Buyer hereby acknowledges that such waiver and
release is being made after obtaining the advice of counsel and with full
knowledge and understanding of the consequences and effects of such waiver, and
that such waiver is made with the full knowledge, understanding and agreement
that California Civil Code Section 1542 provides as follows, and that the
protections afforded by said code section are hereby waived:

	 	 	“A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR DOES NOT
KNOW OR SUSPECT TO EXIST IN HIS FAVOR AT THE TIME OF EXECUTING THE RELEASE,
WHICH IF KNOWN BY HIM MUST HAVE MATERIALLY AFFECTED HIS SETTLEMENT WITH THE
DEBTOR.”

	 	 	 
	 

Buyer	 	
 

Seller

     This Section 6.6 shall survive either (a) the Close of Escrow 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.

     7. Conditions to the Close of Escrow.

          7.1 Seller’s Conditions to the Close of Escrow. Seller’s obligations under
this Agreement (including, without limitation, its obligation to sell the
Property to Buyer pursuant to the provisions of this Agreement) are subject to
the satisfaction (or written waiver by Seller), not later than the scheduled
Closing Date (or such earlier date as may be specified with respect to a
condition under this Section 7.1), of each and all of the following conditions:
(a) Buyer shall have timely delivered to Escrow Holder the Purchase Price in
accordance with the provisions of Section 2.1; (b) Buyer shall have executed
and delivered to Escrow Holder each and all of the documents to be delivered by
Buyer pursuant to Section 5.1.2; and (c) each of Buyer’s representations and
warranties set forth in Section 6.1 shall be true and correct as of the Close
of Escrow.

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          7.2 Buyer’s Conditions to the Close of Escrow. Buyer’s obligations under
this Agreement to purchase the Property at or prior to the Outside Closing Date
are subject to the satisfaction (or written waiver by Buyer), not later than
the Outside Closing Date (or such earlier date as may be specified with respect
to a condition under this Section 7.2), of each and all of the following
conditions:

               7.2.1 Delivery of Documents. Seller shall have executed and delivered to
Escrow Holder each and all the documents to be delivered to Escrow Holder by
Seller described in Section 5.1.1;

               7.2.2 Effectiveness of Seller’s representations and Warranties/Material
Compliance with Agreement. Seller’s representations and warranties set forth in
Section 6.2 shall be true and correct as of the effective Date and the Close of
Escrow and Seller shall not have on or prior to the Close of Escrow, failed to
meet, comply with or perform in any material respect any covenants or
agreements on Seller’s part as required by the terms of this Agreement;

               7.2.3 Owner’s Title Policy. The Title Company shall be then irrevocably
and unconditionally committed to issue to Buyer the Owner’s Title Policy in the
form called for by Section 3.1 and subject only to the Permitted Exceptions;
and

               7.2.4 Tenant Default. Neither GSA nor Quest shall (i) be in default (after
any applicable notice and cure periods) under its Tenant Lease, (ii) have given
written notice to Seller, as landlord, that it is discontinuing operations at
the Property or (iii) have filed bankruptcy or be the subject of an involuntary
bankruptcy procedure.

          7.3 Failure of a Condition. Subject to the provisions of Section 5 and
Section 10, and subject to the rights and remedies of any party hereto in the
case of a default hereunder by the other party hereto, in the event of any
termination of this Agreement by reason of failure of a condition set forth in
Section 7.1 or in Section 7.2, the Deposit (less 50% of all Escrow and Title
Company termination fees) shall be returned to Buyer, Buyer shall deliver to
Seller all Buyer Prepared Due Diligence Materials and all documents delivered
to Buyer pursuant to the provisions hereof, Buyer shall comply with the
requirements applicable in the event of termination of this Agreement, and all
of the remaining rights and obligations of Buyer and Seller shall terminate
(except with respect to the obligations of Buyer under Section 4.4(c), which
obligations shall survive such termination).

     8. Additional Covenants and Agreements.

          8.1 DISCLAIMER OF REPRESENTATIONS OR WARRANTIES BY SELLER.

          (a) Buyer acknowledges, represents and warrants to Seller that as of the
Close of Escrow it knows, and has, or will have, inspected, analyzed,
investigated, reviewed and evaluated all aspects and characteristics of the
Property, including, without limitation, the physical nature and environmental
condition of the Property, to the full satisfaction of Buyer (except only to
the extent Seller has elected, pursuant to the provisions of this Agreement, to
prohibit Buyer form undertaking a particular test of the Land which Buyer had
desired to

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undertake), and will acquire the Property solely on the basis of such
examinations and the title insurance protection afforded by the Owner’s Title
Policy, and not on the basis of any information provided or to be provided by
Seller, including but not limited to the Due Diligence Materials, or on the
basis of any of the representations, warranties, indemnities, or post-Close of
Escrow obligations of Seller under this Agreement. Buyer expressly acknowledges
that neither Seller nor any agent, attorney, employee, or representative of
Seller has made any representation (other than those set forth in this
Agreement) regarding the subject matter of the sale of the Property, including,
without limitation, as to the physical nature or environmental condition of the
Land, and that Buyer, in executing, delivering and/or performing this Agreement
has not relied upon any representation (other than those contained in this
Agreement) made by or on behalf of the seller.

          (b) Buyer hereby acknowledges and agrees that the sale of the Property
hereunder is and shall be made on an “AS IS, WHERE IS” BASIS AND WITH ALL
FAULTS, AS OF THE DATE OF THE CLOSE OF ESCROW, WITHOUT ANY CLAIM OR RIGHT OF
ACTION AGAINST SELLER UNDER CONTRACT, ANY APPLICABLE ENVIRONMENTAL LAW (DEFINED
BELOW) OR ANY OTHER LAW, THE COMMON LAW OR IN EQUITY WITH RESPECT TO THE
PHYSICAL NATURE OR ENVIRONMENTAL CONDITION OF THE PROPERTY, AND THAT SELLER HAS
NOT MADE, DOES NOT MAKE, AND SPECIFICALLY NEGATES AND DISCLAIMS, ANY
REPRESENTATIONS, WARRANTIES, INDEMNITIES, OBLIGATIONS OR GUARANTIES OF ANY KIND
OR CHARACTER WHATSOEVER, WHETHER EXPRESS OR IMPLIED, ORAL OR WRITTEN, PAST,
PRESENT, FUTURE OR OTHERWISE, OF, AS, TO, CONCERNING OR WITH RESPECT TO, THE
PROPERTY OR THE MERCHANTABILITY OR FITNESS OF THE PROPERTY FOR ANY PARTICULAR
PURPOSE AND, EXCEPT AS OTHERWISE EXPRESSLY PROVIDED TO THE CONTRARY IN THIS
AGREEMENT, SELLER HEREBY DISCLAIMS, AND BUYER HEREBY WAIVES, ANY OBLIGATION,
LIABILITY, RIGHT, RIGHT OF RESCISSION, CLAIM OR DEMAND IN CONTRACT, TORT,
STRICT LIABILITY OR OTHERWISE WITH RESPECT TO THE PROPERTY.

          (c) Buyer further acknowledges and agrees that notwithstanding any
provision of this Agreement to the contrary, any information provided or to be
provided hereunder or otherwise with respect to the Property, including without
limitation, the Due Diligence Materials, was obtained from a variety of sources
and that Seller has not made any independent investigation or verification of
such information and disclaims any representation or warranty as to the
accuracy or completeness of such information. Seller shall not be liable for
any negligent misrepresentation or any failure to investigate the Property or
any portion thereof, nor shall Seller be bound in any manner by any verbal or
written statements, representations, appraisals, environmental assessment
reports, or other information or materials pertaining to the Property furnished
to Buyer by Seller or by any real estate broker, attorney, agent,
representative, employee, servant or other person acting on Seller’s behalf,
except for the express representations and warranties of Seller set forth in
Section 6.2. It is understood and agreed that the Property is being sold by
Seller and purchased by Buyer on the basis of and subject to the foregoing
provisions of this Section 8.1, which provisions shall survive the Close of
Escrow.

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           8.2 Operation of the Property Prior to the Close of Escrow. Prior to the
Close of Escrow, Seller shall (a) operate and maintain the Property on a basis
consistent with (and substantially in the same manner as) its prior practice
over the last twelve (12) months, and (b) not, without the prior written
approval of Buyer, which approval shall not be unreasonable withheld,
conditioned or delayed (i) materially alter any of the improvements or (ii)
enter into any contract with any service provider which shall survive the Close
of Escrow and which shall not be cancellable on or at any time following the
Close of Escrow by Buyer without liability on thirty (30) days’ notice (or
less, if applicable).

          8.3 Leasing. Prior to the expiration of the Contingency Date, Seller shall
subject to Buyer’s consent which shall not be unreasonably withheld,
conditioned or delayed, have the right to amend, extend or modify the existing
Tenant Leases, and Seller shall inform Buyer of all such transactions,
including all material terms thereof. During the period after the Contingency
Date and prior to the Closing Date, Seller agrees to inform Buyer of all
potential new Tenant Leases, and amendments extensions or modifications of
existing Tenant Leases, including all material terms thereof, and obtain
Buyer’s written consent (which consent Buyer may withhold in its sole but good
faith discretion) regarding all such prospective agreements or modifications
relating to the Property. Buyer shall, at Closing, assume a portion (based upon
the ratio that the portion of the term of such lease after the Closing Date
bears to the total term of such lease) of the obligation to pay any lease
commissions and tenant improvement costs arising, or having arisen, from any
new Tenant Leases or amendments, extensions or modifications of existing Tenant
Leases that are entered into after the Contingency Date and prior to the
Closing Date.

          8.4 Management Agreements. Unless Seller receives notice from Buyer at
least thirty (30) days prior to the Close of Escrow, effective as of the Close
of Escrow, any management agreement affecting the Property shall be terminated
by Seller and any and all termination fees incurred as a result thereof shall
be the sole obligation of Seller.

          8.5 Subordination, Nondisturbance and Attornment Agreements. Seller shall,
after the Contingency Date, reasonably cooperate with Buyer (at no cost to
Seller) in connection with the distribution to GSA and Quest of subordination,
nondisturbance and attornment agreements (“SNDAs”) in connection with the
prospective financing of the Property by Buyer; provided, however, that the
parties hereto acknowledge that the receipt by Buyer of such financing (and the
receipt by Buyer’s lender(s) of executed SNDAs) shall not be a condition to
Buyer’s obligations under this Agreement.

          8.6 Additional Covenants. Seller shall (i) not sell, assign, or convey any
right, title, or interest whatsoever in or to the Real Property, or create or
permit to attach any lien, security interest, easement, encumbrance, charge, or
condition affecting the Real Property (other than the Permitted Exceptions),
(ii) comply with all obligations to be performed by it under the Tenant Leases,
(iii) provide Buyer with monthly rent rolls containing the same information as
the rent roll delivered as part of the Due Diligence Materials and (iv) provide
Buyer with copies of (a) any default letters sent to or received from GSA or
Quest and, (b) any correspondence received from GSA or Quest that it is “going
dark” or seeking to re-negotiate its lease and (c) notices of bankruptcy
filings received with respect to Quest.

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     9. Destruction/Condemnation of the Real Property.

          9.1 Risk of Physical Loss

          (a) Buyer shall not be obligated to purchase the Property pursuant to this
Agreement if the Improvements are damaged by fire or other casualty prior to
the Closing Date and the cost to repair or restore such damage (“Restoration
Cost") would, in the reasonable good faith estimate of an independent architect
reasonably selected by Buyer and Seller (“Independent Architect"), exceed in
the aggregate a sum equal to One Million Dollars ($1,000,000.00) (the “Damage
Threshold").

          (b) In the event of the occurrence of any such fire or casualty, Seller
shall as soon as reasonably practical after occurrence of the same, but not
later than one business day prior to the Closing Date, notify Buyer in
reasonable detail of such event (“Casualty Event").

          (c) If the damage to the Improvements resulting from such Casualty Event
is less than the Damage Threshold, Buyer and Seller shall proceed to Closing
and Seller shall transfer and assign to Buyer all insurance proceeds and all
rights to receive insurance proceeds by reason of such damage through escrow at
the Closing (together with the amount of any deductibles payable with respect
to such Casualty Event), other than such proceeds expended prior to the Closing
in restoration and repair by Seller, and Buyer shall proceed to close the
transaction contemplated hereby without credit or offset against or reduction
of the Purchase Price.

          (d) If the damage to the Improvements resulting from such Casualty Event
exceeds the Damage Threshold, Buyer may, at its option, either terminate this
Agreement, by giving written notice of such termination (“Damage Termination
Notice") to Seller within ten (10) days of Buyer’s receipt of written notice of
such Casualty Event from Seller, or elect to proceed with its purchase of the
Property hereunder, in which event Seller shall transfer and assign to Buyer
all insurance proceeds and all rights to receive insurance proceeds by reason
of such damage through escrow at the Closing (together with the amount of any
deductibles payable with respect to such Casualty Event), other than proceeds
expended prior to the Closing in restoration and repair by Seller, and Buyer
shall proceed to close the transaction contemplated hereby without credit or
offset against or reduction of the Purchase Price. If the right to receive any
such insurance proceeds to be assigned to Buyer is not assignable by Seller to
Buyer, Buyer may nevertheless elect to close the escrow, in which event Seller
shall promptly deliver to Buyer the proceeds of any such insurance received by
it following Closing (together with the amount of any deductibles payable with
respect to such Casualty Event), except to the extent such proceeds are in
reimbursement for restoration and repair costs incurred or to be incurred by
Seller prior to Closing and Buyer shall proceed to close the transaction
contemplated hereby without credit or offset against, or reduction of the
Purchase Price. In the event that such damage shall occur and Buyer elects not
to acquire the Property, then this Agreement shall terminate and, except for
those indemnification and other obligations of the parties hereto which by
their terms survive termination, all obligations of the parties hereto shall
terminate and shall be of no further force or effect, and the Deposit and all
Deposit Interest (less 50% of the Escrow Holder’s fees) shall be returned
promptly to Buyer.

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           9.2 Condemnation. In the event that, prior to the Close of Escrow, any
governmental entity shall commence, or threaten the commencement of, any action
in condemnation, eminent domain or any other type of proceeding similar thereto
to take any portion of the Property (a “Taking"), (a) in the case where a
material portion of the Land shall be subject to such taking, Buyer shall have
the right, but not the obligation, to terminate this Agreement, which right
shall be exercisable only by delivery by Buyer of written notice of termination
to Seller within ten (10) days following receipt by Buyer of notice of such
taking, (b) in all cases where less than a material portion of the Land is
subject to such taking, Buyer shall have no right to terminate its obligations
under this Agreement, and (c) in any case where a taking affects the Land prior
to the Close of Escrow, at the Close of Escrow, Seller shall assign to Buyer by
an assignment in form reasonably satisfactory to both parties all condemnation
awards attributable to the Property to be sold at the Close of Escrow to Buyer
pursuant to the provisions of this Agreement.

     10. Remedies.

          10.1 SELLER’S DEFAULT. IF THE TRANSACTION HEREIN PROVIDED SHALL NOT BE
CLOSED BY REASON OF SELLER’S DEFAULT UNDER THIS AGREEMENT AND BUYER SHALL NOT
HAVE DEFAULTED UNDER THIS AGREEMENT, THEN BUYER AS ITS SOLE REMEDY SHALL,
SUBJECT TO THE PROVISIONS OF THIS SECTION 10, BE ENTITLED TO THE RETURN OF THE
DEPOSIT AND ANY DEPOSIT INTEREST ACCRUED THEREON AND PAYMENT OF ITS ACTUAL OUT
OF POCKET EXPENSES, NOT TO EXCEED THE SUM OF ONE HUNDRED THOUSAND DOLLARS
($100,000.00). AS MATERIAL CONSIDERATION TO SELLER’S ENTERING INTO THIS
AGREEMENT WITH BUYER, BUYER WAIVES ANY RIGHT TO RECORD OR FILE A NOTICE OF LIS
PENDENS OR NOTICE OF PENDENCY OF ACTION OR SIMILAR NOTICE AGAINST ANY PORTION
OF THE LAND OR THE PROPERTY.

          10.2 BUYER’S DEFAULT. IN THE EVENT THE TRANSACTION HEREIN PROVIDED SHALL
NOT CLOSE BY REASON OF BUYER’S DEFAULT UNDER THIS AGREEMENT AND SELLER SHALL
NOT HAVE DEFAULTED UNDER THIS AGREEMENT, THEN ESCROW HOLDER SHALL DELIVER THE
DEPOSIT TO SELLER AS FULL COMPENSATION AND LIQUIDATED DAMAGES UNDER AND IN
CONNECTION WITH THIS AGREEMENT.

          10.2 IN CONNECTION WITH THE FOREGOING, THE PARTIES RECOGNIZE THAT IN THE
EVENT OF A DEFAULT BY BUYER, SELLER WILL INCUR EXPENSES IN CONNECTION WITH THE
TRANSACTION CONTEMPLATED BY THIS AGREEMENT AND THAT IT IS EXTREMELY DIFFICULT
AND IMPRACTICABLE TO ASCERTAIN THE EXTENT OF DETRIMENT TO SELLER OR BUYER
CAUSED BY THE BREACH BY BUYER UNDER THIS AGREEMENT AND THE FAILURE OF THE
CONSUMMATION OF THE TRANSACTION CONTEMPLATED BY THIS AGREEMENT OR THE AMOUNT OF
COMPENSATION SELLER SHOULD RECEIVE AS A RESULT OF BUYER’S BREACH OR DEFAULT. IN
THE EVENT THE SALE OF THE PROPERTY SHALL NOT BE CONSUMMATED ON ACCOUNT OF
BUYER’S DEFAULT (AND SELLER

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SHALL NOT HAVE DEFAULTED), THEN THE RETENTION OF THE DEPOSIT SHALL BE
SELLER’S SOLE AND EXCLUSIVE REMEDY UNDER THIS AGREEMENT BY REASON OF SUCH
DEFAULT, SUBJECT TO THE PROVISIONS OF SECTION 11.6.

	 	 	 
	 

Seller’s Initials	 	
 

Buyer’s Initials

          10.3 Limitation of Liability. Notwithstanding any provision of this
Agreement to the contrary, in no case shall Seller ever be liable to Buyer or
any Buyer Party under any statutory, common law, equitable or other theory of
law, either prior to or following the Close of Escrow, for any lost rents,
profits, “benefit of the bargain,” business opportunities or any form of
consequential damage in connection with any claim, liability, demand or cause
of action (including, without limitation, any Buyer Claim) in any way or manner
relating to the Property, the condition of the Property, this Agreement, or any
transaction or matter between the parties contemplated hereunder.

     11. Miscellaneous.

          11.1 Brokers. Seller and Buyer each represent and warrant to the other
that, except for (i) the broker’s commission specified in (and to be payable
only upon satisfaction of the conditions specified in) that certain written
agreement (“Broker’s Agreement") executed by and between Seller and its broker
(“Seller’s Broker"), and (ii) the broker’s commission in the amount of Seven
Hundred Five Thousand Dollars ($705,000) to be paid by Seller to Triple Net
Realty, Inc. upon the Close of Escrow, the representing party has taken no
action which would or could result in any liability or obligation for any
brokerage commission or finder’s fee arising from or relating to the
transaction contemplated by this Agreement. Each party agrees to indemnify,
defend and hold the other party harmless from any claims, demands, obligations,
liabilities, losses, damages, costs or expenses, including without limitation,
attorneys’ fees arising in connection with any brokers or finders fees which
are due or which are claimed to be due as a result of the actions of the
indemnifying party. This indemnification provision shall survive the Close of
Escrow, the termination of this Agreement or the cancellation of Escrow.

          11.2 Limitation of Liability. No present or future affiliate, member,
partner, director, officer, shareholder, employee, advisor or agent of or in
Seller shall have any personal liability, directly or indirectly, under or in
connection with this Agreement or any agreement made or entered into under or
in connection with the provisions of this Agreement, or any amendment or
amendments to any of the foregoing made at any time or times, heretofore or
hereafter, and Buyer and its successors and assigns and, without limitation,
all other persons and entities, shall look solely to Seller’s assets for the
payment of any claim or for any performance, and Buyer hereby waives any and
all such personal liability. The limitations of liability contained in this
Section 11.2 are in addition to, and not in limitation of, any limitation on
liability applicable to Seller provided in Section 10 or by law or by any other
contract, agreement or instrument.

-19-

 

           11.3 Successors and Assigns. Buyer may not assign or transfer its rights
or obligations under this Agreement without the prior written consent of Seller
(in which event such transferee shall assume in writing all of the transferor’s
obligations hereunder, but such transferor shall not be released from its
obligations hereunder), which consent may be withheld in the sole discretion of
Seller; provided, however, that notwithstanding any provision of this Agreement
to the contrary, prior to the Closing Buyer shall be permitted to assign in
good faith any or all of its rights and obligations under this Agreement to any
one or more entities which are owned or controlled by the Buyer, upon notice to
Seller; provided however, that absent the express agreement of Seller, no such
assignment shall release Buyer from its liabilities hereunder. No consent given
by Seller to any transfer or assignment of Buyer’s rights or obligations
hereunder shall be construed as a consent to any other transfer or assignment
of Buyer’s rights or obligations hereunder. No transfer or assignment in
violation of the provisions hereof shall be valid or enforceable. Subject to
the foregoing, this Agreement and the terms and provisions hereof shall inure
to the benefit of and be binding upon the successors and assigns of the
parties.

          11.4 Further Assurances. Buyer and Seller agree to execute all such
instruments and documents and to take all such actions pursuant to the
provisions hereof as are reasonably necessary to consummate or carry out the
purchase, sale and other transactions herein contemplated.

          11.5 Notices. All notices or other communications required or permitted
hereunder to be delivered as communicated from one party to another shall be in
writing, and shall be personally delivered (including by means of professional
messenger service), by facsimile, or by recognized overnight air courier (e.g.,
Federal Express) and shall be deemed received upon the date of receipt thereof
and addressed as follows:

	 	 	 
	
To Buyer:
	 	With a Copy To:
	
Triple Net Properties, LLC
	 	Hirschler Fleischer
	
1551 N. Tustin Avenue, Suite 650
	 	701 East Byrd Street, 15th Floor
	
Santa Ana, CA 92705
	 	Richmond, VA 23219
	
Telephone: (714) 667-8252
	 	Telephone: (804) 771-9567
	
Facsimile: (714) 667-6860
	 	Facsimile: (804) 644-0957
	
Attention: Anthony W. Thompson
	 	Attention: Louis J. Rogers, Esq.
	
          
        Theresa Hutton	 	 
	 	 	 
	
To Seller:
	 	With a Copy To:
	
Mark Friedman
	 	Paul, Hastings, Janofsky & Walker LLP
	
c/o Fulcrum Capital Corp.
	 	515 South Flower Street, 25th Floor
	
7750 College Town Drive, Suite 350
	 	Los Angeles, California 90071
	
Sacramento, California 95826
	 	Telephone: (213) 683-6000
	
Telephone: (916) 381-1887
	 	Facsimile: (213) 627-0705
	
Facsimile: (916) 383-3974
	 	Attention: David A. Blumenfeld, Esq.

-20-

 

          To Escrow Holder:

          First American Title Company

          1610 Arden Way, Suite 190

          Sacramento California, 95815

          Telephone: (916)    -

          Facsimile: (916)    -

          Attention: Lisa Blasquez

          11.6 Legal Costs. In the event of the bringing of any action or suit by a
party hereto against another party hereunder by reason of any breach of any of
the covenants, agreements or provisions on the part of the other party arising
out of this Agreement, then in that event the prevailing party shall be
entitled to have and recover of and from the other part all costs and expenses
of the action or suit, including reasonable attorneys’ fees, accounting and
engineering fees, and any other professional fees resulting therefrom.

          11.7 Matters of Construction. All exhibits attached and referred to in
this Agreement are hereby incorporated herein as fully set forth in (and shall
be deemed to be a part of) this Agreement. This Agreement contains the entire
agreement between the parties respecting the matters herein set forth and
supersedes all prior agreements between the parties hereto respecting such
matters. Subject to this Section 11.8, time is of the essence of this
Agreement. Whenever action must be taken (including the giving of notice or the
delivery of documents) under this Agreement during a certain period of time (or
by a particular date) that ends (or occurs) on a non-business day, then such
period (or date) shall be extended until the immediately following business
day. As used herein, “business day” means any day other than a Saturday, Sunday
or federal or California State holiday. If any term or provision of this
Agreement or the application thereof to any person or circumstance shall, to
any extent, be invalid or unenforceable, the remainder of this Agreement, or
the application of such term or provision to persons or circumstances other
than those as to which it is held invalid or unenforceable, shall not be
affected thereby, and each such term and provision of this Agreement shall be
valid and be enforced to the fullest permitted by law. Section headings shall
not be used in construing this Agreement. Except as expressly provided in this
Agreement to the contrary, no remedy conferred upon a party in this Agreement
is intended to be exclusive of any other remedy herein or by law provided or
permitted, but each shall be cumulative and shall be in addition to every other
remedy given hereunder or now or hereafter existing at law, in equity or by
statute (except as otherwise expressly herein provided). No waiver by a party
of any breach of this Agreement or of any warranty or representation hereunder
by the other party shall be deemed to be a waiver of any other breach by such
other party (whether preceding or succeeding and whether or not of the same or
similar nature), and no acceptance of payment or performance by a party after
any breach by the other party shall be deemed to be a waiver of any breach of
this Agreement or of any representation or warranty hereunder by such other
party, whether or not the first party knows of such breach at the time it
accepts such payment or performance. No failure or delay by a party to exercise
any right it may have by reason of the default of the other party shall operate
as a waiver of default or modification of this Agreement or shall prevent the

-21-

 

exercise of any right by the first party while the other party continues
to be so in default. Except as otherwise expressly provided herein, any
approval or consent provided to be given by a party hereunder may be given or
withheld in the absolute discretion of such party. This Agreement shall be
construed and enforced in accordance with the internal laws of the State of
California (without regard to conflicts of law). Except as expressly provided
herein to the contrary, nothing in this Agreement, expressed or implied, is
intended to confer any rights or remedies upon any person, other than the
parties hereto and, subject to the restrictions on assignment herein contained,
their respective successors and assigns. This Agreement may be amended only be
written amendments executed by all parties. This Agreement may be executed in
any number of counterparts, provided each of the parties hereto executes at
least one counterpart; each such counterpart hereof shall be deemed to be an
original instrument, but all such counterparts together shall constitute but
one agreement.

          11.8 Cooperation with S-X 3-14 Audit. The Seller acknowledges that Buyer
intends to assign all of its rights, title and interest in and to this
Agreement and that the assignee may be a publicly registered company
(“Registered Company”) promoted by Buyer. The Seller acknowledges that it has
been advised that if the assignee is a Registered Company, the assignee is
required to make certain filings with the Securities and Exchange Commission
(the “SEC Filings") that related to the most recent pre-acquisition fiscal year
(the “Audited Year") for the Property. To assist the assignee in preparing the
SEC Filings, the Seller agrees, to the extent in Seller’s actual possession, at
no cost to Seller, to provide the assignee with the following: (i) Access to
bank statements for the Audited year; (ii) Rent roll as of the end of the
Audited Year; (iii) Operating statements for the Audited Year; (iv) Access to
the general ledger for the Audited Year; (v) Cash receipts schedule for each
month in the Audited Year; (vi) Access to invoice for expenses and capital
improvements in the Audited Year; (vii) Copies of all insurance documentation
for the Audited Year; and (viii) Copies of accounts receivable aging as of the
end of the Audited Year and an explanation for all accounts over 30 days past
due as of the end of the Audited Year. Buyer shall, within three (3) business
days of receipt of a reasonably detailed invoice therefor, reimburse Seller for
(a) all of Seller’s actual third-party costs reasonably incurred in connection
with Seller’s assistance and/or cooperation with respect to this Section 11.8
and (b) Two-Hundred Fifty Dollars ($250) per day for each day that Seller
provides Seller’s employees or principals to Buyer and/or such assignee in the
performance of such assistance and/or cooperation (the parties hereto
acknowledging that minor requests to Seller for photocopies or documents shall
not be subject to such Two Hundred Fifty Dollars ($250) per day payment). The
parties hereto acknowledge that Seller shall not (and shall not be required to)
make any representations, warranties, covenants or agreement (and shall not
incur liability of any kind of type) to or in favor of Buyer, a Registered
Company or any other person or entity in connection with Seller’s provision of
documents (or cooperation with respect to this Section 11.8). The provisions of
this Section 11.8 shall survive Closing.

          11.9 Seller’s Exchange. In the event Seller so elects, Buyer agrees to
cooperate with Seller in effecting a tax-deferred exchange under Internal
Revenue Code § 1031. Seller shall have the right to elect tax-deferred exchange
by giving Buyer written notice of such election prior to Closing. If Seller so
elects to effect a tax-deferred exchange, Buyer agrees to execute such escrow
instructions, documents, agreements or instruments to effect an exchange as
Seller may reasonably request. Seller may assign its rights and delegate its
duties under this Agreement in whole or in part to a third party in order to
effect such an exchange; provided that

-22-

 

Seller shall remain responsible to Buyer for the full and prompt
performance of any delegated duties.

-23-

 

     IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first above written.

	 	 	 	 
	SELLER:	 	Government Property Fund IV, LLC
	 	 	a California limited liability company
	 	 	 
	 	 	By:
	 	 	Name: Mark Friedman
	 	 	Title: Managing Member
	 	 	 
	BUYER:	 	Triple Net Properties, LLC
	 	 	a California limited liability company
	 
	 	 	By:
	 	 	Name: Anthony W. Thompson
	 	 	Title: President
	 	 	 	 
	 	 	
By:	 
	 	 	 	

	 	 	
Name: 	 
	 	 	 	

	 	 	
Title:	 
	 	 	 	

We acknowledge receipt of a fully executed copy of the following “Real Property
Purchase and Sale Agreement and Escrow Instructions” executed by Seller and
Buyer and we agree to follow all instructions contained therein.

ESCROW HOLDER

FIRST AMERICAN TITLE COMPANY

	 	 
	By:	 
	 	

	Name: 	 
	 	

	Title:	 
	 	

-24-

 

LIST OF EXHIBITS

	 	 	 
	Exhibit	 	Description
	
	 	

	“A”	 	
Legal Description of the Land
	“A-1”	 	
Retained Property
	“B”	 	
Initial Due Diligence Matters
	“C”	 	
Deed
	“D”	 	
FIRPTA Certificate
	“E”	 	
Bill of Sale and Assignment of Leases
	“F”	 	
Tenant Leases Schedule
	“G”	 	
Estoppel Certificate Form
	“H”	 	
Access Easement

-25-exv10w1

 

	 	 	 
	 	 	Exhibit 10.1

	 	 	 

	 	 	
Fiscal Year 2004

Executive Bonus

Plan
	 	 	 
	 	 	
Airgas, Inc.
	 	 	 
	 	 	
April 2003

 

 

Purpose of this Document

The purpose of this document is to allow bonus eligible employees at Airgas,
Inc. to understand the mechanics, measures, and other design features of the
Fiscal Year 2004 Executive Bonus Plan, and serve as a guide in the
implementation and administration of the plan. Included are payout schedules,
specific definitions and terminology, and basic plan governance.

 

 

Airgas, Inc. Fiscal Year 2004 Executive Bonus Plan

Purpose of the Plan

The purpose of the Airgas, Inc. Fiscal Year 2004 Executive Bonus Plan (the
“Plan”) is to align Management’s efforts with the strategic goals of the
Company through competitive annual incentive opportunities. This plan will be
effective from April 1, 2003 to March 31, 2004 (the “Plan Year”).

Eligibility

Participation in the Plan is determined by the function manager (e.g., CFO,
CIO, Senior Vice President).

Target Awards

Participants in the Executive Bonus Plan will be eligible for an annual cash
incentive award (the “Award”) based on the achievement of predetermined goals.
An annual incentive or bonus target is generally determined based on the
participant’s position in the organization, and can vary according to the
judgement of management.

Performance Measurement

Final Award payments are determined by adjusting the target award upward or
downward based on achievement relative to a variety of performance measures,
including: Corporate/Consolidated financial performance, individual
accountabilities, Operating Company and Area performance. Depending upon an
individual’s position and responsibilities, these various performance measures,
assessed based on different weightings, will determine the Award. Performance
measures and weighting have been established for three categories of
participants: Corporate, Operating Company Management and Area Managers.
Details are provided below.

Corporate/Consolidated Performance

Assessment of Corporate/Consolidated performance is based on achievement
relative to consolidated:

	 	•	 	Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA);
	 
	 	•	 	Sales; and
	 
	 	•	 	Return on Capital (ROC).

Earnings Before Interest, Taxes, Depreciation and Amortization (EBITDA) is
defined as revenue minus expenses (excluding interest, taxes, depreciation and
amortization).

Return on Capital (ROC) is defined as:

1

 

	 	 	 
	ROC =	 	
EBITDA – (80% x Depreciation Expense) – Unleveraged Cash
Taxes

Average Capital Outstanding During the Year

Consolidated EBITDA and Sales were chosen to replace Earnings Per Share in the
2004 Plan since EBITDA (driven by sales growth) is the primary measure of
earnings growth over the long term, and it is critical for Airgas to raise its
return on investment. Performance against these measures will be determined
based on achievement relative to predetermined targets for the Plan Year, as
set forth and approved by the Governance and Compensation Committee of the
Airgas, Inc. Board of Directors.

Individual Accountabilities

Individual performance is measured based on achievement relative to at least
one “line-of-sight” goal in the Plan Year. Prior to each Plan Year, each
participant will meet with his/her manager to develop individual performance
goals that are quantifiable (where possible) and are aligned to the Company’s
goals and key financial performance metrics. In addition, these goals should
represent “stretch” targets that are attainable, yet challenging.

Operating Company Metrics

Assessment of operating company performance is based on achievement relative to
financial performance goals set for the operating company in which the
individual works. For the upcoming Plan Year, financial performance at the
operating company level will be based on three measures:

	•	 	Earnings Before Interest,
Taxes, Depreciation, and Amortization (EBITDA);
	 
	•	 	Sales; and
	 
	•	 	Return on Average Capital
Employed (RACE).

Performance against these measures will be determined based on achievement
relative to predetermined targets for the Plan Year, as set forth and approved
by the Governance and Compensation Committee.

Area Performance Metrics

The term “Area” can be defined as either a specific geographic area (group of
branches or sales territory) or functional area. For the upcoming Plan Year,
financial performance at the Area level will be based on two measures:

	•	 	Earning Before Interest, Taxes,
Depreciation, and Amortization (EBITDA); and
	 
	•	 	Sales.

It is recognized that EBITDA may not be an appropriate measure for Area
performance in all cases. Where necessary, operating company management may
use a measure that is closely aligned with EBITDA.

2

 

Performance against these measures will be determined based on achievement
relative to predetermined targets for the Plan Year, as set forth and approved
by the Governance and Compensation Committee.

Weighting of Performance Goals

Corporate Employees

For corporate employees, Award payments will be awarded based on the relative
achievement of these goals carrying the following weights:

	 	 	 	 	 	 	 	 	 	 	 	 	 
	Consolidated Airgas	 	 
	
	 	 	 	 
	EBITDA	 	Sales	 	ROC	 	Individual Performance
	
	 	
	 	
	 	

	45%
	 	 	15	%	 	 	15	%	 	 	25	%

Operating Company Management

For operating company management, Award payments will be awarded based on the
relative achievement of these goals carrying the following weights:

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Consolidated Performance	 	Operating Company Performance	 	 
	
	 	
	 	 	 	 
	EBITDA	 	EBITDA	 	Sales	 	RACE	 	Individual Performance
	
	 	
	 	
	 	
	 	

	25%
	 	 	25	%	 	 	20	%	 	 	15	%	 	 	15	%

Area Managers

For Area managers within the operating companies, Award payments will be
awarded based on the relative achievement of these goals carrying the following
weights:

	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	Operating Company	 	 	 	 
	Area Performance	 	Performance	 	Individual Performance
	
	 	
	 	

	Sales	 	EBITDA	 	Sales	 	EBITDA	 	Metric 1	 	Metric 2
	
	 	
	 	
	 	
	 	
	 	

	20%	 	
30%
	 	10%
	 	15%
	 	12.5%
	 	12.5%

Determining Incentive Payouts

Achievement relative to these specific goals determines the extent to which a
participant receives an Award. For quantitative goals, such as
corporate/consolidated, operating company and Area financial measures,
performance is assessed relative to threshold, target, and maximum levels. The
Governance and Compensation Committee has approved tables that identify
corresponding incentive

3

 

payout levels related to threshold, target, and maximum performance levels for
quantitative goals (see graphs below).

For individual accountabilities a maximum achievement percentage for any single
goal or group of goals is 100%, and anything short of full achievement of such
goals will be given an achievement percentage between 0% and 100%. Prior to
the Plan Year, the participant and his or her manager will agree on the
performance framework.

Pay for Performance Relationship

The following graphs indicate the relationship between the achievement of a
particular financial goal and the payout for that goal associated with that
level of achievement. The weighting of these financial goals in determining an
overall incentive payout depends on the participant’s position and level of
responsibility.

4

 

     

     

Examples

	1.	 	Corporate

This employee earns $50,000 and has a target percentage of 10% of her base
salary or $5,000. At the end of the Plan year, this example assumes the
following performance results:

	 	•	 	EBITDA was 101% of Plan target, which means a payout of 100%;
	 
	 	•	 	Sales were 101% of Plan target, which means a payout of 110%;
	 
	 	•	 	ROC was at 0.1% above target, leading to a payout of 100%;
	 
	 	•	 	This employee met 80% of individual goals

5

 

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Performance	 	Target	 	Multiplied	 	Performance	 	 	 	 	 	Measure	 	Multiplied	 	Payout	 	 	 	 	 	 	 	 
	Measure	 	Bonus	 	By	 	Weighting	 	Equals	 	Target	 	By	 	%	 	Equals	 	Payout
	
	 	
	 	
	 	
	 	
	 	
	 	
	 	
	 	
	 	

	EBITDA
	 	$	5,000	 	 	 	X	 	 	 	45	%	 	 	=	 	 	$	2,250	 	 	 	X	 	 	 	100	%	 	 	=	 	 	$	2,250	 
	SALES
	 	$	5,000	 	 	 	X	 	 	 	15	%	 	 	=	 	 	$	750	 	 	 	X	 	 	 	110	%	 	 	=	 	 	$	825	 
	ROC
	 	$	5,000	 	 	 	X	 	 	 	15	%	 	 	=	 	 	$	750	 	 	 	X	 	 	 	100	%	 	 	=	 	 	$	750	 
	Individual

Performance	 	$	5,000	 	 	 	X	 	 	 	25	%	 	 	=	 	 	$	1,250	 	 	 	X	 	 	 	80	%	 	 	=	 	 	$	1,000	 
	 
	 	 	 	 	 	 	 	 	 	 	
	 	 	 	 	 	 	 	
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
	 
	Totals
	 	 	 	 	 	 	 	 	 	 	100	%	 	 	 	 	 	$	5,000	 	 	 	 	 	 	 	 	 	 	 	 	 	 	$	4,825	 
	 
	 	 	 	 	 	 	 	 	 	 	
	 	 	 	 	 	 	 	
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
	 

	2.	 	Operating Company Management

This employee earns $50,000 and has a target percentage of 10% of her base
salary or $5,000. At the end of the Plan year, this example assumes the
following performance results:

	 	•	 	Corporate/Consolidated EBITDA was 101% of Plan target, which means a payout of 100%;
	 
	 	•	 	EBITDA at the operating company was 100% of target, leading to a payout of 100%;
	 
	 	•	 	Sales at Operating company were 101% of target, leading to a payout of 110%;
	 
	 	•	 	RACE at Operating company was 101% of target, leading to a payout of 100%;
	 
	 	•	 	Employee met 80% of individual performance goals.

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Performance	 	Target	 	Multiplied	 	Performance	 	 	 	 	 	Measure	 	Multiplied	 	Payout	 	 	 	 	 	 	 	 
	Measure	 	Bonus	 	By	 	Weighting	 	Equals	 	Target	 	By	 	%	 	Equals	 	Payout
	
	 	
	 	
	 	
	 	
	 	
	 	
	 	
	 	
	 	

	Corporate/Consolidated
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	• EBITDA
	 	$	5,000	 	 	 	X	 	 	 	25	%	 	 	=	 	 	$	1,250	 	 	 	X	 	 	 	100	%	 	 	=	 	 	$	1,250	 
	Operating Company
Performance
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	• EBITDA
	 	$	5,000	 	 	 	X	 	 	 	25	%	 	 	=	 	 	$	1250	 	 	 	X	 	 	 	100	%	 	 	=	 	 	$	1,250	 
	 	• Sales
	 	$	5,000	 	 	 	X	 	 	 	20	%	 	 	=	 	 	$	1000	 	 	 	X	 	 	 	110	%	 	 	=	 	 	$	1,100	 
	 	• RACE
	 	$	5,000	 	 	 	X	 	 	 	15	%	 	 	=	 	 	$	750	 	 	 	X	 	 	 	100	%	 	 	=	 	 	$	750	 
	Individual Performance
	 	$	5,000	 	 	 	X	 	 	 	15	%	 	 	=	 	 	$	750	 	 	 	X	 	 	 	80	%	 	 	=	 	 	$	600	 
	 
	 	 	 	 	 	 	 	 	 	 	
	 	 	 	 	 	 	 	
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
	 
	Totals
	 	 	 	 	 	 	 	 	 	 	100	%	 	 	 	 	 	$	5,000	 	 	 	 	 	 	 	 	 	 	 	 	 	 	$	4,950	 
	 
	 	 	 	 	 	 	 	 	 	 	
	 	 	 	 	 	 	 	
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
	 

	3.	 	Area Managers — Operating Company

This employee earns $50,000 and has a target percentage of 10% of her base
salary or $5,000. At the end of the Plan year, this example assumes the
following performance results:

	 	•	 	EBITDA at the Area level was 100% of target, leading to a payout of 100%;
	 
	 	•	 	Sales at the Area level was 101% of target, leading to a payout of 110%;
	 
	 	•	 	EBITDA at the Operating company was 101% of target, leading to a payout of 100%;
	 
	 	•	 	Sales at the Operating company were 102% of target, yielding a 120% payout;
	 
	 	•	 	This employee on individual performance met 60% of Metric 1 and 80% of Metric 2.

6

 

To calculate her actual bonus, we multiply each measure target dollar amount by
actual performance results:

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Performance	 	Bonus	 	Multiplied	 	Performance	 	 	 	 	 	Measure	 	Multiplied	 	Payout	 	 	 	 	 	 	 	 
	Measure	 	Target	 	By	 	Weighting	 	Equals	 	Target	 	By	 	%	 	Equals	 	Payout
	
	 	
	 	
	 	
	 	
	 	
	 	
	 	
	 	
	 	

	Area Performance
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	• EBITDA
	 	$	5,000	 	 	 	X	 	 	 	30	%	 	 	=	 	 	$	1,500	 	 	 	X	 	 	 	100	%	 	 	=	 	 	$	1,500	 
	 	 	• Sales
	 	$	5,000	 	 	 	X	 	 	 	20	%	 	 	=	 	 	$	1,000	 	 	 	X	 	 	 	110	%	 	 	=	 	 	$	1,100	 
	Operating Company
Performance
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	• EBITDA
	 	$	5,000	 	 	 	X	 	 	 	15	%	 	 	=	 	 	$	750	 	 	 	X	 	 	 	100	%	 	 	=	 	 	$	750	 
	 	 	• Sales
	 	$	5,000	 	 	 	X	 	 	 	10	%	 	 	=	 	 	$	500	 	 	 	X	 	 	 	120	%	 	 	=	 	 	$	600	 
	Individual
Performance
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	Metric 1
	 	$	5,000	 	 	 	X	 	 	 	12.5	%	 	 	 	 	 	$	625	 	 	 	X	 	 	 	60	%	 	 	 	 	 	$	375	 
	 	Metric 2
	 	$	5,000	 	 	 	X	 	 	 	12.5	%	 	 	=	 	 	$	625	 	 	 	X	 	 	 	80	%	 	 	=	 	 	$	500	 
	 
	 	 	 	 	 	 	 	 	 	 	
	 	 	 	 	 	 	 	
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
	 
	Totals
	 	 	 	 	 	 	 	 	 	 	100	%	 	 	 	 	 	$	5,000	 	 	 	 	 	 	 	 	 	 	 	 	 	 	$	4,825	 
	 
	 	 	 	 	 	 	 	 	 	 	
	 	 	 	 	 	 	 	
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
	 

Funding

The Plan will be self-funding, as corporate profitability targets will be
established net of target Award payments under the Plan. Therefore, achievement
of corporate profitability targets will ensure that the Plan has funded itself.

Executive Bonus Plan Payment

At the end of the Plan Year, after all financial results have been finalized,
including approval of corporate/consolidated, operating company and Area
performance measures by the Governance and Compensation Committee, actual
individual Award payment will be determined. The Award will be paid in cash no
later than 75 days following the end of the fiscal year.

Administration of the Plan

The Management Committee of Airgas, Inc. shall have full power to administer
and interpret the Plan and, in its sole discretion, may establish or amend
rules of general application for the administration of the plan. The Management
Committee may amend or terminate the Plan at any time (except as to performance
and operating goals under the Plan that must be approved by the Governance and
Compensation Committee of the Airgas, Inc. board of directors).

Partial Year Eligibility

Employees who are eligible for the Plan for a portion of the year will receive
a prorated Award based on the base salary earned while they are eligible for
the Plan.

	•	 	New hires
	 

	 	–	New employees will immediately be eligible for the Plan.
	 
	 	–	Base salary will be accumulated from the date of hire to the end of the
Plan Year, unless eligibility ceases prior to that date. Transfers — For
employees who transfer from one job or employee status to another,
eligibility will depend on their award eligibility before and after
transferring.

7

 

	 	–	If an employee transfers from a position that is not bonus eligible to
a position that is eligible for an Award under the Plan, the annual
incentive award will be prorated based on the time in the bonus eligible
position. All calculations are done using year-end financial data.
	 
	 	–	If an employee transfers from a position that is eligible for an Award
under the Plan to a position that is not bonus eligible, the annual
incentive award will be prorated based on the length of time in the bonus
eligible position. All calculations are done using year-end financial
data.
	 
	 	–	If an employee transfers from one position that is eligible for an
Award under the plan to another position that is eligible for an award
under the plan, participation in the Plan will continue uninterrupted.
However, if the transfer involves a move that will change the weightings
used to determine an individual’s annual incentive award, the bonus
calculation will be based on the pro-rated time spent in each position.
All calculations will be done using year-end data. Accountabilities must
be established and assessed for each position separately.
	 

	•	 	Promotions

	 
	 	–	If an employee is promoted during the fiscal year, new accountabilities
must be established to reflect the new position.
	 

	•	 	Terminations
	 

	 	–	Employees who are not employed by Airgas, Inc. on the date the annual
incentive award is paid will receive no payment, unless it is
contractually stated in a separation agreement and except for the
following circumstances:

	 	–	Employees who retire or die during the plan year will be
eligible for a prorated annual incentive award. The annual
incentive award will be calculated from the date when they become
eligible, normally the beginning of the Plan Year to the date of
retirement or death.

	•	 	Leave of absence
	 

	 	–	If an employee is on a leave of absence at the end of the fiscal year,
he or she will be eligible for an Award provided that he or she returns
to work as an active employee. Any Award paid will be prorated based upon
the length of time the employee was actively working during the fiscal
year. The calculation will be made using year-end financial data. The
Award payment will be made in the next regularly scheduled payroll cycle
at the end of the associate’s first month of employment following his or
her return from leave of absence.
	 
	 	–	If an employee is on a leave of absence during the fiscal year, and
returns during the year, he or she will be eligible for an Award. Any
Award paid will be prorated based upon the length of time an associate
was actively working during the fiscal year. The calculation will be made
using year-end financial data.

8

 

Tax Considerations and Withholding

Participants will be required to report taxable income in the year the award is
received. The company will withhold taxes in the appropriate amount on all
payouts.

Bankruptcy

In the event Airgas, Inc. declares bankruptcy, the Management Committee, at its
discretion, may immediately discontinue the Plan. In the event that the Plan is
discontinued, all participants will forfeit the right to any payments under the
Plan.

Future Employment

Payment of an annual incentive Award under this plan does not imply contractual
agreement to extend or continue employment of an employee beyond receipt of the
annual incentive Award.

9

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