Document:

Exhibit 10.36

 

RECORDER MEMO: This COPY has not been QUALITY ASSURED.

 

This page is part of your
document - DO NOT DISCARD

 

	
   

  	
   

  	
  20091425286

  	
  Pages:

  
	
   

  	
  [SEAL]

  	
  [BAR
  CODE]

  	
  0029

  
	
   

  	
   

  	
  Recorded/Filed
  in Official Records

  	
   

  
	
   

  	
   

  	
  Recorder’s
  Office, Los Angeles County,

  	
   

  
	
   

  	
   

  	
  California

  	
   

  
	
   

  	
   

  	
  09/18/09
  AT 08:00AM

  	
   

  

 

	
  FEES:

  	
   

  	
  0.00

  	
   

  
	
  TAXES:

  	
   

  	
  0.00

  	
   

  
	
  OTHER:

  	
   

  	
  0.00

  	
   

  
	
  PAID:

  	
   

  	
  0.00

  	
   

  

 

[BAR CODE]

LEADSHEET

 

[BAR CODE]

200909180180006

 

00001216363

 

[BAR CODE]

002346527

 

SEQ:

03

 

DAR - Title company (Hard Copy)

 

[BAR CODE]

 

THIS FORM IS
NOT TO BE DUPLICATED

 

	
  [ILLEGIBLE]

  	
   

  	
  T72

  

 

 

CHICAGO
TITLE COMPANY

 

	
   

  	
  09/18/2009

  
	
  RECORDING
  REQUESTED BY

  	
  [BAR
  CODE]

  
	
  AND
  WHEN RECORDED MAIL TO:

  	
  *20091425286*

  
	
   

  	
   

  
	
  Munsch
  Hardt Kopf & Harr, P.C.

  	
   

  
	
  3800
  Lincoln Plaza

  	
   

  
	
  500
  N. Akard

  	
   

  
	
  Dallas,
  Texas 75201

  	
   

  
	
  Attention:
  Gregg Cleveland

  	
   

  

 

 

(Space
above this tine for Recorder’s use only)

 

SUBAREA “A”
PARTIAL ASSIGNMENT OF OWNER PARTICIPATION AGREEMENT

AND CONSENT
TO ASSIGNMENT

 

THIS SUBAREA “A” PARTIAL ASSIGNMENT OF OWNER PARTICIPATION AGREEMENT AND
CONSENT TO ASSIGNMENT (this “Agreement”)  is entered into as of this 17th  day of September,  2009, by and between SF NO HO LLC, a
California limited liability company (“Assignor”),
BEHRINGER HARVARD NOHO, LLC, a Delaware limited liability company (“Assignee”) and THE COMMUNITY REDEVELOPMENT
AGENCY OF THE CITY OF LOS ANGELES, a public body, corporate and politic (the “CRA/LA”)  with respect to
that certain real property (the “Property”)  described more fully in Exhibit “A” (Legal Description)
attached hereto and incorporated herein by this reference. Assignor, Assignee
and the CRA/LA shall hereinafter sometimes be referred to individually as a “Party” and collectively as the “Parties.”

 

SEE EXHIBIT A and “B”

 

RECITALS

 

WHEREAS, SL No Ho, LLC, a California limited liability company (“Developer”)  and the CRA/LA entered into that certain Owner Participation
Agreement dated as of March 5, 2002, as supplemented and amended by (i) that
certain First Implementation Agreement dated as of November 18, 2002, (ii) that
certain Second Implementation Agreement dated as of December 12, 2003 (the
“Second Implementation”),  (iii) that certain Third
Implementation Agreement dated as of October 1, 2004, (iv) that
certain Partial Assignment and Assumption Agreement dated as of December 18,
2003 from Developer to Assignor concerning Subarea A, (v) that certain
Second Partial Assignment and Assumption Agreement dated as of October 1,
2004 from Developer to No Ho Lofts, LLC, a Delaware limited liability company (“Subarea B Assignee”)  concerning Subarea B, (vi) that
certain Third Partial Assignment of Owner Participation Agreement and Consent
to Assignment, dated as of January 9, 2007 from Subarea B Assignee to
RedRock Noho Residential, LLC, a Delaware limited liability company and SMA
SPE, LLC,  a Delaware limited liability
company (collectively, “Subarea B-2 Assignee”), as tenants in common concerning Subarea
B-2, (viii) that certain Fourth Partial Assignment of Owner Participation
Agreement  and Consent to
Assignment, dated as of August 3, 2007 from No Ho Lofts, LLC, a Delaware
limited liability company to RedRock Noho Retail, LLC, a Delaware limited
liability company (the “Subarea B-1 Assignee”), concerning Subarea B-l (ix) that
certain Letter Agreement dated December 18, 2003 concerning the Los
Angeles County Metropolitan Transportation Authority right of way realignment
and exchange (the “First Letter Agreement”), (x) that certain Letter Agreement
dated March 4, 2004 correcting certain obligations under Item 103.1  (e)(3) (the “Second Letter Agreement”), (xi) that certain  Letter Agreement dated February 13,
2007 concerning certain construction obligations of Assignor, and

 

1

 

RECORDING
REQUESTED BY

AND
WHEN RECORDED MAIL TO:

 

Munsch
Hardt Kopf & Harr, P.C.

3800
Lincoln Plaza

500
N. Akard

Dallas,
Texas 75201

Attention:
Gregg Cleveland

 

 

(Space
above this line for Recorder’s use only)

 

SUBAREA “A”
PARTIAL ASSIGNMENT OF OWNER PARTICIPATION AGREEMENT

AND CONSENT TO ASSIGNMENT

 

THIS SUBAREA “A” PARTIAL ASSIGNMENT OF OWNER PARTICIPATION. AGREEMENT
AND CONSENT TO ASSIGNMENT (this “Agreement”)  is entered into as of this 17 day of
September, 2009, by and between SF NO HO LLC, a California limited liability
company (“Assignor”).  BEHRINGER HARVARD NOHO, LLC, a Delaware
limited liability company (“Assignee”)  and THE COMMUNITY REDEVELOPMENT AGENCY OF
THE CITY OF LOS ANGELES, a public body, corporate and politic (the “CRA/LA”)
with respect to that certain real property (the “Property”)  described more fully in Exhibit “A”
(Legal Description) attached hereto and incorporated herein by this
reference. Assignor, Assignee and the CRA/LA shall hereinafter sometimes be
referred to individually as a “Party” and
collectively as the “Parties.”

 

RECITALS

 

WHEREAS, SL No Ho, LLC, a California limited liability company (“Developer”)  and the CRA/LA
entered into that certain Owner Participation Agreement dated as of March 5,
2002, as supplemented and amended by (i) that certain First Implementation
Agreement dated as of November 18, 2002, (ii) that certain Second
Implementation Agreement dated as of December 12, 2003 (the “Second Implementation”), (iii) that
certain Third Implementation Agreement dated as of October 1, 2004, (iv) that
certain Partial Assignment and Assumption Agreement dated as of December 18,
2003 from Developer to Assignor concerning Subarea A, (v) that certain
Second Partial Assignment and Assumption Agreement dated as of October 1,
2004 from Developer to No Ho Lofts, LLC, a Delaware limited liability company (“Subarea B Assignee”)  concerning
Subarea B, (vi) that certain Third Partial Assignment of Owner
Participation Agreement and Consent to Assignment, dated as of January 9,
2007 from Subarea B Assignee to RedRock Noho Residential, LLC, a Delaware
limited liability company and SMA SPE, LLC, a Delaware limited liability
company (collectively, “Subarea B-2 Assignee”), as
tenants in common concerning Subarea B-2, (viii) that certain Fourth
Partial Assignment of Owner Participation Agreement and Consent to Assignment,
dated as of August 3, 2007 from No Ho Lofts, LLC, a Delaware limited
liability company to RedRock Noho Retail, LLC, a Delaware limited liability
company (the “Subarea B-1 Assignee”), concerning
Subarea B-l (ix) that certain Letter Agreement dated December 18,
2003 concerning the Los Angeles County Metropolitan Transportation Authority
right of way realignment and exchange (the “First
Letter Agreement”), (x) that certain Letter
Agreement dated March 4, 2004 correcting certain obligations under Item
103.1 (e)(3) (the “Second Letter
Agreement”), (xi) that certain Letter Agreement
dated February 13, 2007 concerning certain construction obligations of
Assignor, and

 

1

 

(xii)
that certain Letter Agreement dated August 31, 2005 correcting Attachment
10 (collectively, the “OPA”).

 

WHEREAS, certain terms of the OPA are also reflected in the following
documents recorded against the Property: (i) Agreement Containing
Covenants Affecting Real Property/Affordability Covenants recorded as Document No. 03-3851364
in the records of the Los Angeles County Recorder’s office; and (2) Agreement
Containing Covenants Affecting Real Property recorded as Document No. 03-3851365
in the records of the Los Angeles County Recorder’s office (collectively, the “Regulatory Agreements”).

 

WHEREAS, any capitalized terms not otherwise defined in this Agreement
shall have the respective meanings ascribed to such terms in the OPA.

 

WHEREAS, pursuant to the OPA: Developer (i) has certain rights to
develop a mixed-use development in North Hollywood, California, known as NoHo
Commons (the “Project”);  and (ii) in consideration for
Developer developing the Project in accordance with the CRA/LA’s guidelines and
requirements, the CRA/LA will assist with financing for the Project by making
available to Assignor certain CRA/LA subsidies and facilitating certain loans
and grants.

 

WHEREAS, pursuant to that certain Partial Assignment of Owner
Participation Agreement and Consent to Assignment, dated as of December 18,
2003 (the “Subarea A  Assignment”),  Developer assigned to Assignor certain rights, duties and
obligations relating to the construction, operation and maintenance of Subarea
A.

 

WHEREAS, pursuant to that certain Second Partial Assignment of Owner
Participation Agreement and Consent to Assignment, dated as of October 1,
2004 (the “Subarea B Assignment”),
Developer assigned to the Subarea B Assignee all of its rights, duties and
obligations relating to the construction, operation and maintenance of Subarea
B and the Subarea B Improvements.

 

WHEREAS, pursuant to the that certain Third Partial Assignment of Owner
Participation Agreement and Consent to Assignment, dated as of January 9,
2007 (the “Subarea B-2 Assignment”),  the Subarea B Assignee assigned to the
Subarea B-2 Assignee all of its rights, duties and obligations relating to the
operation and maintenance of Subarea B-2 and the Subarea B-2 Improvements.

 

WHEREAS, pursuant to that certain Fourth Partial Assignment of Owner
Participation Agreement and Consent to Assignment, dated as of August 3,
2007 (the “Subarea B-l Assignment”),  the Subarea B Assignee assigned to the
Subarea B-l Assignee all of its rights, duties and obligations relating to the
operation and maintenance of Subarea B-l and the Subarea B-l Improvements.

 

WHEREAS, Assignor has agreed to transfer and convey to Assignee its fee
interest in Subarea A together with those certain apartment buildings
containing approximately 438 apartment units, and the other improvements,
structures and fixtures placed, constructed or installed on Subarea A
(collectively, the “Subarea A Improvements”)
and to assign Assignor’s rights, duties and obligations under the OPA and
Regulatory Agreements, with the exception of the Retained Obligations which are
not being assigned hereunder, to Assignee which are specifically set forth on Exhibit “B”
and relate solely to the operation and maintenance of Subarea A and the Subarea
A Improvements (collectively, the “Assignee
Property”),  all subject
to the terms and conditions of this Agreement.

 

2

 

WHEREAS, Developer, the Subarea B Assignee, the Subarea B-l Assignee and
the Subarea B-2 Assignee shall retain all of the obligations contained in the
OPA that do not relate to the Assignee Property, including without limitation
all obligations relating to the Assignee Property that were retained by
Developer pursuant to the Subarea A Assignment, Subarea B (including Subarea
B-l and Subarea B-2), Subarea C, Subarea D, the Subarea B Improvements (including
the Subarea B-l Improvements and the Subarea-B-2 Improvements), the Subarea C
Improvements and the Subarea D Improvements (collectively, the “Non-Subarea A Obligations”) and Developer,
the Subarea B Assignee, the Subarea B-l Assignee and the Subarea B-2 Assignee
shall retain all of the rights contained in the OPA that do not relate to the
Assignee Property, including without limitation all rights relating to Subarea
B (including Subarea B-l and Subarea B-2), Subarea C, Subarea D, the Subarea B
Improvements (including the Subarea B-l Improvements and the Subarea-B-2
Improvements), the Subarea C Improvements and the Subarea D Improvements
(collectively, the “Non-Assigned Property”).

 

WHEREAS, Assignor and Assignee require CRA/LA’s execution of this Agreement
as the CRA/LA’s acknowledgement and agreement of the matters set forth in this
Agreement including, without limitation, those obligations and restrictions in
the OPA which continue to attach to the Assignee Property as set forth in this
Agreement and a release of the Assignee Property and the Assignee of all other
obligations, restrictions and requirements described in the OPA.

 

NOW THEREFORE, in consideration of the mutual covenants and agreements
contained herein, and other good and valuable consideration the receipt and
sufficiency of which are hereby acknowledged, the Parties hereby agree as
follows:

 

ARTICLE I

DEFINITIONS

 

Section 1.1                           Defined Terms. In
addition to terms defined elsewhere herein, the following terms shall have the
following respective meanings:

 

(a)                                     “Assigned Interests” means, only to the extent specifically set
forth on Exhibit “B”, all of Assignor’s right, title and interest under
the OPA and the Regulatory Agreements with respect to the ownership, operation
and maintenance of the Assignee Property together with any and all benefits
associated therewith which occur after the Effective Date. The Assigned
Interests are specifically set forth on Exhibit “B”, attached hereto and
incorporated herein by this reference, and it is the Parties intent that the
Assigned Interests include all rights under the OPA and the Regulatory
Agreements relating to the Assignee Property that are necessary for the
Assignee Property to receive all of the benefits established in the OPA and the
Regulatory Agreements for the Assignee Property, or that could reasonably be
inferred to be an integral part of the benefits that are appurtenant to the
Assigned Interests.

 

(b)                                    “Assumed Obligations” means those certain duties and obligations
under the OPA and the Regulatory Agreements relating to the ownership,
operation and maintenance of the Assignee Property specifically set forth as an
obligation of Assignee on Exhibit “B” which occur after the Effective
Date.

 

(c)                                     “Business Day” means any day on which banks are open to
conduct business in the state of California.

 

3

 

(d)                                    “CRA/LA Audit” means that housing compliance audit currently
being conducted by the CRA/LA in regards to the Property for compliance with
the CRA/LA Housing Policy and/or the Housing Management Plan.

 

(e)                                     “Effective Date” means the date upon which fee title to the
Assignee Property is conveyed to Assignee.

 

(f)                                       “HUD Loan” means the loan evidenced by and described in
that certain Loan Agreement (Number 106620 of City Contracts) between the City
of Los Angeles, as lender, and the CRA/LA, as borrower, relating to the
Project, dated May 4, 2004, as assigned to and assumed by Developer
pursuant to that certain Assignment and Assumption Agreement by and between the
CRA/LA and Developer entered into as of August 27, 2004.

 

(g)                                    “Retained Obligations” means those certain obligations and duties of
Assignor under the OPA relating to the acquisition and construction of the
Assignee Property that are specifically set forth as an obligation of Assignor
on Exhibit “C”.

 

ARTICLE II

ASSIGNMENT AND ASSUMPTION

 

Section 2.1                           Assignment. Assignor
hereby assigns and transfers to Assignee all of Assignor’s right, title and
interest in and to the Assigned Interests, without recourse, representation or
warranty, which occur after the Effective Date, it being the intent of the
Parties that all benefits including, without limitation, all subsidies and
other payments, relating to periods of time after the Effective Date are
assigned to Assignee and only those benefits including, without limitation, all
subsidies and other payments, relating to periods of time prior to the
Effective Date are retained by Assignor.

 

Section 2.2                           Acceptance and Assumption. Assignee hereby accepts the foregoing assignment and transfer from
Assignor, and Assignee hereby assumes and agrees to perform all of the Assumed
Obligations which occur after the Effective Date, and to be bound by, and to
comply from and after the Effective Date with, all of the terms and provisions
of the OPA and the Regulatory Agreements to the extent same relate to the
Assigned Interests and the Assumed Obligations.

 

Section 2.3                           Effect of Assignment.
From and after the Effective Date the Parties, by their execution of this
Agreement, agree that: (a) Assignee shall be deemed a party to the OPA and
any reference therein to “Developer” shall be deemed to refer to Assignee to
the extent said reference relates to the Assigned Interests and/or the Assumed
Obligations; (b) Assignor shall remain a party to the OPA solely with
respect to the Retained Obligations and, except as set forth in Subsection 2.3(a) above,
any reference to “Developer” shall be deemed to refer to Assignor, Developer,
the Subarea B Assignee, the Subarea B-l Assignee or the Subarea B-2 Assignee,
as the case may be; (c) Assignee shall be entitled to exercise and enforce
all rights to the Assigned Interests under the OPA as if Assignee had been a
signatory to the OPA or a beneficiary thereunder as of the date of its original
execution and Assignor shall no longer have any entitlement thereto; (d) CRA/LA
hereby releases Assignee, its successors and assigns and the Assignee Property
from all obligations, restrictions and requirements contained in the OPA,
except for compliance with the Assumed Obligations specified on Exhibit “B”
from and after the Effective Date; and (e) Assignor is not released from
and shall be responsible for the performance and

 

4

 

satisfaction
of the Retained Obligations and Assignee shall have no liability therefore; (f) CRA/LA
hereby releases Assignor from all duties and obligations under the OPA and
Regulatory Agreements which occur after the Effective Date and the obligations
related to the Assignee Property assumed by Assignee as set forth on Exhibit “B”
which occur after the Effective Date.

 

Section 2.4                           Consent to Amendment.
Notwithstanding Section 2.3 above, from and after the Effective Date, any
future amendment of the OPA which does not affect any of the Assignee Property,
the Assigned Interests, or the Assumed Obligations shall not require the
consent or signature of Assignee. In addition, from and after the Effective
Date, the CRA/LA shall make a good faith effort to provide written notification
to Lender (defined below and at the address below) at least ten (10) days
prior to executing any proposed amendments or modifications to any of the
provisions of the OPA which are binding on the Assignee Property. From and
after the Effective Date, the CRA/LA agrees that any amendments or
modifications to any of the provisions of the OPA which are binding on the
Assignee Property shall not be binding on the Lender, unless the Lender has
consented to such amendments or modifications, such consent not to be
unreasonably withheld, delayed or conditioned.

 

Section 2.5                           Conflict of Terms. It
is the intent of the Parties that this Agreement effect an assignment to
Assignee of all of Assignor’s right, title and interest in and to the operation
and maintenance of the Assignee Property under the OPA to the extent of the
Assigned Interests and Assumed Obligations set forth on Exhibit “B”. Exhibit “B”
is intended as an exhaustive list of all assigned rights, benefits and
obligations. Therefore, notwithstanding the provisions set forth in Section 2.1
above, to the extent that a particular interest, obligation, or benefit under
the OPA is expressly assigned or assumed, as applicable, in Exhibit “B”,
such specific provision shall control over the general assignment language
contained in Sections 2.1 and 2.2 above.

 

ARTICLE III

ASSIGNOR’S REPRESENTATION AND
WARRANTY

 

Section 3.1                           No Default Under OPA.
Assignor hereby represents and warrants to Assignee that, neither the Assignor
nor, to the best of Assignor’s knowledge, the CRA/LA is in default of any of
its obligations under the OPA or the Regulatory Agreements.

 

ARTICLE
IV

CRA/LA
CONSENT

 

Section 4.1                           Consent to
Assignment. The CRA/LA acknowledges,
consents and agrees to the allocation of obligations and benefits as set forth
herein and shall not attempt to bestow any benefit upon Assignor under the OPA
unless and only to the extent that such action is consistent with the
allocation of such benefit as set forth in this Agreement. The CRA/LA consents
to: (i) the assignment, transfer and/or hypothecation of Assignee’s
interest in the Assignee Property and the OPA by Assignee to any lender
including, without limitation Red Mortgage Capital, Inc., its successors
and assigns pursuant to the Fannie Mae Delegated Underwriting and Servicing
Program (collectively, the “Lender”)  or
is assignee or designee including, without limitation, any assignee or designee
in lieu of foreclosure, without liability for any event of default under the
OPA or the Regulatory Agreements first accruing or arising prior to Lender’s or
its assignee’s or designee’s acquisition of the Assignee Property. The CRA/LA
shall have the right to require any transferee of the Assignee Property to
comply with the terms and obligations of the OPA and the Regulatory Agreements
first accruing and arising during the transferee’s period of

 

5

 

ownership
in order for the transferee to enforce the benefits of, and the obligations of
the CRA/LA under, the OPA relating to the Assignee Property.

 

Section 4.2                           No Breach of the Assumed Obligations. The CRA/LA hereby certifies to Assignor, Assignee and Lender that,
subject to the findings of the CRA/LA Audit, Assignor (a) has performed
and is in compliance in all material respects with its obligations under the
OPA and the Regulatory Agreements, including the Retained Obligations, and (b) is
not currently in default of any of its obligations under the OPA or the
Regulatory Agreements, including the Retained Obligations. The CRA/LA
acknowledges that Assignor and Assignee are entering into this Agreement in
reliance upon said certification and that the CRA/LA shall hereafter be
estopped from pursuing any rights or remedies against Assignee or Lender in
connection with any alleged breach of an Assumed Obligation prior to the date
hereof.

 

Section 4.3                           Waiver and Release of Claims.

 

(a)                     The CRA/LA hereby acknowledges and agrees
that, from and after the Effective Date only, Assignee (and its successors)
shall be responsible for compliance with (and the Assignee Property shall only
be bound and encumbered by) only the Assumed Obligations which occur after the
Effective Date and, from and after the Effective Date, the CRA/LA expressly,
fully and forever releases and discharges Assignee and the Assignee Property from
any and all losses, expenses, claims, costs, damages, debts, attorneys’ fees,
actions, suits, judgments, awards, obligations and/or liabilities of any kind,
whether foreseeable or unforeseeable, known or unknown, suspected or
unsuspected, with respect to or in any way relating to or arising out of (i) the
Non-Subarea A Obligations and the Non-Assigned Property, and (ii) any
obligations under the OPA or the Regulatory Agreements which occurred prior to
the Effective Date including, without limitation, the Retained Obligations;
provided that nothing herein shall be deemed a release of Assignee from the
Assumed Obligations.

 

(b)                    The CRA/LA hereby acknowledges and agrees
that, from and after the Effective Date only, (i) Assignor (and its
successors) shall not be responsible for any obligations under the OPA or the
Regulatory Agreements which occur after the Effective Date except for the
Retained Obligations that have not been fully performed by Assignor, and (ii) the
CRA/LA expressly, fully and forever releases and discharges Assignor from any
and all losses, expenses, claims, costs, damages, debts, attorneys’ fees,
actions, suits, judgments, awards, obligations and/or liabilities of any kind,
whether foreseeable or unforeseeable, known or unknown, suspected or unsuspected,
with respect to or in any way relating to or arising out of the OPA or the
Regulatory Agreements which occur after the Effective Date; provided that
nothing herein shall be deemed a release of Assignor from the Retained
Obligations that have not been fully performed by Assignor.

 

(c)                     The Parties acknowledge that the Property is
currently being audited under the CRA/LA Audit and that the CRA/LA Audit may
reveal violations of the OPA, including but not limited to the CRA/LA Housing
Policy and/or the Housing Management Plan attached to the OPA. Notwithstanding
anything to the contrary in this Agreement, the Parties do hereby acknowledge
that this Waiver and Release of Claims does not extend to violations uncovered
in the CRA/LA Audit and the Parties further agree to correct any violations
uncovered by the CRA/LA Audit in a manner reasonably satisfactory to the
CRA/LA.

 

6

 

(d)                    The Parties agree that the HUD Loan does not
encumber the Assignee Property nor is the Assignee responsible for repayment of
the HUD Loan and the Developer (as defined in the first Recital above) is
solely responsible for repayment of the HUD Loan. The CRA/LA expressly, fully
and forever releases and discharges, Assignor, Assignee and the Assignee
Property from any remedies which might be construed as in any way relating to
or arising out of a default of the HUD Loan under the OPA. The Parties agree that
any default by Developer on the HUD Loan shall be interpreted as a Developer
Event of Default pursuant to Section 1001.1 and Section I.E. of
Attachment No. 8 of the OPA and shall have no affect whatsoever on the
Assignee or the Assignee Property. The CRA/LA hereby acknowledges and agrees
that in the event of such Developer Event of Default, the CRA/LA shall have no
right against Assignor, Assignee or the Assignee Properly. Notwithstanding the
foregoing, the CRA/LA acknowledges and agrees that, as set forth in Exhibit “B”,
from and after the Effective Date, any and all payments set forth in Section I.A.2.
of Attachment 8, as amended by Section 22 of the Second Implementation,
which are allocated to Subarea A (each a “HUD Payment”) shall be paid to
Assignee. Assignor and Assignee shall prorate the HUD Payment applicable to the
CRA/LA Fiscal Year 2009-2010 between themselves.

 

Section 4.4                           No Cross Default. The
CRA/LA hereby acknowledges that:

 

(a)                                     A default of any of the Assumed Obligations
shall not be deemed a default of the Non-Subarea A Obligations and/or Retained
Obligations, and vice versa.

 

(b)                                    In the event of a default of any of the
Non-Subarea A Obligations, then the CRA/LA shall have no rights or remedies
against Assignor, Assignee or the Assignee Property and, to the extent that
such a default would entitle the CRA/LA to terminate the OPA, then the CRA/LA
shall have no right to terminate the OPA to the extent it relates to Subarea A
or the Subarea A Improvements, including without limitation, any of the
Assigned Interests.

 

(c)                                     In the event of a default of any of the
Retained Obligations, then the CRA/LA shall have no rights or remedies against
Assignee or the Assignee Property and, to the extent that such a default would
entitle the CRA/LA to terminate the OPA, then the CRA/LA shall have no right to
terminate the OPA to the extent it relates to Subarea A or the Subarea A
Improvements, including without limitation, any of the Assigned Interests.

 

Section 4.5                           Consent to Financing and Security Interest: The CRA/LA hereby acknowledges and agrees
that Assignee, and any successors to Assignee, shall have the right, at any
time and without notice to or the need for approval from CRA/LA, to encumber
all or any portion of the Assignee Property.

 

Section 4.6                           Relinquishment of Right of Reverter. The right of reveller related to the Assignee Property reserved to
CRA/LA under OPA Section 1002.3 and in the Grant Deed from CRA/LA and
recorded as Instrument No. 03-3851362 on December 23, 2003, is hereby
quitclaimed, waived, released and relinquished by the CRA/LA. The CRA/LA agrees
to execute and deliver on or prior to the Effective Date a quitclaim of such
right of reverter, and/or such other documentation evidencing the
relinquishment of such right by the CRA/LA as Assignee or Assignee’s title
company may reasonably require.

 

Section 4.7.                        Relinquishment of Option to Purchase. The option to purchase the Assignee Property reserved to CRA/LA under
OPA Section 1004 and in the Grant Deed from CRA/LA and recorded as
Instrument No. 03-3851362 on December 23, 2003, is hereby
quitclaimed, waived, released

 

7

 

and relinquished by CRA/LA. CRA/LA agrees on or prior to the Effective
Date to execute and deliver a quitclaim of such option to purchase, and/or such
other documentation evidencing the relinquishment of such option by CRA/LA as
Assignee or Assignee’s title company may reasonably require.

 

Section 4.8                           Lender Reliance. Each
Party hereto hereby acknowledges and agrees that any Lender shall have the
right to rely on the contents and provisions of this Agreement and that such
Lender will rely on such content and provisions in connection with its loan to
Assignee.

 

Section 4.9                           Affordable Housing Subsidy. The CRA/LA acknowledges and agrees that (a) the Affordable
Housing Subsidy in the Public-Private Feasibility Agreement (Attachment No. 8
to the OPA) with respect to Subarea A is assigned to Assignee and that CRA/LA
will provide the Affordable Housing Subsidy payable for the Restricted Units
provided on Subarea A to Assignee in accordance with the provisions of the OPA,
(b) the amount of the Affordable Housing Subsidy is $1,988,276.24 per
annum which amount shall be paid to the owner of Subarea A by September 30
of each year, (c) the Affordable Housing Subsidy is scheduled to be paid
in twenty-one (21) equal annual installments beginning with the CRA/LA Fiscal
Year 2008-2009 and continuing annually until the CRA/LA Fiscal Year 2028-2029, (d) the
first installment of the Affordable Housing Subsidy was paid to Assignor on or
about September 30, 2008 for the CRA/LA Fiscal Year 2008-2009, (e) the
CRA/LA Fiscal Year is from July 1 to June 30 of each year, and (f) all
other subsidies and payments set forth in the OPA with respect to Subarea A
are, to the extent set forth in Exhibit “B”, assigned to Assignee.
Assignor and Assignee shall prorate the Affordable Housing Subsidy applicable
to the CRA/LA Fiscal Year 2009-2010 between themselves.

 

ARTICLE V

EFFECT OF ASSIGNMENT ON
INTERPRETATION OF OPA

 

Section 5.1                           Interpretation of OPA.
The Parties hereby acknowledge and agree that, from and after the Effective
Date, certain rights, duties and obligations under the OPA shall be interpreted
as follows:

 

(a)                                     The failure by Developer to commence or complete
construction of any improvements on time (or at all) on the Non-Assigned
Property shall not constitute a default on the part of Assignee and shall not
affect Assignee’s right to any benefit that Assignee may otherwise be entitled
to under the OPA.

 

(b)                                    With respect to the Assignee Property, the
CRA/LA shall have no right pursuant Section 1003.3 of the OPA to terminate
the OPA after the Effective Date of this Agreement.

 

(c)                                     The transfer of the Assignee Property to
Assignee constitutes a “First Sale” pursuant to Section 605.3. l(c) of
the OPA of the Subarea A Project Element, and that, upon payment by Assignor to
the CRA/LA of the amount required by Section 605.3.1(a) of the OPA,
if any, the Adjusted Project Costs shall be defined as the gross proceeds of
the sale of the Assignee Property pursuant to Section 605.3. l(b) of
the OPA.

 

(d)                                    The CRA/LA acknowledges that no payment is due
the CRA/LA under Section 605.3.1(c) of the OPA.

 

8

 

(e)                                     Assignee shall be responsible only for the
accuracy of those representations and warranties of the Developer under the OPA
that relate to the Assignee Property from and after the Effective Date.

 

ARTICLE VI

INDEMNITIES

 

Section 6.1                           Assignor Indemnity.
Subject to Section 6.3, below, but without limiting the provisions of Section 4.3
or Section 5.1 hereof, Assignor hereby agrees to indemnify, defend and
hold harmless Assignee and Assignee’s officers, directors, trustees,
shareholders, members, partners, employees, beneficiaries, representatives,
managers, agents and controlling persons (collectively the “Indemnified Parties”) from and against any and all
expenses, losses, claims, damages and liabilities (including without limitation
reasonable attorneys’ fees and expenses) caused by, or in any way resulting
from or relating to, a breach by Assignor of any Assigned Interests or Assumed
Obligation prior to the Effective Date and a breach by Assignor of any Retained
Obligation.

 

Section 6.2                           Assignee Indemnity.
Subject to the provisions of Section 6.3, below, but without limiting the
provisions of Section 4.3 or Section 5.1 hereof, Assignee hereby
agrees to indemnify, defend and hold harmless Assignor and Assignor’s officers,
directors, trustees, shareholders, members, partners, employees, beneficiaries,
representatives, managers, agents and controlling persons (also collectively
the “Indemnified Parties”)  from
and against any and all expenses, losses, claims, damages and liabilities
(including without limitation reasonable attorneys’ fees and expenses) caused
by, or in any way resulting from or relating to, a breach by Assignee of any
Assigned Interests or Assumed Obligations on or after the Effective Date.

 

Section 6.3                           Indemnification Procedures. The respective obligations of Assignor and Assignee under Section 6.1
and Section 6.2, above, shall be subject to the following terms and
conditions:

 

(a)                                     As soon as reasonably possible, but no later
than thirty (30) days following an Indemnified Party’s receipt of notice of any
claim or other matter that may give rise to indemnification under this
Agreement (each a “Claim”), said
Indemnified Party shall notify in writing the Party responsible for the
applicable indemnification obligation (the “Indemnifying
Party”)  of such Claim. The Indemnifying
Party shall undertake the defense of the Claim with legal representation of the
Indemnifying Party’s choice but reasonably satisfactory to the Indemnified
Party. The notice required by this Section 6.3(a) shall state the
nature and basis upon which indemnification is sought. Failure of the
Indemnified Party to give the notice required by this Section 6.3(a) within
the applicable time period shall not relieve the Indemnifying Party of any
liability that the Indemnifying Party may have to the Indemnified Party except
to the extent the Indemnifying Party is prejudiced thereby. All costs and
expenses of such defense (including reasonable fees of counsel) and any
settlement or compromise resulting from the defense of any claim or other
matter that may give rise to indemnification under this Agreement that has been
consented to by the Indemnified Party shall be paid for by the Indemnifying
Party, provided that the Indemnifying Party’s obligation to indemnify such
Indemnified Party with respect to any such settlement or compromise shall be
fully satisfied by the payment by the Indemnifying Party of the amounts called
for by such settlement or compromise and any such settlement or compromise
approved by the Indemnified Party shall include a complete release of such
Indemnified Party.

 

9

 

(b)                                    In the event that the Indemnifying Party fails
to undertake the defense of a Claim or advises the Indemnified Party of its
intention not to defend a Claim, the Indemnified Party will (upon further
written notice to the Indemnifying Party) have the right to undertake the
defense, compromise or settlement of said Claim on behalf of and for the
account and risk of the Indemnifying Party, and the Indemnifying Party shall
reimburse the Indemnified Party for any and all reasonable, third-party,
out-of-pocket costs and expenses (including reasonable attorney’s fees)
incurred by the Indemnified Party for the defense, compromise or settlement of
said Claim.

 

(c)                                     Any judgment, award, settlement or compromise
of any Claim, the defense of which has been undertaken by the Indemnifying
Party, shall be solely for the payment of money and shall be binding on the
Indemnified Party, and the amount of such judgment, award, settlement or
compromise shall be prima facie evidence of the amount (together with all
amounts in respect of costs and expenses referred to in Section 6.3(a),
above) which the Indemnifying Party is obligated to indemnify the Indemnified
Party under this Agreement with respect to any Claim. In the event of payment
by the Indemnified Party of any amount subject to indemnification under this
Agreement that neither the Indemnifying Party nor the Indemnified Party elect
to contest or defend as above provided, the actual amount of such payment shall
be prima facie evidence of the amount (together with all amounts in respect of
costs and expenses referred to in Section 6.3(a), above) which the
Indemnifying Party is obligated to indemnify the Indemnified Party under this
Agreement with respect to that payment.

 

(d)                                    In the event so requested by the Indemnifying
Party, the Indemnified Party shall use its reasonable best efforts to make
available all information and assistance reasonably required in the defense by
the Indemnifying Party of any Claim.

 

(e)                                     Any and all claims made by Assignor or any
Indemnified Party under Section 6.2 above shall be subject and subordinate
to the rights and liens of any bona fide third party beneficiary of a deed of
trust encumbering the Assignee Property.

 

ARTICLE VII

MISCELLANEOUS

 

Section 7.1                           Further Assignment of Assigned Interests. The CRA/LA acknowledges that, from and after
the Effective Date, Assignee may sell, assign, transfer, encumber or grant to
any third parties any rights, duties or interests in the Assigned Property
without the prior written consent of the CRA/LA.

 

Section 7.2                           Receipt of Further Payments. If Assignor receives, after the Effective Date, any payments or
benefits on account of any Assigned Interests, Assignor shall promptly notify
Assignee thereof, hold such amounts in trust for Assignee, and promptly (but in
no event later than thirty (30) days after Assignor’s receipt thereof) turn
over such amounts in full to Assignee or as Assignee may direct, in the same or
equivalent form received, without recourse, representation or warranty of
Assignor.

 

Section 7.3                           Survival. All
representations, warranties, covenants and agreements made by the Parties
hereunder shall be considered to have been relied upon by the Parties and shall
survive the execution, delivery and performance of this Agreement and all other
documents contemplated herein.

 

Section 7.4                           Successors and Assigns.
This Agreement, including, without limitation, the

 

10

 

representations, warranties, covenants and agreements contained herein (a) shall
inure to the benefit of and be enforceable by the Parties and their respective
permitted successors, assigns and transferees, and (b) shall be binding
upon and enforceable against the Parties and their respective successors,
assigns and transferees.

 

Section 7.5                           Further Assurances.
Each of the Parties agrees to execute and deliver, or cause to be executed and
delivered, all such instruments, and to take all such action, as the other
Parties may reasonably require in order to effectuate the intent and purposes
of, and to carry out the terms of, this Agreement.

 

Section 7.6                           Costs and Expenses.
Except as otherwise expressly provided herein, Assignor and Assignee shall each
bear its own costs and expenses (including but not limited to attorneys’ fees
and expenses) in connection with the negotiation and preparation of this
Agreement.

 

Section 7.7                           Counterpart Execution.
This Agreement may be executed in any number of counterparts, each of which,
when so executed and delivered, shall be an original, but all of which together
shall constitute one Agreement binding on all of the Parties. Any signature
delivered by facsimile or telecopier shall be deemed to constitute an original
signature hereto.

 

Section 7.8                           Amendments; Waivers.

 

(a)                                     No amendment of any provision of this
Agreement shall be effective unless it is in writing and signed by all the
Parties, and no waiver of any provision of this Agreement, nor consent to any
departure by a Party therefrom, shall be effective unless it is in writing and
signed by the other Parties, and then such waiver or consent shall be effective
only in the specific instance and for the specific purpose for which given.

 

(b)                                    No failure on the part of any Party to excuse,
and no delay in exercising any right hereunder or under any related document
shall operate as a waiver thereof by such Party, nor shall any single or
partial exercise of any right hereunder or under any other related document
preclude any other or further exercise thereof or the exercise of any other
right. The rights and remedies of each Party provided herein and in other
related documents (i) are cumulative and are in addition to, and not
exclusive of, any rights or remedies provided by law, and (ii) are not
conditional or contingent on any attempt by such Party to exercise any of its
rights under any other related document against the other Parties or any other
entity.

 

Section 7.9                           Governing Law. This
Agreement shall be governed by and construed under, and the obligation of the
Parties hereunder shall be determined in accordance with, the laws of the State
of California (without regard to any conflict of laws provisions thereof).

 

Section 7.10                     Notices. All demands,
notices, requests, consents and communications required hereunder or under the
OPA shall be in writing and shall be deemed to have been duly given if
personally delivered by courier service or messenger, sent by overnight
delivery service, or facsimile transmission, or deposited in the mails, by
certified or registered mail, postage prepaid, return receipt requested, to the
following addresses, or such other addresses as may be furnished hereafter by
notice in writing:

 

11

 

	
  To Assignee:

  	
  Behringer
  Harvard Multifamily OP I LP

  
	
   

  	
  15601
  Dallas Parkway, Suite 600

  
	
   

  	
  Addison,
  Texas 75001

  
	
   

  	
  Attention:
  Mark Alfieri

  
	
   

  	
  469/341-2471

  
	
   

  	
  214/655-1610
  (FAX)

  
	
   

  	
   

  
	
  With a copy to:

  	
  Munsch
  Hardt Kopf & Harr, P.C.

  
	
   

  	
  3800
  Lincoln Plaza

  
	
   

  	
  500
  N. Akard

  
	
   

  	
  Dallas,
  Texas 75201

  
	
   

  	
  Attention:
  Gregg Cleveland

  
	
   

  	
  214/855-7537

  
	
   

  	
  214/978-4364
  (FAX)

  
	
   

  	
   

  
	
  To Assignor:

  	
  SF
  No Ho LLC

  
	
   

  	
  c/o
  Fairfield Residential LLC

  
	
   

  	
  5510
  Morehouse Dr., Suite 200

  
	
   

  	
  San
  Diego, California 92121

  
	
   

  	
  Attn:
  Gino A. Barra

  
	
   

  	
  (619)
  457-2123

  
	
   

  	
  (619)
  457-3982 (FAX)

  
	
   

  	
  email:
  gbarra@ffres.com

  
	
   

  	
   

  
	
  With a copy to:

  	
  Meltzer,
  Purtill & Stelle LLC

  
	
   

  	
  1515
  East Woodfield Rd., Second Floor

  
	
   

  	
  Schaumburg,
  Illinios 60173-5431

  
	
   

  	
  Attn:
  Michael J. Wolfe

  
	
   

  	
  (847)
  330-6052

  
	
   

  	
  (847)
  330-1231 (FAX)

  
	
   

  	
  email:
  mwolfe@mpslaw.com

  
	
   

  	
   

  
	
  To the CRA/LA:

  	
  To
  the address provided for notices to the CRA/LA under the OPA.

  

 

All demands, requests, consents, notices and
communications shall be deemed to have been received if addressed in the same
manner described above (i) at the time of actual delivery thereof if
delivered by hand, by courier service or by facsimile transmission, or (ii) if
sent by overnight delivery service, then one (1) Business Day after
deposit thereof with such delivery service, or (iii) if sent by certified
or registered mail, then three (3) Business Days after certification or
registration thereof.

 

Section 7.11                     Integration. This
Agreement, together with the OPA, and any exhibits attached hereto, constitute
the entire agreement and understanding between the Parties with respect to the
subject matter hereof and supersede all prior agreements, understandings or
representations pertaining to the subject matter hereof, whether oral or
written. There are no representations, warranties or other agreements between
the Parties in connection with the subject matter hereof except as specifically
set forth or incorporated herein.

 

12

 

Section 7.12                     Severability. If any
provision of this Agreement or any other agreement or document delivered in
connection herewith, is partially or completely invalid or unenforceable in any
jurisdiction, then that provision shall be ineffective in that jurisdiction to
the extent of its invalidity or un enforceability, but the invalidity or un
enforceability of that provision shall not affect the validity or
enforceability or any provision of this Agreement, all of which shall be
construed and enforced as if that invalid or unenforceable provision were
omitted, nor shall the invalidity or un enforceability of that provision in one
jurisdiction affect its validity or enforceability in any other jurisdiction.

 

Section 7.13                     Captions and Headings.
The section captions and headings in this Agreement are for convenience of
reference only and are not intended to be full or accurate descriptions of the
contents thereof. They shall not be deemed to be part of this Agreement and in
no way define, limit, extend or describe the scope or intent of any provisions
hereof.

 

Section 7.14                     Agreement Effective.
Notwithstanding any provision of this Agreement to the contrary, this Agreement
shall become effective only upon and simultaneous with, the transfer of the
Property from Assignor to Assignee by recorded deed.

 

[The
remainder of this page has been intentionally left blank

Signatures appear on the following page.]

 

13

 

IN WITNESS WHEREOF, the Parties have executed
this Agreement as of the date first set forth above.

 

	
  “ASSIGNOR”:

  	
   

  
	
   

  	
   

  
	
  SF
  NO HO LLC,

  a California limited liability company

  	
   

  
	
   

  	
   

  
	
  By:

  	
  FF
  CALIFORNIA HOUSING FUND LLC,

  	
   

  
	
   

  	
  a
  Delaware limited liability company

  	
   

  
	
   

  	
  Its:

  	
  Manager

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  FF
  PROPERTIES, INC.,

  	
   

  
	
   

  	
   

  	
  a
  Delaware corporation

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/
  Gino A. Barra

  	
   

  
	
   

  	
   

  	
   

  	
  Gino A. Barra

  	
   

  
	
   

  	
   

  	
   

  	
  Vice President

  	
   

  

 

	
  “ASSIGNEE”:

  	
   

  
	
   

  	
   

  
	
  BEHRINGER
  HARVARD NOHO, LLC, a Delaware

  	
   

  
	
  limited
  liability company

  	
   

  
	
   

  	
   

  
	
  By:

  	
  /s/
  Mark T. Alfieri

  	
   

  
	
   

  	
   

  	
   

  
	
  Print:

  	
  Mark
  T. Alfieri

  	
   

  
	
   

  	
   

  	
   

  
	
  Title:

  	
  COO

  	
   

  

 

[Signatures
continue on the following page.]

 

 

	
  The
  State of Texas

  	
  §

  	
   

  
	
   

  	
  §

  	
   

  
	
  County
  of Dallas

  	
  §

  	
   

  

 

BEFORE ME, the undersigned authority, on this day personally appeared
Mark T. Alfieri, Chief Operating Officer, of Behringer Harvard NOHO, LLC, a
Delaware limited liability company, known to me to be the person whose name is
subscribed to the foregoing instrument, and acknowledged to me that he executed
the same for the purposes and consideration therein expressed, in the capacity
therein stated, and as the act and deed of said limited liability company.

 

GIVEN UNDER MY HAND AND SEAL OF OFFICE, this the 14th day of September, 2009.

 

 

	
   

  	
   

  	
  /s/ Linda K.
  Perkins

  
	
   

  	
   

  	
  Notary
  Public

  
	
   

  	
   

  	
  Linda
  K. Perkins

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Seal:

  	
  

  

 

 

CALIFORNIA ALL-PURPOSE ACKNOWLEDGMENT

 

	
  State
  of California

  
	
   

  
	
  County
  of San Diego

  
	
   

  
	
  On
  September 15, 2009 before me, Shannyn Daye Henkel, Notary Public,

  
	
  Date

  	
  Here insert Name and Title of the Officer

  
	
   

  
	
  personally
  appeared

  	
  Gino
  A. Barra

  
	
   

  	
  Name(s) of Signer(s)

  
	
  ,

  
			

 

[SEAL]

 

Place Notary Seal Above

 

who
proved to me on the basis of satisfactory evidence to be the person whose name
is subscribed to the within instrument and acknowledged to me that he executed
the same in his authorized capacity, and that by his signature on the
instrument the person, or the entity upon behalf of which the person acted,
executed the instrument.

 

I
certify under PENALTY OF PERJURY under the laws of the State of California that
the foregoing paragraph is true and correct.

 

WITNESS
my hand and official seal.

 

	
  Signature

  	
  /s/
  Shannyn Daye Henkel

  	
   

  
	
   

  	
  Signature of Notary Public

  	
   

  

 

OPTIONAL

 

Though the
information below is not required by law, it may prove valuable to persons
relying on the document 

and could prevent fraudulent removal and reattachment of this form to another
document.

 

Description of Attached Document

 

	
  Title
  or Type of Document:

  	
   

  
	
  Document
  Date:

  	
   

  	
  Number
  of Pages:

  	
   

  
	
  Signer(s) Other
  Than Named Above:

  	
   

  
						

 

Capacity(ies) Claimed by Signer(s)

 

	
  Signer’s
  Name:

  	
   

  	
   

  	
   

  
	
  o

  	
  Individual

  	
   

  	
   

  
	
  o

  	
  Corporate
  Officer — Title(s):

  	
   

  	
   

  	
   

  
	
  o

  	
  Partner
  — o Limited o General

  	
   

  	
  RIGHT THUMBPRINT

  
	
  o

  	
  Attorney
  in Fact

  	
   

  	
  OF SIGNER

  
	
  o

  	
  Trustee

  	
   

  	
  Top of thumb
  here

  
	
  o

  	
  Guardian
  or Conservator

  	
   

  	
   

  
	
  o

  	
  Other:

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Signer
  Is Representing:

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Signer’s
  Name:

  	
   

  	
   

  	
   

  
	
  o

  	
  Individual

  	
   

  	
   

  
	
  o

  	
  Corporate
  Officer — Title(s):

  	
   

  	
   

  	
   

  
	
  o

  	
  Partner
  — o Limited o General

  	
   

  	
  RIGHT THUMBPRINT

  
	
  o

  	
  Attorney
  in Fact

  	
   

  	
  OF SIGNER

  
	
  o

  	
  Trustee

  	
   

  	
  Top of thumb
  here

  
	
  o

  	
  Guardian
  or Conservator

  	
   

  	
   

  
	
  o

  	
  Other:

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Signer
  Is Representing:

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
								

 

©
2007 National Notary Association · 9350 De Soto Ave., P.O. Box 2402 · Chatsworth, CA 91313-2402 · www.NationalNotary.org Item # 5907 Reorder:
Call Toll-Free 1-800-876-6827

 

 

“THE
CRA/LA”

 

	
  THE
  COMMUNITY REDEVELOPMENT AGENCY OF

  	
   

  
	
  THE
  CITY OF LOS ANGELES, a public body, corporate and

  	
   

  
	
  politic

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  By:

  	
  /s/
  Authorized Signatory

  	
   

  
	
  Print:

  	
  Authorized
  Signatory

  	
   

  
	
  Its:

  	
  Regional
  Administrator

  	
   

  

 

 

APPROVED
AS TO FORM:

 

CARMEN
A. TRUTANICH,

CITY
ATTORNEY

 

 

	
  By:

  	
  /s/
  Authorized Signatory 9/14/09

  	
   

  
	
   

  	
  Assistant/Deputy City Attorney

  	
   

  

 

 

APPROVED
AS TO FORM:

 

 

	
  By:

  	
  /s/
  Authorized Signatory

  	
   

  
	
   

  	
  Agency Special Counsel

  	
   

  

 

 

CALIFORNIA
ALL-PURPOSE ACKNOWLEDGMENT

 

	
  STATE
  OF CALIFORNIA

  
	
   

  
	
  COUNTY
  OF Los Angeles

  
	
   

  
	
  On
  September 15, 2009 before me, Shannyn Daye Henkel, Notary Public

  
	
   

  	
  Name
  and Title of the Officer e.g. “JANE DOE, NOTARY PUBLIC”

  
	
   

  	
   

  
	
  personally
  appeared

  	
  Margarita
  Hernandez Escontrias

  
	
   

  	
  Name(s) of Signer(s)

  
			

 

who
proved to me on the basis of satisfactory evidence to be the person whose name
is subscribed to the within instrument and acknowledged to me that she executed
the same in her authorized capacity, and that by her signature on the
instrument the person, or the entity upon behalf of which the person acted,
executed the instrument.

 

I
certify under PENALTY OF PERJURY under the laws of the State of California that
the foregoing paragraph is true and correct

 

	
   

  	
  WITNESS my hand and official seal.

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  /s/ Shannyn Daye Henkel

  	
   

  
	
   

  	
  SIGNATURE OF NOTARY

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  [SEAL]

  	
   

  

 

 

	
  -OPTIONAL SECTION-

  
	
  CAPACITY
  CLAIMED BY SIGNER

  
	
   

  
	
  Though
  statute does not require the Notary to fill in the date below, doing so may
  prove invaluable to persons relying on the document.

  
	
   

  
	
  o  INDIVIDUAL

  
	
   

  
	
  o  CORPORATE OFFICER(s)

  
	
   

  
	
   

  
	
  TITLE(s)

  
	
   

  
	
  o PARTNERS(S

  	
  o  LIMITED

  
	
  o GENERAL

  	
   

  
	
   

  	
   

  
	
  o ATTORNEY-IN-FACT

  	
   

  
	
   

  	
   

  
	
  o  TRUSTEE(S)

  	
   

  
	
   

  	
   

  
	
  o  GUARDIAN/CONSERVATOR

  	
   

  
	
   

  	
   

  
	
  o  OTHER:

  	
   

  
	
   

  
	
   

  
	
   

  
	
  SIGNER IS
  REPRESENTING

  
	
  NAME OF PERSON(S) OR ENTITY(IES)

  
	
   

  

 

OPTIONAL
SECTION

 

	
  THIS
  CERTIFICATE MUST BE ATTACHED TO THE DOCUMENT DESCRIBED AT RIGHT:

  	
   

  	
  Title
  or Type of Document:                                              .

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Number of Pages:
       Date of Document:                        .

  
	
  Though
  the data requested here is not required by law, it could

  	
   

  	
   

  
	
  prevent
  fraudulent reattachment of this form.

  	
   

  	
  Signer(s) Other
  Than Named Above:

  

 

 

EXHIBIT “B”

 

Assigned Interests and Assumed Liabilities

 

(See Attached)

 

 

EXHIBIT “B” TO SUBAREA “A” PARTIAL ASSIGNMENT OF OWNER 

PARTICIPATION AGREEMENT AND CONSENT TO ASSIGNMENT

 

Supplementary Comments to Assigned Interests

 

The
Assigned Interests and Assumed Obligations shall include any and all rights,
duties and obligations of the Developer under those Sections of the OPA and
those Paragraphs of that certain First Letter Agreement and the Second Letter
Agreement, but only to the extent said Sections relate to, apply to, or involve
the ownership, operation and maintenance of Subarea A and the Subarea A
Improvements:

 

	
  102(a)

  	
   

  	
   

  
	
  103.1

  	
   

  	
  Assumed only to the extent necessary to confirm the
  Agency’s right to pre-approve tenants pursuant to Section 103.1 of the
  OPA shall not apply to residential tenants of Subarea A.

  
	
  103.1(a)

  	
   

  	
  Assumed only to the extent necessary to confirm
  construction of 438 units and associated parking allowed.

  
	
  103.1(e)(l)

  	
   

  	
   

  
	
  103.1(e)(4)

  	
   

  	
  See also Section 6 of the Second Implementation
  Agreement. Assignor assigns to Assignee the unpaid Housing Subsidy for Subarea
  A payable to the Developer by the Agency, which has been calculated by the
  Agency to be $1,988,276.24 per annum in accordance with the calculations set
  forth in Section 103.1(e)(4). The Housing Subsidy is separately
  performed for Subareas A and B-2. The annual payments of the Housing Subsidy
  are scheduled to terminate at the end of Agency Fiscal Year 2028-2029.

  
	
  104

  	
   

  	
   

  
	
  105

  	
   

  	
   

  
	
  106

  	
   

  	
   

  
	
  106.2

  	
   

  	
   

  
	
  Article 2

  	
   

  	
   

  
	
  302

  	
   

  	
   

  
	
  308.1

  	
   

  	
  Assumed only to the extent necessary to confirm the
  representations and warranties and assume the obligations of Developer under
  the second, third and fourth paragraphs only of Section 308.1 of the OPA
  which relate solely to the Assignee Property from and after the Effective
  Date, shall be deemed to have been made and assumed by Assignee only after

  

 

4

 

	
   

  	
   

  	
  the Effective Date, and Assignor shall have no
  responsibility or liability therefore, except to the extent Assignor made any
  such representations and warranties or assumed any such obligations before
  the Effective Date for which Assignor shall remain solely liable. Further,
  only to the extent it is applicable, Assignee shall assume only (i) the
  right to the Agency’s reimbursement obligation in the fifth paragraph of
  Section 308.1, as it relates to the Assignee Property and (ii) the
  remainder of the fifth paragraph of Section 308.1 only in the event of
  construction by Assignee on the Assignee Property after the Effective Date.

  
	
  308.2

  	
   

  	
   

  
	
  316.1

  	
   

  	
   

  
	
  318.5

  	
   

  	
   

  
	
  319

  	
   

  	
  Assumed only to the extent necessary to confirm the
  Release of Construction Covenants is conclusive evidence of the satisfactory
  Completion of the construction for Subarea A and the termination of all
  construction covenants.

  
	
  509

  	
   

  	
  Assumed only to the extent necessary to confirm that
  the representations and warranties of Developer under Section 509 of the
  OPA which relate only to the use and operation of the Assignee Property by
  the Assignee from and after the date of this Agreement, shall be deemed to
  have been made by Assignee only after the date of this Agreement, and
  Assignor shall have no responsibility or liability therefore, except for
  representations and warranties made by Assignor prior to the date of this
  Agreement for which Assignee shall have no responsibility or liability.

  
	
  601.2

  	
   

  	
  Assumed only to the extent necessary to confirm that
  the Agency has certified the Project Costs which pertain to the annual return
  shortfall and annual agency participation payments.

  
	
  602

  	
   

  	
   

  
	
  603

  	
   

  	
   

  
	
  605.1

  	
   

  	
   

  
	
  605.2

  	
   

  	
   

  
	
  605.3

  	
   

  	
   

  
	
  605.4

  	
   

  	
   

  
	
  702.7

  	
   

  	
   

  

 

 

	
  801.1.2

  	
   

  	
  Assumed only to the extent it applies to the
  operation and use of the Assignee Property from and after the date of this
  Agreement.

  
	
  801.1.5

  	
   

  	
   

  
	
  801.1.6

  	
   

  	
   

  
	
  801.1.8

  	
   

  	
  Assumed only to the extent necessary to confirm that
  a coordinated Signage Plan may be independently prepared and implemented for
  Subarea A, on the one hand, and Subareas B and C, on the other hand.

  
	
  801.1.10

  	
   

  	
   

  
	
  801.1.11

  	
   

  	
   

  
	
  801.1.12

  	
   

  	
   

  
	
  801.1.14

  	
   

  	
   

  
	
  801.2

  	
   

  	
   

  
	
  802

  	
   

  	
   

  
	
  803.1

  	
   

  	
   

  
	
  803.2

  	
   

  	
   

  
	
  804.2

  	
   

  	
   

  
	
  1001.1

  	
   

  	
   

  
	
  1001.2

  	
   

  	
   

  
	
  1002

  	
   

  	
   

  
	
  1002.1

  	
   

  	
   

  
	
  1002.2

  	
   

  	
   

  
	
  1101 through
  1109

  	
   

  	
   

  
	
  1110

  	
   

  	
  Assignee makes the representations and warranties in
  Paragraphs 1 thru 5 as of the Effective Date only

  
	
  1111 through
  1124

  	
   

  	
   

  
	
  1126

  	
   

  	
   

  
	
  1127

  	
   

  	
  Assignee only assumes this section for purposes of
  establishing the “Date of the Agreement”

  
	
  Attachment
  No. 2

  	
   

  	
   

  
	
  Attachment
  No. 3

  	
   

  	
   

  
	
  Attachment
  No. 8

  	
   

  	
  The payment rights from the Agency in Sections IA,
  IB, ID, IE, VI and VII with respect to Subarea A are assigned to Assignee. In
  addition, the payment rights under Section II with respect to the
  (Affordable Housing Subsidy) with respect to the Restricted Units provided on
  Subarea A are assigned.

  
	
  Attachment
  No. 10

  	
   

  	
   

  
	
  First Implementation Agreement

  	
   

  	
   

  
	
  l.a

  	
   

  	
   

  

 

 

	
  2.a

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Second Implementation Agreement

  	
   

  	
   

  
	
  1

  	
   

  	
   

  
	
  2

  	
   

  	
   

  
	
  6

  	
   

  	
  See 103. l(e)(4), above. Assignor assigns to
  Assignee the unpaid Housing Subsidy for Subarea A payable to the Developer by
  the Agency, which has been calculated by the Agency to be $1,988,276.24 per
  annum in accordance with the calculations set forth in
  Section 103.1(e)(4). The Housing Subsidy is separately performed for
  Subareas A and B-2. The annual payments of the Housing Subsidy are scheduled
  to terminate at the end of Agency Fiscal Year 2028-2029.

  
	
  17

  	
   

  	
  Assignee only assumes the rights to the credit
  allocated to Subarea A.

  
	
  22

  	
   

  	
  Assignee only assumes the rights to the payments and
  credits under Sections 1.A.2, 1.A.3, and l.B as allocated to Subarea A.

  
	
  23

  	
   

  	
  Assignee only assumes the rights to the credit
  allocated to Sublease A.

  
	
  24

  	
   

  	
   

  
	
  First Letter Agreement

  	
   

  	
   

  
	
  6

  	
   

  	
   

  
	
  7

  	
   

  	
   

  
	
  9

  	
   

  	
   

  
	
  10

  	
   

  	
   

  
	
  Second Letter Agreement

  	
   

  	
   

  

 

Except as otherwise expressly
provided in this Agreement including, without limitation, Sections 4.6 and 4.7,
Assignee acknowledges that it is acquiring the Property subject to the
following covenants and restrictions:

 

1. Agreement Containing
Covenants Affecting Real Property (Affordability Covenants) by and between SF
NO HO, LLC and The Community Redevelopment Agency of the City of Los Angeles
dated December 18, 2003 and recorded against the Property on December 23,
2003 as Instrument No. 03-3851364.

 

2. Grant Deed from The
Community Redevelopment Agency of the City of Los Angeles to SF No Ho, LLC
dated December 19, 2003 and recorded against the Property on December 23,
2003

 

 

as Instrument No. 03-3851362.

 

3. Agreement Containing
Covenants Affecting Real Property by and between the Community Redevelopment
Agency of the City of Los Angeles and SF No Ho, LLC dated December 19,
2003, recorded against the Property on December 23, 2003 as Instrument No. 03-3851365.

 

 

EXHIBIT “C” TO SUBAREA “A” PARTIAL ASSIGNMENT OF OWNER
PARTICIPATION

AGREEMENT AND CONSENT TO ASSIGNMENT

 

Retained Obligations

 

	
  101

  	
   

  	
   

  
	
  103.2

  	
   

  	
   

  
	
  107

  	
   

  	
   

  
	
  301

  	
   

  	
   

  
	
  303

  	
   

  	
   

  
	
  303.1

  	
   

  	
   

  
	
  303.2

  	
   

  	
   

  
	
  303.3

  	
   

  	
   

  
	
  303.4

  	
   

  	
   

  
	
  303.5

  	
   

  	
   

  
	
  303.6

  	
   

  	
   

  
	
  304

  	
   

  	
   

  
	
  305

  	
   

  	
   

  
	
  306

  	
   

  	
   

  
	
  306.1

  	
   

  	
   

  
	
  306.2

  	
   

  	
   

  
	
  306.3

  	
   

  	
   

  
	
  306.4

  	
   

  	
   

  
	
  306.5

  	
   

  	
   

  
	
  307

  	
   

  	
   

  
	
  308.1

  	
   

  	
  Paragraphs 1 and 6 only

  
	
  309

  	
   

  	
   

  
	
  310.1

  	
   

  	
   

  
	
  310.2

  	
   

  	
   

  
	
  312

  	
   

  	
   

  
	
  313

  	
   

  	
   

  
	
  314

  	
   

  	
   

  
	
  315

  	
   

  	
   

  
	
  317

  	
   

  	
   

  
	
  318

  	
   

  	
   

  
	
  318.1

  	
   

  	
   

  
	
  318.2

  	
   

  	
   

  

 

1

 

	
  318.2.1

  	
   

  
	
  318.2.2

  	
   

  
	
  318.2.3

  	
   

  
	
  318.2.4

  	
   

  
	
  318.3

  	
   

  
	
  318.4

  	
   

  
	
  401.2

  	
   

  
	
  401.3

  	
   

  
	
  406.2

  	
   

  
	
  601.1

  	
   

  
	
  701

  	
   

  
	
  702.1

  	
   

  
	
  702.2

  	
   

  
	
  702.3

  	
   

  
	
  702.5

  	
   

  
	
  702.6

  	
   

  
	
  703.1

  	
   

  
	
  703.2

  	
   

  
	
  703.3

  	
   

  
	
  703.4

  	
   

  
	
  703.5

  	
   

  
	
  801.1.1

  	
   

  
	
  801.1.7

  	
   

  
	
  801.1.9

  	
   

  
	
  801.1.13

  	
   

  
	
  804.1

  	
   

  
	
  1002.3

  	
   

  
	
  1003.1

  	
   

  
	
  1004

  	
   

  
	
  1004.1

  	
   

  
	
  1004.2

  	
   

  
	
  1004.3

  	
   

  
	
  1004.4

  	
   

  
	
  1005

  	
   

  
	
  1125

  	
   

  

 

2

 

	
  Attachment No. 7

  	
   

  	
   

  
	
  Attachment No. 9

  	
   

  	
   

  
	
  Attachment No. 11

  	
   

  	
   

  
	
  Attachment No. 12

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  First Implementation Agreement

  	
   

  	
   

  
	
  3

  	
   

  	
   

  
	
  4

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Second Implementation Agreement

  	
   

  	
   

  
	
  7

  	
   

  	
  Assignee retains only the obligations in the first
  paragraph which were assumed by Assignor

  
	
  9

  	
   

  	
   

  
	
  10

  	
   

  	
   

  
	
  11

  	
   

  	
  See Section 310.1.

  
	
  12

  	
   

  	
   

  
	
  13

  	
   

  	
   

  
	
  16

  	
   

  	
   

  
	
  18

  	
   

  	
   

  
	
  19

  	
   

  	
   

  
	
  21

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Letter Agreement

  	
   

  	
   

  
	
  5

  	
   

  	
   

  
	
  8

  	
   

  	
   

  
	
  9

  	
   

  	
   

  

 

3Exhibit
10.37

 

AGREEMENT OF SALE AND PURCHASE

AND JOINT ESCROW INSTRUCTIONS

 

ACACIA ON
SANTA ROSA CREEK

 

THIS AGREEMENT OF SALE AND PURCHASE AND JOINT ESCROW
INSTRUCTIONS (this “Agreement”),
dated as of October 12, 2009 (the “Agreement
Date”), is between ACACIA ON SANTA ROSA CREEK, LLC, a California limited liability company (“Seller”), and BEHRINGER
HARVARD MULTIFAMILY OP I LP, a Delaware limited partnership  (“Buyer”).

 

ARTICLE 1

 

CERTAIN DEFINITIONS

 

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

 

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

 

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

 

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

 

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

 

1.1.5       “Application
Deadline” shall have the meaning
ascribed in Section 2.4.1.

 

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

 

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

 

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

 

 

1.1.9       “Assumption Approval Deadline” shall have the
meaning ascribed in Section 2.4.2.

 

1.1.10     “Assumption Documents” shall have the
meaning ascribed in Section 9.5.1(g).

 

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

 

1.1.12     “Broker” shall mean Arroyo & Coates.

 

1.1.13     “Broker’s Commission” shall have the meaning ascribed in Section 9.8.

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

2

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

3

 

1.1.37     “Extended Assumption Approval
Deadline” shall have the meaning ascribed in Section 2.4.2.

 

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

 

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

 

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

 

1.1.41     “Improvements” shall mean all buildings, structures and
improvements located on the Land not owned by a Tenant or any other third party
including, without, limitation, two hundred seventy seven (277) apartment
units.

 

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

 

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

 

1.1.44     “Land” shall mean that certain parcel or parcels of land and
appurtenances thereto located at 4656 Quigg Drive, Santa Rosa, California, and
more particularly described on Exhibit A,
including Seller’s right, title and interest, if any, in and to all
rights-of-way, open or proposed streets (public or private), alleys, easements,
strips or gores of land adjacent thereto.

 

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

 

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

 

1.1.47     “Lender” shall have the
meaning ascribed in Section 2.2.

 

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

 

4

 

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

 

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

 

1.1.51     “Loan” shall have the
meaning ascribed in Section 2.2.

 

1.1.52     “Loan Documents” shall have the
meaning ascribed in Section 2.2.

 

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

 

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

 

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

 

1.1.56     “Permitted Exceptions” shall mean and
include all of the following:  (a) applicable
zoning and building ordinances and land use regulations; (b) such state of
facts as would be disclosed by a physical inspection of the Property; (c) the
lien of taxes and assessments not yet due and payable (it being agreed by Buyer
and Seller that if any tax or assessment is levied or assessed with respect to
the Property after the date hereof and the owner of the Property has the
election to pay such tax or assessment either immediately or under a payment
plan with interest, Seller may elect to pay under a payment plan, which
election shall be binding on Buyer); (d) any exclusions from coverage set
forth in the jacket of any Owner’s Policy of Title Insurance, but excluding all
specific title exceptions in Schedules B and C of the Title Commitment on any
standard printed exceptions in the Title Commitment; (e) any exceptions
caused by Buyer, any Licensee Parties and their respective agents,
representatives or employees; (f) such other exceptions as the Title
Company shall commit to insure over, without any additional cost to Buyer,
whether such insurance is made available in consideration of payment, bonding,
indemnity of Seller or otherwise; (g) the rights of the Tenants under the
Leases, as tenants only; and (h) any matters deemed to constitute Permitted
Exceptions under Section 4.2 hereof.

 

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

 

1.1.58     “Personal Property” shall mean all of the
right, title, and interest of Seller in and to the tangible personal property,
which is located at and used exclusively in connection with the Property as of
the Closing Date a specific list thereof as of the Effective Date being
attached hereto as Exhibit H,
but specifically excluding (a) any personal property owned, financed or leased
by any Tenant under any Lease, (b) the Computer Equipment, (c) any 

 

5

 

tangible personal property owned
by the Property Manager, and (d) any tangible personal property owned by a
third party.  Personal Property shall not
include the Excluded Materials.

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

6

 

1.1.70     “Replacement Guarantor” shall have the
meaning ascribed in Section 2.4.1.

 

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

 

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

 

1.1.73     “Seller Guarantors” shall have the
meaning ascribed in Section 2.4.1.

 

1.1.74     “Servicer” shall have the
meaning ascribed in Section 2.3.

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

1.1.83     “Title Company” shall mean Chicago Title
Company.

 

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

 

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

 

7

 

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

 

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

 

ARTICLE 2

 

AGREEMENT OF
PURCHASE AND SALE; PURCHASE PRICE

 

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

 

2.2                  Purchase Price.  Buyer shall pay Seller the purchase price of
THIRTY EIGHT MILLION SIX HUNDRED FIFTY THOUSAND DOLLARS ($38,650,000.00) (“Purchase Price”) at Closing in cash or
other immediately available federal funds. 
Notwithstanding the foregoing, a portion of the Purchase Price shall be
paid by Buyer’s assumption of, and agreement to pay and perform, the
obligations of Seller under the loan documents (the “Loan Documents”) evidencing that certain loan (the “Loan”) from Berkshire Mortgage Finance
Limited Partnership (together with its successors and assigns, “Lender”) to Seller in the original
principal amount of TWENTY NINE MILLION SIX HUNDRED THOUSAND DOLLARS
($29,600,000.00) and having an approximate unpaid balance of TWENTY SEVEN
MILLION ONE HUNDRED THOUSAND DOLLARS ($27,100,000.00).  The Loan is serviced by a servicer (the “Servicer”).  The
balance of the Purchase Price and such other funds as may be necessary to pay
Buyer’s expenses hereunder, subject to closing adjustments, shall be deposited
with the Escrow Agent no later than one (1) business day prior to the Closing
Date in accordance with this Agreement and paid to Seller upon satisfaction of
all conditions precedent to the Closing as described herein.

 

2.3                  Deposits; Designation of Reporting Person &
Contract Consideration.

 

2.3.1       Initial
Deposit. Within two (2) business days
after the Effective Date (the “Deposit Date”),
Buyer shall deposit via wire transfer the sum of THREE HUNDRED THOUSAND DOLLARS
($300,000.00) in immediately available U.S. funds as a deposit (the “Initial Deposit”)
with Escrow Agent whose address is as indicated in Section 10.3,
below.  If 

 

8

 

Buyer fails to make the Initial
Deposit on or before 5:00 p.m. Pacific Time on the Deposit Date, then this
Agreement shall terminate and shall be of no further force and effect and the
parties shall have no further obligations to one another except to the extent
expressly stated otherwise herein. 
Unless Buyer delivers written notice to Seller and Escrow Agent on or before
5:00 p.m. Pacific Time on the fifth (5th) day after the delivery of all of
the Deliverable Due Diligence Items as set forth in Section 3.2.1
hereof (the “Initial Due Diligence Period”)
that it is terminating this Agreement, the Initial Deposit shall be deemed
fully earned and non-refundable except as specifically set forth herein and
except if Seller fails to obtain Corporate Approval as described in Section 6.1.2
hereof on or before 5:00 p.m. Pacific Time on the last date of the Due
Diligence Period.  Buyer expressly agrees
that the Initial Deposit shall be released by Escrow Agent to Seller upon the
later of (a) the expiration of the Initial Due Diligence Period, or (b) the
date on which Seller notified Buyer and Escrow Agent that it has obtained
Corporate Approval, unless Buyer has terminated this Agreement as provided
above or Seller has failed to timely obtain Corporate Approval as described
above.  Notwithstanding that the
foregoing is to be self-executing, Seller and Buyer agree to promptly execute
and deliver to Escrow Agent any instructions necessary in order to cause the
release of the Initial Deposit to Seller or Buyer, as applicable.

 

2.3.2       Unless
Buyer terminates this Agreement within the Initial Due Diligence Period
referenced in Section 2.3.1, above, or before the expiration of the
Due Diligence Period pursuant to Section 3, below, then by 5:00 p.m.
Pacific Time on the last day of the Due Diligence Period, Buyer shall deposit
with Escrow Agent via wire transfer an additional NINE HUNDRED THOUSAND DOLLARS
($900,000.00) (the “Additional Deposit”)
in immediately available funds.  Once
made, the Additional Deposit shall be non-refundable in all instances except (a) if
the Closing fails to occur solely as a result of a material default by Seller
hereunder that is not cured within all applicable notice and cure periods, (b) if
the Closing fails to occur solely as a result of the failure of a condition
precedent in Buyer Conditions Precedent (set forth in Section 9.3
hereof) through no fault of Buyer, and (c) as otherwise expressly stated otherwise
in this Agreement, including specifically Section 2.4.2
hereof.  If Buyer fails to make the
Additional Deposit on or before 5:00 p.m. Pacific Time on the business day
after the date of the expiration of the Due Diligence Period, then this Agreement
shall terminate and shall be of no further force and effect and the parties
shall have no further obligations to one another except to the extent expressly
stated otherwise herein.

 

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

 

2.3.3       Designation of Reporting Person.  In order to assure compliance with the
requirements of Section 6045 of the Internal Revenue Code of 1986, as
amended (for purposes of this Section 2.3.3, the “Code”), and any related reporting
requirements of the Code, Seller and Buyer hereby designate Escrow Agent as the
person to be responsible for all information reporting under Section 6045(e) of
the Code (the “Reporting Person”).  In 

 

9

 

connection with the foregoing
appointment, Seller and Buyer hereby agree: (a) to provide to the
Reporting Person all information and certifications regarding such party, as
reasonably requested by the Reporting Person or otherwise required to be
provided by a party to the transaction described herein under Section 6045
of the Code; and (b) to provide to the Reporting Person such party’s
taxpayer identification number and a statement (on Internal Revenue Service Form W-9
or an acceptable substitute form, or on any other form the applicable current
or future Code sections and regulations might require and/or any form requested
by the Reporting Person), signed under penalties of perjury, stating that the
taxpayer identification number supplied by such party to the Reporting Person
is correct.  Each party hereto agrees to
retain this Agreement for not less than four years from the end of the calendar
year in which the Closing occurred, and to produce it to the Internal Revenue
Service upon a valid request therefor.

 

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

 

2.4                  Loan
Assumption.

 

2.4.1       Application
for Loan Assumption.  Within five
(5) business days after the later of (i) Seller has provided Buyer
the request forms and requirements from Lender for the Loan Assumption and (ii) Seller
has obtained Corporate Approval as described in Section 6.1.2
hereof (the “Application Deadline”),
Buyer shall apply, in good faith, to the Lender for approval of the assignment
by Seller, and assumption by Buyer, of Seller’s interest in the Loan.  Buyer and Seller agree to use commercially
reasonable efforts to cooperate with each other in connection with said
application process and each party shall submit to Lender any information
reasonably requested by Lender to complete and approve said application by the
Assumption Approval Deadline (as hereinafter defined).  Seller and Buyer hereby acknowledge that
Affiliates of each recently closed a sale and acquisition of the Waterford
Place Apartments, located in Dublin, California (the “Waterford Transaction”).  The Waterford Transaction involved a Loan
Assumption of loans currently held by the Federal Home Loan Mortgage
Corporation as assignee from Lender and the loan documents representing such
loans were substantially similar to the Loan Documents evidencing the Loan.  In the Waterford Transaction the Seller
Affiliate negotiated and obtained in the Assumption Agreement thereunder
certain provisions relating to the release of Seller and Seller Guarantor and
the Buyer Affiliate negotiated and obtained therein certain modifications and
amendments to the loan documents being assumed by the Buyer Affiliate.  Seller and Buyer hereby mutually agree to
pursue the Loan Assumption in good faith on the same basic terms as were
negotiated and obtained in the Waterford Transaction Assumption Agreement.  Buyer agrees that Buyer shall pay any
required loan assumption review fee to the Lender as and when required by the
Lender and/or Servicer in accordance with the Loan Documents.  Seller has informed Buyer that certain
Affiliates of Seller (each a “Seller
Guarantor”) have provided certain standard non-recourse carve-out
guaranties and/or environmental indemnities to the Lender with respect to the
Loan and that Lender will require Buyer to provide a financially responsible
person or entity to provide a substantially similar guaranty and indemnity (a “Replacement Guarantor”).  Buyer agrees that Buyer will offer a 

 

10

 

Replacement Guarantor who shall, in Lender’s sole
discretion, satisfy the financial conditions currently required to be
maintained by the applicable Seller Guarantor(s) pursuant to the Loan
Documents.  Notwithstanding anything to
the contrary contained herein, provided that Seller and Buyer shall have
satisfied its obligations under this Section 2.4, the failure of
Lender to approve the assignment and assumption of the Loan by the Assumption
Approval Deadline shall not constitute a default by either Seller or Buyer.

 

2.4.2       Certain
Condition Precedent Regarding Loan Assumption.  Without limitation to any of the conditions
precedent set forth in this Agreement, it shall be a condition to Buyer’s and
Seller’s obligation to close the purchase and sale of the Property that the
Lender shall have approved, in writing (or otherwise has indicated in
correspondence that upon its execution at the Closing of the agreement upon
Loan Assumption documents that it has approved the assumption of the Loan), the
assumption of the Loan by Buyer, such approval to include the closing of such
assumption in 2009 or on January 7, 2010, in accordance with this
Agreement, and the release of Seller and Seller Guarantor and approval of Buyer’s
Replacement Guarantor within forty-two (42) days of the Effective Date (the “Assumption Approval Deadline”).  If Lender fails to approve the assumption of
the Loan, the release of Seller and Seller Guarantor and approval of Buyer’s
Replacement Guarantor by Buyer on or before 5:00 p.m. Pacific Time on the
Assumption Approval Deadline, then either Buyer or Seller, in their sole and
absolute discretion, may extend the Assumption Approval Deadline for ten (10) additional
days (the “Extended Assumption Approval Deadline”)
by notice in writing to the other party prior to the expiration of the
Assumption Approval Deadline; provided, however, that if Lender fails to
approve the assumption of the Loan by Buyer, the release of Seller and the
Seller Guarantor and approval of Buyer’s replacement Guarantor on or before
5:00 p.m. Pacific Time on the Extended Assumption Approval Deadline, then
either Buyer or Seller  may thereafter
terminate this Agreement by delivering written notice to the other at any time
after the expiration of the Extended Assumption Approval Deadline; provided,
however, that if the Lender approves Buyer’s assumption of the Loan, the
release of Seller and Seller Guarantor and approval of Buyer’s Replacement
Guarantor before the delivery of such termination notice, then such termination
notice shall be null and void.  In the
event of such termination the Deposit shall be returned to Buyer so long as the
Buyer is not otherwise in material default hereunder and the parties shall have
no further liability to each other except as set forth herein.  Notwithstanding the immediately preceding
sentence, Seller agrees that Buyer shall also be entitled to a refund of the
Deposit if the Lender (a) unconditionally refuses to consent to the
assignment and assumption of the Loan or the release of Seller and Seller
Guarantor, or (b) conditions such consent on the Buyer agreeing to modifications
to the terms and conditions of the Loan Documents where such modifications
would result in an increase in the costs of assuming and/or servicing the Loan
(e.g., a change in interest rate, a change in the assumption fee) of Twenty
Thousand Dollars ($20,000.00) or more. 
Buyer acknowledges that the Loan Documents may require the borrower
thereunder to maintain certain repair, replacement and/or other reserves. To
the extent Lender has agreed to waive these reserve requirements for Seller but
is unwilling to waive such requirements for Buyer, then the requirement that
Buyer maintain the reserves and the cost involved in funding the reserves shall
not be considered in calculating the Twenty Thousand Dollar ($20,000.00)
threshold referenced above, provided that Lender’s only reserve requirement is
a monthly deposit into a Replacement Reserve of an amount not exceeding $225
per unit or a monthly amount of $5,193.75.

 

11

 

2.4.3       Closing of
Loan Assumption.  Upon Lender’s
approval of Buyer’s assumption of the Loan, Seller and Buyer agree to execute
such documentation as may be reasonably required by Lender as contemplated and
described in Section 2.4.1 hereof pursuant to and in accordance
with the terms of the Loan Documents and to take all other steps necessary to
promptly close the loan assumption on the Closing Date, the completion of which
shall include Lender’s release of Seller and the Seller Guarantor from future
liability with respect to the Loan. 
Concurrent with the Closing of the assumption of the Loan and provided
the Lender shall agree, all reserve accounts maintained by such Lender on
behalf of Seller in connection with the Loan, if any, shall be assigned by Seller
to Buyer at the Closing and Seller shall receive a credit at Closing equal to
the amounts so assigned.  If the Lender
shall not so agree to the assignment and assumption of existing reserves at
Closing as aforesaid, such reserves shall not be assigned to or assumed by
Buyer and Seller shall not receive a credit therefor at Closing, and if
required by Lender, Buyer shall establish replacement reserves in the amounts
reasonably required by Lender but such amounts shall not be in excess of the
amounts currently required by the Loan Documents or, if no requirement, the
last sentence of Section 2.4.2 hereof, and if Lender requires such
additional reserves, Buyer shall have no obligation to agree thereto and such
requirement shall be deemed to be a “material change” in the Loan Documents as
contemplated in Section 9.4.1 hereof, and Buyer shall upon Seller’s
request and expense, reasonably cooperate with Seller’s efforts to recover such
Seller reserves from Lender.  All costs
and fees of assuming the Loan shall be at Buyer’s sole cost and expense and
Buyer shall pay all assumption deposit fees, application fees, review
processing fees, legal fees, and loan assumption fees when charged by the
Lender and/or Servicer in accordance with the terms of the applicable Loan
Documents in connection with the assumption thereof.

 

2.4.4       Materiality.  The provisions of this Section 2.4
are material and included as a material portion of the consideration given by
Buyer to Seller in exchange for Seller’s agreement to enter into and perform
under this Agreement

 

2.5                  General
Assumption.  As
additional consideration for the purchase and sale of the Property, at Closing
Buyer will: (a) assume and perform (i) all of the covenants and
obligations of Seller, Seller’s predecessors in title and Seller’s Affiliates
pursuant to the Leases and Approved Contracts (including, without limitation,
those relating to any Tenant Deposits) which arise on or after the Closing
Date, and (ii) all obligations under the Leases and Approved Contracts
relating to the physical and environmental condition of the Property arising on
or after the Closing Date; and (b) assume and agree to discharge, perform
and comply with each and every liability, duty, covenant, debt or obligation of
Seller or any of its Affiliates resulting from, arising out of, or in any way
related to any Licenses and Permits and arising on or after the Closing
Date.  By closing under this Agreement,
Buyer hereby indemnifies, defends, and holds Seller, Seller’s Affiliates and
their respective partners, members, shareholders, officers, directors,
managers, employees and agents harmless from and against any and all claims,
liens, damages, demands, causes of action, liabilities, lawsuits, judgments,
losses, costs and expenses (including but not limited to reasonable attorneys’
fees and expenses) asserted against or incurred by Seller and arising out of
the failure of Buyer to perform its obligations pursuant to this Section 2.5.  The provisions of this Section 2.5
shall survive the Closing.

 

12

 

ARTICLE 3

 

BUYER’S
DUE

DILIGENCE/CONDITION OF THE PROPERTY

 

3.1                  Buyer’s
Inspections and Due Diligence.  Buyer acknowledges that commencing on the
Effective Date and continuing until 5:00 p.m. Pacific Time on the tenth
(10th) day thereafter (the period of time from the Effective Date until such
time shall be referred to herein as the “Due
Diligence Period”), Buyer shall conduct its examinations,
inspections, testing, studies and investigations of the Property, review
information regarding the Property and such documents applicable to the
Property, including, without limitation, the documents that Seller delivers or
makes available, as set forth in Section 3.2 below (collectively,
the “Due Diligence”).  Except for any limitations as may be imposed
by this Article 3 below, Buyer may conduct such due diligence
activities, inspections, and studies of the Property as it deems necessary or
appropriate, and examine and investigate to its full satisfaction all facts, circumstances,
and matters relating to the Property (including the physical condition and use,
availability and adequacy of utilities, access, zoning, compliance with
applicable laws, environmental conditions, accessibility matters, engineering
and structural matters), title and survey matters, and any other matters it
deems necessary or appropriate for purposes of consummating this
transaction.  The Due Diligence shall be
at Buyer’s sole cost and expense.

 

3.2                  Delivery
Period.

 

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

 

3.2.2       No
Warranty. 
Buyer acknowledges that many of the Due Diligence Items were prepared by
third parties other than Seller.  Buyer
further acknowledges and agrees that (a) except as specifically set forth
in this Agreement, neither Seller nor any of Seller’s respective agents, employees,
contractors or any other party has made any warranty or 

 

13

 

representation
regarding the truth, accuracy or completeness of the Due Diligence Items or the
source(s), and (b) Seller has not undertaken any independent investigation
as to the truth, accuracy or completeness of the Due Diligence Items, and
Seller is providing the Due Diligence Items or making the Due Diligence Items
available to Buyer solely as an accommodation to Buyer.  Buyer acknowledges that the Due Diligence
Items are subject to the confidentiality provisions of Section 3.5
below.

 

3.2.3       Excluded Materials.  Notwithstanding any terms to the contrary in
this Agreement, (a) Seller shall not be obligated or otherwise required to
furnish or make available to Buyer any of the following (collectively, “Excluded Materials”):  (i) any appraisals or other economic
evaluations of, or projections with respect to, all or any portion of the
Property, including, without limitation, budgets, prepared by or on behalf of
Seller or any Affiliate of Seller or any other party, (ii) any documents,
materials or information which are subject to attorney/client, work product or
similar privilege, which constitute attorney communications with respect to the
purchase of the Property by Seller, (iii) any information which Seller, in
good faith, considers proprietary and not related to the operation of the
Property, and (iv) any information which is subject to any other
confidentiality obligations; (b) Due Diligence Items shall not include any
Excluded Materials; and (c) Seller shall have no obligation or liability
of any kind to Buyer as a result of Seller not furnishing or making available
to Buyer the Excluded Materials.

 

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

 

3.4                  Insurance
Requirements. 
As a condition precedent to any entry onto the Property by Buyer or any
Licensee Parties prior to the Closing, Buyer or any such Licensee Parties shall
carry worker’s compensation insurance in compliance with applicable law,
liability 

 

14

 

insurance
covering bodily injury, property damage, with a combined single limit of
$2,000,000, and automobile liability insurance in an amount not less than
$1,000,000.00 covering all automobile and equipment owners and/or operated by
Buyer and any Licensee Parties in connection with the license granted
herein.  The liability policies described
herein shall name Seller and those reasonably designated by Seller as
additional insured.  All such insurance
shall: (a) be primary and no insurance of Seller or any of the additional
insured shall be called upon to contribute to a loss and (b) not be
cancelled or materially modified without first giving Seller thirty (30) days’
advance written notice of cancellation or material modification.  Before entering the Property pursuant to this
Section 3.4, Buyer shall deliver copies of the policies or
certificates of insurance issued by the insurance carrier(s) to Seller
demonstrating compliance with the terms of this Section.  In the event that, during the Due Diligence
Period or at any other time during the pendency of this Agreement that Buyer or
any Licensee Parties are entering the Property, Buyer or any Licensee Parties
fail to procure or maintain the insurance requirements as set forth in this Section or
such insurance is modified such that it does not provide coverage to Seller and
its additional insured as required herein neither Buyer nor any Licensee
Parties shall be permitted to enter the Property and if Buyer does not cure
such failure within three (3) days of notice thereof from Seller, then
Seller shall thereafter have the right upon to terminate this Agreement upon
twenty-four (24) hours written notice to Buyer whereupon Buyer shall
immediately cease all operations on the Property and promptly remove all
Licensee Parties from the Property (unless the subject insurance requirements
are satisfied and evidence thereof delivered to Seller before the expiration of
said twenty-four (24) hour notice) and the Additional Deposit (but not the
Initial Deposit) shall be promptly returned to Buyer.

 

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

 

3.6                  Due
Diligence Indemnity. 
Buyer shall defend, protect, indemnify, and hold harmless Seller, Seller’s
Affiliates and their respective partners, shareholders, members, officers,
directors, employees and agents, as applicable, and the Property Manager from
and against all Losses (whether arising out of injury or death to persons or
damage to the Property or otherwise) including, but not limited to, costs of
remediation, restoration and other similar 

 

15

 

activities,
mechanic’s and materialmen’s liens and attorneys’ fees, arising out of or in
connection with Buyer’s Due Diligence, Buyer’s breach of its obligations under Section 3.7
or Buyer’s or any Licensee Parties’ entry upon the Property; provided, however,
that Buyer shall have no obligations under this Section 3.6 to the
extent the Losses are caused solely by the negligence or willful misconduct of
Seller, Seller’s Affiliates, Seller’s partners, shareholders, members,
officers, directors, employees and agents, as applicable, and/or the Property
Manager or result from the mere discovery by Buyer of pre-existing conditions
at the Property and the Buyer promptly notifies Seller in writing of such
discovery.  The provisions of this Section 3.6
shall survive the Closing or, if the purchase and sale is not consummated, any
termination of this Agreement.

 

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

 

3.8                  Due
Diligence Period. 
Except as set forth in Section 2.3.1 hereof, unless Buyer
delivers to Seller and Escrow Agent written notice terminating this Agreement
on or before the end of the Due Diligence Period which notice may be for any
reason, or no reason, (the “Disapproval Notice”),
this Agreement shall continue in full force and effect.  If Buyer fails to give Seller the Disapproval
Notice, then Buyer shall be deemed to have approved all of the matters
described in Sections 3.1 and 3.2.  If the Agreement is terminated under Section 2.3.1
hereof, then Buyer shall be entitled to the immediate return of the Initial
Deposit and Buyer shall return all Due Diligence Items in its possession to
Seller and provide to Seller, promptly after receipt of a request from Seller,
originals of any third party reports, studies and appraisals relating to the
Property in its possession, without representation or warranty and at no cost
to Seller.  If, however, the Agreement is
not terminated under Section 2.3.1 hereof, but Buyer does elect to
deliver the Disapproval Notice on or before the expiration of the Due Diligence
Period, then Buyer shall be entitled to the immediate return of the Additional
Deposit (but not the Initial 

 

16

 

Deposit)
and Buyer shall return all Due Diligence Items to Seller and provide to Seller,
promptly after receipt of a request from Seller, originals of all third party
reports, studies and appraisals relating to the Property in its possession,
without representation or warranty and at no cost to Seller.  The foregoing obligation shall survive any
termination of this Agreement.  Subject
to the terms of this Agreement, provided that Buyer has not delivered the
Disapproval Notice, Buyer, after the expiration of the Due Diligence Period,
may continue to conduct further physical Due Diligence or other examinations,
inspections, tests, studies and investigations regarding the Property;
provided, however, that except as otherwise expressly provided in Sections
5.1 and 10.2.2, in no event shall Buyer have any right to terminate
or otherwise modify its obligations hereunder after the end of the Due
Diligence Period as a result of any such further Due Diligence or other
examinations, inspections, tests, studies or investigations regarding the
Property, and the provisions of this Article 3, including, without
limitation, the indemnification provisions, shall continue to apply.

 

3.9                  Delivery of Buyer’s Due Diligence Materials.  Buyer agrees that if Buyer
terminates this Agreement for any reason permitted hereunder, including Buyer’s
disapproval of its Due Diligence within the Due Diligence Period, then Buyer
shall, at Seller’s request and at no cost to Seller, assign to Seller all of
its rights, interest and title to copies of all third party drafts and final
surveys, environmental site assessments, appraisals, examinations, inspections,
tests, studies and investigations of the Property or any other similar
documents or materials applicable to the Property, obtained by Buyer during the
Due Diligence Period (collectively, “Buyer’s Due Diligence
Materials”).  Buyer’s
obligations under this Section shall expressly survive the termination
and/or expiration of this Agreement.

 

ARTICLE 4

 

TITLE,
SURVEY & CONTRACTS

 

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

 

4.2                  Certain
Exceptions to Title. 
Buyer shall have the right to object in writing to any title matters
that are not Permitted Exceptions and that are disclosed in the Title
Commitment (herein collectively called “Liens”)
on or before the fifth (5th) day prior to the
expiration of the Due Diligence Period. 
Buyer’s failure to disapprove the Liens in writing within such period
shall constitute Buyer’s approval of all such Liens.  All such Liens which are timely objected to
by Buyer shall be herein collectively called the “Title Objections”. 
Seller, in its sole and absolute discretion, may elect (but shall not be
obligated) to remove or cause to be removed, or insured over, at its expense,
any Title Objections, and shall be entitled to a reasonable adjournment of the
Closing for the purpose of such removal, which removal will be deemed 

 

17

 

effected
by, among other things, the issuance of title insurance reasonably acceptable
to Buyer eliminating or insuring against the effect of the Title
Objections.  Seller shall notify Buyer in
writing no later than the day prior to the expiration of the Due Diligence
Period (the “Title Cure Period”), whether
Seller elects to remove the same. 
Notwithstanding the above, as an additional Buyer Conditions Precedent
(See 9.3.6 hereof) but not as a covenant of Seller, Seller shall have obtained
the termination of, the deletion from the Title Commitment and Buyer’s Owner’s
Policy, or have made arrangements to otherwise insure over that certain
drainage easement granted to the State of California on February 7, 1967,
pursuant to Grant Deed recorded in Book 2252, Page 604 of the Official
Records of Sonoma County, California (the “Drainage Easement”).  Except as set forth in the preceding
sentence, if Seller is unable to remove or endorse over any Title Objections
prior to the expiration of the Title Cure Period, or if Seller elects not to
remove one or more Title Objections by the expiration of the Title Cure Period,
Buyer may elect, as its sole and exclusive remedy therefore, to either (a) terminate
this Agreement on or before the end of the Due Diligence Period and,
thereafter, the parties shall have no further rights or obligations hereunder
except for those obligations which expressly survive the termination of this
Agreement, or (b) waive, in writing, such Title Objections, in which event
such Title Objections shall be deemed additional “Permitted Exceptions” and the
Closing shall occur as herein provided without any reduction of or credit
against the Purchase Price.  If before
the end of the Due Diligence Period, Buyer elects to proceed with the
transaction contemplated herein, then Buyer shall be deemed to have elected to
waive those Title Objections Seller elected not to remove or endorse over and
its right to terminate this Agreement pursuant to this Section 4.2.  Notwithstanding the foregoing, Seller shall
be obligated at Closing to cause the release of the Liens of any financing
obtained by Seller which is secured by the Property other than the Loan.  Buyer expressly acknowledges and agrees that
Seller shall not be deemed in default of this Agreement if Seller is unable to
remove, endorse over or otherwise insure over the Drainage Easement and Buyer’sole
remedy in the event Seller is unable to remove, endorse over or otherwise
insure over the Drainage Easement shall be terminate this Agreement and receive
a full refund of the Deposit less that amount Seller is entitled to retain
pursuant to Section 2.3.4, above.

 

4.3                  Additional
Exceptions. 
In the event the Title Commitment is amended or updated after the
expiration of the Due Diligence Period (each, a “Title  Commitment Update”),
Buyer shall furnish Seller with a written statement of approval or objections
to any matter first raised in a Title Commitment Update that affects title to
the Real Property and that was not caused by Buyer or any Licensee Parties
within five (5) business days after its receipt of such Title Commitment
Update together with a legible copy of each new exception raised therein (each,
a “Title  Commitment Update Review Period”).  Should Buyer fail to notify Seller in writing
of any objections to any matter first disclosed in a Title Commitment Update
prior to the expiration of the applicable Title Commitment Update Review
Period, as applicable, Buyer shall be deemed to have approved such matters
whereupon they shall become Permitted Exceptions. If, however, Buyer objects to
such new exception, then Seller shall have until 5:00 p.m. Pacific Time on
the fifth (5th) business day after Seller’s receipt of Buyer’s written objection in which
to notify Buyer, in Seller’s sole discretion, either (a) that Seller will
remove the new disapproved exception(s) prior to the Close of Escrow and,
thereafter, Seller shall be entitled to a reasonable adjournment of the Closing
for the purpose of such removal, which removal will be deemed effected by,
among other things, the issuance of title insurance reasonably acceptable to
Buyer eliminating or insuring against the effect of the Title 

 

18

 

Objections,
or (b) that Seller will not remove the new disapproved exception(s).  If Seller does not elect to do either (a) or
(b), such silence shall be conclusively deemed to constitute Seller’s election
not to remove any new exception(s) disapproved by Buyer.  If Seller elects not to remove any new
disapproved exception(s), whether by giving notice thereof or by failing to
give notice, then Buyer shall have until 5:00 p.m. Pacific Time on the
fifth (5th) business day after Seller’s election (or deemed election) not to cure the
disapproved exception in which to elect (y) to terminate this Agreement by
written notice to Seller and Escrow Holder or (z) to waive in writing
Buyer’s previous disapproval of (and thereby accept) any items that Seller does
not elect to remove.  Buyer’s failure to
terminate this Agreement by delivering written notice of such election on or
before 5:00 p.m. Pacific Time on the fifth (5th) business
day after Seller’s election or deemed election not to remove the new
disapproved exception shall be deemed to constitute Buyer’s irrevocable
election to waive Buyer’s previous disapproval whereupon the disapproved
exception shall become a Permitted Exception. 
If, however, Buyer does elect to terminate this Agreement, then this
Agreement shall so terminate, the Deposit shall be returned to Buyer and
neither party shall have any further obligations to the other hereunder except
to the extent any such obligation expressly survives the termination of this
Agreement.

 

4.4                  Survey Objections.  Buyer shall have the right to obtain a new
survey or an update of any survey provided by Seller (the “Survey”)
at its sole cost and expense.  Promptly
upon receipt of the Survey, Buyer, at its sole cost and expense, shall deliver
a copy to Seller and to Escrow Agent.  No
later than the fifth (5th) day prior to the expiration of
the Due Diligence Period, Buyer shall have the right to notify Seller, in
writing, of any matters disclosed on the Survey that are not Permitted
Exceptions and that affect Buyer’s title to the Property.  Buyer’s failure to obtain the Survey or
disapprove any matters disclosed by the Survey on or before such time shall
constitute Buyer’s approval of the matters disclosed by the Survey or matters
that would have been disclosed had Buyer obtained a Survey.  All such matters which are timely objected to
by Buyer shall be herein collectively called the “Survey
Objections”.  Seller, in its
sole and absolute discretion, may no later than the day prior to the expiration
of the Due Diligence Period (the “Survey Cure Period”),
elect to remove or cause to be removed, or insured over, at its expense, any
Survey Objections, and shall be entitled to a reasonable adjournment of the Closing
for the purpose of such removal, which removal will be deemed effected by,
among other things, the issuance of title insurance reasonably acceptable to
Buyer eliminating or insuring against the effect of the Survey Objections.  Seller shall notify Buyer in writing of such
election within the Survey Cure Period. 
If Seller is unable to cure or endorse over any Survey Objections prior
to the expiration of the Survey Cure Period, or if Seller elects not to remove
one or more Survey Objections, Buyer may elect, as its sole and exclusive
remedy therefore, to either (a) terminate this Agreement by giving written
notice to Seller and Escrow Agent on or before the end of the Due Diligence
Period and, thereafter, the parties shall have no further rights or obligations
hereunder except for those obligations which expressly survive the termination
of this Agreement, or (b) waive, in writing, such Survey Objections, in
which event the Closing shall occur as herein provided without any reduction of
or credit against the Purchase Price.  If
before the end of the Due Diligence Period, Buyer elects to proceed with the
transaction contemplated herein, then Buyer shall be deemed to have elected to
waive those Survey Objections Seller elected not to cure and its right to terminate
this Agreement pursuant to this Section 4.4.

 

19

 

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

 

4.6                  Contracts. 
On or before the fifth (5th) day
prior to the expiration of the Due Diligence Period, Buyer shall have the right
to disapprove, by written notice to Seller, any of the Contracts that are not
terminable upon thirty (30) days or less prior notice.  If Buyer desires to have any Contract
terminated that is not expressly terminable upon thirty (30) days’ or less
notice (any, a “Non-Terminable Contract”), then
Buyer shall notify Seller in writing of any such Non-Terminable Contract that
it desires to have terminated.  Within
three (3) days following receipt of any such Buyer notice, Seller shall
notify Buyer in writing whether Seller, in its sole and absolute discretion, is
willing to terminate such Non-Terminable Contract.  If Seller notifies Buyer that it is unwilling
to terminate any such Non-Terminable Contracts, then Buyer shall have the
right, until the expiration of the Due Diligence Period, either to waive in
writing its prior disapproval of the corresponding Non-Terminable Contract(s) or
to terminate this Agreement by giving written notice to Seller and Escrow
Holder as Buyer’s sole and exclusive remedy, in which event the Additional
Deposit (but not the Initial Deposit) shall be returned to Buyer.  If Buyer fails to waive any such prior
disapproval and does not terminate this Agreement before the expiration of the
Due Diligence Period, then Buyer shall be deemed to have waived its prior
disapproval of the corresponding Non-Terminable Contract(s).  All of the Contracts which are either
terminable on thirty (30) days or less notice or which are not disapproved by
Buyer, or with respect to which Buyer’s initial disapproval is waived or deemed
to be waived hereunder, are referred to herein as the “Approved
Contracts.”

 

ARTICLE 5

 

REMEDIES

 

5.1                  Permitted
Termination; Seller Default.  If the sale of the Property is not
consummated due to the permitted termination of this Agreement by Buyer as
herein expressly provided, then the Deposit shall be returned to Buyer;
provided, however, the Initial Deposit shall not be returned to Buyer unless
the permitted termination of this Agreement specifically states that the
Deposit is to be returned to Buyer or the Agreement states that only the
Additional Deposit is to be returned to Buyer. 
Upon such termination, Buyer will have no liability hereunder except as
otherwise expressly stated in this Agreement. 
If the sale of the Property is not consummated due solely to Seller’s
material default hereunder that is not cured within all applicable notice and
cure periods, then Buyer shall have the right, to elect, as its sole and
exclusive remedy, to (a) terminate this Agreement by written notice to
Seller, promptly after which the Deposit shall be returned to Buyer, (b) waive
the default and proceed to close the 

 

20

 

transaction
contemplated herein, or (c) provided that all of the conditions to Seller’s
obligations to close have been satisfied and so long as Buyer is not then in
default of any of its material obligations under this Agreement, seek specific
performance of Seller’s obligations under this Agreement and record and
maintain against the Property a notice of lis pendens in accordance with
applicable law if Buyer further satisfies and continues to satisfy each of the
following obligations: (i) Buyer shall have reasonably demonstrated that
it is prepared to deliver into escrow all funds required by this Agreement in order
for the Closing to occur, Buyer shall have deposited all funds required by this
Agreement in order for the Closing to occur, and Buyer shall be ready and
willing in all other respects to close escrow in accordance with the terms and
conditions of this Agreement; and (ii) Buyer shall have filed an action
for specific performance (a “Specific Performance
Action”) within sixty (60) days of the date the Closing was to have
occurred.  Notwithstanding anything to
the contrary contained herein, Seller shall not be deemed in default unless and
until Buyer provides Seller with written notice of such default and Seller
fails to cure such default within five (5) business days of its receipt of
such written notice.

 

5.2                  Buyer
Default; Liquidated Damages.  IF THE SALE
IS NOT CONSUMMATED DUE TO ANY DEFAULT BY BUYER HEREUNDER AND
BUYER FAILS TO CURE SUCH BREACH WITHIN FIVE (5) BUSINESS DAYS AFTER BUYER’S
RECEIPT OF WRITTEN NOTICE FROM SELLER SPECIFYING SUCH BREACH (PROVIDED, HOWEVER, THAT THE FOREGOING NOTICE AND CURE RIGHTS
SHALL NOT APPLY TO BUYER’S FAILURE TO CLOSE ON THE CLOSING DATE), THEN SELLER
SHALL RETAIN THE DEPOSIT AS LIQUIDATED DAMAGES, WHICH RETENTION SHALL OPERATE
TO TERMINATE THIS AGREEMENT AND RELEASE BUYER FROM ANY AND ALL LIABILITY
HEREUNDER, EXCEPT AS OTHERWISE EXPRESSLY PROVIDED IN THIS AGREEMENT.  THE PARTIES HAVE AGREED THAT SELLER’S ACTUAL
DAMAGES, IN THE EVENT OF A FAILURE TO CONSUMMATE THIS SALE DUE TO BUYER’S
DEFAULT, WOULD BE EXTREMELY DIFFICULT OR IMPRACTICABLE TO DETERMINE.  AFTER NEGOTIATION, THE PARTIES HAVE AGREED
THAT, CONSIDERING ALL THE CIRCUMSTANCES EXISTING ON THE DATE OF THIS AGREEMENT,
THE AMOUNT OF THE DEPOSIT IS A REASONABLE ESTIMATE OF THE DAMAGES THAT SELLER
WOULD INCUR IN SUCH EVENT.  BY PLACING
THEIR INITIALS BELOW, EACH PARTY SPECIFICALLY CONFIRMS THE ACCURACY OF THE
STATEMENTS MADE ABOVE AND THE FACT THAT EACH PARTY WAS REPRESENTED BY COUNSEL
WHO EXPLAINED, AT THE TIME THIS AGREEMENT WAS MADE, THE CONSEQUENCES OF THIS
LIQUIDATED DAMAGES PROVISION.  THE
PARTIES ACKNOWLEDGE THAT SUCH PAYMENT OF THE DEPOSIT IS NOT INTENDED AS A
FORFEITURE OR PENALTY WITHIN THE MEANING OF CALIFORNIA CIVIL CODE SECTIONS 3275
OR 3369, BUT IS INTENDED TO CONSTITUTE LIQUIDATED DAMAGES TO SELLER UNDER
CALIFORNIA CIVIL CODE SECTIONS 1671, 1676 AND 1677.  THE FOREGOING IS NOT INTENDED TO LIMIT BUYER’S
SURVIVING OBLIGATIONS UNDER THIS AGREEMENT INCLUDING, WITHOUT LIMITATION, ALL
OF BUYER’S INDEMNITIES IN THIS AGREEMENT.

 

	
  Initials:

  	
  Seller

  	
    /s/ KR

  	
   

  	
  Buyer

  	
    /s/
  MA

  	
   

  

 

21

 

ARTICLE 6

REPRESENTATIONS AND WARRANTIES OF SELLER

 

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

 

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

 

6.1.2       Authority.  Subject to the receipt of
Corporate Approval (as defined below), the execution and delivery of this
Agreement and the performance of Seller’s obligations hereunder have been or
will be duly authorized by all necessary action on the part of Seller and this
Agreement constitutes the legal, valid and binding obligation of Seller,
subject to equitable principles and principles governing creditors’ rights
generally.  For purposes of this
Agreement, “Corporate Approval” shall mean that Seller shall have obtained
approval of this Agreement by the management and/or Board of Directors of Shea
Properties LLC and J.F. Shea Co., Inc., its parent companies, in their
sole and absolute discretion as required by Seller’s corporate policies and
procedures on or before the expiration of the Due Diligence Period.  If Seller fails to provide Buyer with written
notice that it has received Corporate Approval on or before 5:00 p.m.
Pacific Time on the last day of the Due Diligence Period, then this Agreement
shall automatically terminate, the Deposit, to the extent made, shall be
returned to Buyer and neither party shall have any further obligation to the
other hereunder.

 

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

 

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

 

6.1.5       Consents.  Except for the consent of the
Lender with respect to the Loan Assumption and the Corporate Approval, no
consent, waiver, approval or authorization is required from any person or
entity (that has not already been obtained or will be obtained) in connection
with the execution and delivery of this Agreement by Seller or the performance
by Seller of the transactions contemplated hereby.

 

6.1.6       Leases. 
To Seller’s knowledge, true, correct and complete copies of the Leases
in Property Manager’s files have been or will be delivered or made available to
Buyer in accordance with Section 3.2.1 above.  Except as set forth in the Rent Roll or
otherwise 

 

22

 

disclosed to Buyer by Seller in
writing prior to the expiration of the Due Diligence Period, to Seller’s
knowledge, the Leases listed on the Rent Roll are in full force and effect as
of the date set forth on the Rent Roll. 
To Seller’s knowledge, Seller has not received written notice of any
uncured default of Seller, as landlord, under any Lease.  Except as may be set forth in the Rent Roll
or otherwise disclosed to Buyer by Seller in writing prior to the expiration of
the Due Diligence Period, to Seller’s knowledge, no Tenant has paid any rent,
fees, or other charges for more than one month in advance.  Seller is the landlord under each of the
Leases and, except for the security interests granted in connection with the
Loan encumbering the Property, has not assigned, mortgaged, pledged or otherwise
encumbered any of its rights or interests under the Leases.

 

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

 

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

 

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

 

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

 

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

 

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

 

6.1.13     Prohibited
Persons and Transactions.  Neither Seller, Shea Properties Management, Inc.,
Shea Properties LLC nor J.F. Shea Co, Inc. are, nor will they become, a
person or entity with whom U.S. persons or entities are restricted from doing
business under regulations of the Office of Foreign Asset Control (“OFAC”) of the Department of the Treasury
(including those named on OFAC’s Specially Designated and Blocked Persons List)
or under any statute, executive order (including the September 24, 2001,
Executive Order Blocking 

 

23

 

Property and Prohibiting
Transactions with Persons Who Commit, Threaten to Commit, or Support
Terrorism), or other governmental action and is not and will not engage in any
dealings or transactions or be otherwise associated with such persons or
entities.

 

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

 

6.3                  Seller’s Maximum Aggregate Liability.  Notwithstanding any provision to the contrary
contained in this Agreement or any documents executed by Seller pursuant hereto
or in connection herewith, the representations and warranties of Seller set
forth in Section 6.1, together with Seller’s liability for any
breach of any of Seller’s interim operating covenants under Article 8,
shall survive the Closing and not be merged into the deed for a period of nine (9) months.  Buyer shall have no right to bring any action
against Seller as a result of any untruth or inaccuracy of such representations
and warranties, or any such breach, unless (a) Buyer serves a written
claim on Seller within such nine (9) month period, (b) Buyer
commences and serves an action against Seller within thirty (30) days after
Buyer gives such notice, and (c) the aggregate amount of all liability and
losses arising out of any such untruth or inaccuracy, or any such breach,
exceeds $25,000.  In addition, in no
event shall Seller’s liability for all such breaches exceed, in the aggregate,
$500,000.  Seller shall have no liability
with respect to any of Seller’s representations, warranties and covenants
herein if, prior to the Closing, Buyer has actual knowledge of any breach of a
representation, warranty or covenant of Seller herein, or Buyer obtains actual
knowledge (from whatever source, including, without limitation, any of the Due
Diligence Items, as a result of Buyer’s Due Diligence, the inclusion of any
information in or written disclosure by Seller or Seller’s agents and employees)
that contradicts any of Seller’s representations and warranties herein, and
Buyer nevertheless consummates the transaction contemplated by this
Agreement.  The provisions of this Section 6.3
shall expressly survive the Close of Escrow and shall not merge into the Deed
or any of the other closing documents hereunder.

 

ARTICLE 7

 

REPRESENTATIONS
AND WARRANTIES OF BUYER

 

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

 

24

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

7.2                  Buyer’s Independent Investigation.

 

25

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

7.2.2       AS-IS SALE. 
EXCEPT FOR THE EXPRESS REPRESENTATIONS AND
WARRANTIES OF SELLER UNDER SECTION 6.1, ABOVE, BUYER ACKNOWLEDGES
AND AGREES THAT NEITHER SELLER, NOR ANYONE ACTING FOR OR ON BEHALF OF SELLER
INCLUDING, WITHOUT LIMITATION, BROKER, HAS MADE ANY REPRESENTATIONS,
WARRANTIES, OR PROMISES TO BUYER, OR TO ANYONE ACTING FOR OR ON BEHALF OF
BUYER, CONCERNING ANY ASPECT OF THE PROPERTY INCLUDING, WITHOUT LIMITATION, (A) THE
MANNER OR QUALITY OF THE CONSTRUCTION OR MATERIALS, IF ANY, INCORPORATED INTO
THE PROPERTY; (B) COMPLIANCE WITH TITLE III OF THE AMERICANS WITH
DISABILITIES ACT OF 1990 AND ALL SIMILAR STATE AND LOCAL ACCESSIBILITY LAWS; (C) COMPLIANCE
WITH THE FAIR HOUSING ACT AND ALL SIMILAR STATE AND LOCAL LAWS; (D) COMPLIANCE
WITH ANY “SOFT STORY” RETROFIT STANDARDS; (E) COMPLIANCE WITH ANY
ENVIRONMENTAL PROTECTION, POLLUTION OR LAND USE LAWS, RULES, REGULATION, ORDERS
OR REQUIREMENTS, INCLUDING, WITHOUT LIMITATION, CALIFORNIA HEALTH &
SAFETY CODE, THE FEDERAL WATER POLLUTION CONTROL ACT, THE FEDERAL RESOURCE
CONSERVATION AND RECOVERY ACT, THE U.S. ENVIRONMENTAL PROTECTION AGENCY
REGULATIONS AT 40 C.F.R., PART 261, THE COMPREHENSIVE ENVIRONMENTAL
RESPONSE, COMPENSATION AND LIABILITY ACT OF 1980, AS AMENDED, THE RESOURCE
CONSERVATION AND 

 

26

 

RECOVERY ACT OF
1976, THE CLEAN WATER ACT, THE SAFE DRINKING WATER ACT, THE HAZARDOUS MATERIALS
TRANSPORTATION ACT, THE TOXIC SUBSTANCE CONTROL ACT, AND REGULATIONS
PROMULGATED UNDER ANY OF THE FOREGOING; (F) THE PRESENCE OR ABSENCE OF
HAZARDOUS MATERIALS OR MOLD AT, ON, UNDER, OR ADJACENT TO THE PROPERTY; (G) THE
CONTENT, COMPLETENESS OR ACCURACY OF THE DUE DILIGENCE ITEMS, TITLE COMMITMENT,
SURVEY OR UPDATED SURVEY; (H) THE SIZE AND/OR DIMENSIONS OF ANY OF THE
IMPROVEMENTS, AND (I) THE CONFORMITY OF THE IMPROVEMENTS TO ANY PLANS OR
SPECIFICATIONS FOR THE PROPERTY, INCLUDING ANY PLANS AND SPECIFICATIONS THAT MAY HAVE
BEEN OR MAY BE PROVIDED TO BUYER. 
BUYER FURTHER ACKNOWLEDGES AND AGREES THAT THE PROPERTY WILL BE
INDEPENDENTLY INVESTIGATED BY BUYER TO ITS FULL SATISFACTION PRIOR TO
EXPIRATION OF THE DUE DILIGENCE PERIOD, OR THAT BUYER WILL TERMINATE THIS
AGREEMENT AS PROVIDED ABOVE, THAT BUYER WILL BE ACQUIRING THE PROPERTY BASED
SOLELY UPON AND IN RELIANCE ON ITS OWN INSPECTIONS, EVALUATIONS, ANALYSES AND
CONCLUSIONS, AND THAT SUBJECT TO SELLER’S EXPRESS OBLIGATIONS HEREUNDER, BUYER
WILL BE ACQUIRING THE PROPERTY IN ITS “AS-IS” CONDITION AND STATE OF REPAIR
INCLUSIVE OF ALL FAULTS AND DEFECTS, WHETHER KNOWN OR UNKNOWN, AS MAY EXIST
AS OF THE CLOSING, AND BUYER EXPRESSLY ASSUMES THE RISK THAT ADVERSE PHYSICAL,
ENVIRONMENTAL, FINANCIAL, LEGAL AND OTHER CONDITIONS MAY NOT BE REVEALED
BY BUYER’S INSPECTION OF THE PROPERTY.

 

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

 

	
   

  	
  Buyer:

  	
    /s/ MA

  	
   

  	
   

  

 

7.3                  Buyer’s Release of Seller; Indemnity.

 

7.3.1       Seller Released From
Liability. 
Seller is hereby released from all responsibility and liability to Buyer
regarding the condition (including, without limitation, its physical condition
and its compliance with applicable laws, and the presence in the soil, air,
structures and surface and subsurface waters, of Hazardous Materials or
substances that have been or may in the future be determined to be toxic,
hazardous, undesirable or subject to regulation and that may need to be specially
treated, handled and/or removed from the Property under current or future
federal, state and local laws, regulations or guidelines), valuation,
salability or utility of the Property, or its suitability for any purpose
whatsoever except to the extent that such responsibility or liability is the
result of the material inaccuracy (if any) of Seller’s representations under Section 6.1
hereof.

 

7.3.2       Buyer’s Waiver of
Objections. 
Buyer acknowledges that its failure to deliver the Disapproval Notice
shall constitute Buyer’s representation and warranty to Seller that, prior to
the expiration of the Due Diligence Period, it will have inspected the 

 

27

 

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

 

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

 

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

 

	
   

  	
  Buyer’s
  Initials:

  	
    /s/ MA

  	
   

  	
   

  

 

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

 

28

 

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

 

ARTICLE 8

 

LEASES;
MAINTENANCE OF PROPERTY

 

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

 

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

 

8.2                  Lease Expenses.  At Closing, Buyer shall reimburse
Seller for any and all Reimbursable Lease Expenses to the extent that the same
have been paid by Seller prior to Closing. 
In addition, at Closing, Buyer shall assume Seller’s obligations to pay,
when due (whether on a stated due date or by acceleration) any Reimbursable
Lease Expenses unpaid as of the Closing, and Buyer hereby agrees to indemnify,
defend and hold Seller harmless from and against any and all claims for such
Reimbursable Lease Expenses which remain unpaid for any reason at the time of
Closing, which obligations of Buyer shall survive the Closing and shall not be
merged therein.  Each party shall make
available to the other all Commission Agreements, records, bills, vouchers and
other data in such party’s control verifying Reimbursable Lease Expenses and
the payment thereof.

 

29

 

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

 

8.4                  Certain Interim
Operating Covenants. 
Seller covenants to Buyer that  Seller
will operate the Property, from the Effective Date until Closing or earlier
termination of this Agreement as follows: 
(i) continue to operate, manage and maintain the Property in a good
and workmanlike manner in the ordinary course of Seller’s business and
substantially in accordance with Seller’s present practice, and will keep the
Improvements and Personal Property in good order and operating condition,
subject to ordinary wear and tear and further subject to Section 10.2
and cause all necessary repairs, renewals and replacements to be promptly
made  which are required by the terms of
the Leases; (ii) maintain property insurance on the Property which is at
least equivalent in all material respects to the insurance policies covering
the Property as of the Effective Date; (iii) not enter into any new
contract for the provision of goods or services to or with respect to the
Property other than in the ordinary course of business or that is to terminate
upon the Closing, or renew, extend, modify or replace any of the Contracts
unless such contract is an Approved Contract, is a contract terminable as of
the Closing Date or Buyer consents thereto in writing, which approval shall not
be unreasonably withheld, delayed or conditioned; (iv) advise Buyer
promptly of any change in any applicable laws, regulations, restrictions,
rulings, or orders that might have a material adverse change on the value or
use of the Property by Buyer of which Seller obtains written notice after the
Effective Date and also advise Buyer promptly of any litigation, arbitration or
administrative hearing concerning or affecting the Property which would have a
material adverse effect on the value or use of the Property of which Seller
obtains written notice after the Effective Date; (v) subject to the prorations prescribed herein, cause to be
paid all trade accounts, costs and expenses of operation and maintenance of the
Property incurred and accruing or due prior to Closing; (vi) not knowingly take any action, which action would have
the effect of materially violating any of the representations and warranties of
Seller set forth in Section 6.1 of the Agreement unless such action
is required by any applicable Laws; (vii) without
the prior written consent of Buyer, not remove any equipment forming a part of
the Property except such as is replaced by Seller by an article of
substantially equal suitability and value, free and clear of any lien or
security interest; (viii) if any apartment unit is vacated more than five
business (5) days prior to Closing, then prior to Closing return such unit
to rentable condition in accordance with Seller’s customary cleaning, painting,
and repair standards for vacant units (the condition of such an apartment unit
after cleaning is referred to herein as a “Rent Ready Condition”);
provided if Seller fails to return any such vacated unit to a Rent Ready
Condition prior to Closing, or a unit is vacated within five (5) business
days of Closing and Seller fails to return such unit to Rent Ready Condition by
Closing, then at Closing Seller shall credit Buyer an amount equal to the
reasonably estimated cost to return each such unit to a Rent Ready Condition,
up to, but not to exceed, $1,000; and (ix) Seller
shall maintain its website and related material through the Closing except that
as soon after Closing as reasonably possible, Seller shall remove all 

 

30

 

references to the Seller as Owner
and its property management company, as well as any internet lease
concessions.  In addition, Seller shall
terminate any leasing and/or management agreement with the Property Manager or
any affiliate of Seller with respect to the Property effective as of the
Closing Date and pay any and all costs and expenses of termination thereof.

 

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

 

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

 

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

 

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

 

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

 

ARTICLE 9

 

CLOSING AND
CONDITIONS

 

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

 

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

 

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

 

31

 

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

 

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

 

9.2.4       Corporate Approval.  Corporate
Approval. 
Seller shall have obtained the Corporate Approval on or before the
expiration of the Due Diligence Period.

 

9.2.5       Loan Assumption.  On or before the Assumption Approval
Deadline, Lender shall have agreed to consent to the assignment of Seller’s
interest in the Loan to Buyer and to release the Seller and Seller Guarantors
from future liability with respect to the Loan as contemplated under Section 2.4.2
hereof.

 

Neither Buyer nor Seller shall
willfully or in bad faith act or fail to act for the purpose of permitting any
of Seller’s Conditions Precedent to fail. 
Except as otherwise provided herein, if any of the foregoing Seller
Conditions Precedent are not satisfied by the respective dates designated
hereunder for any reason other than a default by Seller or Buyer hereunder,
this Agreement shall terminate, the Additional Deposit (but not the Initial
Deposit) shall be returned to Buyer and, neither party shall have any further
rights or obligations under this Agreement except for those which this
Agreement expressly provides shall survive any termination.  Notwithstanding the foregoing, if the Seller
has terminated the Agreement under Section 2.4.2 as a result of
Lender having failed to consent to the Loan Assumption as described in the
above Section 9.2.4, then the entire Deposit shall be returned to
Buyer.  Seller shall have the right to
waive any of the Seller Conditions Precedent, and the election by Seller to
proceed with the Closing shall be deemed Seller’s waiver of any unsatisfied
Seller Conditions Precedent to the extent any such Seller Condition(s) Precedent
has(have) not been previously satisfied or waived.

 

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

 

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

 

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

 

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

 

32

 

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

 

9.3.5       Loan Assumption.  On or before the Assumption Approval
Deadline, Lender shall have agreed to consent to the assignment of Seller’s
interest in the Loan to Buyer.

 

9.3.6       Deletion of Drainage Easement.  On or before the Closing Date, Seller shall
have taken the necessary action as described in Section 4.2 to
remove, endorse over or otherwise insure the Drainage Easement.

 

Neither Buyer nor Seller shall
willfully or in bad faith act or fail to act for the purpose of permitting any
of the Buyer Conditions Precedent to fail. 
If any of the Buyer Conditions Precedent set forth in this Agreement are
not timely satisfied for any reason other than a default by Seller or Buyer
hereunder, this Agreement shall terminate, the Deposit shall be returned to
Buyer so long as Buyer is not otherwise in material default hereunder and
neither party shall have any further rights or obligations under this Agreement
with respect to the Property except for those which this Agreement expressly
provides shall survive any termination. 
Notwithstanding the foregoing, Buyer shall have the right to waive, in
its sole and absolute discretion, any of the Buyer Conditions Precedent, and
the election by Buyer to proceed with the Closing with the actual knowledge
that a Buyer Condition Precedent has not been satisfied, shall be deemed Buyer’s
waiver of such Buyer Condition Precedent to the extent any such Buyer Condition
Precedent has not been previously satisfied or waived.

 

9.4                  Closing.

 

9.4.1       The closing hereunder (“Closing”)
shall be held and delivery of all items to be made at the Closing under the
terms of this Agreement shall be made through escrow at Escrow Agent’s office
on the tenth (10th) day after (a) the receipt
by Buyer and Seller of Lender’s approval of the assumption of the Loan by Buyer
and the release of the Seller and Seller Guarantors and (b) Lender, Buyer
and Seller have agreed on the terms and conditions of the documents and
instruments necessary to cause Buyer to assume the Loan and Lender to release
the Seller and Seller Guarantors (the “Closing
Date”); provided, however, that Buyer and Seller agree to use good
faith efforts to agree on the terms and conditions of such documents and
instruments in accordance with Section 2.4.1 hereof as soon as
reasonably practicable but Buyer shall not be required to agree to any material
change in Buyer’s reasonable discretion in the terms and conditions in the Loan
Documents.  If the Closing has not
occurred by tenth (10th) business days after the Assumption Approval Deadline
(as may be extended pursuant to the terms and conditions hereof), then either
party, so long as such party is not then in material default of this Agreement
beyond all applicable notice and cure periods, if any, shall have the right to
terminate this Agreement by delivering written notice to the other party.  If this Agreement is so terminated, then the
Deposit shall be returned to Buyer in accordance with Section 2.4.2,
above, if Buyer is not then in default hereof and neither party shall have any
liability to the other hereunder except to extent otherwise expressly stated
herein.  Notwithstanding anything to the
contrary contained in the Agreement, (y) Seller shall have the unilateral
right to extend the Closing to Thursday, January 7, 2010 upon prior
written notice (the “Extension Notice”)
to Buyer and Escrow Agent delivered no later than 5:00 p.m. Pacific Time 

 

33

 

on November 17,
2009, and (z) if Seller delivers the Extension Notice and, as a result,
the Closing is extended until January 7, 2010, then Seller shall have the
unilateral right to accelerate the Closing by delivering written notice to
Buyer no later than ten (10) days prior to the earlier date on which
Seller desires the Closing to occur; provided, however, that Lender is in a
position to complete the assumption and assignment of the Loan on such tenth
(10th) day; provided, further, however, that if Lender is not prepared to
complete the assignment and assumption of the Loan on such tenth (10th) day
through no fault of either Buyer or Seller, then the Closing shall occur on the
first day after such ten (10) day period on which Lender is able to
close.  Buyer shall inform the Lender
during the application process that Lender’s approval of the proposed
assignment and assumption of the Loan will need to remain in effect through January 7,
2010.

 

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

 

9.5                  Seller’s
Closing Documents and Other Items.

 

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

 

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

 

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

 

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

 

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

 

34

 

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

 

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

 

(g)           With respect to the assumption by
Buyer of the Loan, such documents, instruments and certificates required by
Lender pursuant to the Loan Documents (the “Assumption
Documents”) to be delivered by Seller, any Seller Guarantor or any
Affiliate of the foregoing;

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

9.6.5       With respect to the assumption by Buyer of the Loan, such Assumption
Documents to be delivered by Buyer and/or any Replacement Guarantor.

 

35

 

9.6.6       Documentation to establish to Seller’s and Escrow Holder’s reasonable
satisfaction the due authority of Buyer’s acquisition of the Property and Buyer’s
delivery of the documents required to be delivered by Buyer pursuant to this
Agreement including, but not limited to, the organizational documents of Buyer,
as they may have been amended from time to time, resolutions of Buyer and
incumbency certificates of Buyer;

 

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

 

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

 

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

 

9.7                  Prorations and Closing Costs.

 

9.7.1       Prorations.

 

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

 

36

 

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

 

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

 

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

 

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

 

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

 

37

 

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

 

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

 

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

 

9.7.2       Closing
Costs.  Seller shall
pay (a) the county and city transfer taxes, and (b) costs and charges
customarily charged to sellers in accordance with common escrow practices in
the county in which the Property is located, other than those costs and charges
specifically required to be paid by Buyer hereunder.  Buyer shall pay (a) the premium
associated with the issuance of the Title Policy including, without limitation,
the premium of any extended coverage, any coverage in excess of the Purchase
Price and all endorsements Buyer may require in accordance with Section 4.4,
(b) Escrow Agent’s costs and fees, (c) the recording fees required in
connection with the transfer of the Property to Buyer, and (d) any
additional costs and charges customarily charged to buyers in accordance with
common escrow practices in the county in which the Property is located, other
than those costs and charges specifically required to be paid by Seller
hereunder.

 

9.8                  Broker.  Buyer hereby represents and
warrants to Seller that (a) Broker is only representing Seller in this
transaction, (b) it did not employ or use any broker or finder to arrange
or bring about this transaction, and (c) there are no claims or rights for
brokerage commissions or finder’s fees in connection with the transactions
contemplated by this Agreement, other than the commission (“Broker’s Commission”) required to be paid
by Seller to Broker pursuant to a separate agreement between Seller and
Broker.  Seller hereby represents and
warrants to Buyer that Seller has not employed any broker with respect to this
transaction, other than Broker, and Seller shall only pay the Broker’s
Commission.  If any person brings a claim
for a commission or finder’s fee based upon any contact, dealings, or
communication with Buyer in connection with the transactions contemplated by
this Agreement, other than Broker, then Buyer shall defend Seller from such
claim, and shall indemnify Seller and hold Seller harmless from any and all
costs, damages, claims, liabilities, or expenses (including, without
limitation, reasonable attorneys’ fees and disbursements) incurred by Seller
with respect to the claim. If any person brings a claim for a commission or
finder’s fee against Buyer based upon any contact, dealings, or communication
with Seller in connection with the transactions contemplated by this Agreement,
other than Broker, then Seller shall defend Buyer from such claim, and shall
indemnify Buyer and hold Buyer harmless from any and all costs, damages,
claims, liabilities, or expenses (including, without limitation, reasonable
attorneys’ fees and disbursements) incurred by Buyer with respect to the
claim.  The provisions of this Section 9.8

 

38

 

shall
survive the Closing or, if the purchase and sale is not consummated, any
termination of this Agreement.

 

ARTICLE 10

 

MISCELLANEOUS

 

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

 

10.2                Risk of Loss and Insurance Proceeds.

 

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

 

10.2.2     Major
Loss.  If the
amount of the damage or destruction or condemnation as specified above exceeds
$500,000, then Buyer may at its option, to be exercised by written notice to
Seller within ten (10) business days of Seller’s notice of the occurrence
of the damage or destruction or the commencement of condemnation proceedings,
terminate this Agreement.  Buyer’s
failure to elect to terminate this Agreement within said ten (10) business
day period shall be deemed an election by Buyer to consummate this purchase and
sale transaction.  If Buyer elects to
terminate this Agreement within such ten (10) business day period, then
the Deposit shall be returned to Buyer and neither party shall have any further
rights or obligations hereunder except as expressly provided elsewhere in this
Agreement.  If Buyer elects or is deemed
to have elected to proceed with the purchase, then upon the Closing, there
shall be a credit against the Purchase Price due hereunder equal to the amount
of any insurance proceeds (other than business interruption or rental loss
insurance applicable to the period prior to Closing) or condemnation awards
collected by Seller as a result of any such damage or destruction or
condemnation, plus the amount of any insurance deductible, less any sums
expended by Seller directly toward the restoration or repair of the
Property.  If the proceeds or awards have
not been collected as of the Closing, then such proceeds (including business
interruption or rental loss insurance of Seller which would be applicable to
any period subsequent to Closing) or awards shall be assigned to Buyer, except
to the extent needed to 

 

39

 

reimburse
Seller for sums expended prior to the Closing to repair or restore the
Property, without a reduction to the Purchase Price.

 

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

 

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

 

	
  If
  to Seller:

  	
   

  	
  Acacia
  on Santa Rosa Creek, LLC

  
	
   

  	
   

  	
  c/o
  Shea Properties

  
	
   

  	
   

  	
  130
  Vantis, Ste. 200

  
	
   

  	
   

  	
  Aliso
  Viejo, CA 92656

  
	
   

  	
   

  	
  Attn:
  Kirk Roloff

  
	
   

  	
   

  	
  Facsimile:
  (949) 389-7434

  
	
   

  	
   

  	
  E-mail:
  kirk.roloff@sheaproperties.com

  
	
   

  	
   

  	
   

  
	
  With
  copies to:

  	
   

  	
  Acacia
  on Santa Rosa Creek, LLC

  
	
   

  	
   

  	
  c/o
  Shea Properties

  
	
   

  	
   

  	
  130
  Vantis, Ste. 200

  
	
   

  	
   

  	
  Aliso
  Viejo, CA 92656

  
	
   

  	
   

  	
  Attn:
  Julia Guizan, Esq.

  
	
   

  	
   

  	
  Facsimile:
  (949) 389-7466

  
	
   

  	
   

  	
  E-mail:
  julie.guizan@jfshea.com

  
	
   

  	
   

  	
   

  
	
  and
  to:

  	
   

  	
  Miller
  Starr Regalia

  
	
   

  	
   

  	
  1331
  N. California Blvd., Fifth Flr.

  
	
   

  	
   

  	
  Walnut
  Creek, CA 94596

  
	
   

  	
   

  	
  Attn:
  Hans Lapping, Esq.

  
	
   

  	
   

  	
  Facsimile:
  (925) 933-4126

  
	
   

  	
   

  	
  E-mail:
  hl@msrlegal.com

  
	
   

  	
   

  	
   

  
	
  If
  to Buyer:

  	
   

  	
  Behringer
  Harvard Multifamily OP I LP

  
	
   

  	
   

  	
  15601
  Dallas Parkway, #600

  
	
   

  	
   

  	
  Addison,
  Texas 75001

  
	
   

  	
   

  	
  Attn:
  Mark T. Alfieri, Senior Vice President

  
	
   

  	
   

  	
  Facsimile:
  (214) 655-1610

  
	
   

  	
   

  	
  E-mail:
  malfieri@behringerharvard.com

  

 

40

 

	
  with
  Copies to:

  	
   

  	
  Robert
  L. Abbott PC

  
	
   

  	
   

  	
  2828
  Routh Street, Suite 500

  
	
   

  	
   

  	
  Dallas,
  Texas 75201

  
	
   

  	
   

  	
  Attn:
  Robert L. Abbott, Esq.

  
	
   

  	
   

  	
  Facsimile:
  (214) 849-9823

  
	
   

  	
   

  	
  E-mail:
  abbott@rabbottpc.com

  
	
   

  	
   

  	
   

  
	
  If
  to Escrow Agent:

  	
   

  	
  Partners
  Title Company

  
	
   

  	
   

  	
  712
  Main Street, Suite 2000E

  
	
   

  	
   

  	
  Houston,
  Texas 77002-3218

  
	
   

  	
   

  	
  Attn:
  Reno Hartfiel, Executive VP/

  
	
   

  	
   

  	
           General
  Counsel

  
	
   

  	
   

  	
  Facsimile:
  (713) 238-9199

  
	
   

  	
   

  	
  E-mail:
  rhartfiel@partnerstitle.com

  

 

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

 

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

 

41

 

such
reference will include the successors and permitted assigns of such party under
this Agreement.

 

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

 

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

 

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

 

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

 

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

 

42

 

10.10              Waiver
of Consequential and Punitive Damages.  NOTWITHSTANDING ANYTHING TO THE CONTRARY
CONTAINED HEREIN, IN NO EVENT SHALL EITHER SELLER OR BUYER OR ANY AFFILIATE OF
SELLER OR BUYER OR THEIR RESPECTIVE MEMBERS, PARTNERS, SHAREHOLDERS, DIRECTORS,
OFFICERS, MANAGERS, EMPLOYEES OR AGENTS BE LIABLE FOR ANY INDIRECT,
CONSEQUENTIAL, INCIDENTAL OR PUNITIVE DAMAGES (INCLUDING BUT NOT LIMITED TO
DAMAGES FOR LOST PROFITS AND LOSS OF BUSINESS INFORMATION) ARISING OUT OF THE
TRANSACTION CONTEMPLATED HEREIN, EVEN IF SELLER OR BUYER OR ANY SUCH PARTY HAS
BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES.

 

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

 

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

 

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

 

43

 

10.14              Governmental
Approvals. Nothing contained in this
Agreement shall be construed as authorizing Buyer to apply for a zone change,
variance, subdivision maps, lot line adjustment, condominium conversions or
other discretionary governmental act, approval or permit with respect to the
Property prior to the Close of Escrow, and Buyer agrees not to do so without
Seller’s prior written approval, which approval may be withheld in Seller’s
sole and absolute discretion.  Buyer
agrees not to submit any reports, studies or other documents, including,
without limitation, plans and specifications, impact statements for water,
sewage, drainage or traffic, environmental review forms, or energy conservation
checklists to any governmental agency, or any amendment or modification to any
such instruments or documents prior to the Close of Escrow unless first
approved by Seller, which approval Seller may withhold in Seller’s sole
discretion.  Buyer’s obligation to
purchase the Property shall not be subject to or conditioned upon Buyer’s
obtaining any variances, zoning amendments, subdivision maps, lot line
adjustment, or other discretionary governmental act, approval or permit.

 

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

 

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

 

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

 

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

 

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

 

10.20              Natural Hazard
Disclosure. 
Buyer and Seller acknowledge that Seller may be required to disclose if
the property lies within the following natural hazard areas or zones:  (i) a special flood hazard area
designated by the Federal Emergency Management 

 

44

 

Agency (California Civil Code Section 1103(c)(1));
(ii) an area of potential flooding (California Government Code Section 8589.4);
(iii) a very high fire hazard severity zone (California Government Code Section 51178
et seq.); (iv) a wild land area that may contain substantial forest fire
risks and hazards (Public Resources Code Section 4135; (v) earthquake
fault zone (Public Resources Code Section 2622); or (vi) a seismic
hazard zone (Public Resources Code Section 2696) (sometimes all of the
preceding are herein collectively called the “Natural
Hazard Matters”). 
Accordingly, Seller shall provide Buyer with a natural hazard disclosure
report (the “Natural Hazard Disclosure Statement”)
prepared by a professional consulting firm (the “Natural
Hazard Expert”) relating to the Property no later than three (3) days
after the Effective Date.  Buyer
expressly acknowledges and agrees that (a) the Natural Hazard Disclosure
Statement prepared by the Natural Hazard Expert will fully and completely discharge
Seller from its disclosure obligations referred to herein, if and to the extent
any such obligations exist, (b) for the purpose of this Agreement, the
provisions of Civil Code section 1103.4 regarding non-liability of Seller for
errors or omissions not within its personal knowledge shall be deemed to apply,
and (c) the Natural Hazard Expert shall be deemed to be an expert, dealing
with matters within the scope of its expertise with respect to the examination
and written report regarding the natural hazards referred to above.  Buyer agrees to provide Seller with a written
acknowledgment of its receipt of the Natural Hazard Disclosure Statement.

 

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

 

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

 

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

 

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

 

10.22.3  Judicial Reference.  In the event the Representatives
are not able to resolve the Dispute within 30 days following the date one party
first notifies the other party of the Dispute in writing, then the Dispute
shall be resolved by general judicial reference pursuant to Code of Civil
Procedure Sections 638 and 641 through 645.1, or any successor statutes
thereto, and as modified or as otherwise provided in this Section.  Subject to the limitations set forth in this
Section, the general referee shall have the authority to try all issues,
whether of fact or law, and to report a statement of decision to the
court.  The referee shall be the only
trier of 

 

45

 

fact or law in the reference proceeding, and shall
have no authority to further refer any issues of fact or law to any other
party, without the mutual consent of all parties to the judicial reference
proceeding.

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

46

 

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

 

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

 

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

 

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

 

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

 

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

 

	
   

  	
  /s/
  KR

  	
   Seller’s Initials

  	
  /s/
  MA

  	
   Buyer’s Initials

  

 

47

 

10.23              Prohibition
of Condominium Conversion. 
Buyer represents, warrants and covenants to Seller that, to the fullest
extent permitted by law, Buyer shall not, for a period of ten (10) years
from April 24, 2003, the date of completion of construction of the
Improvements (the “Completion Date”),
convert the Property into condominiums or similar forms of subdivided
ownership.  In connection with the
foregoing, Buyer further agrees that (a) the prohibition against condominium
conversions is reasonable under the circumstances existing as of the Effective
Date, (b) if Buyer sells or otherwise transfers the Property within ten (10) years
of the Completion Date, then Buyer shall notify its buyer in writing of this
restriction and include a similar prohibition against condominium conversions
in any purchase and sale or similar agreement to so transfer the Property, (c) Buyer
shall indemnify, defend, protect and hold Seller and its Affiliates harmless,
from any and all Losses resulting from Buyer’s breach of the representation,
warranty and covenant contained in this Section 10.23, (d) without
in any way limiting the materiality of the other provisions of this Agreement,
the provisions of this Section 10.23 are material and included as a
material portion of the consideration given by Buyer to Seller in exchange for
Seller’s performance under this Agreement, (e) Buyer acknowledges that
Seller has given Buyer material concessions regarding this transaction in
exchange for Buyer agreeing to the provisions of this Section 10.23,
and (f) Buyer’s obligations under this Section 10.23 shall
expressly survive the Closing and the deliver of the Deed.  In addition, Buyer acknowledges and agrees
that its breach of the terms and conditions of this Section 10.24
will constitute immediate and irreparable damage to the Seller, which cannot be
fully and adequately compensated in money damages and which will warrant
preliminary and other injunctive relief, an order for specific performance, and
other equitable relief.  In connection
with the foregoing, Buyer further agrees that no bond or other security shall
be required in obtaining such equitable relief and Buyer hereby consent to the
remedy of an injunction or specific performance to the extent Seller is
entitled thereto.  Buyer acknowledges
that Seller’s remedies hereunder are cumulative and other action may be taken
and remedies enforced against it in the event of a breach of this Section.  At the Closing, Buyer and Seller shall record
a memorandum of agreement (the “Memorandum”) evidencing Buyer’s
agreements set forth herein.

 

10.24              Rule 3-14
Audit.  Seller acknowledges that under
Rule 3-14 of Regulation S-X, Buyer is required to obtain certain
information in connection with reports Buyer is required to file with the
Securities and Exchange Commission. 
Accordingly, subject to the terms and conditions of this Section 10.24,
Seller agrees to use commercially reasonable efforts to cooperate with Buyer’s
auditors in the preparation of such audited financial statements.  In furtherance of the foregoing, (a) Seller
shall, during normal business hours and upon not less than three (3) business
days’ prior written notice, allow Buyer’s auditors reasonable access to such
books and records maintained by Seller and Property Manager exclusively in
respect of the Property solely to the extent necessary to prepare and file such
audited financial statements in compliance with Rule 3-14 of Regulation
S-X; and (b) if Seller has audited financial statements with respect to
the Property, Seller shall provide Buyer’s auditors with a copy of such audited
financial statements; provided, however, that Buyer expressly acknowledges and
agrees that if Seller does not have audited financial statements with respect
to the Property, Seller shall be under no obligation to cause such audited
financial statements to be prepared. 
Seller’s obligation to cooperate shall survive the Closing for a period
of three (3) years.  In
consideration of the foregoing, Buyer agrees that Buyer shall indemnify,
defend, protect and hold harmless Seller, Property Manager and their respective
Affiliates, partners, shareholders, members, officers, directors, managers,
agents, and employees from and against any and all Losses of any kind or 

 

48

 

nature, arising out of or in any way connected with
Seller’s provision of the materials required by this Section 10.24,
including without limitation lawsuits by shareholders or regulators or any
other persons whatsoever. 
Notwithstanding anything to the contrary contained herein, Seller shall
only be obligated to provide to Buyer Seller’s accounting information at the
Property level, and shall not be obligated to provide any information
concerning Seller’s capital structure or non-property related debt or any of
the following: (i) information contained in Seller’s credit reports,
credit authorizations, credit or financial analyses or projections, investment
analyses, account summaries or other documents prepared solely for Seller’s
internal purposes and not directly related to the operation of the Property,
including any valuation documents and information regarding the value of the
Property and the price paid by Seller therefor; (ii) material which is
subject to attorney-client privilege or which is attorney work product; (iii) sales
contracts, appraisal reports, letters or loan matters; (iv) financial
statements or information relating to Seller or any Affiliate of Seller other
than those at the Property level; (v) Seller’s tax returns; or (vi) material
which Seller is legally or contractually required to maintain as
confidential.  Notwithstanding anything
to the contrary set forth herein, Buyer expressly agrees that Seller’s delivery
of any information under this Section 10.24 (X) shall be
subject to the terms and conditions of Section 10.11, above; (Y) does
not in any manner increase any liability of Seller under this Agreement, or (Z) obviate
or waive the “AS IS” provisions of Section 7.2.2, above.  Subject to the terms of this Section 10.24,
Seller’s and Buyer’s respective obligation under this Section 10.24
shall expressly survive the Closing and the delivery of the Deed.

 

[Signature Page To
Follow]

 

49

 

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

 

	
  SELLER:

  	
  ACACIA ON SANTA ROSA CREEK,
  LLC,  

  a California limited liability company

  
	
   

  	
   

  
	
   

  	
  By:

  	
  Shea Properties Management
  Co., Inc.,

  
	
   

  	
   

  	
  a Delaware corporation

  
	
   

  	
  Its:

  	
  Manager

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/ Kirk Roloff

  
	
   

  	
   

  	
  Name:

  	
  Kirk Roloff

  
	
   

  	
   

  	
  Its:

  	
  Assistant Secretary

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/ Colm Macken

  
	
   

  	
   

  	
  Name:

  	
  Colm Macken

  
	
   

  	
   

  	
  Its:

  	
  Vice President

  

 

[Signature
Page Continued On Following Page]

 

50

 

	
  BUYER:

  	
  BEHRINGER HARVARD MULTIFAMILY

  OP I LP, a Delaware limited partnership

  
	
   

  	
   

  	
   

  
	
   

  	
  By: 

  	
  BHMF, Inc., a Delaware
  corporation,

  
	
   

  	
   

  	
  its general partner

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/ Mark T. Alfieri

  
	
   

  	
   

  	
  Name:

  	
  Mark T. Alfieri

  
	
   

  	
   

  	
  Its:

  	
  Chief Operating Officer

  

 

51

 

ESCROW
AGENT:

 

The Escrow Agent is executing this Agreement to
evidence its agreement to hold the Deposit and act as escrow agent in
accordance with the terms and conditions of this Agreement.  Escrow Agent certifies that it is in
possession of a fully executed counterpart original or copy of the Agreement
this 12 day of October, 2009 and that this date shall be deemed the “Effective
Date” for purposes of this Agreement.

 

	
   

  	
   

  	
  PARTNERS TITLE COMPANY

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/ Carol Gonzales

  
	
   

  	
   

  	
  Name:

  	
  Carol Gonzales

  
	
   

  	
   

  	
  Title:

  	
  Escrow Officer

  

 

52

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