Document:

ex10-1

EXHIBIT 10.1

AGREEMENT OF PURCHASE AND SALE

      THIS AGREEMENT OF PURCHASE AND SALE (this “Agreement”) is entered into as
of March 8, 2001 (the “Effective Date”), by and among G & W/LAKEVILLE CORPORATE
CENTER, LLC, a California limited liability company (“Seller”), and REGAN
HOLDING CORP., a California corporation (“Buyer”).

      THIS AGREEMENT IS ENTERED INTO on the basis of the following facts,
intentions and understandings of the parties:

      A. Seller is the owner of the land (the “Land”) and the improvements
located thereon (the “Improvements”), commonly known as 2084 Lakeville Highway
and 2090 Marina Avenue in the City of Petaluma, County of Sonoma, State of
California. The Land is more particularly described in Exhibit A, attached
hereto. The Land and the Improvements are hereinafter collectively referred to
as the “Real Property.”

      B. The Real Property is subject to that certain Lakeville Industrial
Center Net Lease (the “Lease”) dated October 28, 1998, entered into between
Seller, as Landlord, and Buyer, as Tenant. Pursuant to the Lease, Seller
granted to Buyer an option to purchase the Property. Buyer has exercised its
option to purchase the Property.

      C. Seller now desires to sell the Property (as hereinafter defined) to
Buyer, and Buyer desires to purchase the Property from Seller, in accordance
with the terms of the Lease and this Agreement.

      NOW THEREFORE, for valuable consideration, the receipt and adequacy of
which are hereby acknowledged, Seller and Buyer hereby agree as follows:

      1. Purchase and Sale of Property. Seller shall sell to Buyer, and Buyer shall
purchase from Seller, on the terms, covenants and conditions set forth in this
Agreement, the following described property (collectively, the “Property”):

      
      1.1. Real Property. The Real Property, together with all minerals, oil, gas
and other hydrocarbon substances thereon and all easements, access rights, air,
water and riparian rights, development rights, solar rights and all tenements,
privileges and appurtenances pertaining thereto;

      
      1.2. Personal Property. All fixtures, equipment, machinery, building
materials, furniture, furnishings and other personal property located on,
attached to, or used in connection with the operation and maintenance of the
Real Property that are owned by Seller (collectively, the “Personal Property”);

1.

      
      1.3. Intangible Property. Seller’s interest in any and all intangible personal
property arising out of or in connection with the ownership or operation of the
Real Property,
including (i) the right to use the current names of the Real Property, (ii)
all licenses, permits, certificates of occupancy and franchises issued to
Seller by federal, state or local municipal authorities relating to the use,
maintenance, occupancy or operation of the Real Property, (iii) all warranties
given by third parties with respect to the Real Property, and (iv) all service,
equipment, maintenance, construction and employment agreements (collectively,
the “Service Contracts”) entered into by Seller with respect to the Real
Property and listed on Exhibit B, attached hereto, which Buyer elects to have
assigned to it pursuant to the provisions of this Agreement (collectively, the
“Intangible Property”); and

      
      1.4. Lease. The Lease, together with all security and damage deposits held by
Seller in accordance with the terms of the Lease.

      2. Purchase Price. Buyer shall pay to Seller the purchase price (the “Purchase
Price”) in the amount of Ten Million Six Hundred Thousand Dollars ($10,600,000)
for the Property. The Purchase Price shall be paid in the manner described in
Section 4.

      3. Deposit. Within two (2) business days after the execution of this
Agreement, Buyer and Seller shall open an escrow account (the “Escrow”) with
North American Title (“Escrow Holder”), and Buyer shall deposit with Escrow
Holder by cashier’s check or immediately available federal wire transfer cash
in the amount of Forty Thousand Dollars ($40,000) (the “Deposit”). Escrow
Holder shall place the Deposit in an interest-bearing account at an institution
acceptable to Buyer, to be held as a deposit on account of the Purchase Price.
(The Deposit and all interest earned thereon shall hereinafter collectively be
referred to as the “Earnest Money Deposit.”) Upon Close of Escrow, the Earnest
Money Deposit shall be applied against the Purchase Price.

      4. Payment of Purchase Price. On or before Close of Escrow, Buyer shall
deposit with Escrow Holder by immediately available federal wire transfer or
cashier’s check an additional amount equal to the difference between the
Purchase Price and the Earnest Money Deposit, plus or minus the closing
adjustments and prorations described in Section 11.7.

      5. Remedies; Liquidated Damages.

      
      5.1. Remedies. If the transfer of the Property from Seller to Buyer does not
close as a result of a default by Seller under this Agreement, Buyer’s sole
remedy shall be either (but not both) (i) the return of the Earnest Money
Deposit and reimbursement of Buyer’s actual expenses incurred in connection
with this transaction, not to exceed Fifty Thousand Dollars ($50,000), or (ii)
an action for specific performance of this Agreement (with Buyer thereby
waiving any other remedy which Buyer may have against Seller at law or in
equity).

      
      5.2. LIQUIDATED DAMAGES. IF THE TRANSFER OF THE PROPERTY FROM SELLER TO BUYER
IS NOT CONSUMMATED DUE TO A DEFAULT BY BUYER

2.

UNDER THIS AGREEMENT, SELLER SHALL
HAVE THE RIGHT TO TERMINATE THIS AGREEMENT IN WRITING IMMEDIATELY AND WITHOUT
FURTHER OBLIGATION TO BUYER. SELLER SHALL BE ENTITLED TO RETAIN ANY PORTION OF
THE EARNEST MONEY DEPOSIT THEN HELD BY ESCROW HOLDER AS LIQUIDATED
DAMAGES AND AS SELLER’S SOLE REMEDY. NOTWITHSTANDING THE FOREGOING, THIS
PROVISION SHALL NOT LIMIT SELLER’S RIGHT TO OBTAIN REIMBURSEMENT FOR ATTORNEYS’
FEES AND COSTS, AFFECT BUYER’S RESTORATION OBLIGATIONS, OR WAIVE OR AFFECT
BUYER’S INDEMNITY OBLIGATIONS AND SELLER’S RIGHTS TO THOSE INDEMNITY
OBLIGATIONS UNDER THIS AGREEMENT. THE PARTIES AGREE THAT SELLER’S ACTUAL
DAMAGES AS A RESULT OF BUYER’S DEFAULT UNDER THIS AGREEMENT WOULD BE DIFFICULT
OR IMPOSSIBLE TO DETERMINE, AND THE EARNEST MONEY DEPOSIT IS THE BEST ESTIMATE
OF THE AMOUNT OF DAMAGES SELLER WOULD SUFFER AS A RESULT OF SUCH DEFAULT.
SELLER HEREBY WAIVES THE PROVISIONS OF CALIFORNIA CIVIL CODE SECTION 3389. THE
PARTIES WITNESS THEIR AGREEMENT TO THIS LIQUIDATED DAMAGES PROVISION BY
INITIALING THIS SECTION:

	 	 	 
	Seller:  (/s/MTW)		
Buyer:  (/s/HLS)

      6. Due Diligence.

      
      6.1. Seller’s Studies. Seller either has or will provide to Buyer within two
(2) business days after the Effective Date copies of the documents and
materials (the “Due Diligence Documents”) described in Exhibit C, attached
hereto. In addition, Seller shall make available at Seller’s office for
Buyer’s review all studies, reports, maps, surveys, and other documents
relating to the Property and the Lease in Seller’s possession or control
(together with the Due Diligence Documents hereinafter referred to as the “Due
Diligence Materials”).

      
      6.2. Survey. During the Due Diligence Period, Buyer, at Buyer’s sole cost and
expense, shall the right to have an ALTA survey (the “Survey”) prepared of the
Real Property.

      
      6.3. Right of Entry. During the period (the “Contract Period”) commencing on
the Effective Date and ending on the earlier of Close of Escrow or termination
of this Agreement, Buyer’s representatives, agents, consultants and contractors
shall have the right to enter the Real Property to conduct investigations of
the Property and the physical and economic conditions thereof, including the
conduct of such engineering, economic feasibility and soil tests as Buyer may
desire (each, a “Buyer Inspection”), pursuant to the following terms and
conditions:

      
      
      6.3.1. Buyer’s Expense. Each Buyer Inspection shall be at Buyer’s sole cost
and expense.

3.

      
      
      6.3.2. No Interference. Any entry by Buyer or its representatives, agents,
consultants or contractors shall not interfere with Seller’s use of the Real
Property.6.3.3. Seller’s Approval Rights. Seller shall have the right to
approve of any proposed physical testing or drilling of the Real Property,
which approval may be withheld by Seller in its sole and absolute
discretion.6.3.4. Restoration. Buyer, at Buyer’s sole cost and expense, shall
restore the Real Property to its condition existing immediately prior to
Buyer’s Inspections if, for any reason, the Property is not transferred by
Seller to Buyer. The restoration obligation contained in this Section 6.3.4
shall survive the termination of this Agreement.

      
      
      6.3.5. Indemnity. Buyer shall indemnify, defend and hold harmless Seller for,
from and against any and all claims, damages, costs, liabilities and losses
(including mechanics’ liens) and expenses (including, without limitation,
reasonable attorneys’ fees) arising out of any entry by Buyer or its agents,
representatives, consultants or contractors on the Real Property. The
indemnity obligations contained in this Section 6.3.5 shall survive Close of
Escrow or any termination of this Agreement.

      
      6.4. Designation of Representatives. Seller and Buyer each shall designate one
(1) representative to act for them in scheduling and arranging visits to and
inspections of the Real Property and in coordinating the delivery of and/or
access to the Due Diligence Materials pursuant to Section 6.1 above. Buyer’s
Representative and Seller’s Representative are identified in the Summary of
Certain Terms. Each party shall have the right to change its respective
representative by notice to the other party given in accordance with Section
15.7.

      
      6.5. Disapproval of Seller’s Studies or Buyer’s Inspections.

      
      
      6.5.1. Termination Notice. Buyer shall have the right, at any time during the
period (the “Due Diligence Period”) commencing on the Effective Date and ending
at 6:00 p.m. Pacific Standard Time on the thirtieth (30th) day after the
Effective Date to disapprove of the results of Buyer’s review of the Due
Diligence Materials, Buyer’s Inspections of the Real Property or any aspect of
this transaction, by notifying Seller in writing (a “Termination Notice”). If
Buyer fails to provide Seller with a Termination Notice prior to the expiration
of the Due Diligence Period, then Buyer shall be deemed to have approved the
results of Buyer’s review of the Due Diligence Materials and Buyer’s
Inspections.

      
      
      6.5.2. Result of Termination Notice. If Buyer delivers a Termination Notice to
Seller during the Due Diligence Period, then this Agreement shall terminate and
Seller shall immediately direct Escrow Holder to return the Earnest Money
Deposit to Buyer.

      
      6.6. Title Review. Buyer shall notify Seller in writing (the “Title Objection
Notice”) prior to the expiration of the Due Diligence Period if Buyer objects
to the condition of title as shown on a title report (the “Title Report”) for
the Real Property issued by North American Title (“Title Company”) or any items
shown on the Survey. Buyer shall be deemed to have approved the condition of
title as shown on the Title Report and the Survey if Buyer fails to

4.

deliver to
Seller the Title Objection Notice prior to the expiration of the Due Diligence
Period. If Buyer timely delivers to Seller the Title Objection Notice, Seller
shall notify Buyer in writing within three (3) business days after Seller’s
receipt of the Title Objection Notice of Seller’s election to either (i) cure
or satisfy all or some of the objection(s) (the “Objections”) set forth in the
Title Objection Notice and/or (ii) not to cure or satisfy any of the
Objections. Seller shall have until Close of Escrow to cure or satisfy any
Objections that Seller elects to cure or satisfy and Seller’s failure to do so
by Close of Escrow shall constitute a default by Seller under this
Agreement. If Seller fails to notify Buyer in writing of its election within
the three (3) business day period referenced above, Seller shall be deemed to
have elected not to cure or satisfy all of the Objections. If Seller notifies
Buyer in writing of its election not to cure or satisfy any of the Objections
or is deemed to have elected not to cure or satisfy any of the Objections, then
Buyer shall either: (A) waive the Objections and proceed with Close of Escrow
pursuant to all of the terms of this Agreement, with a reduction in the
Purchase Price equal to the cost of curing the Objections as reasonably
estimated by Buyer, or (B) terminate this Agreement by written notice to
Seller. Buyer shall notify Seller in writing of its election either to
terminate this Agreement or waive the Objections pursuant to the foregoing
sentence within three (3) business days after Buyer’s receipt of Seller’s
response to the Title Objection Notice. If Buyer fails to notify Seller in
writing of its election to either terminate this Agreement or waive the
Objections within the time period provided above, Buyer shall be deemed to have
terminated this Agreement. If Buyer terminates this Agreement pursuant to this
Section, Seller shall immediately direct Escrow Holder to return the Earnest
Money Deposit to Buyer.

      
      6.7. Modification of Title Report. In the event that Title Company issues any
modification or supplement to the Title Report between the end of the Due
Diligence Period and Close of Escrow that is not the result of activities of
Buyer or any of Buyer’s agents, representatives, consultants or contractors,
and, if, in Buyer’s reasonable judgment, the change materially and adversely
affects the Real Property or Buyer’s projected use thereof, Buyer shall have
three (3) business days after receipt of the modification or supplement to the
Title Report in which to object thereto by written notice to Seller. If Buyer
objects to such a change, Seller shall have three (3) days after the date
Seller receives Buyer’s objection notice (and, if necessary, Close of Escrow
shall be extended by the number of days necessary to give Seller this full
three (3) day period) in which to notify Buyer in writing of its election
either to satisfy or cure Buyer’s objection or not to satisfy or cure Buyer’s
objection. Seller shall have until Close of Escrow to cure or satisfy any
objections that Seller elects to cure or satisfy and Seller’s failure to do so
by Close of Escrow shall constitute a default by Seller under this Agreement.
Seller shall be deemed to have elected not to cure or satisfy all of Buyer’s
objections if Seller fails to notify Buyer in writing of its election within
the three (3) day period referenced above. If Seller notifies Buyer in writing
of its election not to satisfy the objection or Seller is deemed to have
elected not to cure or satisfy Buyer’s objection, then Buyer shall either: (A)
waive the objection and proceed with Close of Escrow pursuant to all of the
terms of this Agreement, or (B) terminate this Agreement. Buyer shall notify
Seller in writing of its election either to terminate this Agreement or waive
its objection within three (3) business days after the earlier of Buyer’s
receipt of Seller’s written notice election not to cure Buyer’s objection or
the expiration of the three (3) day period within which Seller was required to
notify Buyer of its election. If

5.

Buyer terminates this Agreement pursuant to
this Section, (i) this Agreement, and all of the obligations, rights and
liabilities of Buyer and Seller to each other hereunder shall terminate; and
(ii) Seller shall immediately direct Escrow Holder to return the Earnest Money
Deposit to Buyer.

      
      6.8. Service Contracts. Buyer shall notify Seller in writing prior to the end
of the Due Diligence Period as to which (if any) Service Contracts Buyer shall
assume at Close of Escrow. Seller shall terminate all other Service Contracts
by Close of Escrow.

      
      6.9. Assumption of Bonds. Notwithstanding anything to the contrary contained
in Section 11.7 of this Agreement, Buyer agrees to purchase the Property
subject to outstanding bonds attributable to and unpaid assessments assessed
against the Property (with no adjustment to the Purchase Price).

      7. Status

      
      7.1. As-Is Purchase. Except as otherwise provided in Section 14.2, Seller
hereby specifically disclaims any warranty, guaranty or representation, oral or
written, past, present or future, of, as to or concerning (i) the nature and
condition of the Property, including, but not by way of limitation, the water,
soil, geology, environmental conditions (including the presence or absence of
any Hazardous Materials (defined below)), and the suitability thereof for any
and all activities and uses which Buyer may elect to conduct thereon; (ii) the
nature and extent of any right-of-way, lease, possessory interest, lien,
encumbrance, license, reservation, condition or otherwise; and (iii) the
compliance of the Property or its operation with any laws, ordinances or
regulations of any government or other body. The sale of the Property as
provided for herein is made on an “AS IS” basis, and Buyer expressly
acknowledges that, in consideration of the agreements of Seller herein, and
except as otherwise expressly specified herein, SELLER MAKES NO WARRANTY OR
REPRESENTATION, EXPRESS OR IMPLIED, OR ARISING BY OPERATION OF LAW, INCLUDING,
BUT IN NO WAY LIMITED TO, ANY WARRANTY OF CONDITION, HABITABILITY,
MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OF THE PROPERTY. The term
“Hazardous Materials” shall mean any substance: (i) the presence of which
requires investigation or remediation under any federal, state or local
statute, regulation, ordinance, order, action, policy or common law; (ii) which
is or becomes defined as a “hazardous waste,” “hazardous substance,” pollutant
or contaminant under any federal, state or local statute, regulation,
ordinance, rule, directive or order or any amendments thereto (hereinafter
referred to as “Environmental Laws”) including, without limitation, the
Comprehensive Environmental Response, Compensation and Liability Act (42 U.S.C.
Section 9601 et seq.) and/or the Resource Conservation and Recovery Act (41
U.S.C. Section 6901 et seq.); (iii) which is toxic, explosive, corrosive,
flammable, infectious, radioactive, carcinogenic, mutagenic or otherwise
hazardous and is or becomes regulated by any governmental authority, agency,
department, commission, board, agency or instrumentality of the United States,
the State of California or any political subdivision thereof; (iv) which
contains gasoline, diesel fuel or other petroleum hydrocarbons; (v) which
contains polychlorinated biphenyls (PCBs), asbestos or urea formaldehyde foam
insulation; or (vi) radon gas.

6.

      7.2. Release. Excluding any claim that Buyer may have against Seller as a
result of any breach by Seller of any of Seller’s representations or warranties
set forth in Section 14.2, effective as of Close of Escrow, Buyer, for itself
and its agents, affiliates, successors and assigns, hereby releases and forever
discharges Seller and its officers, directors, shareholders, members, partners,
agents, affiliates, successors and assigns (collectively, “Seller’s Parties”)
from, and waives any right to proceed against Seller or Seller’s Parties for,
any and all costs, expenses, claims, liabilities and demands (including
attorneys’ fees and costs) at law or in equity, whether known or unknown,
arising out of the physical, environmental, economic, legal or other condition
of the Property, including any claims for contribution pursuant to the
Comprehensive
Environmental Response, Compensation and Liability Act of 1980, as amended, or
any other Environmental Laws which Buyer has or may have in the future.
Without limiting the foregoing, Buyer hereby specifically waives the provisions
of Section 1542 of the California Civil Code which provide:

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

Buyer hereby specifically acknowledges that Buyer has carefully reviewed this
Section 7.2, and discussed its import with legal counsel, is fully aware of its
consequences, and that the provisions of this Section 7.2 are a material part
of this Agreement.

	 	 
	Buyer 
(/s/HLS)	
(X) agrees.

      
      8. Operation of Property. Seller hereby covenants with Buyer that during the
Contract Period:

      
      
      8.1. Leases, Contracts. Seller shall not enter into, amend or terminate any
lease, service contract or any other agreement or contract affecting or
relating to the Real Property that will survive Close of Escrow (including any
Service Contract) without the prior written consent of Buyer, which consent
shall not be unreasonably withheld;

      
      
      8.2. Insurance. All insurance coverage carried by Seller with respect to the
Real Property and in effect as of the Effective Date shall remain continuously
in full force and effect;

      
      
      8.3. Maintenance. Seller shall continue to maintain the Real Property in
substantially the same manner in which Seller is maintaining the Real Property
as of the Effective Date;

7.

      
      
      8.4. Personal Property. Seller shall not remove any Personal Property from the
Real Property unless it is replaced with a comparable item of equal quality and
quantity as existed at the time of such removal and shall maintain the Personal
Property in good condition and repair.

      
      
      8.5. Withdrawal. Seller shall withdraw the Property from the market and not
enter into any agreement to sell the Property to any other party or otherwise
negotiate with any other party concerning a sale of the Property.

      9. Grant Deed. Seller shall convey to Buyer all of its interest in the Real
Property by a grant deed (the “Deed”) in the form of Exhibit D, attached
hereto.

      10. Conditions Precedent. In addition to the documents and funds which must be
placed into Escrow prior to Close of Escrow as stated in Section 11 of this
Agreement, the following are conditions precedent to Close of Escrow:

      
      
      10.1. Seller. The following are conditions precedent to Seller’s obligation to
proceed with Close of Escrow:

      
      
      
      10.1.1. No Proceedings. No suit, action or other proceeding (instituted by any
party other than Seller) shall be pending which seeks, nor shall there exist
any judgment the effect of which is, to restrain the purchase and sale of the
Property;

      

      
      
      10.1.2. Buyer’s Representations True and Correct. Buyer’s representations and
warranties set forth herein shall be true and correct in all material respects
on Close of Escrow;

      

      
      
      10.1.3. Performance of Covenants. Buyer shall have performed all of Buyer’s
covenants and agreements contained in this Agreement that are required to be
performed by Buyer prior to or on Close of Escrow; and

      

      
      
      10.1.4. Authority. Buyer shall have provided to Seller and Title Company prior
to Close of Escrow evidence of authority for Buyer to enter into this Agreement
and purchase the Property from Seller.

      
      
      10.2. Buyer. The following are conditions precedent to the Buyer’s obligation
to proceed with Close of Escrow:

      
      
      
      10.2.1. Satisfaction With Due Diligence. Buyer’s inspection and approval
during the Due Diligence Period of the Due Diligence Materials, the Lease, the
Service Contracts, the Survey and all other physical, environmental, legal and
any other matters relating to the Property that Buyer may elect to investigate;

      
      
      
      10.2.2. Title. Buyer’s inspection and approval of all title and survey matters
relating to the Property within the time periods provided in Sections 6.6 and
6.7;

8.

      
      
      
      10.2.3. Owner’s Title Policy. Buyer’s receipt prior to Close of Escrow of an
irrevocable written commitment of Title Company to issue, upon the payment of
its regularly scheduled premium, an ALTA Owner’s Policy (1992 Form) of title
insurance, with extended coverage (the “Owner’s Title Policy”) dated as of the
date and time of the recordation of the Deed, in the amount of the Purchase
Price, insuring Buyer that fee simple title to the Real Property is vested in
Buyer, subject only to (i) a lien for real property taxes and assessments not
then delinquent; (ii) matters of title respecting the Real Property approved or
deemed approved by Buyer during the Due Diligence Period; and (iii) matters
affecting the condition of title to the Real Property created by or with the
written consent of Buyer or its agents, representatives, consultants or
contractors;

      
      
      
      10.2.4. Financing. Buyer’s obligations to perform pursuant to this Agreement
are contingent upon Buyer’s ability to obtain financing in an amount of
approximately $5,500.000.00 on terms acceptable to Buyer in sufficient time to
close escrow pursuant to this Agreement . Buyer acknowledges that it will use
it best efforts to obtain financing in as prompt a manner as is commercially
feasible; it being Buyer’s desire to close escrow as soon as possible.

      
      
      
      10.2.5. No Proceedings. As of Close of Escrow, no suit, action or other
proceeding (instituted by any party other than Buyer) shall be pending which
seeks, nor shall there exist any judgment the effect of which is, to restrain
the purchase and sale of the Property;

      
      
      
      10.2.6. Seller’s Representations True and Correct. As of Close of Escrow,
Seller’s representations and warranties set forth in this Agreement shall be
true and correct in all material respects;

      
      
      
      10.2.7. Performance and Covenants. Seller shall have performed all of the
covenants and agreements herein that Seller is required to perform on or before
Close of Escrow.

      
      
      
      10.2.8. Authority. Seller shall have provided to Buyer and Title Company at
Close of Escrow with evidence of authority to enter into this Agreement and
transfer the Property to Buyer.

      
      
      10.3. Failure of Buyer’s Conditions Precedent. If any of Buyer’s conditions
precedent described in Section 10.2 have not been satisfied or waived by the
time provided therein, then this Agreement shall terminate. Upon termination
of this Agreement pursuant to the foregoing sentence, Seller shall direct the
Escrow Holder to return the Earnest Money Deposit to Buyer. If Close of Escrow
fails to occur due to a default under this Agreement by either Seller or Buyer,
the parties’ respective remedies shall be as described in Section 5 hereof.

      11. Escrow.

      
      
      11.1. Time. Close of Escrow shall occur when all documents and funds specified
in this Section 11 have been deposited into Escrow. The failure of Seller or
Buyer to be in a position by the Scheduled Closing Date (as defined in the
Summary of Certain Terms) to

9.

fulfill their respective obligations with respect
to Close of Escrow and thus enable Title Company to cause Close of Escrow to
occur on the Scheduled Closing Date shall constitute a default by the party so
failing.

      
      
      11.2. Documents. On or before the business day immediately preceding the
Scheduled Closing Date, the parties shall deposit into Escrow the funds and
documents described below.

      
      
      
      11.2.1. Seller. Seller shall deposit the following:

      
      
      
      
      
      a. Deed. A duly executed and acknowledged Deed, conveying to Buyer all of its
interest in the Real Property;

      
      
      
      
      
      b. Bill of Sale and Assignment. Two (2) duly executed counterparts of a Bill
of Sale and Assignment (the “Assignment”) in the form of Exhibit E, attached
hereto, transferring to Buyer all of Seller’s interest in the Lease, Personal
Property and Intangible Property;

      
      
      
      
      
      c. Non-Foreign Person Certificate. A duly executed non-foreign person
certificate (the “Non-Foreign Person Certificate”) under Section 1445 of the
Internal Revenue Code in the form of Exhibit F, attached hereto;

      
      
      
      
      
      d. Form 597-W. A duly executed Withholding Exemption Certificate for Real
Estate Sales (Form 597-W) (the “Form 597-W”);

      
      
      
      
      
      e. Seller’s Date Down Certificates. A Seller’s Date Down Certificate
(“Seller’s Date Down Certificate”) in the form of Exhibit G, attached hereto;
and

      
      
      
      
      
      f. Additional Documents. Such additional documents and funds, including
without limitation, escrow instructions consistent with the terms and
conditions of this Agreement, as may be reasonably required of Seller to close
the transaction in accordance with this Agreement.

      
      
      
      11.2.2. Buyer. Buyer shall deposit the following:

      
      
      
      
      
      a. Purchase Price. The Purchase Price, plus or minus the closing adjustments
and prorations due hereunder;

      
      
      
      
      
      b. Assignment. Two (2) duly executed original counterparts of the Assignment;

      
      
      
      
      
      c. Buyer’s Date Down Certificate. A duly executed Buyer’s Date Down
Certificate in the form of Exhibit H, attached hereto; and

10.

      
      
      
      
      
      d. Additional Documents. Such additional documents and funds, including
without limitation, escrow instructions consistent with the terms and
conditions of this Agreement, as may be reasonably required of Buyer to close
the transaction in accordance with this Agreement.

      
      
      11.3. Procedure. Escrow Holder shall close the Escrow as follows:

      
      
      
      
      11.3.1. Record Deed. Record the Deed in the Official Records of Sonoma County,
California and deliver conformed copies thereof to Buyer and Seller;

      
      
      
      
      11.3.2. Purchase Price. Deliver to Seller by wire transfer to the account
designated by Seller in writing, the Purchase Price, minus prorations and
closing costs;

      
      
      
      
      11.3.3. Additional Deliveries to Seller. Deliver to Seller one (1) fully
executed original of the Assignment and Buyer’s Date Down Certificate; and

      
      
      
      
      11.3.4. Additional Deliveries to Buyer. Deliver to Buyer (i) one (1) fully
executed original of the Non-Foreign Certificate, Assignment, Form 597-W, and
Seller’s Date Down Certificate, and (ii) the Owner’s Title Policy.

      
      
      11.4. Possession. Seller shall deliver possession of the Property to Buyer at
Close of Escrow free and clear of all tenants and occupants, except for the
Buyer under the Lease.

      
      
      11.5. Deliveries Outside Escrow. Upon Close of Escrow, Seller shall deliver
(or shall have previously delivered) to Buyer, the following items in Seller’s
possession:

      
      
      
      
      11.5.1. Keys; Security Systems. Keys to all buildings located on the Real
Property and access codes to any security systems comprising part of the
Property;

      
      
      
      
      11.5.2. Approvals. Originals or, to the extent originals are not available,
copies of all governmental licenses, permits and approvals relating to the
occupancy or use of the Real Property;

      
      
      
      
      11.5.3. Project Agreements and Project Documents. Originals, or to the extent
originals are not available, copies of all construction drawings and
specifications (including, without limitation, structural, electrical, HVAC,
mechanical and plumbing plans and specifications) and any addenda thereto, and
all other blueprints, architectural documents, operating manuals and similar
documents, landscaping plans, development plans and shop drawings relating to
the Improvements.

      
      
      
      
      11.5.4. Warranties. Originals or, to the extent originals are not available,
copies of all existing warranties given by third parties with respect to the
Real Property.

11.

      
      
      11.6. Escrow Instructions. This Agreement shall serve as escrow instructions
and an executed copy of this Agreement shall be deposited by Seller and Buyer
with Escrow Holder following the execution and delivery hereof. The parties
agree to execute for the benefit of Escrow Holder such additional escrow
instructions as required, provided that the additional escrow instructions do
not change the terms of this Agreement but merely offer protection to Escrow
Holder. Seller and Buyer hereby designate Escrow Holder as the “Reporting
Person” for the transaction pursuant to Section 6045(e) of the Internal Revenue
Code.

      
      
      11.7. Closing Costs and Prorations.

      
      
      
      
      11.7.1. Closing Costs

      
      
      
      
      
      
      a. Buyer’s Share of Closing Costs. Buyer shall pay the following portions of
the closing costs (the “Closing Costs”) in connection with transfer of the
Property: (A) the title insurance premiums for the Owner’s Title Policy and
any endorsements requested by Buyer; (B) the Escrow fees; and (C) all recording
fees incurred in connection with the Deed.

      
      
      
      
      
      
      b. Seller’s Share of Closing Costs. Seller shall pay the following portions of
the Closing Costs: (A) all City and County documentary transfer taxes; and (B)
all recording fees not the responsibility of Buyer pursuant to Section 11.7.1.a
above.

      
      
      
      
      
      
      c. No Close of Escrow. If Close of Escrow does not occur because of a failure
of either Seller or Buyer to comply with its obligations under this Agreement,
the costs incurred in connection with the Escrow, including the cost of the
Title Report and any cancellation fees or other costs of Title Company, shall
be paid by the defaulting party. If Close of Escrow does not occur because of
any other reason, including any termination of this Agreement by Buyer pursuant
to Sections 6.5, 6.6 or 6.7, such costs shall be paid equally by Buyer and
Seller.

      
      
      
      
      11.7.2. Lease Rentals. All accrued rent (including all accrued operating
expenses and tax escalations and recoveries), charges and revenues of any kind
under the Lease shall be prorated as of 11:59 p.m. Pacific Standard Time on the
day immediately prior to Close of Escrow (the “Proration Date”) based on the
actual number of days in the month in which Close of Escrow occurs. Seller
shall receive a credit at Close of Escrow for any uncollected rent, charges or
revenues for the month in which Close of Escrow occurs. If, after Close of
Escrow, either Buyer or Seller receives any revenue to which it is not entitled
under the terms of this Agreement, the party receiving the revenue shall
promptly forward such amount to the other party.

      
      
      
      
      11.7.3. Re-Proration. There shall be no re-prorations after the Closing Date
of any Tenant reconciliations.

12.

      
      
      
      
      11.7.4. Leasing Costs. All leasing commissions and tenant improvement costs
(collectively, “Leasing Costs”) due or payable in connection with the Lease
shall be paid in full by Seller at or prior to Close of Escrow. Buyer shall be
responsible for all Leasing Costs which shall become due after Close of Escrow
in connection with any other leases entered into by Buyer.

      
      
      
      
      11.7.5. Security Deposits. Buyer shall receive a credit against the Purchase
Price equal to all security deposits currently held by Seller in connection
with the Lease.

      
      
      
      
      11.7.6. Real Estate Taxes. All real and personal property taxes attributable
to the Real Property (to the extent they are not the obligation of the tenant
under the Lease) shall be prorated as of 11:59 p.m. Pacific Standard Time on
the Proration Date based on a 365-day year and the assessed value of the
Property in effect on the Proration Date. Seller shall pay or credit Buyer for
all such taxes attributable to periods through and including the Proration
Date. If at any time after the Proration Date additional or supplemental taxes
(which are not the obligation of the tenant under the Lease) are assessed
against the Real Property by reason of any event occurring prior to or on the
Proration Date, or there is any rebate of such taxes (with Seller being
responsible for the supplemental or additional taxes attributable to the period
prior to and including the Proration Date and Buyer being responsible for the
supplemental or additional taxes attributable to the period after the Proration
Date), Buyer and Seller shall promptly re-
prorate such taxes, and any amounts due from one party to the other shall be
paid in cash at that time. All real and personal property taxes, installments
of bonds, special taxes and assessments, and supplemental or additional taxes
which are the obligations of Buyer as tenant under the Lease shall be
considered to be rent for purposes of prorating such taxes and shall be
prorated among Buyer and Seller pursuant to Section 11.7.2.

      
      
      
      
      11.7.7. Utilities. Buyer shall arrange with all utility services and companies
serving the Real Property to have accounts started in the name of Buyer or its
property manager beginning as of the Closing Date. Buyer and Seller shall
cooperate to have the utility services and companies make utility readings as
of the Proration Date. If readings cannot be made, utility charges shall be
prorated as of 11:59 p.m. Pacific Standard Time on the Proration Date based on
estimates from the latest bills available; provided, in any event, Seller shall
pay, through and including the Proration Date, all utility charges attributable
to the Real Property that are not payable directly by Buyer as tenant under the
Lease. All utility charges attributable to the Real Property that are payable
directly by Buyer as tenant under the Lease shall be considered to be rent for
purposes of prorating such utility charges and shall be prorated among Buyer
and Seller pursuant to Section 11.7.2).

      
      
      
      
      11.7.8. Insurance. Seller shall not assign to Buyer any insurance policies in
connection with the Property.

      
      
      
      
      11.7.9. Calculations for Closing. Seller and Buyer shall provide Escrow Holder
with a preliminary calculation of prorations no later than three (3) days prior
to the

13.

Proration Date and a final calculation no later than one (1) day prior
to the Proration Date. The final calculation shall be executed by each party
and may be relied upon by Escrow Holder in completing the closing adjustments
and prorations. In the event incomplete information is available, or estimates
have been utilized to calculate prorations as of the Proration Date, any
prorations relating thereto shall be further adjusted and completed outside of
Escrow within sixty (60) days after the Proration Date or as soon as possible
after complete information becomes available to Buyer and Seller. Any
adjustments to initial estimated prorations that are required upon review of
such complete information shall be made by Buyer and Seller, with due diligence
and cooperation, by prompt cash payment to the party entitled to a credit as a
result of such adjustments. Any errors or adjustments in calculations of the
foregoing adjustments shall be corrected or adjusted as soon as practicable
after Close of Escrow.

      
      
      
      
      11.7.10. Additional Costs. Buyer and Seller each shall pay their own legal,
lending and other fees and expenses incurred in connection with the
negotiation, documentation and closing of the contemplated transactions.

      
      
      11.8. Failure to Furnish Non-Foreign Person Certificate. If Seller shall fail
to deposit into Escrow the Non-Foreign Person Certificate as required by this
Agreement, Buyer may at its option either (i) delay Close of Escrow until such
time as Seller has complied with the conditions set forth herein, and such
adjournment shall not place Buyer in default of its obligations hereunder, or
(ii) withhold from the Purchase Price and remit to the Internal Revenue
Service, a sum equal to ten percent (10%) of the gross selling price of the
Property or such other sum as shall be required in accordance with the
withholding obligations imposed upon Buyer
pursuant to Section 1445 of the Code. Such withholding shall not place Buyer
in default under this Agreement, and Seller shall not be entitled to claim that
such withholding shall excuse Seller’s performance under this Agreement.

      12. Brokerage Commission. Upon Close of Escrow, a real estate sales commission
(the “Commission”) shall be paid by Seller to Sabella & Lipman (“Seller’s
Broker”) in an amount as agreed upon in writing between Seller and Broker.
Except for Seller’s payment of such commission (from payment of which Seller
shall indemnify and hold harmless Buyer), each party to this Agreement warrants
to the other that no person or entity can properly claim a right to a real
estate commission, finder’s fee or other real estate brokerage-type
compensation (collectively, “Real Estate Compensation”) based upon the acts of
that party with respect to the transaction contemplated by this Agreement.
Each party hereby agrees to indemnify and defend the other (by counsel
reasonably acceptable to the party seeking indemnification) against and hold
the other harmless from and against any and all loss, damage, liability or
expense, including costs and reasonable attorneys’ fees, resulting from any
claims for Real Estate Compensation by any person or entity based upon such
acts.

      13. Condemnation/Casualty.

      
      
      13.1. Right to Terminate. If before Close of Escrow, all or any portion of the
Property is damaged or destroyed by fire or other casualty, or is taken by
condemnation or

14.

eminent domain (or an action of condemnation or eminent domain
has been commenced or threatened against all or any portion of the Property),
Seller shall promptly notify Buyer of such fact, and Buyer shall have the
option to terminate this Agreement upon notice to Seller on or before the
Closing Date.

      
      
      13.2. Election to Terminate. Upon Buyer’s termination of this Agreement
pursuant to this Section 13, Seller shall immediately instruct Escrow Holder to
return Earnest Money Deposit to Buyer. Upon termination of this Agreement,
neither Buyer nor Seller shall have any further rights or obligations under
this Agreement.

      
      
      13.3. No Election to Terminate. If Buyer does not exercise the option to
terminate this Agreement, neither Buyer nor Seller shall have the right to
terminate this Agreement. However, Buyer shall be entitled to receive and keep
at Close of Escrow all insurance proceeds, in the event of a casualty, and all
rights to receive future awards, in the case of a taking by condemnation or
eminent domain with respect to the Property, and Close of Escrow shall be
consummated pursuant to the terms hereof without any reduction in the Purchase
Price. Until the Close of Escrow or the earlier termination of this Agreement
by Buyer, all such insurance proceeds and awards shall be deposited with Title
Company into Escrow, for disbursement in accordance with the foregoing
provisions.

      14. Representations and Warranties.

      
      
      14.1. Buyer. Buyer represents and warrants to Seller the following:

      
      
      
      
      14.1.1. Authority. Buyer has the full power to execute and deliver and fully
perform its obligations under this Agreement; and this Agreement constitutes a
valid and legally binding obligation of Buyer, enforceable in accordance with
its terms.

      
      
      
      
      14.1.2. No Violation. Neither this Agreement nor anything provided to be done
hereunder violates or shall violate any contract, agreement or instrument to
which Buyer is a party, the effect of which shall be to prohibit or to seek or
purport to prohibit Buyer from fulfilling its obligations under this Agreement.

      
      
      
      
      14.1.3. No Assignment. Buyer has not made (i) a general assignment for the
benefit of creditors; (ii) filed any voluntary petition in bankruptcy or
suffered the filing of an involuntary petition by Buyer’s creditors; (iii)
suffered the appointment of a receiver to take possession of all or
substantially all of Buyer’s assets; (iv) suffered the attachment or other
judicial seizure of all, or substantially all, of Buyer’s assets; (v) admitted
in writing its inability to pay its debts as they become due; or (vi) made an
offer of settlement, extension or composition to its creditors generally.

      
      
      14.2. Seller. Seller represents and warrants to Buyer the following:

15.

      
      
      
      
      14.2.1. Authority. Seller has the full power to execute and deliver and fully
perform its obligations under this Agreement; and this Agreement constitutes a
valid and legally binding obligation of Seller, enforceable in accordance with
its terms.

      
      
      
      
      14.2.2. No Violation. . Neither this Agreement nor anything provided to be
done hereunder violates or shall violate any contract, agreement or instrument
to which Seller is a party, the effect of which shall be to prohibit or to seek
or purport to prohibit Seller from fulfilling its obligations under this
Agreement.

      
      
      
      
      14.2.3. No Assignment. Seller has not (i) made a general assignment for the
benefit of creditors; (ii) filed any voluntary petition in bankruptcy or
suffered the filing of an involuntary petition by its creditors; (iii) suffered
the appointment of a receiver to take possession of all or substantially all of
its assets; (iv) suffered the attachment or other judicial seizure of all, or
substantially all, of its assets; (v) admitted in writing its inability to pay
its debts as they come due; or (vi) made an offer of settlement, extension or
composition to its creditors generally.

      
      
      
      
      14.2.4. No Litigation. Seller has not received any actual notice of any
pending or threatened litigation which would materially and adversely affect
the Property.

      
      
      
      
      14.2.5. Notice of Violations. Except as disclosed in the Due Diligence
Documents, Seller has not received any written notice from any governmental
authority and Seller is not aware of any violation of any law, regulation or
code, including any building code, with respect to the Property which has not
been cured.

      
      
      
      
      14.2.6. No Eminent Domain Action. Seller has not received any written notice
from any governmental authority and Seller is not aware of any eminent domain
proceedings for the condemnation of the Real Property that are threatened or
currently pending.

      
      
      
      
      14.2.7. Service Contracts. The documents constituting the Service Contracts
which are delivered or made available to Buyer pursuant to Section 6.1 are
true, correct and complete copies of the Service Contracts and there is no
default or alleged default by Seller or the vendor under the Service Contracts
that has not been cured.

      
      
      
      
      14.2.8. No Additional Leases. Seller has not entered into or assumed any lease
relating to the Property that is in effect as of the Effective Date except for
the Lease.

      
      
      
      
      14.2.9. Licenses, Permits, Etc. Seller has obtained all approvals, easements
and rights of way which are required by any and all governmental authorities
having jurisdiction over the Property or by private parties for the normal use,
occupancy and operation of the Property and to ensure continued free and
unrestricted vehicular and pedestrian ingress to and egress from the Property;
all such approvals are in full force and effect and, to Seller’s actual
knowledge, there are no facts or circumstances which might result in revocation
of or failure to renew the same; to Seller’s actual knowledge, the Improvements
comply with all applicable laws, statutes, ordinances, rules and regulations of
any and all govern-mental or quasi-governmental

16.

agencies having or claiming
jurisdiction over the Property or the use of all or any part thereof (“Legal
Requirements”) and there are no violations thereof.

      
      
      
      
      14.2.10. Due Diligence Materials. All Due Diligence Materials and other
information which Seller has provided to Buyer concerning the Property are
correct and complete.

      
      
      
      
      14.2.11. Outstanding Contracts. As of the Closing Date, there will be no
outstanding contracts made by Seller for any improvements to the Property which
have not been fully paid for.

      
      
      
      
      14.2.12. Property. Except for Buyer, no one has any option or right of first
refusal to purchase the Property.

      
      
      
      
      14.2.13. Hazardous Materials.

      
      
      
      
      
      
      
      (i) To Seller’s actual knowledge, the Property is not in violation of any
Environmental Laws.

      
      
      
      
      
      
      
      (ii) Except as disclosed in the Due Diligence Documents, to Seller’s
actual knowledge, there has been no use, presence, disposal, storage,
generation or release (as those terms are used in the Environmental Laws, and
hereinafter collectively referred to as “Use”) of Hazardous Materials on, from
or under the Property during the period that Seller has owned the Property or
any prior period.

      
      
      
      
      
      
      
      (iii) To Seller’s actual knowledge, no enforcement action or litigation
has been brought or threatened against Seller or the Property during the period
that Seller has owned the Property or any prior period, nor any settlements
reached by Seller or any prior owner of or other party having any interest in
the Property, with any party or parties, alleging use of any Hazardous
Materials on, from or under the Property.

      
      
      
      
      
      
      
      (iv) To Seller’s actual knowledge, there are no underground storage tanks
on the Property.

      
      
      
      
      
      
      
      (v) The scope of the representations and warranties set forth in Sections
14.2.13(i), (ii), (iii), (iv) and (v) shall not diminish in any respect any
liability of Seller to Buyer which would otherwise exist under the
Environmental Laws.

      
      
      
      
      14.2.14. Subsequent Changes. Seller will promptly notify Buyer in writing of
any event or occurrence which would cause any of Seller’s above representations
and warranties to cease to be true or correct in any respect.

      
      
      14.3. No Warranties. Except for those representations and warranties expressly
set forth in Section 14.2, the parties understand and acknowledge that no
person acting on behalf of Seller is authorized to make, and by execution
hereof Buyer acknowledges that no person has

17.

made, any representation or
warranty regarding the Property, or the transaction contemplated herein, or
regarding Leases or the zoning, construction, physical condition or other
status of the Real Property. No representation, warranty, agreement,
statement, guaranty or promise, if any, made by any person acting on behalf of
Seller which is not contained in this Agreement shall be valid or binding on
Seller.

      15. Miscellaneous.

      
      
      15.1. Successors and Assigns. This Agreement shall be binding upon the heirs,
executors, administrator, and successors and assigns of Seller and Buyer.
Notwithstanding the forgoing, except in order to effectuate an Exchange,
neither Buyer nor Seller may assign its rights and obligations under this
Agreement without the prior written consent of the other party (which consent
may be withheld in each party’s sole discretion). No assignment by Buyer or
Seller shall result in assigning party being released from any obligations
under this Agreement. Any assignment in violation of this Section shall be
void.

      
      
      15.2. Entire Agreement. This Agreement contains all of the covenants,
conditions and agreements between the parties and shall supersede all prior
correspondence, agreements and understandings, both oral and written.

      
      
      15.3. Attorneys’ Fees. Should either party employ attorneys to enforce any of
the provisions of this Agreement or to protect its interest in any manner
arising under this Agreement, or to recover damages for breach of this
Agreement, or to enforce any judgment relating to this Agreement and the
transaction contemplated hereby, the prevailing party shall be entitled to
reasonable attorneys’ fees and court costs.

      
      
      15.4. Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of California.

      
      
      15.5. Further Assurances. Seller and Buyer shall promptly perform, execute and
deliver or cause to be performed, executed and/or delivered at or after Close
of Escrow any and all acts, deeds and assurances, including the delivery of any
documents, as either party or Escrow Holder may reasonably require in order to
carry out the intent and purpose of this Agreement.

      
      
      15.6. Severability. In case any one (1) or more of the provisions contained in
this Agreement for any reason is held to be invalid, illegal or unenforceable
in any respect, such invalidity, illegality or unenforceability shall not
affect any other provision hereof, and this Agreement shall be construed as if
such invalid, illegal or unenforceable provision had never been contained
herein.

      
      
      15.7. Notices.

      
      
      
      
      15.7.1. Means/Receipt. All notices or other communications required or
permitted hereunder shall be in writing, and shall be personally delivered or
sent by registered or certified mail, postage prepaid, return receipt
requested, national overnight courier service (next

18.

business day delivery) or
facsimile, and shall be deemed received upon the earlier of (i) if personally
delivered, the date of delivery to the address of the person to receive such
notice, (ii) if mailed, three (3) business days after the posting by the United
States Post Office, (iii) if sent by national overnight courier service (next
business day delivery), one (1) business day after delivery to such courier
service, or (iv) if given by facsimile, upon electronic evidence of receipt.

      
      
      
      
      15.7.2. Addresses. Any notice to Seller shall be sent to Seller at Seller’s
Address, as stated on page (i) of this Agreement. Any notice to Buyer shall be
sent to Buyer at Buyer’s Address, as stated on page (i) of this Agreement.

      
      
      15.8. Counterparts. This Agreement may be executed in one (1) or more
counterparts, and all the counterparts shall constitute but one (1) and the
same agreement, notwithstanding that all parties hereto are not signatory to
the same or original counterpart.

      
      
      15.9. Time. Time is of the essence of every provision contained in this
Agreement.

      
      
      15.10. Nonwaiver. Unless otherwise expressly provided in this Agreement, no
waiver by Seller or Buyer of any provision hereof shall be deemed to have been
made unless expressed in writing and signed by Seller or Buyer, as the case may
be. No delay or omission in the exercise of any right or remedy accruing to
Seller or Buyer, as the case may be, upon any breach under this Agreement shall
impair such right or remedy or be construed as a waiver of any such breach
theretofore or thereafter occurring. The waiver by Seller or Buyer of any
breach of any term, covenant or condition herein stated shall not be deemed to
be a waiver of any other term, covenant or condition.

      
      
      15.11. Survival. Each of the terms, covenants and conditions of this Agreement
contained in this Agreement shall survive the delivery of the Deed to Buyer and
shall not be deemed to have merged into the Deed; provided, however, that
unless Seller or Buyer, as the case may be, receives a written notice regarding
an alleged breach of any representation, warranty or covenant of Seller or
Buyer contained in the Sections referenced above on or prior to the date that
is three (3) months after Close of Escrow, then Seller’s or Buyer’s obligations
and liability with respect to such representation, warranty or covenant, as
applicable, shall terminate on the date that is three (3) months after Close of
Escrow.

      
      
      15.12. Captions. Section titles or captions contained in this Agreement are
inserted as a matter of convenience and for reference, and in no way define,
limit, extent or describe the scope of this Agreement.

      
      
      15.13. Exhibits. All exhibits attached hereto shall be incorporated herein by
reference as if set out herein in full.

      
      
      15.14. Construction. The parties acknowledge that each party and its counsel
have reviewed and revised this Agreement and that the normal rule of
construction to the effect

19.

that any ambiguities are to be resolved against the
drafting party shall not be employed in the interpretation of this Agreement or
any amendment or exhibits hereto.

      
      
      15.15. Business Day. As used herein, the term “business day” shall mean any
day other than a Saturday, Sunday or day on which banks in the State of
California are authorized to be closed for business.

      16. Deferred Exchange. Either party may consummate the purchase or sale of the
Property as part of a so-called like kind exchange (the “Exchange”) pursuant to
Section 1031 of the Internal Revenue Code of 1986, as amended, provided that
(i) Close of Escrow shall not be delayed or affected by reason of the Exchange,
nor shall the consummation or accomplishment of the Exchange be a condition
precedent or condition subsequent to either party’s obligations under this
Agreement; (ii) the party electing to consummate this transaction as part of an
Exchange (the “Electing Party”) shall effect the Exchange through an assignment
of this Agreement, or its rights under this Agreement, to a qualified
intermediary; (iii) the other party (the “Accommodator”) shall not be required
to take an assignment of the purchase agreement for the relinquished property
or be required to acquire or hold title to any real property for purposes of
consummating the Exchange; and (iv) the Electing Party shall pay any additional
costs that would not otherwise have been incurred by the Accommodator had the
Electing Party not consummated this transaction through the Exchange. The
Accommodator shall not by this Agreement or acquiescence to the Exchange
proposed by the Electing Party have its rights under this Agreement affected or
diminished in any manner or be responsible for compliance with or be deemed to
have warranted to the Electing Party that the Exchange in fact complies with
Section 1031 of the Internal Revenue Code of 1986, as amended.

      17. No Effect on Buyer’s Rights Under Lease Upon Failure to Close. In the
event the Parties fail to close escrow for any reason, such failure to close
shall not terminate or effect in any way, Buyer’s right to continue as the
Tenant pursuant to the Lease and all Addendums
thereto including, but not limited to, the Tenant’s right therein to extend the
term(s) of the Lease, the right of first offer and the right of first refusal.

20.

      IN WITNESS WHEREOF, the parties hereto have executed this Agreement in one
or more counterparts, on the date set forth above, effective as of the date
first above written.

	 	 
	 	“Seller”
	 
	
	
	
	

	 	G & W/LAKEVILLE CORPORATE CENTER, LLC, a
California limited liability company

	 	 
	By:	G&W Ventures, LLC, a California
limited liability company, its Managing
Member
	 
	 	By: /s/ MATTHEW T.
WHITE
	 	

	 	Name: Matthew T. White

	 	

	 	Its:  Manager
	 	

	 	 
	 	“Buyer”
	 
	 	REGAN HOLDING CORP., a California

corporation
	 
	 	By:  /s/ H. LYNN STAFFORD
	 	

	 	Name: H. Lynn Stafford
	 	

	 	Its:    
Chief Information Officer
	 	

	 
	 	By: 
	 	

	 	Name: 
	 	

	 	Its: 
	 	

21.

EXHIBIT A

LAND

The land referred to in this Report is situated in
the County of Sonoma,
 City of Petaluma, State
of California, described as follows:

PARCEL ONE:

PARCELS 1 and 2 as shown and designated upon City of Petaluma Parcel

Map No. 171, filed December 30, 1980 in Book 316 of Maps, Page 22,

Sonoma County Records.

EXCEPTING THEREFROM that portion contained in Deed to the City of

Petaluma, a Municipal Corporation, recorded February 1, 1990 under

Instrument No. 90-11544, and re-recorded March 27, 1990 as Document

No. 90-30132, and re-recorded April 18, 1990 as Document No. 90-38789,

Sonoma County Records.

ALSO EXCEPTING THEREFROM that portion contained in Deed to John M.

Headley, et al, recorded February 1, 1990 as Instrument No. 90-11545,

and re-recorded March 27, 1990 as Document No. 90-30135.

ALSO EXCEPTING THEREFROM that portion contained in the Deed of Trust

to the City of Petaluma recorded June 7, 1996 as Document No.

96-50841, Sonoma County Records.

PARCEL TWO:

AN EASEMENT for public utilities, 10 feet wide, lying Easterly of and

adjacent to, the Westerly line of the above-described Parcel, being

more particularly described as follows:

BEGINNING at Point “X” as set forth in Parcel 1 of Corporation Grant

Deed recorded February 1, 1990 in Document No. 90-11545. Thence along

said line common to Teitler and U-Haul Company South 54 degrees 08

minutes 19 seconds East, 10.00 feet; thence leaving said line and

parallel with the above-described Right-of-Way line South 35 degrees

51 minutes 41 seconds West, 143.47 feet to the point of curvature;

thence on a tangent curve to the right, radius 133 feet, through a

central angle of 27 degrees 28 minutes 28 seconds, an arc length of

63.78 feet to a point on the existing Easterly Right-of-Way line of

Marina Avenue; thence along said line North 35 degrees 51 minutes 41

seconds East, 26.65 feet; thence on a non-tangent curve to the right

whose center bears North 37 degrees 44 minutes 44 seconds West, radius

123 feet, through a central angle of 16 degrees, 23 minutes 35

seconds, an arc length of 35.19 feet to a point of tangency; thence

North 35 degrees 51 minutes 41 seconds East, 143.47 feet to the point

of beginning.

EXCEPTING therefrom all that portion lying within parcel one above.

 

PARCEL THREE:

FOR THE PLACE OF COMMENCEMENT BEGIN at the Northwesterly corner of the

tract of land described in the Deed from Brandon Heirs to A.W. Baker,

dated May 14, 1912 and recorded in Book 73 of Official Records of

Sonoma County, Page 388, said Northwesterly corner being on the

Southerly line of the Lakeville Highway, thence Easterly along the

Southerly line of said Highway, 318.36 feet to a point; thence

Southwesterly and parallel with the Northwesterly line of said tract

of land so conveyed to A.W. Baker, 239.12 feet to the actual place of

commencement; thence Northwesterly at right angles, 100 feet to a

point; thence Northeasterly at right angles, 60 feet to a point on the

Southwesterly line of the land described in the Deed from A.W. Baker,

et al, to Stanley McCutchan, dated October 13, 1927 and recorded June

26, 1928 in Book 205 of Official Records of Sonoma County, Page 149;

thence Southeasterly at right angles and along the Southwesterly line

of said land conveyed to McCutchan, 100 feet to a point; thence

Southwesterly at right angles 60 feet to the place of commencement.

EXCEPTING THEREFROM that portion lying within the City of Petaluma,

Sonoma County, California, being a portion of the Lands of John M.

Headley and Delores A. Headley, husband and wife, co-trustees under a

declaration of trust dated April 2, 1981 and amended June 14, 1982, as

conveyed by Deed recorded under Document No. 90-11543 of Official

Records, Sonoma County Records, and being more particularly described

as follows:

BEGINNING at the most Westerly corner of said lands, also being a

point on the Easterly Right-Of-Way line of Marina Avenue; thence along

said Right-Of-Way line North 35 degrees 51 minutes 41 seconds East,

8.56 feet to a point hereinafter referred to as Point “A”; thence

leaving said Right-Of-Way line in a Southerly direction, on a curve

concave Westerly, with a radius of 155 feet, through a central angle

of 3 degrees 14 minutes 35 seconds, an arc length of 8.77 feet to a

point on the Southwesterly line of said lands; thence along said line

North 54 degrees 08 minutes 19 seconds West, 1.94 feet to the point of

beginning.

A.P. Nos. 005-050-020 and 031ex10-2

Exhibit 10.2

LOAN AGREEMENT

   THIS LOAN AGREEMENT (“Agreement”) is executed as of June 19, 2001, by
and between REGAN HOLDING CORP, a California corporation (“Borrower”),
and WELLS FARGO BANK, NATIONAL ASSOCIATION (“Lender”).

R E C I T A L S

A. Borrower owns or will own certain real property described in
Exhibit A hereto and all improvements now or hereafter existing
thereon (collectively, the “Property”).

B. Borrower desires to borrow from Lender, and Lender agrees to loan
to Borrower, the amounts described below.

NOW, THEREFORE, Borrower and Lender agree as follows:

ARTICLE 1. DEFINITIONS

1.1 DEFINED TERMS. The following capitalized terms generally used
in this Agreement shall have the meanings defined or referenced below.
Certain other capitalized terms used only in specific sections of this
Agreement are defined in such sections.

“ADA” —  means the Americans with Disabilities Act, 42 U.S.C.
676712101, et. seq. as now or hereafter amended or modified.

“Agreement” —  shall have the meaning ascribed to such term in the
preamble hereto.

“Bankruptcy Code” — means the Bankruptcy Reform Act of 1978 (11 USC
67101-1330) as now or hereafter amended or recodified.

“Border Zone Property” — means any property designated as “border zone
property” under the provisions of California Health and Safety Code,
Sections 25220 et seq., or any regulation adopted in accordance
therewith.

“Borrower” — means REGAN HOLDING CORP, a California corporation.

“Business Day” — means a day of the week (but not a Saturday, Sunday or
holiday) on which the offices of Lender are open to the public for
carrying on substantially all of Lender’s business functions. Unless
specifically referenced in this Agreement as a Business Day, all
references to “days” shall be to calendar days.

“Deed of Trust” —  means that certain Deed of Trust with Absolute
Assignment of Leases and Rents, Security Agreement and Fixture Filing
of even date herewith executed by REGAN HOLDING CORPORATION, a
California corporation, as Trustor, to American Securities Company, a
California corporation, as Trustee, for the benefit of Lender, as
Beneficiary, as hereafter amended, supplemented, replaced or modified.

“Default” — shall have the meaning ascribed to such term in that
certain Section entitled Default.

“Effective Date” — means the date the Deed of Trust is recorded in the
Office of the County Recorder of the county where the Property is
located.

“Extended Maturity Date” — means June 19, 2002.

“Guarantor” — Legacy Marketing Group, Inc.

 

“Hazardous Materials” — shall have the meaning ascribed to such term in
that certain Section entitled Hazardous Materials.

“Hazardous Materials Claims” — shall have the meaning ascribed to such
term in that certain Section entitled Hazardous Materials Claims.

“Hazardous Materials Laws” — shall have the meaning ascribed to such
term in that certain Section entitled Hazardous Materials Laws.

“Indemnitor” — not applicable.

“Lender” — means WELLS FARGO BANK, NATIONAL ASSOCIATION.

“Loan” — means the principal sum that Lender agrees to lend and Borrower
agrees to borrow pursuant to the terms and conditions of this Agreement:
Four Million Seven Hundred Fifty Thousand and 00/100ths Dollars
($4,750,000.00).

“Loan Documents” — means those documents, as hereafter amended,
supplemented, replaced or modified, properly executed and in recordable
form, if necessary, listed in Exhibit B as Loan Documents.

“Maturity Date” — means December 19, 2001.

“Non-Borrower Trustor” — not applicable.

“Note” — means that certain Promissory Note Secured by Deed of Trust of
even date herewith, in the original principal amount of the Loan,
executed by Borrower and payable to the order of Lender, as hereafter
amended, supplemented, replaced or modified.

“Option to Extend” — means Borrower’s option, subject to the terms and
conditions of that certain Section entitled Option to Extend, to extend
the term of the Loan from the Maturity Date to the Extended Maturity
Date.

“Original Maturity Date” — means the Maturity Date.

“Other Related Documents” — means those documents, as hereafter amended,
supplemented, replaced or modified from time to time, properly executed
and in recordable form, if necessary, listed in Exhibit B as Other
Related Documents.

“Participant” — shall have the meaning ascribed to such term in that
certain Section entitled Loan Sales and Participations; Disclosure of
Information.

“Prime Rate” — means a base rate of interest which Lender establishes
from time to time and which serves as the basis upon which the effective
rates of interest are calculated for those loans making reference
thereto. Any change in an effective rate due to a change in the Prime
Rate shall become effective on the day each such change is announced
within Lender.

“Property” — shall have the meaning ascribed to such term in Recital A.

“Subdivision Map” — shall have the meaning ascribed to such term in that
certain Section entitled Subdivision Maps.

“Title Policy” — means the ALTA Lender’s Policy of Title Insurance as
issued by Commonwealth Land Title Insurance Company.

      1.2 EXHIBITS INCORPORATED. Exhibits A and B, attached hereto, are
hereby incorporated into this Agreement.

ARTICLE 2. LOAN

 

2.1 LOAN. Subject to the terms of this Agreement, Lender agrees to
lend to Borrower and Borrower agrees to borrow from Lender the
principal sum of Four Million Seven Hundred Fifty Thousand and
00/100ths Dollars ($4,750,000.00); said sum to be evidenced by the
Note of even date herewith. The Note shall be secured, in part, by
the Deed of Trust, of even date herewith, encumbering certain real
property and improvements as legally defined therein. Amounts
disbursed to or on behalf of Borrower pursuant to the Note shall be
used for the acquisition of the Property.

2.2 LOAN FEE. Borrower shall pay to Lender, at or before Loan
closing, a loan fee in the amount of $50,000.00.

2.3 LOAN DOCUMENTS. Borrower shall deliver to Lender
concurrently with this Agreement each of the    documents, properly
executed and in recordable form, as applicable, described in Exhibit B
as Loan Documents, together with those documents described in Exhibit
B as Other Related Documents.

2.4 EFFECTIVE DATE. The date of the Loan Documents is for reference
purposes only. The Effective Date of delivery and transfer to Lender of
the security under the Loan Documents and of Borrower’s and Lender’s
obligations under the Loan Documents is the date the Deed of Trust is
recorded in the Office of the County Recorder of the county where the
Property is located.

2.5 MATURITY DATE. The Maturity Date of the Loan shall be December 19,
2001, at which time all sums due and owing under this Agreement and
the other Loan Documents shall be repaid in full. All payments due to
Lender under this Agreement, whether at the Maturity Date or
otherwise, shall be paid in immediately available funds.

2.6 CREDIT FOR PRINCIPAL PAYMENTS. Any payment made upon the
outstanding principal balance of the Loan shall be credited as of the
Business Day received, provided such payment is received by Lender no
later than 11:00 A.M. (Pacific Standard Time or Pacific Daylight Time,
as applicable) and constitutes immediately available funds. Any
principal payment received after said time or which does not
constitute immediately available funds shall be credited upon such
funds having become unconditionally and immediately available to
Lender.

2.7 FULL REPAYMENT AND RECONVEYANCE. Upon receipt of all sums owing
and outstanding under the Loan Documents, Lender shall issue a full
reconveyance of the Property from the lien of the Deed of Trust;
provided, however, that all of the following conditions shall be
satisfied at the time of, and with respect to, such reconveyance: (a)
Lender shall have received all escrow, closing and recording costs,
the costs of preparing and delivering such reconveyance and any sums
then due and payable under the Loan Documents; and (b) Lender shall
have received a written release satisfactory to Lender of any set
aside letter, letter of credit or other form of undertaking which
Lender has issued to any surety, governmental agency or any other
party in connection with the Loan and/or the Property. Lender’s
obligation to make further disbursements under the Loan shall
terminate as to any portion of the Loan undisbursed as of the date of
issuance of such release or reconveyance, and any commitment of Lender
to lend any undisbursed portion of the Loan shall be canceled.

2.8 OPTION TO EXTEND. Borrower shall have the option to extend the
term of the Loan from the Maturity Date (for purposes of this Section,
“Original Maturity Date”), to the Extended Maturity Date, upon
satisfaction of each of the following conditions precedent:

            
         
(a) Borrower shall provide Lender with written notice of
Borrower’s request to exercise the Option to Extend not more than
ninety (90) days but not less than thirty (30) days prior to the
Original Maturity Date;

            
         
(b) As of the date of Borrower’s delivery of notice of request to
exercise the Option to Extend, and as of the Original Maturity Date,
no Default shall have occurred and be continuing, and no event or
condition which, with the giving of notice or the passage of time or
both, would constitute a Default shall have occurred and be
continuing, and Borrower shall so certify in writing;

		
	 	      (c) Borrower shall execute or cause the execution of
all documents reasonably required by Lender to exercise
the Option to Extend and shall deliver to Lender, at
Borrower’s sole cost and expense, such title insurance
endorsements reasonably required by Lender;

 

		
	 	      (d) There shall have occurred no material adverse
change, as determined by Lender in its sole discretion,
in the financial condition of Borrower, any Guarantor,
any Indemnitor or any Non-Borrower Trustor from that
which existed as of the later of: (A) the Effective
Date; or (B) the date upon which the financial condition
of such party was first represented to Lender;
	 
	 	      (e) On the Original Maturity Date, Borrower shall pay
to Lender an extension fee in the amount of one-half of
one percent (0.5%) of the total commitment amount of the
Loan (whether disbursed or undisbursed), as determined on
the Original Maturity Date.

Except as modified by this Option to Extend, the terms and conditions
of this Agreement and the other Loan Documents as modified and
approved by Lender shall remain unmodified and in full force and
effect.

ARTICLE 3. DISBURSEMENT

		
	 	3.1 CONDITIONS PRECEDENT. Lender’s obligation to make any
disbursements or take any other action under the Loan Documents
shall be subject at all times to satisfaction of each of the
following conditions precedent:
	 
	 	(a) Lender shall have received satisafactory evidence that Borrower
has invested cash in the Property of not less than $5,750,000.00.
	 
	 	(b) There exists no Default, as defined in this Agreement, or
Default as defined in any of the other Loan Documents or in the
Other Related Documents, or event, omission or failure of condition
which would constitute a Default after notice or lapse of time, or
both; and
	 
	 	(c) Lender shall have received all Loan Documents, other documents,
instruments, policies, and forms of evidence or other materials
requested by Lender under the terms of this Agreement or any of the
other Loan Documents; and

      (d) The Deed of Trust is a valid lien upon the Property and is
prior and superior to all other liens and encumbrances
thereon except those approved by Lender in writing.

         3.2 ACCOUNT, PLEDGE AND ASSIGNMENT, AND DISBURSEMENT
AUTHORIZATION. The proceeds of the Loan, when qualified for
disbursement, shall be disbursed to or for the benefit or account of
Borrower under the terms of this Agreement; provided, however, that
any direct disbursements from the Loan which are made by means of wire
transfer, shall be subject to the provisions of any funds transfer
agreement which is identified in Exhibit B hereto. Disbursements
hereunder may be made by Lender upon the written request of
______________________ until such time as written notice of Borrower’s
revocation of such authority is received by Lender at the address
herein.

ARTICLE 4. INSURANCE

Borrower shall, while any obligation of Borrower or any Guarantor
under any Loan Document remains outstanding, maintain at Borrower’s
sole expense, with licensed insurers approved by Lender, the following
policies of insurance in form and substance satisfactory to Lender:

		
	 	      4.1 TITLE INSURANCE. A Title Policy, together with any
endorsements which Lender may require, insuring Lender, in
the principal amount of the Loan, of the validity and the
priority of the lien of the Deed of Trust upon the Property,
subject only to matters approved by Lender in writing.
During the term of the Loan, Borrower shall deliver to
Lender, within five (5) days of Lender’s written request,
such other endorsements to the Title Policy as Lender may
require.

 

		
	 	      4.2 PROPERTY INSURANCE. A Builders Risk Completed Value
Hazard Insurance policy, including, without limitation, such
endorsements as Lender may require, insuring Lender against
damage to the Property in an amount acceptable to Lender.
Lender shall be named on the policy under a Lender’s Loss
Payable Endorsement (form #438BFU or equivalent).
	 
	 	      4.3 FLOOD HAZARD INSURANCE. A policy of flood insurance,
as required by applicable governmental regulations, or as
deemed necessary by Lender.
	 
	 	      4.4 LIABILITY INSURANCE. A policy of comprehensive
general liability insurance with limits as required by
Lender, insuring against liability for injury and/or death to
any person and/or damage to any property occurring on the
Property and/or from any cause whatsoever.
	 
	 	      4.5 GENERAL. Borrower shall provide to Lender the
originals of all required insurance policies, or other
evidence of insurance acceptable to Lender. All insurance
policies shall provide that the insurance shall not be
cancelable or materially changed without ten (10) days prior
written notice to Lender. Lender shall be named under a
Lender’s Loss Payable Endorsement (form #438BFU or
equivalent) on all insurance policies which Borrower actually
maintains with respect to the Property. Borrower shall
provide to Lender evidence of any other hazard insurance
Lender may deem necessary at any time during the Loan.

ARTICLE 5. REPRESENTATIONS AND WARRANTIES

As a material inducement to Lender’s entry into this Agreement,
Borrower represents and warrants to Lender as of the Effective Date
and continuing thereafter that:

		
	 	      5.1 AUTHORITY/ENFORCEABILITY. Borrower is in compliance
with all laws and regulations applicable to its organization,
existence and transaction of business and has all necessary
rights and powers to own, improve and operate the Property as
contemplated by the Loan Documents.
	 
	 	      5.2 BINDING OBLIGATIONS. Borrower is authorized to
execute, deliver and perform its obligations under the Loan
Documents, and such obligations shall be valid and binding
obligations of Borrower.
	 
	 	      5.3 FORMATION AND ORGANIZATIONAL DOCUMENTS. Borrower has
delivered to Lender all formation and organizational
documents of Borrower, of the partners, joint venturers or
members of Borrower, if any, and of all guarantors of the
Loan, if any, and all such formation and organizational
documents remain in full force and effect and have not been
amended or modified since they were delivered to Lender.
Borrower shall immediately provide Lender with copies of any
amendments or modifications of the formation or
organizational documents.
	 
	 	      5.4 NO VIOLATION. Borrower’s execution, delivery, and
performance under the Loan Documents do not: (a) require any
consent or approval not heretofore obtained under any
partnership agreement, operating agreement, articles of
incorporation, bylaws or other document; (b) violate any
governmental requirement applicable to the Property or any
other statute, law, regulation or ordinance or any order or
ruling of any court or governmental entity; (c) conflict
with, or constitute a

 

		
	 	breach or default or permit the acceleration of obligations
under any agreement, contract, lease, or other document by
which the Borrower is or the Property is bound or regulated;
or (d) violate any statute, law, regulation or ordinance, or
any order of any court or governmental entity.
	 
	 	      5.5 COMPLIANCE WITH LAWS. Borrower has, and at all times
shall have obtained, all permits, licenses, exemptions, and
approvals necessary to occupy, operate and market the
Property, and shall maintain compliance with all governmental
requirements applicable to the Property and all other
applicable statutes, laws, regulations and ordinances
necessary for the transaction of its business. The Property
is a legal parcel lawfully created in full compliance with
all subdivision laws and ordinances.
	 
	 	      5.6 LITIGATION. Except as disclosed to Lender in
writing, there are no claims, actions, suits, or proceedings
pending, or to Borrower’s knowledge, threatened against
Borrower or affecting the Property.
	 
	 	      5.7 FINANCIAL CONDITION. All financial statements and
information heretofore and hereafter delivered to Lender by
Borrower, including, without limitation, information relating
to the financial condition of Borrower, the Property, the
partners, joint venturers or members of Borrower, and/or any
Guarantors, fairly and accurately represent the financial
condition of the subject thereof and have been prepared
(except as noted therein) in accordance with generally
accepted accounting principles consistently applied.
Borrower acknowledges and agrees that Lender may request and
obtain additional information from third parties regarding
any of the above, including, without limitation, credit
reports.
	 
	 	      5.8 NO MATERIAL ADVERSE CHANGE. There has been no
material adverse change in the financial condition of
Borrower and/or Guarantor since the dates of the latest
financial statements furnished to Lender and, except as
otherwise disclosed to Lender in writing, Borrower has not
entered into any material transaction which is not disclosed
in such financial statements.
	 
	 	      5.9 ACCURACY. All reports, documents, instruments,
information and forms of evidence delivered to Lender
concerning the Loan or security for the Loan or required by
the Loan Documents are accurate, correct and sufficiently
complete to give Lender true and accurate knowledge of their
subject matter, and do not contain any misrepresentation or
omission.
	 
	 	      5.10 AMERICANS WITH DISABILITIES ACT COMPLIANCE.
Borrower represents and warrants to Lender that the Property
shall be hereafter maintained in full and strict compliance
with the requirements and regulations of the Americans With
Disabilities Act, of July 26, 1990, Pub. L. No. 101-336, 104
Stat. 327, 42 U.S.C. 6712101, et seq., as hereafter amended.
At Lender’s written request from time to time, Borrower
shall provide Lender with written evidence of such compliance
satisfactory to Lender. Borrower shall be solely responsible
for all such ADA costs of compliance and reporting.
	 
	 	      5.11 BUSINESS LOAN. The Loan is a business loan
transaction in the stated amount solely for the purpose of
carrying on the business of Borrower and none of the proceeds
of the Loan will be used for the personal, family or
agricultural purposes of the Borrower.

 

ARTICLE 6. HAZARDOUS MATERIALS

		
	 	      6.1 SPECIAL REPRESENTATIONS AND WARRANTIES. Without in
any way limiting the other representations and warranties set
forth in this Agreement, and after reasonable investigation
and inquiry, Borrower hereby specially represents and
warrants to the best of Borrower’s knowledge as of the date
of this Agreement as follows:

		
	 	      (a) Hazardous Materials. The Property is not and has
not been a site for the use, generation, manufacture,
storage, treatment, release, threatened release,
discharge, disposal, transportation or presence of any
oil, flammable explosives, asbestos, urea formaldehyde
insulation, radioactive materials, hazardous wastes,
toxic or contaminated substances or similar materials,
including, without limitation, any substances which are
“hazardous substances,” “hazardous wastes,” “hazardous
materials,” “toxic substances,” “wastes,” “regulated
substances,” “industrial solid wastes,” or “pollutants”
under the Hazardous Materials Laws, as described below,
and/or other applicable environmental laws, ordinances
and regulations (collectively, the “Hazardous
Materials”). “Hazardous Materials” shall not include
commercially reasonable amounts of such materials used in
the ordinary course of operation of the Property which
are used and stored in accordance with all applicable
environmental laws, ordinances and regulations.
	 
	 	      (b) Hazardous Materials Laws. The Property is in
compliance with all laws, ordinances and regulations
relating to Hazardous Materials (“Hazardous Materials
Laws”), including, without limitation: the Clean Air
Act, as amended, 42 U.S.C. Section 7401 et seq.; the
Federal Water Pollution Control Act, as amended, 33
U.S.C. Section 1251 et seq.; the Resource Conservation
and Recovery Act of 1976, as amended, 42 U.S.C. Section
6901 et seq; the Comprehensive Environment Response,
Compensation and Liability Act of 1980, as amended
(including the Superfund Amendments and Reauthorization
Act of 1986, “CERCLA”), 42 U.S.C. Section 9601 et seq.;
the Toxic Substances Control Act, as amended, 15 U.S.C.
Section 2601 et seq; the Occupational Safety and Health
Act, as amended, 29 U.S.C. Section 651, the Emergency
Planning and Community Right-to-Know Act of 1986, 42
U.S.C. Section 11001 et seq; the Mine Safety and Health
Act of 1977, as amended, 30 U.S.C. Section 801 et seq.;
the Safe Drinking Water Act, as amended, 42 U.S.C.
Section 300f et seq.; and all comparable state and local
laws, laws of other jurisdictions or orders and
regulations.
	 
	 	      (c) Hazardous Materials Claims. There are no claims
or actions (“Hazardous Materials Claims”) pending or
threatened against Borrower or the Property by any
governmental entity or agency or by any other person or
entity relating to Hazardous Materials or pursuant to the
Hazardous Materials Laws.
	 
	 	      (d) Border Zone Property. The Property has not been
designated as Border Zone Property under the provisions
of California Health and Safety Code, Sections 25220 et
seq and there has been no occurrence or condition on any
real property adjoining or in the vicinity of the
Property that could cause the Property or any part
thereof to be designated as Border Zone Property.

		
	 	      6.2 HAZARDOUS MATERIALS COVENANTS. Borrower agrees as
follows:

		
	 	      (a) No Hazardous Activities. Borrower shall not
cause or permit the Property to be used as a site for the
use, generation, manufacture, storage, treatment,
release, discharge, disposal, transportation or presence
of any Hazardous Materials.

 

		
	 	      (b) Compliance. Borrower shall comply and cause the
Property to comply with all Hazardous Materials Laws.
	 
	 	      (c) Notices. Borrower shall immediately notify
Lender in writing of: (i) the discovery of any Hazardous
Materials on, under or about the Property; (ii) any
knowledge by Borrower that the Property does not comply
with any Hazardous Materials Laws; (iii) any Hazardous
Materials Claims; and (iv) the discovery of any
occurrence or condition on any real property adjoining or
in the vicinity of the Property that could cause the
Property or any part thereof to be designated as Border
Zone Property.
	 
	 	      (d) Remedial Action. In response to the presence of
any Hazardous Materials on, under or about the Property,
Borrower shall immediately take, at Borrower’s sole
expense, all remedial action required by any Hazardous
Materials Laws or any judgment, consent decree,
settlement or compromise in respect to any Hazardous
Materials Claims.

		
	 	      6.3 INSPECTION BY LENDER. Upon reasonable prior notice
to Borrower, Lender, its employees and agents, may from time
to time (whether before or after the commencement of a
nonjudicial or judicial foreclosure proceeding) enter and
inspect the Property for the purpose of determining the
existence, location, nature and magnitude of any past or
present release or threatened release of any Hazardous
Materials into, onto, beneath or from the Property.
	 
	 	      6.4 HAZARDOUS MATERIALS INDEMNITY BORROWER HEREBY AGREES
TO DEFEND, INDEMNIFY AND HOLD HARMLESS LENDER, ITS DIRECTORS,
OFFICERS, EMPLOYEES, AGENTS, SUCCESSORS AND ASSIGNS FROM AND
AGAINST ANY AND ALL LOSSES, DAMAGES, LIABILITIES, CLAIMS,
ACTIONS, JUDGMENTS, COURT COSTS AND LEGAL OR OTHER EXPENSES
(INCLUDING, WITHOUT LIMITATION, ATTORNEYS’ FEES AND EXPENSES)
WHICH LENDER MAY INCUR AS A DIRECT OR INDIRECT CONSEQUENCE OF
THE USE, GENERATION, MANUFACTURE, STORAGE, DISPOSAL,
THREATENED DISPOSAL, TRANSPORTATION OR PRESENCE OF HAZARDOUS
MATERIALS IN, ON, UNDER OR ABOUT THE PROPERTY. BORROWER
SHALL IMMEDIATELY PAY TO LENDER UPON DEMAND ANY AMOUNTS OWING
UNDER THIS INDEMNITY, TOGETHER WITH INTEREST FROM THE DATE
THE INDEBTEDNESS ARISES UNTIL PAID AT THE RATE OF INTEREST
APPLICABLE TO THE PRINCIPAL BALANCE OF THE NOTE. BORROWER’S
DUTY AND OBLIGATIONS TO DEFEND, INDEMNIFY AND HOLD HARMLESS
LENDER SHALL SURVIVE THE CANCELLATION OF THE NOTE AND THE
RELEASE, RECONVEYANCE OR PARTIAL RECONVEYANCE OF THE DEED OF
TRUST.
	 
	 	      6.5 LEGAL EFFECT OF SECTION. Borrower and Lender agree
that: (a) this Article is intended as Lender’s written
request for information (and Borrower’s response) concerning
the environmental condition of the real property security as
required by California Code of Civil Procedure 6726.5; and
(b) each provision in this Article (together with any
indemnity applicable to a breach of any such provision) with
respect to the environmental condition of the real property
security is intended by Lender and Borrower to be an
“environmental provision” for purposes of California Code of
Civil Procedure 6736, and as such it is expressly understood
that Borrower’s duty to indemnify Lender hereunder shall
survive: (i) any judicial or non-judicial foreclosure under
the Deed of Trust, or transfer of the Property in lieu
thereof; (ii) the release and reconveyance or cancellation
of the Deed of Trust; and (iii) the satisfaction of all of
Borrower’s obligations under the Loan Documents.

 

ARTICLE 7. COVENANTS OF BORROWER

		
	 	      7.1 EXPENSES. Borrower shall immediately pay Lender upon
demand all costs and expenses incurred by Lender in
connection with: (a) the preparation of this Agreement, all
other Loan Documents and Other Related Documents contemplated
hereby; (b) the administration of this Agreement, the other
Loan Documents and Other Related Documents for the term of
the Loan; and (c) the enforcement or satisfaction by Lender
of any of Borrower’s obligations under this Agreement, the
other Loan Documents or the Other Related Documents. For all
purposes of this Agreement, Lender’s costs and expenses shall
include, without limitation, all appraisal fees, cost
engineering and inspection fees, legal fees and expenses,
accounting fees, environmental consultant fees, auditor fees,
and the cost to Lender of any title insurance premiums, title
surveys, reconveyance and notary fees. Borrower recognizes
and agrees that formal written appraisals of the Property by
a licensed independent appraiser may be required by Lender’s
internal procedures and/or federal regulatory reporting
requirements on an annual and/or specialized basis and that
Lender may, at its option, require inspection of the Property
by an independent supervising architect and/or cost
engineering specialist at least semi-annually. If any of the
services described above are provided by an employee of
Lender, Lender’s costs and expenses for such services shall
be calculated in accordance with Lender’s standard charge for
such services.
	 
	 	      7.2 ERISA COMPLIANCE. Borrower shall at all times comply
with the provisions of ERISA with respect to any retirement
or other employee benefit plan to which it is a party as
employer, and as soon as possible after Borrower knows, or
has reason to know, that any Reportable Event (as defined in
ERISA) with respect to any such plan of Borrower has
occurred, it shall furnish to Lender a written statement
setting forth details as to such Reportable Event and the
action, if any, which Borrower proposes to take with respect
thereto, together with a copy of the notice of such
Reportable Event furnished to the Pension Benefit Guaranty
Corporation.
	 
	 	      7.3 SUBDIVISION MAPS. Prior to recording any final map,
plat, parcel map, lot line adjustment or other subdivision
map of any kind covering any portion of the Property
(collectively, “Subdivision Map”), Borrower shall submit such
Subdivision Map to Lender for Lender’s review and approval,
which approval shall not be unreasonably withheld. Within
ten (10) Business Days after Lender’s receipt of such
Subdivision Map, Lender shall provide Borrower written notice
if Lender disapproves of said Subdivision Map. Lender shall
be deemed to have approved the Subdivision Map if such notice
is not provided to Borrower. Within five (5) Business Days
after Lender’s request, Borrower shall execute, acknowledge
and deliver to Lender such amendments to the Loan Documents
as Lender may reasonably require to reflect the change in the
legal description of the Property resulting from the
recordation of any Subdivision Map. In connection with and
promptly after the recordation of any amendment or other
modification to the Deed of Trust recorded in connection with
such amendments, Borrower shall deliver to Lender, at
Borrower’s sole expense, a title endorsement to the Title
Policy in form and substance satisfactory to Lender insuring
the continued first priority lien of the Deed of Trust.
Subject to the execution and delivery by Borrower of any
documents required under this Section, Lender shall, if
required by applicable law, sign any Subdivision Map
approved, or deemed to be approved, by Lender pursuant to
this Section.
	 
	 	      7.4 FURTHER ASSURANCES. Upon Lender’s request and at
Borrower’s sole cost and expense, Borrower shall execute,
acknowledge and deliver any other instruments and perform any
other acts necessary, desirable or proper, as determined by
Lender, to carry out the purposes of this Agreement and the
other Loan Documents or to perfect and preserve any liens
created by the Loan Documents.

 

		
	 	      7.5 ASSIGNMENT. Without the prior written consent of
Lender, Borrower shall not assign Borrower’s interest under
any of the Loan Documents, or in any monies due or to become
due thereunder, and any assignment without such consent shall
be void.

ARTICLE 8. REPORTING COVENANTS

		
	 	      8.1 FINANCIAL INFORMATION. Borrower shall deliver to
Lender, as soon as available, but in no event later than one
hundred twenty (120) days after Borrower’s fiscal year end, a
current financial statement (including, without limitation,
an income and expense statement and balance sheet) signed by
together with any other financial information requested by
Lender for the following persons and entities:
	 
	 	Borrower

Within thirty (30) days of Lender’s request, Borrower shall also
deliver to Lender (i) quarterly consolidated financial statements for
Borrower; (ii) monthly operating statements for the Borrower,
comparing actual results to the previously submitted budget for the
month and the year to date; (iii) any financial information regarding
any persons or entities in any way obligated on the Loan as Lender may
specify. If audited financial information is prepared, Borrower shall
deliver to Lender copies of that information within fifteen (15) days
of its final preparation. Except as otherwise agreed to by Lender,
all such financial information shall be prepared in accordance with
generally accepted accounting principles consistently applied.

		
	 	      8.2 BOOKS AND RECORDS. Borrower shall maintain complete
books of account and other records for the Property and for
disbursement and use of the proceeds of the Loan, and the
same shall be available for inspection and copying by Lender
upon reasonable prior notice.
	 
	 	      8.3 REPORTS. Within ten (10) days of Lender’s request,
Borrower shall deliver to Lender monthly inventory reports,
marketing and sales schedules and reports, marketing and
sales information and/or leasing information, with respect to
all real property projects of Borrower and all general
partners, venturers and members of Borrower, all in form and
substance acceptable to Lender.

ARTICLE 9. DEFAULTS AND REMEDIES

		
	 	      9.1 DEFAULT. The occurrence of any one or more of the
following shall constitute an event of default (“Default”)
under this Agreement and the other Loan Documents:

		
	 	      (a) Monetary. Borrower’s failure to pay when due any
sums payable under the Note or any of the other Loan
Documents; or
	 
	 	      (b) Performance of Obligations. Borrower’s failure
to perform any obligation in addition to those set forth
in Paragraph (a) of this Section under any of the Loan
FDocuments; provided, however, that if a cure period is
provided for the remedy of such failure, Borrower’s
failure to perform will not constitute a Default until
such date as the specified cure period expires; or
	 
	 	      (c) Use. The prohibition, enjoining or interruption
of Borrower’s right to occupy, use or lease the Property
for a continuous period of more than thirty (30) days; or

 

		
	 	      (d) Condemnation; Attachment. (i) The condemnation,
seizure or appropriation of, or occurrence of an
uninsured casualty with respect to any material portion
of the Property; or (ii) the sequestration or attachment
of, or any levy or execution upon any of the Property,
any other collateral provided by Borrower under any of
the Loan Documents, or any substantial portion of the
other assets of Borrower, which sequestration,
attachment, levy or execution is not released, expunged
or dismissed prior to the earlier of thirty (30) days or
the sale of the assets affected thereby; or
	 
	 	      (e) Representations and Warranties (i) The failure
of any representation or warranty of Borrower in any of
the Loan Documents and the continuation of such failure
for more than ten (10) days after written notice to
Borrower from Lender requesting that Borrower cure such
failure; or (ii) any material adverse change in the
financial condition of Borrower, any Guarantor, or any
Indemnitor from the financial condition represented to
Lender as of the later of: (A) the Effective Date; or
(B) the date upon which the financial condition of such
party was first represented to Lender; or
	 
	 	      (f) Voluntary Bankruptcy; Insolvency; Dissolution.
(i) The filing of a petition by Borrower for relief under
the Bankruptcy Code, or under any other present or future
state or federal law regarding bankruptcy, reorganization
or other debtor relief law; (ii) the filing of any
pleading or an answer by Borrower in any involuntary
proceeding under the Bankruptcy Code or other debtor
relief law which admits the jurisdiction of the court or
the petition’s material allegations regarding Borrower’s
insolvency; (iii) a general assignment by Borrower for
the benefit of creditors; or (iv) Borrower applying for,
or the appointment of, a receiver, trustee, custodian or
liquidator of Borrower or any of its property; or
	 
	 	      (g) Involuntary Bankruptcy. The failure of Borrower
to effect a full dismissal of any involuntary petition
under the Bankruptcy Code or under any other debtor
relief law that is filed against Borrower or in any way
restrains or limits Borrower or Lender regarding the Loan
or the Property, prior to the earlier of the entry of any
court order granting relief sought in such involuntary
petition, or thirty (30) days after the date of filing of
such involuntary petition; or
	 
	 	      (h) Partners; Guarantors. The occurrence of any of
the events specified in Paragraph (f) or Paragraph (g) of
this Section as to any person or entity other than
Borrower, including, without limitation, any Guarantor,
Indemnitor or Non-Borrower Trustor, which is in any
manner obligated to Lender under the Loan Documents; or
	 
	 	      (i) Change In Management or Control The occurrence
of any material management or organizational change in
Borrower or in the partners, venturers or members of
Borrower, including, without limitation, any partnership,
joint venture or member dispute which Lender determines,
in its sole and absolute discretion, shall have a
material adverse effect on the Loan, on the Property, or
on the ability of Borrower or its partners, venturers or
members to perform their obligations under the Loan
Documents; or
	 
	 	      (j) Loss of Priority. The failure at any time of the
Deed of Trust to be a valid first lien upon the Property
or any portion thereof, other than as a result of any
release or reconveyance of

 

		
	 	the Deed of Trust with respect to all or any portion of
the Property pursuant to the terms and conditions of this
Agreement; or
	 
	 	      (k) Hazardous Materials. The discovery of any
significant Hazardous Materials in, on or about the
Property subsequent to the Effective Date. Any such
Hazardous Materials shall be “significant” for this
purpose if said Hazardous Materials, in Lender’s sole
discretion, have a materially adverse impact on the value
of the Property; or

      (l) Transfer of Assets. The sale, assignment, pledge,
hypothecation, mortgage or transfer of all or a substantial portion of
assets of Borrower and/or Guarantor other than in the ordinary course
of business of said entities; or

		
	 	      9.2 ACCELERATION UPON DEFAULT; REMEDIES. Upon the
occurrence of any Default specified in this Article, Lender
may, at its sole option, declare all sums owing to Lender
under the Note, this Agreement and the other Loan Documents
immediately due and payable. Upon such acceleration, Lender
may, in addition to all other remedies permitted under this
Agreement and the other Loan Documents and at law or equity,
apply any sums in the Account to the sums owing under the
Loan Documents and any and all obligations of Lender to fund
further disbursements under the Loan shall terminate.
	 
	 	      9.3 DISBURSEMENTS TO THIRD PARTIES Upon the occurrence
of a Default occasioned by Borrower’s failure to pay money to
a third party as required by this Agreement, Lender may but
shall not be obligated to make such payment from the Loan
proceeds or other funds of Lender. If such payment is made
from proceeds of the Loan, Borrower shall immediately
deposit with Lender, upon written demand, an amount equal to
such payment. If such payment is made from funds of Lender,
Borrower shall immediately repay such funds upon written
demand of Lender. In either case, the Default with respect
to which any such payment has been made by Lender shall not
be deemed cured until such deposit or repayment (as the case
may be) has been made by Borrower to Lender.
	 
	 	      9.4 REPAYMENT OF FUNDS ADVANCED. Any funds expended by
Lender in the exercise of its rights or remedies under this
Agreement and the other Loan Documents shall be payable to
Lender upon demand, together with interest at the rate
applicable to the principal balance of the Note from the date
the funds were expended.
	 
	 	      9.5 RIGHTS CUMULATIVE, NO WAIVER. All Lender’s rights
and remedies provided in this Agreement and the other Loan
Documents, together with those granted by law or at equity,
are cumulative and may be exercised by Lender at any time.
Lender’s exercise of any right or remedy shall not constitute
a cure of any Default unless all sums then due and payable to
Lender under the Loan Documents are repaid and Borrower has
cured all other Defaults. No waiver shall be implied from
any failure of Lender to take, or any delay by Lender in
taking, action concerning any Default or failure of condition
under the Loan Documents, or from any previous waiver of any
similar or unrelated Default or failure of condition. Any
waiver or approval under any of the Loan Documents must be in
writing and shall be limited to its specific terms.

ARTICLE 10. MISCELLANEOUS PROVISIONS

		
	 	      10.1 INDEMNITY. BORROWER HEREBY AGREES TO DEFEND,
INDEMNIFY AND HOLD HARMLESS LENDER, ITS DIRECTORS, OFFICERS,
EMPLOYEES, AGENTS, SUCCESSORS AND ASSIGNS FROM AND AGAINST
ANY AND ALL LOSSES, DAMAGES, LIABILITIES, CLAIMS, ACTIONS,
JUDGMENTS, COURT COSTS AND LEGAL OR OTHER EXPENSES

 

		
	 	(INCLUDING, WITHOUT LIMITATION, ATTORNEYS’ FEES AND EXPENSES)
WHICH LENDER MAY INCUR AS A DIRECT OR INDIRECT CONSEQUENCE
OF: (A) THE PURPOSE TO WHICH BORROWER APPLIES THE LOAN
PROCEEDS; (B) THE FAILURE OF BORROWER TO PERFORM ANY
OBLIGATIONS AS AND WHEN REQUIRED BY THIS AGREEMENT OR ANY OF
THE OTHER LOAN DOCUMENTS; (C) ANY FAILURE AT ANY TIME OF ANY
OF BORROWER’S REPRESENTATIONS OR WARRANTIES TO BE TRUE AND
CORRECT; OR (D) ANY ACT OR OMISSION BY BORROWER, CONSTITUENT
PARTNER OR MEMBER OF BORROWER, ANY CONTRACTOR, SUBCONTRACTOR
OR MATERIAL SUPPLIER, ENGINEER, ARCHITECT OR OTHER PERSON OR
ENTITY WITH RESPECT TO ANY OF THE PROPERTY. BORROWER SHALL
IMMEDIATELY PAY TO LENDER UPON DEMAND ANY AMOUNTS OWING UNDER
THIS INDEMNITY, TOGETHER WITH INTEREST FROM THE DATE THE
INDEBTEDNESS ARISES UNTIL PAID AT THE RATE OF INTEREST
APPLICABLE TO THE PRINCIPAL BALANCE OF THE NOTE. BORROWER’S
DUTY AND OBLIGATIONS TO DEFEND, INDEMNIFY AND HOLD HARMLESS
LENDER SHALL SURVIVE CANCELLATION OF THE NOTE AND THE
RELEASE, RECONVEYANCE OR PARTIAL RECONVEYANCE OF THE DEED OF
TRUST.
	 
	 	      10.2 FORM OF DOCUMENTS. The form and substance of all
documents, instruments, and forms of evidence to be delivered
to Lender under the terms of this Agreement and any of the
other Loan Documents shall be subject to Lender’s approval
and shall not be modified, superseded or terminated in any
respect without Lender’s prior written approval.
	 
	 	      10.3 NO THIRD PARTIES BENEFITED. No person other than
Lender and Borrower and their permitted successors and
assigns shall have any right of action under any of the Loan
Documents.
	 
	 	      10.4 NOTICES. All notices, demands, or other
communications under this Agreement and the other Loan
Documents shall be in writing and shall be delivered to the
appropriate party at the address set forth on the signature
page of this Agreement (subject to change from time to time
by written notice to all other parties to this Agreement).
All notices, demands or other communications shall be
considered as properly given if delivered personally or sent
by first class United States Postal Service mail, postage
prepaid, except that notice of Default may be sent by
certified mail, return receipt requested, or by Overnight
Express Mail or by overnight commercial courier service,
charges prepaid. Notices so sent shall be effective three (3)
days after mailing, if mailed by first class mail, and
otherwise upon receipt; provided, however, that non-receipt
of any communication as the result of any change of address
of which the sending party was not notified or as the result
of a refusal to accept delivery shall be deemed receipt of
such communication.
	 
	 	      10.5 ATTORNEY-IN-FACT. Borrower hereby irrevocably
appoints and authorizes Lender, as Borrower’s
attorney-in-fact, which agency is coupled with an interest,
to execute and/or record in Lender’s or Borrower’s name any
notices, instruments or documents that Lender deems
appropriate to protect Lender’s interest under any of the
Loan Documents.
	 
	 	      10.6 ACTIONS. Borrower agrees that Lender, in exercising
the rights, duties or liabilities of Lender or Borrower under
the Loan Documents, may commence, appear in or defend any
action or proceeding purporting to affect the Property or the
Loan Documents and Borrower shall immediately reimburse
Lender upon demand for all such expenses so incurred or paid
by Lender, including, without limitation, attorneys’ fees and
expenses and court costs.
	 
	 	      10.7 RIGHT OF CONTEST. Borrower may contest in good
faith any claim, demand, levy or assessment by any person
other than Lender which would constitute a Default if: (a)
Borrower pursues the contest diligently, in a manner which
Lender determines is not prejudicial to Lender, and

 

		
	 	does not impair the rights of Lender under any of the Loan
Documents; and (b) Borrower deposits with Lender any funds
or other forms of assurance which Lender in good faith
determines from time to time appropriate to protect Lender
from the consequences of the contest being unsuccessful.
Borrower’s compliance with this Section shall operate to
prevent such claim, demand, levy or assessment from becoming
a Default.
	 
	 	      10.8 RELATIONSHIP OF PARTIES. The relationship of
Borrower and Lender under the Loan Documents is, and shall at
all times remain, solely that of borrower and lender, and
Lender neither undertakes nor assumes any responsibility or
duty to Borrower or to any third party with respect to the
Property, except as expressly provided in this Agreement and
the other Loan Documents.
	 
	 	      10.9 DELAY OUTSIDE LENDER’S CONTROL Lender shall not be
liable in any way to Borrower or any third party for Lender’s
failure to perform or delay in performing under the Loan
Documents (and Lender may suspend or terminate all or any
portion of Lender’s obligations under the Loan Documents) if
such failure to perform or delay in performing results
directly or indirectly from, or is based upon, the action,
inaction, or purported action, of any governmental or local
authority, or because of war, rebellion, insurrection,
strike, lock-out, boycott or blockade (whether presently in
effect, announced or in the sole judgment of Lender deemed
probable), or from any Act of God or other cause or event
beyond Lender’s control.
	 
	 	      10.10 ATTORNEYS’ FEES AND EXPENSES; ENFORCEMENT. If any
attorney is engaged by Lender to enforce or defend any
provision of this Agreement, any of the other Loan Documents
or Other Related Documents, or as a consequence of any
Default under the Loan Documents, with or without the filing
of any legal action or proceeding, and including, without
limitation, any fees and expenses incurred in any bankruptcy
proceeding of the Borrower, then Borrower shall immediately
pay to Lender, upon demand, the amount of all attorneys’ fees
and expenses and all costs incurred by Lender in connection
therewith, together with interest thereon from the date of
such demand until paid at the rate of interest applicable to
the principal balance of the Note as specified therein.
	 
	 	      10.11 IMMEDIATELY AVAILABLE FUNDS. Unless otherwise
expressly provided for in this Agreement, all amounts payable
by Borrower to Lender shall be payable only in United States
currency, immediately available funds.
	 
	 	      10.12 LENDER’S CONSENT. Wherever in this Agreement there
is a requirement for Lender’s consent and/or a document to be
provided or an action taken “to the satisfaction of Lender”,
it is understood by such phrase that Lender shall exercise
its consent, right or judgment in a reasonable manner given
the specific facts and circumstance applicable at the time.
	 
	 	      10.13 LOAN SALES AND PARTICIPATIONS; DISCLOSURE OF
INFORMATION. Borrower agrees that Lender may elect, at any
time, to sell, assign or grant participations in all or any
portion of its rights and obligations under the Loan
Documents, and that any such sale, assignment or
participation may be to one or more financial institutions,
private investors, and/or other entities, at Lender’s sole
discretion (“Participant”). Borrower further agrees that
Lender may disseminate to any such actual or potential
purchaser(s), assignee(s) or participant(s) all documents and
information (including, without limitation, all financial
information) which has been or is hereafter provided to or
known to Lender with respect to: (a) the Property and its
operation; (b) any party connected with the Loan (including,
without limitation, the Borrower, any partner of Borrower,
any constituent partner or member of Borrower, any Guarantor,
any Indemnitor and any Non-Borrower Trustor); and/or (c) any
lending relationship other than the Loan which Lender may
have with any party connected with the Loan. In the event of
any such sale, assignment or participation, Lender and the
parties to such

 

		
	 	transaction shall share in the rights and obligations of
Lender as set forth in the Loan Documents only as and to the
extent they agree among themselves. In connection with any
such sale, assignment or participation, Borrower further
agrees that the Loan Documents shall be sufficient evidence
of the obligations of Borrower to each purchaser, assignee,
or participant, and upon written request by Lender, Borrower
shall enter into such amendments or modifications to the Loan
Documents as may be reasonably required in order to evidence
any such sale, assignment or participation. The indemnity
obligations of Borrower under the Loan Documents shall also
apply with respect to any purchaser, assignee or participant.
	 
	 	Anything in this Agreement to the contrary notwithstanding,
and without the need to comply with any of the formal or
procedural requirements of this Agreement, including this
Section, any lender may at any time and from time to time
pledge and assign all or any portion of its rights under all
or any of the Loan Documents to a Federal Reserve Bank;
provided that no such pledge or assignment shall release such
lender from its obligations thereunder.
	 
	 	      10.14 LENDER’S AGENTS. Lender may designate an agent or
independent contractor to exercise any of Lender’s rights
under this Agreement and any of the other Loan Documents.
Any reference to Lender in any of the Loan Documents shall
include Lender’s agents, employees or independent
contractors. Borrower shall pay the costs of such agent or
independent contractor either directly to such person or to
Lender in reimbursement of such costs, as applicable.
	 
	 	      10.15 TAX SERVICE. Lender is authorized to secure, at
Borrower’s expense, a tax service contract with a third party
vendor which shall provide tax information on the Property
satisfactory to Lender.
	 
	 	      10.16 WAIVER OF RIGHT TO TRIAL BY JURY EACH PARTY TO
THIS AGREEMENT HEREBY EXPRESSLY WAIVES ANY RIGHT TO TRIAL BY
JURY OF ANY CLAIM, DEMAND, ACTION OR CAUSE OF ACTION (a)
ARISING UNDER THE LOAN DOCUMENTS, INCLUDING, WITHOUT
LIMITATION, ANY PRESENT OR FUTURE MODIFICATION THEREOF OR
(b) IN ANY WAY CONNECTED WITH OR RELATED OR INCIDENTAL TO THE
DEALINGS OF THE PARTIES HERETO OR ANY OF THEM WITH RESPECT TO
THE LOAN DOCUMENTS (AS NOW OR HEREAFTER MODIFIED) OR ANY
OTHER INSTRUMENT, DOCUMENT OR AGREEMENT EXECUTED OR DELIVERED
IN CONNECTION HEREWITH, OR THE TRANSACTIONS RELATED HERETO OR
THERETO, IN EACH CASE WHETHER SUCH CLAIM, DEMAND, ACTION OR
CAUSE OF ACTION IS NOW EXISTING OR HEREAFTER ARISING, AND
WHETHER SOUNDING IN CONTRACT OR TORT OR OTHERWISE; AND EACH
PARTY HEREBY AGREES AND CONSENTS THAT ANY PARTY TO THIS
AGREEMENT MAY FILE AN ORIGINAL COUNTERPART OR A COPY OF THIS
SECTION WITH ANY COURT AS WRITTEN EVIDENCE OF THE CONSENT OF
THE PARTIES HERETO TO THE WAIVER OF ANY RIGHT THEY MIGHT
OTHERWISE HAVE TO TRIAL BY JURY.
	 
	 	      10.17 SEVERABILITY. If any provision or obligation under
this Agreement and the other Loan Documents shall be
determined by a court of competent jurisdiction to be
invalid, illegal or unenforceable, that provision shall be
deemed severed from the Loan Documents and the validity,
legality and enforceability of the remaining provisions or
obligations shall remain in full force as though the invalid,
illegal, or unenforceable provision had never been a part of
the Loan Documents, provided, however, that if the rate of
interest or any other amount payable under the Note or this
Agreement or any other Loan Document, or the right of
collectibility therefore, are declared to be or become
invalid, illegal or unenforceable, Lender’s obligations to
make advances under the Loan Documents shall not be
enforceable by Borrower.
	 
	 	      10.18 HEIRS, SUCCESSORS AND ASSIGNS Except as otherwise
expressly provided under the

 

		
	 	terms and conditions of this Agreement, the terms of the Loan
Documents shall bind and inure to the benefit of the heirs,
successors and assigns of the parties.
	 
	 	      10.19 TIME. Time is of the essence of each and every
term of this Agreement.
	 
	 	      10.20 HEADINGS. All article, section or other headings
appearing in this Agreement and any of the other Loan
Documents are for convenience of reference only and shall be
disregarded in construing this Agreement and any of the other
Loan Documents.
	 
	 	      10.21 GOVERNING LAW. This Agreement shall be governed
by, and construed and enforced in accordance with the laws of
the State of California, except to the extent preempted by
federal laws. Borrower and all persons and entities in any
manner obligated to Lender under the Loan Documents consent
to the jurisdiction of any federal or state court within the
State of California having proper venue and also consent to
service of process by any means authorized by California or
federal law.
	 
	 	      10.22 INTEGRATION; INTERPRETATION. The Loan Documents
contain or expressly incorporate by reference the entire
agreement of the parties with respect to the matters
contemplated therein and supersede all prior negotiations or
agreements, written or oral. The Loan Documents shall not be
modified except by written instrument executed by all
parties. Any reference to the Loan Documents includes any
amendments, renewals or extensions now or hereafter approved
by Lender in writing.
	 
	 	      10.23 JOINT AND SEVERAL LIABILITY. The liability of all
persons and entities obligated in any manner under this
Agreement and any of the Loan Documents shall be joint and
several.
	 
	 	      10.24 COUNTERPARTS. To facilitate execution, this
document may be executed in as many counterparts as may be
convenient or required. It shall not be necessary that the
signature of, or on behalf of, each party, or that the
signature of all persons required to bind any party, appear
on each counterpart. All counterparts shall collectively
constitute a single document. It shall not be necessary in
making proof of this document to produce or account for more
than a single counterpart containing the respective
signatures of, or on behalf of, each of the parties hereto.
Any signature page to any counterpart may be detached from
such counterpart without impairing the legal effect of the
signatures thereon and thereafter attached to another
counterpart identical thereto except having attached to it
additional signature pages.

IN WITNESS WHEREOF, Borrower and Lender have executed this Agreement
as of the date appearing on the first page of this Agreement.

	“LENDER”	 

	      WELLS FARGO BANK, NATIONAL ASSOCIATION	 

	      By: /s/ Jonathan Lefferts      
                  

	 

	            Jonathan Lefferts, Vice President	 

 

	      Lender’s Address:

      Real Estate Group (AU #02034)

      555 Montgomery Street, 16th Floor	 

	      San Francisco, CA 94111	 

	    Attn: Jennifer Anton	 

	“BORROWER”	 

	      REGAN HOLDING CORP, a California corporation	 

	      By: /s/ H. Lynn Stafford      
                  
	 

	      Title: Chief Information Officer      
                  
	 

	      Borrower’s Address:

      2090 Marina Avenue

      Petaluma, CA 94954-6714	 

	      Attn: Steven Taylor	 

 

DESCRIPTION OF PROPERTY

Exhibit A to LOAN AGREEMENT between REGAN HOLDING CORP, a California

corporation, as “Borrower”, and WELLS FARGO BANK, NATIONAL

ASSOCIATION, as “Lender”, dated as of June 19, 2001.

All the certain real property located in the County of Sonoma, State

of California, described as follows:

PARCEL ONE:

PARCELS 1and 2 as shown and designated upon City of Petaluma Parcel

Map No. 171, filed December 30, 1980 in Book 316 of Maps, Page 22,

Sonoma County Records.

EXCEPTING THEREFROM that portion contained in Deed to the City of

Petaluma, a Municipal Corporation, recorded February 1, 1990 under

Instrument No. 90-11544, and re-recorded March 27, 1990 as Document

No. 90-30132, and re-recorded April 18, 1990 as Document No. 90-38789,

Sonoma County Records.

ALSO EXCEPTING THEREFROM that portion contained in Deed to John M.

Headley, et al, recorded February 1, 1990 as Instrument No. 90-11545,

and re-recorded March 27, 1990 as Document No. 90-30135.

ALSO EXCEPTING THEREFROM that portion contained in the Deed of Trust

to the City of Petaluma recorded June 7, 1996 as Document No.

96-50841, Sonoma County Records.

PARCEL TWO:

AN EASEMENT for public utilities, 10 feet wide, lying Easterly of and

adjacent to, the Westerly line of the above-described Parcel, being

more particularly described as follows:

BEGINNING at Point “X” as set forth in Parcel 1 of Corporation Grant

Deed recorded February 1, 1990 in Document No. 90-11545. Thence along

said line common to Teitler and U-Haul Company South 54 degrees 08

minutes 19 seconds East, 10.00 feet; thence leaving said line and

parallel with the above-described Right-of-Way line South 35 degrees

51 minutes 41 seconds West, 143.47 feet to the point of curvature;

thence on a tangent curve to the right, radius 133 feet, through a

central angle of 27 degrees 28 minutes 28 seconds, an arc length of

63.78 feet to a point on the existing Easterly Right-of-Way line of

Marina Avenue; thence along said line North 35 degrees 51 minutes 41

seconds East, 26.65 feet; thence on a non-tangent curve to the right

whose center bears North 37 degrees 44 minutes 44 seconds West, radius

123 feet, through a central angle of 16 degrees, 23 minutes 35

seconds, an arc length of 35.19 feet to a point of tangency; thence

North 35 degrees 51 minutes 41 seconds East, 143.47 feet to the point

of beginning.

EXCEPTING therefrom all that portion lying within parcel one above.

 

PARCEL THREE:

FOR THE PLACE OF COMMENCEMENT BEGIN at the Northwesterly corner of the

tract of land described in the Deed from Brandon Heirs to A.W. Baker,

dated May 14, 1912 and recorded in Book 73 of Official Records of

Sonoma County, Page 388, said Northwesterly corner being on the

Southerly line of the Lakeville Highway, thence Easterly along the

Southerly line of said Highway, 318.36 feet to a point; thence

Southwesterly and parallel with the Northwesterly line of said tract

of land so conveyed to A.W. Baker, 239.12 feet to the actual place of

commencement; thence Northwesterly at right angles, 100 feet to a

point; thence Northeasterly at right angles, 60 feet to a point on the

Southwesterly line of the land described in the Deed from A.W. Baker,

et al, to Stanley McCutchan, dated October 13, 1927 and recorded June

26, 1928 in Book 205 of Official Records of Sonoma County, Page 149;

thence Southeasterly at right angles and along the Southwesterly line

of said land conveyed to McCutchan, 100 feet to a point; thence

Southwesterly at right angles 60 feet to the place of commencement.

EXCEPTING THEREFROM that portion lying within the City of Petaluma,

Sonoma County, California, being a portion of the Lands of John M.

Headley and Delores A. Headley, husband and wife, co-trustees under a

declaration of trust dated April 2, 1981 and amended June 14, 1982, as

conveyed by Deed recorded under Document No. 90-11543 of Official

Records, Sonoma County Records, and being more particularly described

as follows:

BEGINNING at the most Westerly corner of said lands, also being a

point on the Easterly Right-Of-Way line of Marina Avenue; thence along

said Right-Of-Way line North 35 degrees 51 minutes 41 seconds East,

8.56 feet to a point hereinafter referred to as Point “A”; thence

leaving said Right-Of-Way line in a Southerly direction, on a curve

concave Westerly, with a radius of 155 feet, through a central angle

of 3 degrees 14 minutes 35 seconds, an arc length of 8.77 feet to a

point on the Southwesterly line of said lands; thence along said line

North 54 degrees 08 minutes 19 seconds West, 1.94 feet to the point of

beginning.

PARCEL FOUR:

BEING A PORTION of the land deeded to Henry Reynaud by A.W. Baker in

that certain Deed of November 10, 1926, Second Tract, recorded in

Liber 154 of Official Records, Page 185, Sonoma County Records.

Starting at a point on the Southerly side of Lakeville Highway, said

point being where the boundary lines of the land of George McClintaock

and the lands of Joseph and Mary Pereira intersect the Southerly side

line of the Lakeville Highway; thence from said point Easterly and

along the Southerly side of the Lakeville Highway, 185.71 feet to a

point; thence Westerly and parallel with the Easterly boundary line of

the lands of Pereira 151.98 feet to the point of beginning; thence at

right angles 100 feet to a point (this being in an Easterly

direction); thence at an angle and in a Southerly direction and

parallel with the boundary line of Pereira 40 feet to a point; thence

at an angle and in a Westerly direction, 100 feet to a point; thence

at an angle and in a Northerly direction and parallel with the

boundary line (Easterly) of the lands of Pereira, 40 feet to the point

of beginning. The land to be deeded being bounded on one side by

Hobbie and the side, by Vail.

PARCEL FIVE:

COMMENCING at the common corner of the lands of S.M. Bell and A. W.

Baker as described in

 

Deed dated September 25, 1929 and recorded September 30, 1929 in Liber

237 of Official Records, at Page 429, Sonoma County Records; thence

along the Southerly line of Lakeville Highway, North 84? 07’ East

318.36 feet; thence South 35? 54” West 319.12 feet to the point of

beginning; and thence from said point of beginning at right angles

Northwesterly, 100 feet to the Easterly line of Petroleum Avenue;

thence South 35? 54’ West, 80 feet along the Easterly line of

Petroleum Avenue to a point; thence at right angles Southeasterly 100

feet to a point; thence North 35? 54’ East, 80 feet to the point of

beginning.

PARCEL SIX:

BEING a portion of that tract of land deeded to A. W. Baker by the

Brandon heirs on May 14, 1924 as recorded in Book 73 of Official

Records, page 388, Sonoma County Records; beginning at a point on the

Southerly side of the Lakeville Highway, said point being the

Northwesterly corner of said tract of land, and is a point common with

the lands of S. M. Bell, and running thence from said corner in an

Easterly direction along the Southerly side line of the Lakeville

Highway, 172.65 feet, more or less, to a point; thence running in a

Southerly direction and parallel with the Westerly side line of said

tract of land, 191.98 feet, more or less, to the point of

commencement.

BEGINNING at said point of commencement and running in an Easterly

direction and at right angles with the said Westerly line, 100 feet;

thence at right angles in a Southerly direction and parallel with the

Westerly side line of said tract, 40 feet, more or less; thence at

right angles running Westerly to a point 100 feet; and thence at right

angles and running in a Northerly direction and parallel with the

Westerly side line of said tract, 40 feet to the point of

commencement.

A.P. No. 005-050-036

 

DOCUMENTS

Exhibit B to LOAN AGREEMENT between REGAN HOLDING CORP, a California

corporation, as “Borrower”, and WELLS FARGO BANK, NATIONAL

ASSOCIATION, as “Lender”, dated as of June 19, 2001 (“Agreement”).

		
	 	1.       Loan Documents. The documents listed below, numbered 1.1
through 1., inclusive, and amendments, modifications and
supplements thereto which have received the prior written consent
of Lender, together with any documents executed in the future that
are approved by Lender and that recite that they are “Loan
Documents” for purposes of this Agreement are collectively
referred to herein as the Loan Documents.

		
	 	      1.1This Agreement.

            1.2The Promissory Note Secured by Deed of Trust of even date
herewith in the original principal amount of the Loan made by Borrower
payable to the order of Lender.

		
	 	      1.3The Deed of Trust with Absolute Assignment of Leases
and Rents, Security Agreement and Fixture Filing of even date
herewith executed by REGAN HOLDING CORP, a California
corporation, as Trustor, to American Securities Company, a
California corporation, as Trustee, for the benefit of
Lender, as Beneficiary.

		
	 	      1.4Uniform Commercial Code —National Financing
Statement —Form UCC-1, dated June 19, 2001, executed by
REGAN HOLDING CORPORATION, a California corporation as Debtor
and Lender as Secured Party.

		
	 	      1.5Corporate Borrowing Resolution of even date herewith
certified by the Secretary of REGAN HOLDING CORP.

		
	 	      1.6Corporate Resolution Authorizing Execution of
Guaranty and Endorsement and Hypothecation of Property of
even date herewith certified by the Secretary of
LEGACYMASTERS MARKETING GROUP INC..

		
	 	2.       Other Related Documents (Which Are Not Loan Documents):

		
	 	      2.1Repayment Guaranty of even date herewith executed by
LEGACY MARKETING GROUP INC., a California corporation, as
Guarantor in favor of Lender.

		
	 	      2.2Funds Transfer Agreement for Disbursement of Loan
Proceeds dated June 19, 2001, executed by and between
Borrower and Wells Fargo Bank, National

 

      Association.

		
	 	      2.3Agreement For Disbursement Prior To Recording And
Amendment To Note of even date herewith executed by and
between Borrower and Lender.

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