Document:

exv10w03

 

Exhibit 10.3

AGREEMENT OF PURCHASE AND SALE

     This Agreement, dated as of October 26, 2007, is between ESS TECHNOLOGY, INC., a California
corporation (“Seller”), and TC FUND PROPERTY ACQUISITIONS, INC., a Delaware corporation (“Buyer”).

ARTICLE I

PURCHASE AND SALE OF PROPERTY

     Section 1.1 Sale.

     Seller agrees to sell to Buyer, and Buyer agrees to purchase from Seller, subject to the
terms, covenants and conditions set forth herein, all of Seller’s right, title and interest in and
to the following property (collectively, the “Property”):

          (a) Real Property. That certain real property located at 48401 Fremont Boulevard,
48461 Fremont Boulevard and 48481 Fremont Boulevard, in the City of Fremont, State of California,
as more particularly described in Exhibit A attached hereto and made a part hereof (the
“Land”), together with (1) all improvements located thereon (the “Improvements”), (2) all rights,
benefits, privileges, easements, tenements, hereditaments, rights-of-way and other appurtenances
thereon or in any way appertaining thereto, including all mineral rights, development rights, air
and water rights, and (3) all strips and gores and any land lying in the bed of any street, road or
alley, open or proposed, adjoining such Land (collectively, the “Real Property”); and

          (b) Intangible Personal Property. To the extent assignable at no cost to Seller, all
intangible personal property, if any, owned by Seller and related to the Real Property and the
Improvements, including, without limitation: any trade names and trademarks associated with the
Real Property and the Improvements (but specifically excluding the names “ESS Technology” and any
derivatives thereof); any plans and specifications and other architectural and engineering drawings
for the Improvements; any warranties; any Service Contracts (as defined in Section 2.1(b) below)
and other contract rights related to the Property (but only to the extent Seller’s obligations
thereunder are expressly assumed by Buyer pursuant to the Assignment of Intangible Personal
Property as defined in Section 8.3(a)(2) below); and any governmental permits, approvals and
licenses (including any pending applications). Notwithstanding anything to the contrary contained
herein, there shall be excluded from the assignment of any rights of Seller under any intangible
property any rights of Seller against third parties with respect to the period prior to Closing
(the “Excluded Rights”) and any rights and obligations of Seller under the Transition Services
Agreement (as defined in Section 3.1(d)) (collectively, the “Intangible Personal Property”).

     Section 1.2 Purchase Price.

          (a) The purchase price of the Property is Twenty Six Million Three Hundred Thousand Dollars
($26,300,000) (the “Purchase Price”).

          (b) The Purchase Price shall be paid as follows:

 

 

               (1) Not later than the second business day after the Effective Date (as defined herein), Buyer
shall deposit in escrow with LandAmerica Commercial Services, 7552 Rambler Road, Suite 1700,
Dallas, Texas 75231, Attention: Jennifer Flynn-Maxwell (the “Title Company”, which includes any
title insurance company affiliate thereof) a promissory note executed by Buyer payable to the order
of Seller (the “Promissory Note”) in the amount of Two Hundred Thousand Dollars ($200,000) and in
the form set forth on Exhibit B attached hereto and made a part hereof.

               (2) If Buyer delivers a waiver notice under Section 2.2 to Seller prior to the expiration of
the Contingency Period, Buyer shall deposit in escrow with the Title Company the amount of One
Million Dollars ($1,000,000) (the “Deposit”, which includes all interest which accrues thereon) in
cash or other immediately available funds within two (2) business days after the expiration of the
Contingency Period. The Deposit shall replace the Promissory Note, and upon the Title Company’s
receipt of the Deposit, the Title Company shall release the Promissory Note to Buyer. The Deposit
shall be considered fully earned by Seller as consideration for entering into the Agreement and
shall be nonrefundable after the Contingency Period except as otherwise expressly provided herein.

     The Deposit shall be held in an interest bearing account at an FDIC insured bank. If the sale
of the Property as contemplated hereunder is consummated, then the Deposit shall be paid to Seller
at the Closing (as defined in Section 1.2(b)(3) below) and credited against the Purchase Price. IF
THE SALE OF THE PROPERTY IS NOT CONSUMMATED DUE TO SELLER’S DEFAULT HEREUNDER, THEN BUYER MAY
ELECT, AS BUYER’S SOLE AND EXCLUSIVE REMEDY, EITHER TO: (1) TERMINATE THIS AGREEMENT AND RECEIVE A
REFUND OF THE DEPOSIT, TOGETHER WITH REIMBURSEMENT OF BUYER’S ACTUAL DOCUMENTED COSTS AND EXPENSES
INCURRED IN CONNECTION WITH THE NEGOTIATION AND EXECUTION OF THIS AGREEMENT, AND IN PERFORMING ITS
DUE DILIGENCE, NOT TO EXCEED ONE HUNDRED THOUSAND DOLLARS ($100,000), IN WHICH EVENT NEITHER PARTY
SHALL HAVE ANY FURTHER RIGHTS OR OBLIGATIONS HEREUNDER EXCEPT AS PROVIDED IN SECTIONS 6.1, 9.3 AND
9.9 BELOW, OR (2) ENFORCE SPECIFIC PERFORMANCE OF THIS AGREEMENT. PROVIDED, HOWEVER, THAT IF
SELLER’S DEFAULT RESULTS FROM THE SALE OR OTHER DISPOSITION OF THE PROPERTY, SUCH THAT THE REMEDY
OF SPECIFIC PERFORMANCE IS NOT AVAILABLE, THEN BUYER MAY SEEK MONETARY DAMAGES. BUYER SHALL NOT
HAVE ANY OTHER RIGHTS OR REMEDIES HEREUNDER AS A RESULT OF ANY DEFAULT BY SELLER PRIOR TO CLOSING,
AND BUYER HEREBY WAIVES ANY OTHER SUCH REMEDY AS A RESULT OF A DEFAULT HEREUNDER BY SELLER. IF THE
SALE IS NOT CONSUMMATED DUE TO ANY DEFAULT BY BUYER HEREUNDER, THEN SELLER SHALL RETAIN THE DEPOSIT
AS LIQUIDATED DAMAGES. THE PARTIES HAVE AGREED THAT SELLER’S ACTUAL DAMAGES, IN THE EVENT OF A
FAILURE TO CONSUMMATE THIS SALE DUE TO BUYER’S DEFAULT PRIOR TO CLOSING, WOULD BE EXTREMELY
DIFFICULT OR IMPRACTICABLE TO DETERMINE. AFTER NEGOTIATION, THE PARTIES HAVE AGREED THAT,
CONSIDERING ALL THE CIRCUMSTANCES EXISTING ON THE DATE OF THIS AGREEMENT, THE AMOUNT OF THE DEPOSIT
IS A REASONABLE ESTIMATE OF THE DAMAGES

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THAT SELLER WOULD INCUR IN SUCH EVENT. BY PLACING THEIR INITIALS BELOW, EACH PARTY SPECIFICALLY
CONFIRMS THE ACCURACY OF THE STATEMENTS MADE ABOVE AND THE FACT THAT EACH PARTY WAS REPRESENTED BY
COUNSEL WHO EXPLAINED, AT THE TIME THIS AGREEMENT WAS MADE, THE CONSEQUENCES OF THIS LIQUIDATED
DAMAGES PROVISION. THE FOREGOING IS NOT INTENDED TO LIMIT BUYER’S OBLIGATIONS UNDER SECTIONS 6.1,
9.3 AND 9.9.

INITIALS:           SELLER /s/RLB      BUYER /s/NB

               (3) The balance of the Purchase Price, which is Twenty Five Million Three Hundred Thousand
Dollars ($25,300,000) (plus or minus the prorations pursuant to Section 8.5 hereof) shall be paid
to Seller in cash or by wire transfer of other immediately available funds at the consummation of
the purchase and sale contemplated hereunder (the “Closing”).

ARTICLE II

CONDITIONS

     Section 2.1 Buyer’s Conditions Precedent.

     Subject to the provisions of Section 9.3 hereof, Seller has provided and/or shall provide
Buyer and its consultants and other agents and representatives with access to the Property to
perform Buyer’s inspections and review and determine the present condition of the Property. Seller
has delivered or made available to Buyer at Seller’s offices or at the Real Property or on a
website all of those items listed on Schedule 2 attached hereto, and shall within the
Delivery Period (as defined below) deliver or make available to Buyer at Seller’s offices or at the
Real Property or on a website, copies of all other Due Diligence Materials (as defined in Section
2.2 below) in Seller’s possession, except as otherwise specifically provided herein along with all
other documents and materials in Seller’s possession or reasonably available to Seller relating to
the ownership or operation of the Property as Buyer may reasonably request. Notwithstanding
anything to the contrary contained herein, the Due Diligence Materials shall expressly exclude (i)
those portions of the Due Diligence Materials that would disclose Seller’s cost of acquisition of
the Real Property, or cost of construction of the Improvements and related soft costs, or any
estimates of costs to repair, replace, remediate or maintain the Real Property, (ii) any reports,
presentations, summaries and the like prepared for any of Seller’s boards, committees, partners or
investors in connection with its consideration of the acquisition of the Real Property,
construction of the Improvements or sale of the Property, (iii) any proposals, letters of intent,
draft contracts or the like prepared by or for other prospective purchasers of the Property or any
part thereof, (iv) Seller’s internal memoranda, attorney-client privileged materials or internal
appraisals, and (v) any information which is the subject of a confidentiality agreement between
Seller and a third party (the items described in clauses (i), (ii) (iii), (iv) and (v) being
collectively referred to as the “Confidential Information”). The “Delivery Period” shall mean the
period which ends five (5) days after the Effective Date (as defined in Section 9.14 below).
Buyer’s obligation to purchase the Property is conditioned upon Buyer’s review and approval of the
following, within the applicable time periods described in Sections 2.2 and 4.1 hereof:

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          (a) Title to the Property and survey matters in accordance with Article IV below.

          (b) The Due Diligence Materials, including, but not limited to all contracts pertaining to the
maintenance of the Property (collectively, the “Service Contracts”).

          (c) The physical condition of the Property.

          (d) The zoning, land use, building, environmental and other statutes, rules, or regulations
applicable to the Property.

          (e) The current real estate tax bills, any warranties, licenses, permits, certificates of
occupancy, plans and specifications, and other agreements or documents pertaining to the Property
which will be binding on Buyer after Closing.

          (f) Any other matters Buyer deems relevant to the Property.

     Section 2.2 Contingency Period.

     Buyer shall have until the date that is thirty (30) days after the Seller Board Approval Date
as defined in this Agreement (such period being referred to herein as the “Contingency Period”) to
review and approve the matters described in Sections 2.1(b)-(f) above in Buyer’s sole discretion
(title and survey review and approval shall be governed by the provisions of Section 4.1 below).
If Buyer determines to proceed with the purchase of the Property, then Buyer shall, before the end
of the Contingency Period, so notify Seller in writing, in which case Buyer shall be deemed to have
approved all of the matters described in Sections 2.1(a)-(f) above (subject to the provisions of
Section 4.1 below as to title and survey matters), including, without limitation, all documents,
Service Contracts and other contracts, agreements, reports and other items and materials related to
the Property prepared by or on behalf of Seller which have been delivered or otherwise made
available to Buyer (collectively, the “Due Diligence Materials”), and the Deposit shall become
nonrefundable except as expressly provided herein. If before the end of the Contingency Period
Buyer fails to give Seller such written notice, then Buyer shall be deemed to have elected to
terminate this Agreement, the Promissory Note shall be immediately returned to Buyer, and neither
party shall have any further rights or obligations hereunder except as provided in Sections 6.1,
9.3 and 9.9 below.

ARTICLE III

BUYER’S EXAMINATION

     Section 3.1 Representations and Warranties of Seller.

     Subject to the disclosures contained in Schedule 1 attached hereto and made a part
hereof (the “Disclosure Items”), matters contained in the Due Diligence Materials, and any matters
of public record in the city, county and state where the Property is located, Seller hereby makes
the following representations and warranties with respect to the Property. Notwithstanding anything
to the contrary contained herein or in any document delivered in connection herewith, Seller shall
have no liability with respect to the Disclosure Items.

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          (a) 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 any involuntary petition by Seller’s
creditors, (iii) suffered the appointment of a receiver to take possession of all, or substantially
all, of Seller’s assets, (iv) suffered the attachment or other judicial seizure of all, or
substantially all, of Seller’s 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.

          (b) Seller is not a “foreign person” as defined in Section 1445 of the Internal Revenue Code
of 1986, as amended (the “Code”) and any related regulations.

          (c) Subject to the provisions of Section 9.17 below, (i) this Agreement has been, and all
documents executed by Seller which are to be delivered to Buyer at Closing will be, duly
authorized, executed and delivered by Seller, and (ii) this Agreement does not and such other
documents will not violate any provision of any agreement or judicial order to which Seller is a
party or to which Seller or, to the best of Seller’s knowledge, the Property is subject.

          (d) Except for that certain Transition Services Agreement dated January 1, 2007, by and
between Seller and Silicon Integrated Systems Corporation, a California corporation (“SIS”),
pursuant to which SIS occupies space in the 48461 Fremont Boulevard building (the “Transition
Services Agreement”), no leases are currently in effect for the Property.

          (e) The only Service Contracts in effect for the Property are set forth in a list of Service
Contracts attached hereto as Exhibit E and made a part hereof (or, if not attached, which
Seller shall deliver to Buyer within the Delivery Period) and which at that time will be attached
hereto as Exhibit E and made a part hereof.

          (f) Except as set forth on Schedule 1, Seller has received no written notice of any
litigation or governmental proceeding (including, but not limited to any condemnation proceeding)
pending with respect to the Property, or with respect to Seller which impairs Seller’s ability to
perform its obligations under this Agreement, except for any personal injury or property damage
action for which there is adequate insurance coverage.

          (g) To the best of Seller’s knowledge, Seller has received no written notice from any
governmental authority of any violation of any law applicable to the Property (including, without
limitation, any Environmental Law as defined in Section 3.6(a)(2) below) that has not been
corrected.

          (h) To the best of Seller’s knowledge, all of the Due Diligence Materials delivered or made
available by Seller to Buyer in connection with the Property are true and complete copies of such
items in Seller’s possession.

          (i) Seller has been duly organized, is validly existing, and is in good standing in the state
in which it was formed, and, if so required to, is qualified to do business in the state in which
the Real Property is located.

          (j) Seller is in compliance with, and, to Seller’s knowledge, all beneficial owners of Seller
are, in compliance with the requirements of Executive Order No. 13224, 66 Fed

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Reg. 49079 (September 25, 2001) (the “Order”) and other similar requirements contained in the rules
and regulations of the Office of Foreign Asset Control, Department of the Treasury
(“ OFAC”) and in any enabling legislation or other Executive Orders in respect thereof (the
Order and such other rules, regulations, legislation, or orders are collectively called the
“Orders”).

          (k) Seller has not entered into any contracts for the sale, exchange or other disposition of
the Property or any portion thereof, nor do there exist any rights of first refusal, options or
other rights of any other party to purchase all or any portion of the Property.

          (l) To the best of Seller’s knowledge, there is no current default or breach by Seller under
the terms or provisions of any of the documents which are referenced as exceptions in the Title
Report, the SIS Lease, or under any of the Service Contracts.

     Each of the representations and warranties of Seller contained in this Section 3.1: (1) shall
be true in all material respects as of the date of Closing, subject in each case to (A) any
Exception Matters (as defined below), (B) the Disclosure Items, and (C) other matters expressly
permitted in this Agreement or otherwise specifically approved in writing; and (2) shall survive
the Closing as provided in Section 3.3 below.

     Section 3.2 No Liability for Exception Matters.

     As used herein, the term “Exception Matter” shall refer to a matter which would make a
representation or warranty of Seller contained in this Agreement untrue or incorrect and which is
disclosed to Buyer in the Due Diligence Materials, the Disclosure Items, or otherwise, or is a
matter of public record in the city, county and state where the Property is located, or is
otherwise discovered by or known to Buyer before the Closing. If Buyer first obtains knowledge of
any Material Exception Matter, as such term is defined below, after the close of the Contingency
Period and prior to Closing and such Exception Matter was not contained in the Due Diligence
Materials, the Disclosure Items or is not a matter of public record in the city, county and state
where the Property is located, Buyer’s sole remedy shall be to terminate this Agreement on the
basis thereof, upon written notice to Seller within the earlier of (a) five (5) days following
Buyer’s discovery of such Exception Matter or (b) the Closing, which ever occurs first, in which
event the Deposit shall be returned to Buyer, unless within five (5) days after receipt of such
notice or by the Closing, as the case may be, Seller notifies Buyer in writing that it elects to
attempt to cure or remedy such Exception Matter, in which event there shall be no return of the
Deposit unless Seller fails to so cure or remedy within the time period set forth below. Seller
shall be entitled to extend the Closing Date (as defined in Section 8.2 below) for up to five (5)
business days in order to attempt to cure or remedy any Exception Matter for which Buyer gives
written notice to Seller within the five (5) business day period prior to the Closing Date. Buyer’s
failure to give notice within five (5) days after it has obtained knowledge of a Material Exception
Matter shall be deemed a waiver by Buyer of such Exception Matter. Seller shall have no obligation
to cure or remedy any Exception Matter, even if Seller has notified Buyer of Seller’s election to
attempt to cure or remedy any Exception Matter (except as specifically provided in Section 4.1(c)
hereof), and, subject to Buyer’s right to terminate this Agreement as set forth above, Seller shall
have no liability whatsoever to Buyer with respect to any Exception Matters. Upon any termination
of this Agreement, pursuant to this Section 3.2, neither party shall have

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any further rights nor obligations hereunder, except as provided in Sections 6.1, 9.3 and 9.9
below. Except as set forth below, if Buyer obtains knowledge of any Exception Matter before the
Closing, but nonetheless elects to proceed with the acquisition of the Property or is obligated to
proceed with the acquisition of the Property, Seller shall have no liability with respect to such
Exception Matter, notwithstanding any contrary provision, covenant, representation or warranty
contained in this Agreement or in any Other Documents (as defined in Section 9.18 below). As used
in this Section 3.2, the term “Material Exception Matter” shall mean a matter that would have a
negative impact on the value of the Property in excess of Two Hundred Fifty Thousand Dollars
($250,000).

     Notwithstanding anything herein to the contrary, if an Exception Matter results from the
breach of Seller’s covenants specifically contained in Section 7.2 and 7.3 of this Agreement, Buyer
may elect to terminate this Agreement (according to the provisions in Section 1.2(b)(2) above) or
Buyer may proceed to Closing, and may pursue Seller for monetary damages after the Closing.

     Section 3.3 Survival of Seller’s Representations and Warranties of Sale.

     The representations and warranties of Seller contained herein or in any Other Documents shall
survive for a period of twelve (12) months after the Closing. Any claim which Buyer may have
against Seller for a breach of any such representation or warranty, whether such breach is known or
unknown, which is not specifically asserted by written notice to Seller within such twelve (12)
month period shall not be valid or effective, and Seller shall have no liability with respect
thereto.

     Section 3.4 Seller’s Knowledge.

     For purposes of this Agreement and any document delivered at Closing, whenever the phrase “to
the best of Seller’s knowledge” or the “knowledge” of Seller or words of similar import are used,
they shall be deemed to mean and are limited to the current actual knowledge only of Robert Blair,
at the times indicated only, and not any implied, imputed or constructive knowledge of such
individual or of Seller or any Seller Related Parties (as defined in Section 3.7 below), and
without any independent investigation or inquiry having been made or any implied duty to
investigate, make any inquiries or review the Due Diligence Materials. Seller represents that
Robert Blair is the person affiliated with Seller who is most knowledgeable regarding the matters
that are being represented and warranted by Seller hereunder. Furthermore, it is understood and
agreed that such individual shall have no personal liability in any manner whatsoever hereunder or
otherwise related to the transactions contemplated hereby.

     Section 3.5 Representations and Warranties of Buyer.

     Buyer represents and warrants to Seller as follows:

          (a) This Agreement and all documents executed by Buyer which are to be delivered to Seller at
Closing do not and at the time of Closing will not violate any provision of any agreement or
judicial order to which Buyer is a party or to which Buyer is subject.

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          (b) Buyer has not (i) made a general assignment for the benefit of creditors, (ii) filed any
voluntary petition in bankruptcy or suffered the filing of any 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 come due, or (vi) made an offer of settlement, extension or composition to its creditors
generally.

          (c) Buyer has been duly organized, is validly existing and is in good standing in the state in
which it was formed, and, if required to do so, is (or will be, at Closing) qualified to do
business in the state in which the Real Property is located. This Agreement has been, and all
documents executed by Buyer which are to be delivered to Seller at Closing will be, duly
authorized, executed and delivered by Buyer.

          (d) Buyer is purchasing the Property as investment rental property, and not for Buyer’s own
operations or use.

          (e) Buyer is not a party in interest with respect to any employee benefit or other plan within
the meaning of Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended
(“ERISA”), or of Section 4975(e)(1) of the Code, which is subject to ERISA or Section 4975 of the
Code and which is an investor in Seller.

          (f) Other than the Brokers (as defined in Section 6.1 below) Buyer has had no contact with any
broker or finder with respect to the Property.

          (g) Buyer is in compliance with all laws, statutes, rules and regulations or any federal,
state or local governmental authority in the United States of America applicable to Buyer and all
beneficial owners of Buyer with respect to or arising out of the requirements of Executive Order
No. 13224, 66 Fed Reg. 49079 (September 23, 2001) (the “Order”) and other similar requirements
contained in the rules and regulations of the Office of Foreign Asset Control. Department of the
Treasury (“OFAC”) and in any enabling legislation or other Executive Orders in respect thereof (the
Order and such other rules, regulations, legislation, or orders are collectively called the
“Orders”). Buyer agrees to make its policies, procedures and practices regarding compliance with
the Orders available to Seller for its review and inspection during normal business hours and upon
reasonable prior notice. Neither Buyer nor to Buyer’s knowledge (without any duty of inquiry or
investigation), any beneficial owner of Buyer:

               (1) is listed on the Specially Designated Nationals and Blocked Persons List maintained by
OFAC pursuant to the Order and/or on any other list of terrorists or terrorist organizations
maintained pursuant to any of the rules and regulations of OFAC or pursuant to any other applicable
Orders (such lists are collectively referred to as the “Lists”);

               (2) has been determined by competent authority to be subject to the prohibitions contained in
the Orders;

               (3) is owned or controlled by, nor acts for or on behalf of, any person or entity on the Lists
or any other person or entity who has been determined by competent authority to be subject to the
prohibitions contained in the Orders; or

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               (4) shall transfer or permit the transfer of any interest in Buyer or any beneficial owner in
Buyer to any person who is or whose beneficial owners are listed on the Lists.

Each of the representations and warranties of Buyer contained in this Section shall be deemed
remade by Buyer as of the Closing and shall survive the Closing for a period of twelve (12) months.
Any claim which Seller may have against Buyer for a breach of any such representation or warranty,
whether such breach is known or unknown, which is not specifically asserted by written notice to
Buyer within such twelve (12) month period shall not be valid or effective, and Buyer shall have no
liability with respect thereto.

     Section 3.6 Buyer’s Independent Investigation.

          (a) By Buyer electing to proceed under Section 2.2, Buyer will be deemed to have acknowledged
and agreed that it has been given a full opportunity to inspect and investigate each and every
aspect of the Property, either independently or through agents of Buyer’s choosing, including,
without limitation:

               (1) All matters relating to title and survey, together with all governmental and other legal
requirements such as taxes, assessments, zoning, use permit requirements and building codes.

               (2) The physical condition and aspects of the Property, including, without limitation, the
interior, the exterior, the square footage within the improvements on the Real Property, the
structure, seismic aspects of the Property, the foundation, roof, paving, parking facilities,
utilities, and all other physical and functional aspects of the Property. Such examination of the
physical condition of the Property shall include an examination for the presence or absence of
Hazardous Materials, as defined below, which shall be performed or arranged by Buyer (subject to
the provisions of Section 9.3 hereof) at Buyer’s sole expense. For purposes of this Agreement,
“Hazardous Materials” shall mean inflammable explosives, radioactive materials, asbestos, asbestos
— containing materials, polychlorinated biphenyls, lead, lead-based paint, radon, under and/or
above ground tanks, hazardous materials, hazardous wastes, hazardous substances, oil, or related
materials, which are listed or regulated in the Comprehensive Environmental Response, Compensation
and Liability Act of 1980, as amended (42 U.S.C. Sections 6901, et seq.), the
Resources Conservation and Recovery Act of 1976 (42 U.S.C. Section 6901, et seq.),
the Clean Water Act (33 U.S.C. Section 1251, et seq.), the Safe Drinking Water Act
(14 U.S.C. Section 1401, et seq.), the Hazardous Materials Transportation Act (49
U.S.C. Section 1801, et seq.), and the Toxic Substance Control Act (15 U.S.C.
Section 2601, et seq.), the California Hazardous Waste Control Law (California
Health and Safety Code Section 25100, et seq.), the Porter-Cologne Water Quality
Control Act (California Water Code Section 13000, et seq.), and the Safe Drinking
Water and Toxic Enforcement Act of 1986 (California Health and Safety Code Section 25249.5,
et seq.) and any other applicable federal, state or local laws (collectively,
“Environmental Laws”).

               (3) Any easements and/or access rights affecting the Property.

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               (4) The Service Contracts and any other documents or agreements of significance affecting the
Property.

               (5) All other matters of material significance affecting the Property, including, but not
limited to, the Due Diligence Materials and the Disclosure Items.

          (b) Except as expressly stated herein, Seller makes no representation or warranty as to the
truth, accuracy or completeness of any materials, data or information delivered by Seller to Buyer
in connection with the transaction contemplated hereby. Buyer acknowledges and agrees that all
materials, data and information delivered by Seller to Buyer in connection with the transaction
contemplated hereby are provided to Buyer as a convenience only and that any reliance on or use of
such materials, data or information by Buyer shall be at the sole risk of Buyer, except as
otherwise expressly stated herein. Without limiting the generality of the foregoing provisions,
Buyer acknowledges and agrees that (a) any environmental or other report with respect to the
Property which is delivered by Seller to Buyer shall be for general informational purposes only,
(b) Buyer shall not have any right to rely on any such report delivered by Seller to Buyer, but
rather will rely on its own inspections and investigations of the Property and any reports
commissioned by Buyer with respect thereto, (c) neither Seller, any affiliate of Seller nor the
person or entity which prepared any such report delivered by Seller to Buyer shall have any
liability to Buyer for any inaccuracy in or omission from any such report and (d) the failure to
deliver any report as to the environmental or other condition of the Property, including any
proposal for work at the Property which was not performed by Seller, shall not be actionable by
Buyer under this Agreement or otherwise.

          (c) EXCEPT AS EXPRESSLY SET FORTH IN THIS AGREEMENT, BUYER SPECIFICALLY ACKNOWLEDGES AND
AGREES THAT SELLER IS SELLING AND BUYER IS PURCHASING THE PROPERTY ON AN “AS IS WITH ALL FAULTS”
BASIS AND THAT BUYER IS NOT RELYING ON ANY REPRESENTATIONS OR WARRANTIES OF ANY KIND WHATSOEVER,
EXPRESS OR IMPLIED, FROM SELLER, ANY SELLER RELATED PARTIES, OR THEIR AGENTS OR BROKERS, OR ANY
OTHER PERSON ACTING OR PURPORTING TO ACT ON BEHALF OF SELLER AS TO ANY MATTERS CONCERNING THE
PROPERTY, INCLUDING WITHOUT LIMITATION: (i) the quality, nature, adequacy and physical condition
and aspects of the Property, including, but not limited to, the structural elements, seismic
aspects of the Property, foundation, roof, appurtenances, access, landscaping, parking facilities
and the electrical, mechanical, HVAC, plumbing, sewage, and utility systems, facilities and
appliances, the square footage within the improvements on the Real Property, (ii) the quality,
nature, adequacy, and physical condition of soils, geology and any groundwater, (iii) the
existence, quality, nature, adequacy and physical condition of utilities serving the Property, (iv)
the development potential of the Property, and the Property’s use, habitability, merchantability,
or fitness, suitability, value or adequacy of the Property for any particular purpose, (v) the
zoning or other legal status of the Property or any other public or private restrictions on use of
the Property, (vi) the compliance of the Property or its operation with any applicable codes, laws,
regulations, statutes, ordinances, covenants, conditions and restrictions of any governmental or
quasi-governmental entity or of any other person or entity, (vii) the presence of Hazardous
Materials on, under or about the Property or the adjoining or neighboring property, (viii) the
quality of any labor and materials used in any improvements on the Real Property, (ix) the
condition of title to the Property, (x) the Service

10

 

Contracts, or other documents or agreements affecting the Property (xi) the value, economics of the
operation or income potential of the Property, or (x) any other fact or condition which may affect
the Property, including without limitation, the physical condition, value, economics of operation
or income potential of the Property. In addition, Seller shall have no legal obligation to apprise
Buyer regarding any event or other matter involving the Property which occurs after the Effective
Date or to otherwise update the Due Diligence Items, unless and until an event or other matter
occurs which would cause Seller to be unable to remake any of its representations or warranties
contained in this Agreement.

     Section 3.7 Release.

          (a) Without limiting the above, and subject to Seller’s liability with respect to the
representations, warranties and covenants of Seller contained in this Agreement, Buyer on behalf of
itself and its successors and assigns waives its right to recover from, and forever releases and
discharges, Seller, Seller’s affiliates, Seller’s investment advisor, the partners, trustees,
beneficiaries, shareholders, members, managers, directors, officers, employees and agents and
representatives of each of them, and their respective heirs, successors, personal representatives
and assigns (collectively, the “Seller Related Parties”), from any and all demands, claims, legal
or administrative proceedings, losses, liabilities, damages, penalties, fines, liens, judgments,
costs or expenses whatsoever (including, without limitation, court costs and attorneys’ fees and
disbursements), whether direct or indirect, known or unknown, foreseen or unforeseen, that may
arise on account of or in any way be connected with or related to the Property, this Agreement
and/or the transactions contemplated hereunder, including, without limitation (i) the physical
condition of the Property including, without limitation, all structural and seismic elements, all
mechanical, electrical, plumbing, sewage, heating, ventilating, air conditioning and other systems,
the environmental condition of the Property and the presence of Hazardous Materials on, under or
about the Property, (ii) any law or regulation applicable to the Property, including, without
limitation, any Environmental Law and any other federal, state or local law, (iii) the Disclosure
Items, (iv) any Exception Matter or (v) any other matter.

          (b) In connection with Section 3.7(a) above, Buyer expressly waives the benefits of Section
1542 of the California Civil Code, which provides as follows: “A GENERAL RELEASE DOES NOT EXTEND
TO CLAIMS WHICH THE CREDITOR DOES NOT KNOW OR SUSPECT TO EXIST IN HIS OR HER FAVOR AT THE TIME OF
EXECUTING THE RELEASE, WHICH IF KNOWN BY HIM OR HER MUST HAVE MATERIALLY AFFECTED HIS OR HER
SETTLEMENT WITH THE DEBTOR.” BUYER ACKNOWLEDGES AND AGREES THAT IT HAS BEEN REPRESENTED BY LEGAL
COUNSEL OF ITS CHOICE IN CONNECTION WITH THIS AGREEMENT, AND THAT SUCH COUNSEL HAS EXPLAINED TO
BUYER THE PROVISIONS OF THIS SECTION 3.7. BY INITIALING BELOW, BUYER CONFIRMS IT HAS AGREED TO THE
PROVISIONS OF THIS SECTION 3.7.

     In this connection, Buyer hereby agrees, represents and warrants that Buyer realizes and
acknowledges that factual matters now unknown to it may have given or may hereafter give rise to
causes of action, claims, demands, debts, controversies, damages, costs, losses and expenses and
other claims and liabilities which are presently unknown, unanticipated and unsuspected, and Buyer
further agrees, represents and warrants that the waivers and releases herein have been

11

 

negotiated and agreed upon in light of that realization and that Buyer nevertheless hereby intends
to release, discharge and acquit Seller and the Seller Related Parties from any such unknown causes
of action, claims, demands, debts, controversies, damages, costs, losses and expenses and other
claims and liabilities which might in any way be included as a material portion of the
consideration given to Seller by Buyer in exchange for Seller’s performance hereunder.

     Seller has given Buyer material concessions regarding this transaction in exchange for Buyer
agreeing to the provisions of this Section 3.7. Each Seller and Buyer have initialed this Section
3.7 to further indicate their awareness and acceptance of each and every provision hereof;
provided, however that failure of any party to initial this Section 3.7 below shall not invalidate
this Section 3.7 nor any other provision of this Agreement.

	 	 	 	 	 	 	 
	SELLER

	 	 	 	BUYER	 	 
	 
	 	 	 	 	 	 
	/s/RLB  

	 	 	 	/s/NB	 	 
	 
	 	 	 	 	 	 
	      

	 	 	 	        	 	 

     Section 3.8 Survival.

     The provisions of this Article III shall survive the Closing subject to the limitations and
qualifications contained in such provisions and in Sections 9.11 and 9.18 hereof.

ARTICLE IV

TITLE

     Section 4.1 Conditions of Title.

          (a) Upon execution of this Agreement, Buyer will order a current preliminary title report or
commitment from the Title Company (the “Title Report”), together with copies of all underlying
documents relating to title exceptions referred to therein. Buyer shall immediately order a survey
of the Property or any update thereto from a duly licensed surveyor (the “Survey”) if desired by
Buyer or if necessary to support the issuance of the Title Policy (as defined in Section 4.2
below). Buyer shall provide to Seller a copy of the Survey, which shall be certified to the Title
Company, Buyer and Seller. Buyer shall pay the entire cost of the Survey. If Closing does not
occur, Buyer shall, if Seller so requests, assign to Seller all contract rights Buyer has with the
surveyor and in such event Seller shall reimburse Buyer for the cost of the Survey.

          (b) Within five (5) business days after the later of the Seller Board Approval Date, or
Buyer’s receipt of the Title Report and Survey (the “Title Review Date”), Buyer shall furnish
Seller with a written statement of objections, if any, to the title to the Property, including,
without limitation, any objections to any matter shown on the Survey (collectively, “Objections”).
In the event the Title Company amends or updates the Title Report after the Title Review Date
(each, a “Title Report Update”), Buyer shall furnish Seller with a written statement of Objections
to any matter first raised in a Title Report Update within three (3)

12

 

business days after its receipt of such Title Report Update (each, a “Title Update Review Period”).
Should Buyer fail to notify Seller in writing of any Objections in the Title Report prior to the
Title Review Date, or to any matter first disclosed in a Title Report Update prior to the Title
Update Review Period, as applicable, Buyer shall be deemed to have approved such matters which
shall be considered to be “Conditions of Title” as defined in Section 4.1(e) below.

          (c) If Seller receives a timely Objection in accordance with Section 4.1(b)

(“Buyer’s Notice”), Seller shall have the right, but not the obligation, within five (5) business
days after receipt of Buyer’s Notice (“Seller’s Response Period”), to elect to attempt to cure any
such matter upon written notice to Buyer (“Seller’s Response”), and may extend the Closing Date for
up to five (5) business days to allow such cure. If Seller does not give any Seller’s Response,
Seller shall be deemed to have elected not to attempt to cure any such matters. Notwithstanding the
foregoing, Seller shall in any event be obligated to cure all matters or items (i) that are
mortgage or deed of trust liens or security interests against the Property, in each case granted by
Seller (and not by other third parties), (ii) real estate tax liens, other than liens for taxes and
assessments not yet delinquent, (iii) that have been voluntarily placed against the Property by
Seller (and not by other third parties) after the date of this Agreement and that are not otherwise
permitted pursuant to the provisions hereof and (iv) liens, such as, but not limited to, mechanic’s
liens, but only those liens that arise pursuant to agreements in which Seller or its agents (and
not tenants or third parties) is the contracting party, and which do not exceed Two Hundred Fifty
Thousand Dollars ($250,000). Seller shall be entitled to apply the Purchase Price towards the
payment or satisfaction of such liens, and may cure any Objection by causing the Title Company to
insure against collection of the same out of the Property.

          (d) If Seller elects (or is deemed to have elected) not to attempt to cure any Objections
raised in any Buyer’s Notice timely delivered by Buyer to Seller pursuant to Section 4.1(b), or if
Seller notifies Buyer that it elects to attempt to cure any such Objection but then does not for
any reason effect such cure on or before the Closing Date as it may be extended hereunder, then
Buyer, as its sole and exclusive remedy, shall have the option of terminating this Agreement by
delivering written notice thereof to Seller within three (3) business days after (as applicable)
(i) its receipt of Seller’s Response stating that Seller will not attempt to cure any such
Objection or (ii) the expiration of Seller’s Response Period if Seller does not deliver a Seller’s
Response or (iii) Seller’s failure to cure by the Closing Date (as it may be extended hereunder)
any Objection which Seller has previously elected to attempt to cure pursuant to a Seller’s
Response. In the event of such a termination, the Deposit shall be immediately returned to Buyer,
and neither party shall have any further rights or obligations hereunder except as provided in
Sections 6.1, 9.3 and 9.9 below. If no such termination notice is timely received by Seller
hereunder, Buyer shall be deemed to have waived all such Objections in which event those Objections
shall become “Conditions of Title” under Section 4.1(e). If the Closing is not consummated for any
reason other than Seller’s default hereunder, Buyer shall be responsible for any title or escrow
cancellation charges.

          (e) At the Closing, Seller shall convey title to the Property to Buyer by deed in the form of
Exhibit C attached hereto (the “Deed,” which shall be modified in form but not in substance
if required by the Title Company) subject to no exceptions other than:

13

 

               (1) Interests of occupant under the Transition Services Agreement;

               (2)Matters created by or with the written consent of Buyer;

               (3) Non-delinquent liens for real estate taxes and assessments; and

               (4) Any exceptions disclosed by the Title Report and any Title Report Update which is approved
or deemed approved by Buyer in accordance with this Article IV above, and any other exceptions to
title disclosed by the public records or which would be disclosed by an inspection and/or survey of
the Property.

All of the foregoing exceptions shall be referred to collectively as the “Conditions of Title.” By
acceptance of the Deed and the Closing of the purchase and sale of the Property, (x) Buyer agrees
it is assuming for the benefit of Seller all of the obligations of Seller with respect to the
Conditions of Title from and after the Closing, and (y) Buyer agrees that Seller shall have
conclusively satisfied its obligations with respect to title to the Property. The provisions of
this Section shall survive the Closing.

     Section 4.2 Evidence of Title.

     Delivery of title in accordance with the foregoing shall be evidenced by the willingness of
the Title Company to issue, at Closing, its Owner’s ALTA standard Policy of Title Insurance (2006
Form) in the amount of the Purchase Price showing title to the Real Property vested in Buyer,
subject to the Conditions of Title (the “Title Policy”). The Title Policy may be written as an
extended coverage policy, provided that Buyer furnishes the Title Company with an acceptable
Survey, and may contain such endorsements as reasonably required by Buyer, provided that the
issuance of such extended coverage or endorsements shall not be conditions to Buyer’s obligations
hereunder. Buyer shall pay the costs for extended coverage and all such endorsements. Seller shall
have no obligation to provide any indemnity or agreement to the Title Company or Buyer to support
the issuance of the Title Policy or any such endorsements other than an affidavit as to the
existence of any tenants at the Property and any ongoing or recently completed construction work at
the Property.

ARTICLE V

RISK OF LOSS AND INSURANCE PROCEEDS

     Section 5.1 Minor Loss.

     Buyer shall be bound to purchase the Property for the full Purchase Price as required by the
terms hereof, without regard to the occurrence or effect of any damage to the Property or
destruction of any improvements thereon or condemnation of any portion of the Property, provided
that: (a) the cost to repair any such damage or destruction does not exceed Five Hundred Thousand
Dollars ($500,000) in the estimate of an architect or contractor selected by Seller and reasonably
acceptable to Buyer or in the case of a condemnation, the diminution in the value of the remaining
Property as a result of a partial condemnation is not material (as hereinafter defined) and (b)
upon the Closing, there shall be a credit against the Purchase Price due hereunder equal to the
amount of any insurance proceeds or condemnation awards collected

14

 

by Seller as a result of any such damage or destruction or condemnation, plus the amount of any
insurance deductible, less any reasonable and documented sums expended by Seller toward the
collection of such proceeds or awards and the restoration or repair of the Property (the nature of
which restoration or repairs, but not the right of Seller to effect such restoration or repairs,
shall be subject to the approval of Buyer, which approval shall not be unreasonably withheld,
conditioned or delayed). If the proceeds or awards have not been collected as of the Closing, then
such proceeds or awards shall be assigned to Buyer, except to the extent needed to reimburse Seller
for sums expended to collect such proceeds or awards or to repair or restore the Property, and
Seller shall retain the rights to such proceeds and awards to such extent.

     Section 5.2 Major Loss.

     If the cost to repair the damage or destruction as specified above exceeds Five Hundred
Thousand Dollars ($500,000) in the estimate of an architect or contractor selected by Seller and
reasonably acceptable to Buyer or the diminution in the value of the remaining Property as a result
of a condemnation is material (as hereinafter defined), then Buyer may, at its option to be
exercised within twenty (20) days of Seller’s notice of the occurrence of the damage or destruction
or the commencement of condemnation proceedings (during which time period Seller will make
available to Buyer all information and documentation reasonably requested by Buyer relating to the
damage or destruction, or condemnation, and any insurance and/or condemnation award, so that Buyer
may make an informed decision as to whether to proceed with the transaction or to terminate),
either terminate this Agreement or consummate the purchase for the full Purchase Price as required
by the terms hereof. If Buyer elects to terminate this Agreement by delivering written notice
thereof to Seller or fails to give Seller notice within such twenty (20) day period that Buyer will
proceed with the purchase, then this Agreement shall terminate, the Deposit shall be immediately
returned to Buyer and neither party shall have any further rights or obligations hereunder except
as provided in Sections 6.1, 9.3 and 9.9 below. If Buyer elects to proceed with the purchase, then
upon the Closing, there shall be a credit against the Purchase Price due hereunder equal to the
amount of any insurance proceeds or condemnation awards collected by Seller as a result of any such
damage or destruction or condemnation, plus the amount of any insurance deductible, less any
reasonable and documented sums expended by Seller toward the collection of such proceeds or awards
or to restoration or repair of the Property (the nature of which restoration or repairs, but not
the right of Seller to effect such restoration or repairs, shall be subject to the approval of
Buyer, which approval shall not be unreasonably withheld, conditioned or delayed). If the proceeds
or awards have not been collected as of the Closing, then such proceeds or awards shall be assigned
to Buyer, except to the extent needed to reimburse Seller for sums expended to collect such
proceeds or awards or to repair or restore the Property, and Seller shall retain the rights to such
proceeds and awards to such extent. A condemnation shall be deemed material if more than twenty
percent (20%) of the net rentable area of the Property is taken, or any portion of any net rentable
area of the Property, or any parking is taken which would cause the Property to be in violation of
any existing laws or regulations, including but not limited to, zoning regulations, or the existing
access to the Property is materially and adversely affected, permanently. After the expiration of
the Contingency Period, Seller will not settle any insurance or condemnation claim involving a
Major Loss without the prior written consent of Buyer.

15

 

ARTICLE VI

BROKERS AND EXPENSES

     Section 6.1 Brokers.

     The parties represent and warrant to each other that no broker or finder was instrumental in
arranging or bringing about this transaction except for Colliers International (“Seller’s Broker”)
and CB Richard Ellis (“Buyer’s Broker,” collectively with Seller’s Broker, the “Brokers”). At
Closing, Seller shall pay the commission due, if any, to Seller’s Broker, which shall be paid
pursuant to a separate agreement between Seller and Seller’s Broker, and Seller shall indemnify
Buyer against any claims of Seller’s Broker arising out of such agreement with Seller’s Broker. To
the extent that Seller’s Broker and Buyer’s Broker have agreed to split such commission,
arrangements will be made for the payment of Buyer’s Broker’s share of such commission through
escrow at the Closing. If any other person brings a claim for a commission or finder’s fee based
upon any contact, dealings or communication with Buyer or Seller, then the party through whom such
person makes his claim shall defend the other party (the “Indemnified Party”) from such claim, and
shall indemnify the Indemnified Party and hold the Indemnified Party harmless from any and all
costs, damages, claims, liabilities or expenses (including without limitation, court costs and
reasonable attorneys’ fees and disbursements) incurred by the Indemnified Party in defending
against the claim. The provisions of this Section 6.1 shall survive the Closing or, if the
purchase and sale is not consummated, any termination of this Agreement.

     Section 6.2 Expenses.

     Except as expressly provided in this Agreement, each party hereto shall pay its own expenses
incurred in connection with this Agreement and the transactions contemplated hereby.

ARTICLE VII

AGREEMENTS AFFECTING THE PROPERTY

     Section 7.1 Maintenance of Improvements; Removal of Tangible Personal Property.

     Seller agrees to keep its customary property insurance covering the Property in effect until
the Closing (provided, however, that the terms of any such coverage maintained in blanket form may
be modified as Seller deems necessary). Seller shall maintain all Improvements substantially in
their present condition (ordinary wear and tear, casualty and condemnation excepted), provided that
Seller shall in no event be obligated to make any capital expenditures or repairs. Notwithstanding
the foregoing, except with respect to the Seller Lease Back Space and the SIS Space, Seller shall
remove all existing furniture, fixtures and equipment from the Property that is owned by Seller
prior to the Closing (other than supplies and materials used in connection with the management,
maintenance and operation of the Property, which will be sold and assigned to Buyer at Closing for
no additional consideration).

16

 

     Section 7.2 Service Contracts.

     Seller will not enter into any new Service Contracts or materially modify any existing Service
Contracts (to the extent such Service Contracts will survive Closing) after the expiration of the
Contingency Period, without Buyer’s prior written approval (not to be unreasonably withheld,
conditioned or delayed). Seller will provide Buyer with any Service Contracts and material
modifications of any existing Service Contracts (to the extent such Service Contracts will survive
Closing), no later than five (5) business days prior to the expiration of the Contingency Period.
Within three (3) business days prior to the expiration of the Contingency Period, Buyer will advise
Seller in writing which Service Contracts Buyer will assume and which Service Contracts Buyer
requests be terminated at Closing. Seller shall deliver at Closing notices of termination of all
Service Contracts that are not so assumed and Buyer shall be responsible for any charges applicable
to periods commencing with the Closing. If there are any Service Contracts which Buyer does not
elect to assume, but which require a substantial (i.e., more than Fifty Thousand Dollars ($50,000))
termination fee which Seller refuses to pay, then if Buyer refuses to either assume such Service
Contract or pay such termination fee, or if Seller and Buyer cannot otherwise resolve the matter to
their mutual satisfaction, then Seller may terminate this Agreement (or Buyer may do so, prior to
the end of the Contingency Period) in which event the Promissory Note shall be immediately returned
to Buyer and neither party shall have any further rights or obligations hereunder, except as
provided in Sections 6.1, 9.3 and 9.9 below.

     Section 7.3 Leases.

     Seller will not enter into any new leases of the Property, or modify the Transition Services
Agreement, from and after the Effective Date and through the Closing.

ARTICLE VIII

CLOSING AND ESCROW

     Section 8.1 Escrow Instructions.

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

     Section 8.2 Closing.

     The Closing hereunder shall be held and delivery of all items to be made at the Closing under
the terms of this Agreement shall be made at the offices of the Title Company or as otherwise
mutually agreed on December 18, 2007, and before 9:00 a.m. local time, or such other earlier date
or later date and time as Buyer and Seller may mutually agree upon in writing (the

17

 

     "Closing Date”). Except as expressly provided herein, such date and time may not be advanced or
extended without the prior written approval of both Seller and Buyer.

     Section 8.3 Deposit of Documents.

          (a) At or before the Closing, Seller shall deposit into escrow the following items:

               (1) the duly executed and acknowledged Deed in the form attached hereto as Exhibit C
conveying the Real Property to Buyer subject to the Conditions of Title;

               (2) four (4) duly executed counterparts of an Assignment and Assumption of Service Contracts,
Warranties and Other Intangible Property in the form attached hereto as Exhibit D pursuant
to the terms of which Buyer shall assume all of Seller’s obligations under the Service Contracts,
and other documents and agreements affecting the Property (the “Assignment of Contracts”);

               (3) an affidavit pursuant to Section 1445(b)(2) of the Code, and on which Buyer is entitled to
rely, that Seller is not a “foreign person” within the meaning of Section 1445(f)(3) of the Code;
and

               (4) California 593-C Certificate.

          (b) At or before Closing, Buyer shall deposit into escrow the following items:

               (1) immediately available funds necessary to close this transaction, including, without
limitation, the Purchase Price (less the Deposit and interest thereon net of investment fees, if
any) and funds sufficient to pay Buyer’s closing costs and share of prorations hereunder; and

               (2) four (4) duly executed counterparts of the Assignment of Contracts.

          (c) Seller and Buyer shall each execute and deposit a closing statement, such transfer tax
declarations and such other instruments as are reasonably required by the Title Company or
otherwise required to close the escrow and consummate the acquisition of the Property in accordance
with the terms hereof. Seller and Buyer hereby designate Title Company as the “Reporting Person”
for the transaction pursuant to Section 6045(e) of the Code and the regulations promulgated
thereunder and agree to execute such documentation as is reasonably necessary to effectuate such
designation.

          (d) Within five (5) business days after the Closing Date, Seller shall deliver or make
available at the Property to Buyer: originals of any items which Seller was required to furnish
Buyer copies of or make available at the Property pursuant to Sections 2.1(b) or (e) above, to the
extent in Seller’s possession. Seller shall deliver possession of the Property to Buyer as
required hereunder and shall deliver to Buyer or make available at the Property a set of keys to
the Property on the Closing Date.

18

 

     Section 8.4 Intentionally Omitted.

     Section 8.5 Prorations.

          (a) Real property taxes and assessments; water, sewer and utility charges; amounts payable
under any Service Contracts or other agreements or documents assumed by Buyer in accordance with
the terms and conditions of Section 7.2; annual permits and/or inspection fees (calculated on the
basis of the period covered); and any other expenses of the maintenance of the Property (including,
without limitation, expenses prepaid by Seller and expenses already paid by Seller but which are
being amortized over time by Seller and with respect to which Seller shall receive a credit at
Closing in the amount of the prepaid or unamortized portion thereof), shall all be prorated as of
11:59 p.m. on the day immediately prior to Closing (i.e., Buyer is entitled to the income and
responsible for the expenses of the day of Closing), on the basis of a 365-day year.

     Seller shall receive credits at Closing for the amount of any utility or other deposits with
respect to the Property if the utility companies agree, in writing, that such deposits shall be
transferred to Buyer for its account. Buyer shall cause all utilities to be transferred into
Buyer’s name and account at the time of Closing. To the extent Seller does not receive a credit for
a deposit, Seller hereby retains the rights to such deposit and to pursue such amounts.

     Seller and Buyer hereby agree that if any of the aforesaid prorations and credits cannot be
calculated accurately on the Closing Date, then the same shall be calculated as soon as reasonably
practicable after the Closing Date, and either party owing the other party a sum of money based on
such subsequent proration(s) or credits shall pay said sum to the other party within thirty (30)
days thereafter. Any amounts not paid within such thirty (30) day period shall bear interest from
the date actually received by the payor until paid at the greater of (i) the rate of ten percent
(10%) per annum or (ii) the prime rate (or base rate) reported from time to time in the “Money
Rates” column or section of The Wall Street Journal as being the base rate on corporate
loans at larger United States money center commercial banks plus two (2) percent.

     Seller retains the right to pursue and control any pending tax appeals applicable to periods
prior to the tax year of the Closing, and Buyer shall cooperate with Seller with respect to such
appeals at no material cost or expense to Buyer. Any refund of real property taxes or special
assessments relating to the period prior to Closing shall be for the account of Seller. To the
extent Buyer receives any such refund, Buyer shall remit such refund to Seller within five (5)
business days of receipt thereof. Notwithstanding the foregoing, Buyer and Seller shall reasonably
and jointly pursue and control any tax appeals applicable to the current tax year, and the parties
shall prorate all costs incurred and recovered in connection therewith based on the portion of the
proceeds of any tax appeal recovery allocable to each party’s respective period of ownership of the
Property.

          (b) Except as provided in Article IV, Section 6.2 and Section 9.5 of this Agreement, (i) Buyer
shall be responsible for all survey costs, the cost of any ALTA policy, title endorsements and
other title fees, and all escrow or closing fees, (ii) Seller will be responsible for the County
documentary transfer tax, and (iii) all other costs and expenses not listed in subclauses (i) and
(ii) above, shall be paid by Buyer and Seller at Closing in accordance with

19

 

prevailing local custom in the city, county and state in which the Property is located. The parties
will execute and deliver any required transfer or other similar tax declarations to the appropriate
governmental entity at Closing.

          (c) The provisions of this Section 8.5 shall survive the Closing.

ARTICLE IX

MISCELLANEOUS

     Section 9.1 Notices.

     Any notices required or permitted to be given hereunder shall be given in writing and shall be
delivered (a) in person, (b) by certified mail, postage prepaid, return receipt requested, (c) by
facsimile with confirmation of receipt or email (subject to the conditions set forth below in this
Section 9.1 relating to email transmissions), or (d) by a commercial overnight courier that
guarantees next day delivery and provides a receipt, and such notices shall be addressed as
follows:

	 	 	 	 	 
	 

	 	To Buyer:
	 	TC Fund Property Acquisitions, Inc.
	 

	 	 	 	c/o Trammell Crow Company
	 

	 	 	 	Four Embarcadero
	 

	 	 	 	Suite 790
	 

	 	 	 	San Francisco, California 94111
	 

	 	 	 	Attention: Lindsay Gordon
	 

	 	 	 	Facsimile No.: (415) 981-8131
	 

	 	 	 	Telephone: (415) 490-0304
	 

	 	 	 	E-mail: lgordon@trammellcrow.com
	 
	 	 	 	 
	 

	 	with a copy to:
	 	Baker & Hostetler LLP
	 

	 	 	 	12100 Wilshire Boulevard, 15th Floor
	 

	 	 	 	Los Angeles, California 90025
	 

	 	 	 	Attention: Bruce R. Greene, Esq.
	 

	 	 	 	Facsimile No.: (310) 820-8859
	 

	 	 	 	Telephone: (310) 820-8800
	 

	 	 	 	E-mail: bgreene@bakerlaw.com
	 
	 	 	 	 
	 

	 	To Seller:
	 	ESS Technology, Inc.
	 

	 	 	 	48401 Fremont Boulevard
	 

	 	 	 	Fremont, California
	 

	 	 	 	Attention: John Marsh, Chief Financial Officer
	 

	 	 	 	Facsimile No.: (510) 492-1511
	 

	 	 	 	Telephone: (510) 492-1173
	 

	 	 	 	E-mail: john.marsh@esstech.com

20

 

	 	 	 	 	 
	 

	 	with a copy to:
	 	Orrick, Herrington & Sutcliffe LLP
	 

	 	 	 	405 Howard Street
	 

	 	 	 	San Francisco, CA 94105-2669
	 

	 	 	 	Attention: Gary Louie
	 

	 	 	 	Facsimile No.: (415) 773-5759
	 

	 	 	 	Telephone: (415) 773-5586
	 

	 	 	 	E-mail: garylouie@orrick.com
	 
	 	 	 	 
	 

	 	 	 	Orrick, Herrington & Sutcliffe LLP
	 

	 	 	 	1000 Marsh Road
	 

	 	 	 	Menlo Park, CA 94025-1015
	 

	 	 	 	Attention: Lowell D. Ness
	 

	 	 	 	Facsimile No.: (650) 614-7401
	 

	 	 	 	Telephone: (650) 614-7455
	 

	 	 	 	E-mail: lness@orrick.com

or to such other address as either party may from time to time specify in writing to the other
party. Any notice or other communication sent as hereinabove provided shall be deemed effectively
given (a) on the date of delivery, if delivered in person; (b) on the date mailed if sent by
certified mail, postage prepaid, return receipt requested or by a commercial overnight courier; or
(c) on the date of transmission, if sent by facsimile with confirmation of receipt or if sent by
email (so long as a hard copy of such notice sent by email is also sent by a commercial overnight
delivery courier for next business day delivery or is delivered in person the next business day),
provided that the facsimile and email transmissions are made on a business day and prior to 5:00
p.m. local time of the recipient, and otherwise on the next business day. Such notices shall be
deemed received (a) on the date of delivery, if delivered by hand or overnight express delivery
service; (b) on the date indicated on the return receipt if mailed; or (c) on the date of
transmission, if sent by facsimile or email (so long as a hard copy of such notice sent by email is
received the next business day by overnight mail or hand delivery), provided that the facsimile and
email transmissions are received on a business day and prior to 5:00 p.m. local time of the
recipient, and otherwise on the next business day). If any notice mailed is properly addressed but
returned for any reason, such notice shall be deemed to be effective notice and to be given on the
date of mailing. Any notice sent by the attorney representing a party, shall qualify as notice
under this Agreement.

     Section 9.2 Entire Agreement.

     This Agreement, together with the Exhibits and schedules hereto, contains all representations,
warranties and covenants made by Buyer and Seller and constitutes the entire understanding between
the parties hereto with respect to the subject matter hereof. Any prior correspondence, memoranda
or agreements are replaced in total by this Agreement together with the Exhibits and schedules
hereto.

21

 

     Section 9.3 Entry and Indemnity.

     In connection with any entry by Buyer, or its agents, employees or contractors onto the
Property, Buyer shall give Seller reasonable advance notice of such entry and shall conduct such
entry and any inspections in connection therewith (a) during normal business hours, (b) so as to
minimize, to the greatest extent possible, interference with Seller’s business (c) in compliance
with all applicable laws, and (d) otherwise in a manner reasonably acceptable to Seller. Without
limiting the foregoing, prior to any entry to perform any on-site invasive testing, including but
not limited to any air sampling, borings, drillings or other samplings, Buyer shall give Seller
written notice thereof, including the identity of the company or persons who will perform such
testing and the proposed scope and methodology of the testing. Seller shall approve or disapprove,
in Seller’s sole discretion, the proposed testing within two (2) business days after receipt of
such notice. If Seller fails to respond within such two (2) business day period, Seller shall be
deemed to have disapproved the proposed testing. If Buyer or its agents, employees or contractors
take any sample from the Property in connection with any such approved testing, Buyer shall provide
to Seller a portion of such sample being tested to allow Seller, if it so chooses, to perform its
own testing. Buyer shall permit Seller or its representative to be present to observe any testing
or other inspection or due diligence review performed on or at the Property. Upon the request of
Seller, Buyer shall promptly deliver to Seller copies of any reports relating to any testing or
other inspection of the Property performed by Buyer or its agents, representatives, employees,
contractors or consultants. Notwithstanding anything to the contrary contained herein, Buyer shall
not contact any governmental authority (other than making routine requests for information for a
Phase I report or a zoning report) without first obtaining the prior written consent of Seller
thereto in Seller’s sole discretion, and Seller, at Seller’s election, shall be entitled to have a
representative participate in any telephone or other contact made by Buyer to a governmental
authority and present at any meeting by Buyer with a governmental authority. Buyer shall maintain,
and shall assure that its contractors maintain, public liability and property damage insurance in
amounts (but in no event less than One Million Dollars ($1,000,000) with respect to any liability
insurance) and in form and substance adequate to insure against all liability of Buyer and its
agents, employees or contractors, arising out of any entry or inspections of the Property pursuant
to the provisions hereof, and Buyer shall provide Seller with evidence of such insurance coverage
prior to any entry on the Property. Buyer shall indemnify and hold Seller harmless from and
against any costs, damages, liabilities, losses, expenses, liens or claims (including, without
limitation, court costs and reasonable attorneys’ fees and disbursements) arising out of or
relating to any entry on the Property by Buyer, its agents, employees or contractors in the course
of performing the inspections, testings or inquiries provided for in this Agreement, including,
without limitation, any release of Hazardous Materials or any damage to the Property; provided that
Buyer shall not be liable to Seller solely as a result of the discovery by Buyer of a pre-existing
condition on the Property to the extent the activities of Buyer, its agents, representatives,
employees, contractors or consultants do not exacerbate the condition. The provisions of this
Section 9.3 shall be in addition to any access or indemnity agreement previously executed by Buyer
in connection with the Property; provided that in the event of any inconsistency between this
Section 9.3 and such other agreement, the provisions of this Section 9.3 shall govern. The
foregoing indemnity shall survive beyond the Closing, or, if the sale is not consummated, beyond
the termination of this Agreement. Buyer’s right of entry, as provided in this Section 9.3, shall
continue up through the date of Closing.

22

 

     Section 9.4 Time.

     Time is of the essence in the performance of each of the parties’ respective obligations
contained herein. If the time period by which any right, option or election provided under this
Agreement must be exercised, or by which any act required hereunder must be performed, or by which
the Closing must be held, expires on a Saturday, Sunday or legal or bank holiday, then such time
period shall be automatically extended through the close of business on the next regularly
scheduled business day.

     Section 9.5 Attorneys’ Fees.

     If either party hereto fails to perform any of its obligations under this Agreement or if any
dispute arises between the parties hereto concerning the meaning or interpretation of any provision
of this Agreement, whether prior to or after Closing, or if any party defaults in payment of its
post-Closing financial obligations under this Agreement, then the defaulting party or the party not
prevailing in such dispute, as the case may be, shall pay any and all costs and expenses incurred
by the other party on account of such default and/or in enforcing or establishing its rights
hereunder, including, without limitation, court costs and reasonable attorneys’ fees and
disbursements.

     Section 9.6 Assignment.

     Buyer’s rights and obligations hereunder shall not be assignable without the prior written
consent of Seller in Seller’s sole discretion. Notwithstanding the foregoing, Buyer shall have the
right, without the necessity of obtaining Seller’s consent but with prior written notice to Seller,
to assign its right, title and interest in and to this Agreement to a related entity in which Buyer
has a direct or indirect ownership interest at any time before the Closing Date. Buyer shall in no
event be released from any of its obligations or liabilities hereunder in connection with any
assignment. Without limiting and notwithstanding the above, in no event shall Buyer have the right
to assign its rights or obligations hereunder to any party which could not make the representation
and warranty contained in subsection 3.5(e) above, and in connection with any assignment pursuant
to the terms hereof, the assignee shall reconfirm in a written instrument acceptable to Seller and
delivered to Seller prior to the effective date of the assignment said representation and warranty
as applied to the assignee and that all other terms and conditions of this Agreement shall apply to
such assignee. Subject to the provisions of this Section, this Agreement shall inure to the
benefit of and be binding upon the parties hereto and their respective successors and assigns.

     Section 9.7 Counterparts.

     This Agreement may be executed in two or more counterparts, each of which shall be deemed an
original, but all of which taken together shall constitute one and the same instrument.

     Section 9.8 Governing Law.

     This Agreement shall be governed by and construed in accordance with the laws of the State in
which the Real Property is located.

23

 

     Section 9.9 Confidentiality and Return of Documents.

     Buyer and Seller shall each maintain as confidential any and all material obtained about the
other or, in the case of Buyer, about the Property, this Agreement or the transactions contemplated
hereby, and shall not disclose such information to any third party. Except as may be required by
law, Buyer will not divulge any such information to other persons or entities including, without
limitation, appraisers, real estate brokers, or competitors of Seller. Notwithstanding the
foregoing, Buyer shall have the right to disclose information with respect to the Property to its
officers, directors, employees, attorneys, accountants, environmental auditors, engineers,
potential lenders, and permitted assignees under this Agreement and other consultants to the extent
necessary for Buyer to evaluate its acquisition of the Property provided that all such persons are
told that such information is confidential and agree (in writing for any third party engineers,
environmental auditors or other consultants) to keep such information confidential. If Buyer
acquires the Property from Seller, Buyer or Seller shall have the right, subsequent to the Closing
of such acquisition, to publicize the transaction in whatever manner it deems appropriate.
Notwithstanding anything to the contrary contained herein, Buyer acknowledges that Seller may
publicize the transaction and its terms in connection with applicable laws relating to disclosure
and reporting requirements. The provisions of this paragraph shall survive the Closing or any
termination of this Agreement. In the event the transaction contemplated by this Agreement does not
close as provided herein, upon the request of Seller, Buyer shall promptly return to Seller all Due
Diligence Materials and other documents and copies obtained by Buyer in connection with the
purchase of the Property hereunder.

     Section 9.10 Interpretation of Agreement.

     The article, section and other headings of this Agreement are for convenience of reference
only and shall not be construed to affect the meaning of any provision contained herein. Where the
context so requires, the use of the singular shall include the plural and vice versa and the use of
the masculine shall include the feminine and the neuter. The term “person” shall include any
individual, partnership, joint venture, corporation, trust, unincorporated association, any other
entity and any government or any department or agency thereof, whether acting in an individual,
fiduciary or other capacity.

     Section 9.11 Intentionally Deleted.

     Section 9.12 Amendments.

     This Agreement may be amended or modified only by a written instrument signed by Buyer and
Seller.

     Section 9.13 No Recording.

     Neither this Agreement or any memorandum or short form thereof may be recorded by Buyer.

24

 

     Section 9.14 Drafts Not an Offer to Enter Into a Legally Binding Contract.

     The parties hereto agree that the submission of a draft of this Agreement by one party to
another is not intended by either party to be an offer to enter into a legally binding contract
with respect to the purchase and sale of the Property. The parties shall be legally bound with
respect to the purchase and sale of the Property pursuant to the terms of this Agreement only if
and when the parties have been able to negotiate all of the terms and provisions of this Agreement
in a manner acceptable to each of the parties in their respective sole discretion, and both Seller
and Buyer have fully executed and delivered to each other a counterpart of this Agreement (or a
copy by facsimile or email transmission) (the “Effective Date”).

     Section 9.15 No Partnership.

     The relationship of the parties hereto is solely that of Seller and Buyer with respect to the
Property and no joint venture or other partnership exists between the parties hereto. Neither
party has any fiduciary relationship hereunder to the other.

     Section 9.16 No Third Party Beneficiary.

     The provisions of this Agreement are not intended to benefit any third parties.

     Section 9.17 Seller’s Conditions Precedent.

     Seller’s obligation to sell the Property to Buyer shall be conditioned on the approval of
Seller’s board of directors in its sole discretion of this Agreement and the transactions
contemplated hereby on or before a date that is ten (10) days after the Effective Date. If the
board of directors does not approve this Agreement and the transactions contemplated hereby on or
before the date provided above, then this Agreement shall terminate, the Deposit shall be
immediately returned to Buyer and neither party shall have any further rights or obligations
hereunder except as provided in Sections 6.1, 9.3 and 9.9. Seller shall notify Buyer in writing as
to whether the investment committee has approved or disapproved this Agreement and the transactions
contemplated hereby, such date being referred to herein as the “Seller Board Approval Date”.

     Section 9.18 Limitation on Liability.

     Notwithstanding anything to the contrary contained herein: (a) the maximum aggregate liability
of Seller, and the maximum aggregate amount which may be awarded to and collected by Buyer
(including, without limitation, for any breach of any representation, warranty and/or covenant by
Seller) in connection with the Property and/or the sale thereof to Buyer including, without
limitation, under this Agreement or any documents executed pursuant hereto or in connection
herewith, including, without limitation, the Deed and the Assignment of Contracts (collectively,
the “Other Documents”, shall under no circumstances whatsoever exceed One Million Five Hundred
Thousand Dollars ($1,500,000); and (b) no claim by Buyer alleging a breach by Seller of any
representation, warranty and/or covenant of Seller contained herein or in any of the Other
Documents may be made, and Seller shall not be liable for any judgment in any action based upon any
such claim, unless and until such claim, either alone or together with any other claims by Buyer
alleging a breach by Seller of any such representation, warranty and/or

25

 

covenant is for an aggregate amount in excess of Twenty-Five Thousand Dollars ($25,000) (the “Floor
Amount”), in which event Seller’s liability respecting any final judgment concerning such claim or
claims shall be for the entire amount thereof, subject to the limitation set forth in clause (a)
above; provided, however, that if any such final judgment is for an amount that is less than or
equal to the Floor Amount, then Seller shall have no liability with respect thereto.
Notwithstanding anything to the contrary contained in this Agreement, the obligations of Seller
under this Agreement and under all of the Other Documents are intended to be binding only on
Seller, and will not be personally binding upon, nor shall any resort be had to, the private
properties of any Seller Related Parties.

     Section 9.19 Lease-Back Agreement.

     During the Contingency Period, Seller and Buyer shall negotiate in good faith towards a
commercially reasonable lease on terms and conditions mutually acceptable to both parties (the
“Lease”) in which Seller will lease from Buyer (i) approximately 46,800 square feet on the ground
floor of the 48401 Fremont Boulevard building (the “Seller Lease Back Space”) and (ii)
approximately 8,000 square feet on the second floor of the 48461 Fremont Boulevard building (the
“SIS Space”) . The Lease will be a triple net lease, the term of which shall be for a period of six
(6) months with respect to the Seller Lease Back Space and a period of one (1) month with respect
to the SIS Space, commencing immediately upon the close of escrow. Base rent will be $0.80 per
square foot, and Seller, as tenant, shall be responsible for its pro-rata share of operating
expenses (including a management fee not to exceed 3% of the base rent). The Lease will be in the
standard current AIREA form for multi-tenant, net commercial leases,
attached hereto as Exhibit F,
with no changes to the attached form except as Buyer and Seller may mutually agree.

     Section 9.20 Survival.

     Except as expressly set forth to the contrary herein, no representations, warranties,
covenants or agreements of Seller contained herein shall survive the Closing.

     Section 9.21 Financing.

     The obtaining of financing by Buyer is not a condition precedent to the obligation of Buyer to
purchase the Property. However, if Buyer elects to obtain such financing, Seller agrees to
reasonably cooperate with Buyer and Buyer’s lender in all reasonable respects, provided that there
is no out-of-pocket expense to Seller, and that the Closing is not delayed. Without limiting the
generality of the foregoing, Seller acknowledges that such cooperation may include (i) allowing
additional inspections and investigations of the Project by such lender’s representatives, so long
as lender’s representatives comply with the terms, conditions and obligations set forth in Section
9.3 of this Agreement to which Buyer is subject, and (ii) providing such lender with a customary
estoppel certificate with respect to the Lease and/or subordination, non-disturbance and attornment
agreement with respect to the Lease that are reasonably acceptable to Seller.

     Section 9.22 Survival of Article IX.

     The provisions of this Article IX shall survive the Closing.

26

 

[signature page follows]

27

 

     The parties hereto have executed this Agreement as of the date set forth in the first
paragraph of this Agreement.

	 	 	 	 	 	 	 	 	 
	 	 	Seller:	 	ESS TECHNOLOGY, INC., 

a California corporation	 	 
	 
	 	 	 	 	 	 	 	 
	 

	 	 	 	By:
	 	/s/Robert. L. Blair
 

	 	 
	 
	 

	 	 	 	Its:
	 	CEO
 

	 	 
	 
	 

	 	 	 	By:	 	 	 	 
	 

	 	 	 	 	 	 

	 	 
	 

	 	 	 	Its:	 	 	 	 
	 

	 	 	 	 	 	 

	 	 
	 
	 	 	 	 	 	 	 	 
	 	 	Buyer:	 	TC FUND PROPERTY ACQUISITIONS, INC.,	 	 
	 	 	 	 	a Delaware corporation	 	 
	 
	 	 	 	 	 	 	 	 
	 
	 

	 	 	 	By:
	 	/s/Nathan Bialkowski
 

	 	 
	 
	 

	 	 	 	Its:
	 	Vice President
 

	 	 
	 
	 

	 	 	 	By:	 	 	 	 
	 

	 	 	 	 	 	 

	 	 
	 

	 	 	 	Its:	 	 	 	 
	 

	 	 	 	 	 	 

	 	 

28

 

LIST OF EXHIBITS AND SCHEDULES

Exhibits

Exhibit A      Real Property Description

Exhibit B      Form of Promissory Note

Exhibit C      Deed

Exhibit D      Assignment of Contracts

Exhibit E      List of Service Contracts

Exhibit F      AIREA Lease Form

Schedules

Schedule 1      Disclosure Items

Schedule 2      Seller Delivery Materials

 

 

Exhibit A

Real Property Description

 

 

Exhibit “A”

Legal Description

Real property in the City of Fremont, County of Alameda, State of California, described as follows:

BEING PORTIONS OF THOSE CERTAIN PARCELS OF LAND DESCRIBED AS LOTS 1 AND 2 IN THE LOT LINE
ADJUSTMENT NO. 99-2 RECORDED FEBRUARY 10, 1999 AS SERIES NUMBER 99-062151, ALAMEDA COUNTY RECORDS,
MORE PARTICULARLY DESCRIBED AS FOLLOWS:

COMMENCING AT THE NORTHERLY CORNER OF SAID LOT 1, SAID CORNER BEING A POINT ON THE SOUTHWESTERLY
LINE OF FREMONT BOULEVARD AS SAID BOULEVARD IS SHOWN ON THE MAP OF TRACT 5187 FILED JUNE 11, 1984
IN BOOK 145 OF MAPS AT PAGES 6 THROUGH 16, ALAMEDA COUNTY RECORDS;

THENCE ALONG SAID SOUTHWESTERLY LINE, SOUTHEASTERLY ALONG THE ARC OF AN 844.00 FOOT RADIUS CURVE TO
THE LEFT, THE CENTER OF WHICH CURVE BEARS NORTH 39°56’49” EAST, THROUGH A CENTRAL ANGLE OF
1°46’16”, AN ARC DISTANCE OF 26.09 FEET;

THENCE CONTINUING ALONG SAID SOUTHWESTERLY LINE, SOUTH 51°49’27” EAST, 318.83 FEET TO THE TRUE
POINT OF BEGINNING OF THIS DESCRIPTION;

THENCE LEAVING SAID LINE, SOUTH 38°10’33” WEST, 307.51 FEET;

THENCE NORTH 51°49’27” WEST, 76.00 FEET;

THENCE SOUTH 38°10’33” WEST, 310.38 FEET TO THE SOUTHWESTERLY LINE OF SAID LOT 1;

THENCE ALONG SAID SOUTHWESTERLY LINE OF LOT 1 AND ALONG THE SOUTHWESTERLY LINE OF SAID LOT 2, THE
FOLLOWING EIGHT COURSES:

1.) SOUTH 45°00’00” EAST, 1.37 FEET;

2.) SOUTH 48°21’59” EAST, 64.75 FEET;

3.) SOUTH 57°59’41” EAST, 102.61 FEET;

4.) SOUTH 71°57’57” EAST, 228.03 FEET;

5.) SOUTH 63°26’06” EAST, 92.12 FEET;

6.) SOUTH 47°43’35” EAST, 63.15 FEET;

7.) SOUTH 31°36’27” EAST, 68.20 FEET; AND

8.) SOUTH 24°34’02” EAST, 198.07 FEET TO THE SOUTHERLY CORNER OF SAID LOT 2;

THENCE ALONG THE SOUTHEASTERLY LINE OF SAID LOT 2, NORTH 67°44’40” EAST, 614.20 FEET TO THE
EASTERLY CORNER OF SAID LOT 2, SAID CORNER BEING A POINT ON THE AFOREMENTIONED SOUTHWESTERLY LINE
OF FREMONT BOULEVARD;

THENCE ALONG SAID SOUTHWESTERLY LINE, THE FOLLOWING TWO COURSES;

1.) NORTHWESTERLY ALONG THE ARC OF A 756.00 FOOT RADIUS, NON-TANGENT CURVE TO THE LEFT, THE CENTER
OF WHICH CURVE BEARS SOUTH 67°44’40” WEST, THROUGH A CENTRAL ANGLE OF 29°34’07”, AN ARC DISTANCE OF
390.15 FEET; AND

 

 

2.) NORTH 51°49’27” WEST, 629.42 FEET TO THE TRUE POINT OF BEGINNING.

APN: 519-1694-015-04

A-1

 

Exhibit B

Form of Promissory Note

B-1

 

PROMISSORY NOTE

			
	 	 	 
	$200,000
	 	October___,2007          

     FOR VALUE RECEIVED, the undersigned, TC FUND PROPERTY ACQUISITIONS, INC., a Delaware corporation
(“Maker”) whose address is c/o Trammell Crow Company, 2001 Ross Avenue, Suite 3400, Dallas, Texas
75201, Attention: J.D. Dell, Esq., promises to pay to the order of ESS TECHNOLOGY, INC., a
California corporation (“Payee”), on demand, the principal sum of Two Hundred Thousand Dollars
($200,000). This Note shall not bear interest until five days (5) days after written demand is made
at the address set forth above, and if this Note is not paid within such five (5) day period, it
will bear interest from that date at the rate of ten percent (10%) per annum. Interest shall be
computed on the basis of a three hundred sixty-five (365) day year and the actual number of days
elapsed.

     Payable in lawful money of the United States. If action is instituted on this Note, Maker agrees to
pay Payee’s reasonable attorneys’ fees and costs incurred in connection with the collection hereof.

     This Note constitutes the “Promissory Note” described in that certain Agreement of Purchase and
Sale dated October 26, 2007 executed by Maker and Payee regarding certain real property situated in
Fremont, California, as more particularly described therein (the “Agreement”).

     Maker and all guarantors and endorsers of this Note hereby severally waive presentment, demand,
protest, notice of dishonor and all other notices, except as expressly provided herein or in the
Agreement.

     The holder hereof shall not be deemed, by any act or omission, to have waived any of its rights or
remedies hereunder unless such waiver is in writing and signed by such holder and then only to the
extent specifically set forth in such writing. A waiver with reference to one event shall not be
construed as continuing or as a bar to or waiver of any right or remedy as to a subsequent event.
No delay or omission of the holder hereof to exercise any right, whether before or after a default
hereunder, shall impair any such right or shall be construed to be a waiver of any right or
default, and the acceptance at any time by the holder hereof of any past-due amount shall not be
deemed to be a waiver of the right to require prompt payment when due of any other amounts then or
thereafter due and payable.

     Nothing contained in this Note shall be deemed to require the payment of interest or other charges
by the undersigned in excess of the amount which the holder hereof may lawfully charge under the
applicable usury laws. In the event that the holder hereof shall collect monies which are deemed to
constitute interest which would increase the effective interest rate to a rate in excess of that
permitted to be charged by applicable law, all such sums deemed to constitute interest in excess of
the legal rate shall, upon such determination, at the option of the holder hereof, be returned to
the undersigned or credited against the principal balance of this Note then outstanding.

 

 

     Time is of the essence hereof. Upon any default hereunder, the holder hereof may exercise all
rights and remedies provided for herein and in the Agreement and by law, including, but not limited
to, the right to immediate payment in full of this Note.

     The remedies of the holder hereof as provided herein or in the Agreement, or any one or more of
them, or in law or in equity, shall be cumulative and concurrent, and may be pursued singularly,
successively, or together at the sole discretion of the holder hereof, and may be exercised as
often as occasion therefor shall occur; and the failure to exercise any such right or remedy shall
in no event be construed as a waiver or a release thereof.

     This Note shall be construed in accordance with and governed by the laws of the State of
California.

	 	 	 	 	 	 	 
	 	 	TC FUND PROPERTY ACQUISITIONS, INC.,

 a Delaware corporation	 	 
	 
	 	 	 	 	 	 
	 

	 	By	 	 	 	 
	 

	 	 	 	 	 	 
	 

	 	Its	 	 	 	 
	 

	 	 	 	 	 	 

 

 

Exhibit C

Form of Deed

	 	 	 	 	 	 	 	 
	RECORDING REQUESTED BY AND 

WHEN RECORDED RETURN IT TO:	 	 	 
	 
	 	 	 	 	 	 	 
	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 
	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 
	 	 	 	 	 	 
	Attention:
	 	 	 	 	 	 	 
	 

	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 
	MAIL ALL TAX STATEMENTS TO:	 	 	 
	 
	 	 	 	 	 	 	 
	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 
	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 
	 	 	 	 	 	 
	Attention:
	 	 	 	 	 	 	 
	 

	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 
	 	 	 	 
	 
	 	 	 	 	 	 	 
	APNs:                                             	 	 	 	 	      SPACE ABOVE THIS LINE FOR RECORDER’S USE

The undersigned Grantor declares:

Documentary Transfer Tax not shown

Pursuant to Section 11932 of the

Revenue and Taxation Code, as amended.

GRANT DEED

    
 FOR VALUABLE CONSIDERATION, receipt of which is hereby acknowledged,
              
              
              
               
   , a           
          
              
              
            
(“Grantor”), hereby grants to          
              
               
              
        , a       
               
                
                       (“Grantee”), the real
property and all improvements thereon located in the County of      
               ,
State of California, described on Exhibit A attached hereto and made a part
hereof (the “Property”), subject to the exceptions to title described on Exhibit B attached hereto and made a part hereof.

[Grantor signature page follows]

C1-1

 

Executed
as of this ___ day of                                         , 2007.

Grantor:                      [ADD APPROPRIATE SIG BLOCK]

C1-2

 

	 	 	 	 	 
	STATE OF CALIFORNIA	 	 ) 
	 

	 	 	 	 )       ss.
	COUNTY OF

	 	 	 	 ) 
	 

	 	 	 	 

    
 On              
              
             
___, 2007, before me,           
               
               ,
a notary public for the State of California, personally appeared     
              
             
         , personally known to
me (or proved to me on the basis of satisfactory evidence) to be the person whose name is
subscribed to the within instrument and acknowledged to me that he/she executed the same in his/her
authorized capacity, and that by his/her signature on the instrument the person, or the entity on
behalf of which the person acted, executed the instrument.

     Witness my hand and official seal.

	 	 	 	 	 
	 

	 	 	 	 
	 

	 	Signature of the Notary
	 	 

[SEAL]

C1-3

 

Exhibit A 

Real Property Legal Description

[See Attached]

C1-4

 

Exhibit B

Exceptions to Title

     (1) Interests of occupant in possession of the Property pursuant to that certain Transition
Services Agreement dated January 1, 2007, by and between such occupant and Grantor;

     (2) Matters created by or with the written consent of Grantee;

     (3) Non-delinquent liens for real estate taxes and assessments; and

     (4) Any matters affecting the Property and shown on or referred to on that certain
preliminary title report issued by LandAmerica Commercial Services
dated                     , 2007, or any
updates thereto, and any other exceptions to title to the Property disclosed by the public records
or which would be disclosed by an inspection and/or survey of the Property.

C1-5

 

DO NOT RECORD

                                        
___, 2007

                                        
County Recorder

     Re:       Request That Statement Of Documentary Transfer Tax Not Be Recorded 

Dear Sir or Madam:

     Request is hereby made in accordance with Section 11932 of the California Revenue and Taxation Code
that this statement of tax due not be recorded with the attached deed but be affixed to the deed
after recordation and before return as directed on the deed.

     The
attached deed names             
               
               
                
  , a             
              
               
                
   ,as Grantor, and 
               
              
              
        , a       
               
               
              
          , as Grantee.

     The property being transferred and described in the attached deed is located in the County
of                                         , State of California.

     The
amount of Documentary Transfer Tax due on the attached deed is $      
              
              
       , computed on full value of the property conveyed.

[Grantor signature page follows]

C-1

 

     Grantor:                                          [ADD APPROPRIATE SIG BLOCK]

C1-2

 

Exhibit D

Assignment of Service Contracts, 

Warranties and Other Intangible Property

     This Assignment of Service Contracts, Warranties and Other Intangible Property (this “Assignment”)
is made and entered into            
         ,
20     , by and between
           
             
            
    (“Assignor”),
           
            
             
            
               
                 (“Assignee”).

     For good and valuable consideration paid by Assignee to Assignor, the receipt and sufficiency of
which are hereby acknowledged, Assignor does hereby assign, transfer, set over and deliver unto
Assignee all of Assignor’s right, title, and interest in and to the following (collectively, the
“Assigned Items”): (i) those certain service contracts (the “Service Contracts”) listed on
Exhibit A, if any, attached hereto and made a part hereof for all purposes, and (ii) to the
extent assignable, those certain warranties held by Assignor (the “Warranties”) listed on
Exhibit B, if any, attached hereto and made a part hereof for all purposes, and (iv) all
zoning, use, occupancy and operating permits, and other permits, licenses, approvals and
certificates, maps, plans, specifications, and all other Intangible Personal Property (as defined
in the Agreement) owned by Assignor and used exclusively in the use or operation of the Real
Property and Personal Property (each as defined in the Agreement), including, without limitation,
any trade names used exclusively in connection with the Real Property (but excluding the names “ESS
Technology” and any derivatives thereof) and any utility contracts or other agreements or rights
relating to the use and operation of the Real Property and Personal Property but excluding the
Transition Services Agreement (as defined in the Agreement) (collectively, the “Other Intangible
Property”). Notwithstanding anything to the contrary contained herein, there shall be excluded from
the assignment of any rights of Assignor under any Service Contracts, Warranties or Other
Intangible Property any rights of Assignor against third parties, including, without limitation,
tenants, with respect to the period prior to the date hereof.

     This Assignment is made subject, subordinate and inferior to the easements, covenants and other
matters and exceptions set forth on Exhibit C, if any, attached hereto and made a part
hereof for all purposes.

     
Assignee acknowledges and agrees, by its acceptance hereof, that, except as expressly provided
in, and subject to the limitations contained in, that certain Agreement of Purchase and Sale, dated
as of October___, 2007, by and between Assignor and Assignee (the “Agreement”), the
assigned items are conveyed “as is, where is” and in their present condition with all
faults, and that except as set forth in the Agreement, assignor has not made, does not make and
specifically disclaims any representations, warranties, promises, covenants, agreements or
guaranties of any kind or character 
whatsoever, whether express or implied, oral or written, past, present or future, of, as to,
concerning or with respect to the nature, quality or condition of the assigned items, the income to
be derived therefrom, or the enforceability, merchantability or fitness for any particular purpose
of the assigned items.

D-1 

 

     Except as otherwise expressly provided in Article VII of the Agreement, by accepting this
Assignment and by its execution hereof, Assignee assumes the payment and performance of, and agrees
to pay, perform and discharge, all the debts, duties and obligations to be paid, performed or
discharged from and after the Closing Date (as defined in the Agreement) by the owner under the
Service Contracts, the Warranties and/or the Other Intangible Property. Assignee agrees to
indemnify, hold harmless and defend Assignor from and against any and all claims, losses,
liabilities, damages, costs and expenses (including, without limitation, court costs and reasonable
attorneys’ fees and disbursements) resulting by reason of the failure of Assignee to pay, perform
or discharge any of the debts, duties or obligations assumed or agreed to be assumed by Assignee
hereunder arising out of or relating to, directly or indirectly, in whole or in part, the Assigned
Items, from and after the Closing Date. Assignor agrees to indemnify, hold harmless and defend
Assignee from and against any and all claims, losses, liabilities, damages, costs and expenses
(including, without limitation, court costs and reasonable attorneys’ fees and disbursements)
resulting by reason of the failure of Assignor to pay, perform or discharge any of the debts,
duties or obligations hereunder arising out of or relating to, directly or indirectly, in whole or
in part, the Assigned Items, prior to the Closing Date.

     All of the covenants, terms and conditions set forth herein shall be binding upon and shall inure
to the benefit of the parties hereto and their respective successors and assigns.

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

[signature page follows]

D-2 

 

     IN WITNESS WHEREOF, Assignor and Assignee have caused this Assignment to be executed on the day and
year first above written.

	 	 	 	 	 	 	 	 
	 

	 	Assignor:	                    	 	 	 	,
	 

	 	 	 	 
	 
	 

	 	 	 	a	 	 
	 

	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	 

	 	 	 	By:	 	 
	 

	 	 	 	 	 	 
	 

	 	 	 	Its:	 	 
	 
	 

	 	 	 		 	By:

	 
	 

	 	 	 		 	Its: 

	 
	 
	 

	 	Assignee:	 	 	 	 	,
	 

	 	 	 	 
	 
	 

	 	 	 	a	 	 
	 

	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	 

	 	 	 	By:	 	 
	 

	 	 	 	 	 	 
	 

	 	 	 	Its:	 	 
	 

	 	 	 	 	 	 
	 
	 

	 	 	 		 	By:

	 
	 

	 	 	 		 	Its: 

D-3 

 

Exhibit 
E 

List of Service Contracts

E-1 

 

Exhibit F

AIREA Lease Form

F-1 

 

Schedule 1

Disclosure Items

     Natural hazards described in the following California code sections (the “Natural Hazard Laws”) may
affect the Property: (A) Govt. Code Section 8589.3 (Special Flood Hazard Area); (B) Govt. Code
Section 8589.4 (Inundation Area); (C) Govt. Code Section 51183.5 (Fire Hazard Severity Zone); (D)
Public Resource Code Section 2621.9 (Earthquake Fault Zone); (E) Public Resource Code Section 2694
(Seismic Hazard Zone); and (F) Public Resource Code Section 4136 (Wildland Area). Seller’s Broker
shall execute and deliver to Buyer a Natural Hazards Disclosure Statement with respect to the
foregoing matters (the “Natural Hazards Disclosure Statement”). Buyer acknowledges and agrees that
Buyer will independently evaluate and investigate whether any or all of such Natural Hazards affect
the Property, and Seller shall have no liabilities or obligations with respect thereto. Prior to
the expiration of the Contingency Period, Buyer shall execute and deliver to Seller the Natural
Hazards Disclosure Statement. BUYER ACKNOWLEDGES AND REPRESENTS THAT BUYER HAS EXTENSIVE EXPERIENCE
ACQUIRING AND CONDUCTING DUE DILIGENCE REGARDING COMMERCIAL PROPERTIES. THIS PROVISION IS AN
ESSENTIAL ASPECT OF THE BARGAIN BETWEEN THE PARTIES.

     Pursuant to California Health & Safety Code Section 25359.7, which requires sellers of commercial
real estate to disclose the known existence of hazardous substances that have come to be located on
or beneath any real property being sold or transferred, Seller hereby discloses that the Property
may contain Hazardous Materials, including, without limitation, asbestos, as described or referred
to in the Environmental Reports. Buyer acknowledges and agrees that, in providing or making
available such Environmental Reports, Seller has satisfied its obligations of disclosure, to the
extent required by California Health & Safety Code Section 25359.7, and that no representation is
being made or given by Seller regarding the presence or absence of any environmental matters or
conditions on or affecting the Property.

     Additional Disclosure Items

     1. The adjacent property is a protected habitat for a mouse.

     2. Approximately
ten (10) years ago, there was a burrowing owl on the Property. Seller and the California Fish and Game Commission entered into a mitigation agreement at that time
and the owl was removed from the Property.

S1-1 

 

Schedule 2 

Seller Delivery Materials

	A.	 	Property Information

	 	•	 	Aerials
	 
	 	•	 	Plat Maps

	B.	 	Title Information

	 	•	 	Preliminary Title Report
	 
	 	•	 	Tax Roll
	 
	 	•	 	Grant of Easement
	 
	 	•	 	Tract Maps
	 
	 	•	 	Lot Line Adjustment
	 
	 	•	 	Bayside Business Park CC&Rs

	C.	 	Reports & Repairs

	 	•	 	JCP (dated July 13, 2007)
	 
	 	•	 	PowerLight Solar System Permit Pkg (dated March 22, 2005)
	 
	 	•	 	Generator Specs & Test Report (dated June 25,1996)
	 
	 	•	 	Geotechnical Investigation (dated September 10,1995)
	 
	 	•	 	Hazardous Materials Statement (dated February 21, 2007)

	D.	 	Site & Floor Plans

	E.	 	Zoning Ordinance

S2-1exv10w9

 

Exhibit 10.9

GUARANTY

     THIS GUARANTY (this “Guaranty”), dated as of November 1, 2007, is made by the undersigned
(individually, a “Guarantor” and collectively, the “Guarantors”), in favor of ROYAL BANK OF CANADA,
as administrative agent for the Lenders (as defined below).

WITNESSETH:

     WHEREAS, pursuant to that certain Amended and Restated Credit Agreement dated November 1, 2007
(as the same may hereafter be amended, supplemented and restated, the “Credit Agreement”), among
Quest Midstream Partners, L.P., a Delaware limited partnership (“MLP”) and Bluestem Pipeline, LLC,
a Delaware limited liability company (“Bluestem” and together with MLP, collectively, the
“Borrowers”), the various financial institutions that are, or may from time to time become, parties
thereto (individually a “Lender” and collectively the “Lenders”) and Royal Bank of Canada, as
administrative agent and collateral agent (in its capacity as administrative agent, the
“Administrative Agent”), the Lenders have agreed to make Credit Extensions for the account of the
Borrowers; and

     WHEREAS, as a condition precedent to the making of Credit Extensions under and as defined in
the Credit Agreement, each Guarantor is required to execute and deliver this Guaranty; and

     WHEREAS, each Guarantor has duly authorized the execution, delivery and performance of this
Guaranty; and

     WHEREAS, each Guarantor is a wholly owned direct or indirect subsidiary of the Borrowers; and

     WHEREAS, it is in the best interests of each Guarantor to execute this Guaranty inasmuch as
each Guarantor will derive substantial direct and indirect benefits from the extensions of credit
made from time to time to or for the account of the Borrowers.

     NOW THEREFORE, for good and valuable consideration, the receipt of which is hereby
acknowledged, and in order to induce the Lenders to make Credit Extensions to the Borrower pursuant
to the Credit Agreement by fulfilling the requirements of the Credit Agreement, the Guarantor
agrees, for the benefit of each Lender, as follows:

ARTICLE I

DEFINITIONS

     SECTION 1.1 Certain Terms. The following capitalized terms when used in this Guaranty,
including its preamble and recitals, shall have the following meanings (such definitions to be
equally applicable to the singular and plural forms thereof):

     “Administrative Agent” is defined in the first recital.

     “Borrowers” is defined in the first recital.

     “Commitments” means each Commitment as defined in the Credit Agreement.

     “Credit Extensions” means each Credit Extension as defined in the Credit Agreement.

					
	 	 	 	 	 
	 
	 	Page 1
	 	Guaranty

 

 

     “Guarantor” and “Guarantors” is defined in the preamble.

     “Guaranty” is defined in the preamble.

     “Lenders” is defined in the first recital.

     “Loan Documents” means the Loan Documents as defined in the Credit Agreement.

     “Note” means each Revolving Note as defined in the Credit Agreement.

     “Obligations” means the Obligations as defined in the Credit Agreement.

     “Obligor” means the Borrower or any other Person (other than the Administrative Agent or any
Lender) obligated under any Loan Document.

     “Required Lenders” means the Required Lenders as defined in the Credit Agreement.

     “Taxes” is defined in clause (a) of Section 2. 7.

     “UCC” means the Uniform Commercial Code as in effect in the State of New York.

     SECTION 1.2 Credit Agreement Definitions. Unless otherwise defined herein or the
context otherwise requires, capitalized terms used in this Guaranty, including its preamble and
recitals, have the meanings provided in the Credit Agreement,

     SECTION 1.3 UCC Definitions. Unless otherwise defined herein or the context otherwise
requires, terms for which meanings are provided in the UCC are used in this Guaranty, including its
preamble and recitals, with such meanings.

ARTICLE II

GUARANTY PROVISIONS

     SECTION 2.1 Guaranty. Each Guarantor hereby absolutely, unconditionally, and
irrevocably (1) guarantees the full and punctual payment when due, whether at stated maturity, by
required prepayment, declaration, acceleration, demand or otherwise, of all Obligations of the
Borrowers and each other Obligor now or hereafter existing under each of the Credit Agreement, the
Notes and each other Loan Document to which the Borrowers or such other Obligor is or may become a
party, whether for principal, interest, fees, expenses or otherwise (including all such amounts
which would become due but for the operation of the automatic stay under Section 362(a) of the
United States Bankruptcy Code, 11 U.S.C. §362(a), and the operation of Sections 502(b) and 506(b)
of the United States Bankruptcy Code, 11 U.S.C. §502(b) and §506(b)), and (2) indemnifies and holds
harmless each Lender and each holder of a Note for any and all costs and expenses (including
reasonable attorney’s fees and expenses) incurred by such Lender or such holder, as the case may
be, in enforcing any rights under this Guaranty; provided however, that each Guarantor shall be
liable under this Guaranty for the maximum amount of such liability that can be hereby incurred
without rendering this Guaranty, as it relates to such Guarantor, voidable under applicable law
relating to fraudulent conveyance or fraudulent transfer, and not for any greater amount. This Guaranty constitutes a guaranty of payment when due and not of
collection, and each Guarantor specifically agrees that it shall not be necessary or required that
any Lender or any holder of any Note exercise any right, assert any claim or demand or enforce any
remedy whatsoever against the

					
	 	 	 	 	 
	 
	 	Page 2
	 	Guaranty

 

 

Borrowers or any other Obligor (or any other Person) before or as a
condition to the obligations of such Guarantor hereunder.

     SECTION 2.2 Acceleration of Guaranty. Each Guarantor agrees that, in the event of the
occurrence of any event of the type described in Section 8.01(f) of the Credit Agreement, with
respect to the Borrowers, any other Obligor or any other Guarantor, and if such event shall occur
at a time when any of the Obligations may not then be due and payable, such Guarantor will pay to
the Lenders forthwith the full amount which would be payable hereunder by such Guarantor if all
such Obligations were then due and payable.

     SECTION 2.3 Guaranty Absolute, etc. This Guaranty shall in all respects be a
continuing, absolute, unconditional and irrevocable guaranty of payment, and shall remain in full
force and effect until all Obligations (other than contingent indemnity obligations) of the
Borrowers and each other Obligor have been paid in full (or, in the case of L/C Obligations, Cash
Collateralized), all obligations of the Guarantors hereunder shall have been paid in full, all
Commitments shall have terminated and, except as provided in Section 10.01(e) of the Credit
Agreement, all Lender Hedging Agreements have terminated. No Guarantor may rescind or revoke its
obligations hereunder. Each Guarantor guarantees that the Obligations of the Borrowers and each
other Obligor will be paid strictly in accordance with the terms of the Credit Agreement and each
other Loan Document under which they arise, regardless of any law, regulation or order now or
hereafter in effect in any jurisdiction affecting any of such terms or the rights of any Lender or
any holder of any Note with respect thereto. The liability of each Guarantor under this Guaranty
shall be absolute, unconditional and irrevocable irrespective of: (1) any lack of validity,
legality or enforceability of the Credit Agreement, any Note or any other Loan Document; (2) the
failure of any Lender or any holder of any Note (a) to assert any claim or demand or to enforce any
right or remedy against the Borrower, any other Obligor or any other Person (including any other
guarantor) under the provisions of the Credit Agreement, any Note, any other Loan Document or
otherwise, or (b) to exercise any right or remedy against any other guarantor of, or collateral
securing, any Obligations of the Borrowers or any other Obligor; (3) any change in the time, manner
or place of payment of, or in any other term of, all or any of the Obligations of the Borrowers or
any other Obligor, or any other extension, compromise or renewal of any Obligations of the
Borrowers or any other Obligor; (4) any reduction, limitation, impairment or termination of any
Obligations of the Borrowers or any other Obligor for any reason, including any claim of waiver,
release, surrender, alteration or compromise, and shall not be subject to (and each Guarantor
hereby waives any right to or claim of) any defense or setoff, counterclaim, recoupment or
termination whatsoever by reason of the invalidity, illegality, nongenuineness, irregularity,
compromise, unenforceability of, or any other event or occurrence affecting, any Obligations of the
Borrowers, any other Obligor or otherwise; (5) any amendment to, rescission, waiver, or other
modification of, or any consent to departure from, any of the terms of the Credit Agreement, any
Note or any other Loan Document; (6) any addition, exchange, release, surrender or non-perfection
of any collateral, or any amendment to or waiver or release or addition of, or consent to departure
from, any other guaranty, held by any Lender or any holder of any Note securing any of the
Obligations of the Borrowers or any other Obligor; (7) the insolvency or bankruptcy of, or similar
event affecting, the Borrowers or any other Obligor; or (8) any other circumstance which might
otherwise constitute a defense available to, or a legal or equitable discharge of, the Borrowers,
any other Obligor, any surety or any guarantor. Each Guarantor waives all rights and defenses which
may arise with respect to any of the foregoing, and each Guarantor waives any right to revoke this
Guaranty with respect to future indebtedness.

     SECTION 2.4 Reinstatement. Each Guarantor agrees that this Guaranty shall continue to
be effective or be reinstated, as the case may be, if at any time any payment (in whole or in part)
of any of the Obligations is rescinded or must otherwise be restored by any Lender or any holder of
any Note, upon

					
	 	 	 	 	 
	 
	 	Page 3
	 	Guaranty

 

 

the insolvency, bankruptcy or reorganization of either Borrower, any other Obligor
or otherwise, all as though such payment had not been made.

     SECTION 2.5 Waiver, etc. The Guarantors hereby waive promptness, diligence, notice
of acceptance and any other notice with respect to any of the Obligations of the Borrowers or any
other Obligor and this Guaranty and any requirement that the Administrative Agent, any other Lender
or any holder of any Note protect, secure, perfect or insure any security interest or Lien, or any
property subject thereto, or exhaust any right or take any action against the Borrowers, any other
Obligor or any other Person (including any other guarantor) or entity or any collateral securing
the Obligations of the Borrowers or any other Obligor, as the case may be.

     SECTION 2.6 Waiver of Subrogation. Until the Obligations are paid in full, all
Commitments have terminated and all Lender Hedging Agreements have terminated (except as provided
in Section 10.01(e) of the Credit Agreement), the Guarantors shall not enforce or exercise any
claim or other rights which they may now or hereafter acquire against the Borrowers or any other
Obligor that arise from the existence, payment, performance or enforcement of any Guarantor’s
obligations under this Guaranty or any other Loan Document, including any right of subrogation,
reimbursement, exoneration, or indemnification, any right to participate in any claim or remedy of
the Lenders against the Borrowers or any other Obligor or any collateral which the Administrative
Agent now has or hereafter acquires, whether or not such claim, remedy or right arises in equity,
or under contract, statute or common law, including the right to take or receive from the Borrowers
or any other Obligor, directly or indirectly, in cash or other property or by set-off or in any
manner, payment or security on account of such claim or other rights. If any amount shall be paid
to any Guarantor in violation of the preceding sentence, such amount shall be deemed to have been
paid to such Guarantor for the benefit of, and held in trust for, the Lenders, and shall forthwith
be paid to the Administrative Agent for the benefit of the Lenders by the Guarantor receiving such
payment to be credited and applied upon the Obligations, whether matured or unmatured. Each
Guarantor acknowledges that it will receive direct and indirect benefits from the financing
arrangements contemplated by the Credit Agreement and that the waiver set forth in this Section is
knowingly made in contemplation of such benefits.

     SECTION 2.7 Payments Free and Clear of Taxes, etc. Each Guarantor hereby agrees
that:

     (a) All payments by such Guarantor hereunder shall be made in accordance with Section 3.01 of
the Credit Agreement free and clear of and without deduction for any and all present or future
taxes, duties, levies, imposts, deductions, assessments, fees, withholdings or similar charges, and
all liabilities with respect thereto; excluding, in the case of the Administrative Agent and each
Lender, taxes imposed on or measured by its net income (including any franchise taxes imposed on or
measured by its net income), by the jurisdiction (or any political subdivision thereof) under the
Laws of which the Administrative Agent or such Lender, as the case may be, is organized or
maintains its Lending Office (all such non-excluded taxes, duties, levies, imposts, deductions,
assessments, fees, withholdings or similar charges, and liabilities being hereinafter referred to
as “Taxes”). In the event that any withholding or deduction from any payment to be made by such
Guarantor hereunder is required in respect of any Taxes pursuant to any applicable law, rule or
regulation, then such Guarantor will (i) pay directly to the relevant authority the full amount
required to be so withheld or deducted; (ii) promptly forward to such Lender an official receipt or
other documentation satisfactory to such Lender evidencing such payment to such authority; and
(iii) pay to such Lender such additional amount or amounts as is necessary to ensure that the net
amount actually received by such Lender will equal the full amount such Lender would have received had no such withholding or deduction been required. Moreover, if any Taxes are
directly asserted against any Lender with respect to any payment received by such Lender hereunder,
such Lender may pay such Taxes and such Guarantor will promptly pay such additional amounts
(including, if

					
	 	 	 	 	 
	 
	 	Page 4
	 	Guaranty

 

 

incurred as a result of such Guarantor’s or the Borrowers’ action, omission or
delay, any penalties, interest or expenses) as is necessary in order that the net amount received
by such Lender after the payment of such Taxes (including any Taxes on such additional amount)
shall equal the amount such Lender would have received had such Taxes not been asserted.

     (b) If a Guarantor fails to pay any Taxes when due to the appropriate taxing authority or
fails to remit to any Lender the required receipts or other required documentary evidence, such
Guarantor shall indemnify such Lender for any incremental Taxes, interest or penalties that may
become payable by such Lender as a result of any such failure.

     (c) Without prejudice to the survival of any other agreement of the Guarantors hereunder, the
agreements and obligations of the Guarantors contained in this Section 2.7 shall survive the
payment in full of the principal of and interest on the Revolving Loan.

     SECTION 2.8 Subordination. Each Guarantor hereby subordinates and makes inferior to
the Obligations any and all indebtedness now or at any time hereafter owed by the Borrowers or
other Obligor to such Guarantor. Each Guarantor agrees that if any Event of Default has occurred
and is continuing under the Credit Agreement, it will not permit the Borrowers to repay such
indebtedness or any part thereof and it will not accept payment from the Borrowers of such
indebtedness or any part thereof without the prior written consent of the Required Lenders. If a
Guarantor receives any such payment without the prior required written consent, the amount so paid
shall be held in trust for the benefit of the Lenders, shall be segregated from the other funds of
such Guarantor, and shall forthwith be paid over to the Administrative Agent to be held by the
Administrative Agent as collateral for, or then or at any time thereafter applied in whole or in
part by the Administrative Agent against, all or any portions of the Obligations, whether matured
or unmatured, in such order as the Administrative Agent shall elect.

ARTICLE III

MISCELLANEOUS PROVISIONS

     SECTION 3.1 Loan Document. This Guaranty is a Loan Document executed pursuant to the
Credit Agreement and shall (unless otherwise expressly indicated herein) be construed, administered
and applied in accordance with the terms and provisions thereof.

     SECTION 3.2 Releases. At such time as the Revolving Loan shall have been paid in full
(other than contingent indemnity obligations and, with respect to L/C Obligations, if they have
been Cash Collateralized), the Commitments have been terminated, and, subject to Section 10.01(e)
of the Credit Agreement, no Lender Hedging Agreements are outstanding, the Administrative Agent
shall, at the request and expense of the Guarantors following such termination, promptly execute
and deliver to the Guarantors such documents and instruments as the Guarantors shall reasonably
request to evidence termination and release of this Guaranty.

     SECTION 3.3 Administrative Agent and Lenders; Successors and Assigns.

     (a) The Administrative Agent is Administrative Agent for each Lender under the Credit
Agreement. All rights granted to Administrative Agent under or in connection with this Guaranty are
for each Lender’s ratable benefit. The Administrative Agent may, without the joinder of any Lender,
exercise any rights in Administrative Agent’s or Lenders’ favor under or in connection with this
Guaranty. The Administrative Agent’s and each Lender’s rights and obligations vis-a-vis each other
may be subject to one or more separate agreements between those parties. However, the Guarantors
are not required to

					
	 	 	 	 	 
	 
	 	Page 5
	 	Guaranty

 

 

inquire about any such agreement and are not subject to any terms of it unless
the Guarantors specifically enter into such agreement. Therefore, neither Guarantors nor any of
their successors or assigns are entitled to any benefits or provisions of any such separate
agreement nor are they entitled to rely upon or raise as a defense any party’s failure or refusal
to comply with the provisions of any such agreement.

     (b) This Guaranty benefits the Administrative Agent, the Lenders, and their respective
successors and assigns and binds each Guarantor and its successors and assigns. Upon appointment of
any successor Administrative Agent under the Credit Agreement, all of the rights of Administrative
Agent under this Guaranty automatically vest in that new Administrative Agent as successor
Administrative Agent on behalf of Lenders without any further act, deed, conveyance, or other
formality other than that appointment. The rights of the Administrative Agent and the Lenders under
this Guaranty may be transferred with any assignment of the obligations hereby guaranteed pursuant
to and in accordance with the terms of the Credit Agreement. The Credit Agreement contains
provisions governing assignments of the obligations guaranteed under this Guaranty.

     SECTION 3.4 Amendments, etc. No amendment to or waiver of any provision of this
Guaranty, nor consent to any departure by any Guarantor herefrom, shall in any event be effective
unless the same shall be in writing and signed by or on behalf of the party against whom it is
sought to be enforced and is in conformity with the requirements of Section 10.01 of the Credit
Agreement. Each such waiver or consent shall be effective only in the specific instance and for
the specific purpose for which given.

     SECTION 3.5 Addresses for Notices to the Guarantors. All notices and other
communications hereunder to the Guarantors shall be in writing and mailed or delivered to it,
addressed to it at the address set forth below or at such other address as shall be designated by
the Guarantor in a written notice to the Administrative Agent at the address specified in the
Credit Agreement complying as to delivery with the terms of this Section. All such notices and
other communications shall, when mailed, be effective when deposited in the mail, addressed as
aforesaid. Address for notices:

9520 N. May Avenue

Suite 300

Oklahoma City, Oklahoma 73120

Beginning November 9, 2007:

210 Park Avenue, Suite 2750

Oklahoma City, Oklahoma 73102

Facsimile: (405) 840-9897

Telephone: (405) 488-1304

     SECTION 3.6 No Waiver; Remedies. In addition to, and not in limitation of, Section 2.3
and Section 2.5, no failure on the part of any Lender or any holder of a Note to exercise, and no
delay in exercising, any right hereunder shall operate as a waiver thereof, nor shall any single or
partial exercise of any right hereunder preclude any other or further exercise thereof or the
exercise of any other right. The remedies herein provided are cumulative and not exclusive of any
remedies provided by law.

     SECTION 3.7 Section Captions. Section captions used in this Guaranty are for
convenience of reference only, and shall not affect the construction of this Guaranty.

     SECTION 3.8 Setoff. In addition to, and not in limitation of, any rights of any
Lender or any holder of a Note under applicable law, upon the occurrence and during the continuance
of an Event of

					
	 	 	 	 	 
	 
	 	Page 6
	 	Guaranty

 

 

Default under or as defined in the Credit Agreement, each Lender and each such
holder shall be entitled to exercise (for the benefit of all Lenders pursuant to Section 10.09 of
the Credit Agreement) any right of offset or banker’s lien against each and every account and other
property or interest that a Guarantor may now or hereafter have with, or which is now or hereafter
in the possession of, any such Lender, to the extent of the full amount of the Obligations.

     SECTION 3.9 Severability. Wherever possible, each provision of this Guaranty shall be
interpreted in such manner as to be effective and valid under applicable law, but if any provision
of this Guaranty shall be prohibited by or invalid under such law, such provision shall be
ineffective to the extent of such prohibition or invalidity, without invalidating the remainder of
such provision or the remaining provisions of this Guaranty.

     SECTION 3.10 Governing Law.

     (a) THIS GUARANTY SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAW OF THE STATE
OF NEW YORK APPLICABLE TO AGREEMENTS MADE AND TO BE PERFORMED ENTIRELY WITHIN SUCH STATE;
PROVIDED THAT THE ADMINISTRATIVE AGENT AND EACH LENDER SHALL RETAIN ALL RIGHTS ARISING
UNDER UNITED STATES FEDERAL LAW.

     (b) EACH GUARANTOR AGREES ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS GUARANTY OR ANY
OTHER LOAN DOCUMENT MAY BE BROUGHT IN THE COURTS OF THE STATE OF NEW YORK SITTING IN THE BOROUGH OF
NEW YORK OR OF THE UNITED STATES FOR THE SOUTHERN DISTRICT OF NEW YORK AND APPELLATE COURTS FROM
ANY THEREOF, AND BY EXECUTION AND DELIVERY OF THIS GUARANTY, EACH GUARANTOR CONSENTS, FOR ITSELF
AND IN RESPECT OF ITS PROPERTY, TO THE NON-EXCLUSIVE JURISDICTION OF THOSE COURTS. EACH GUARANTOR
(1) IRREVOCABLY WAIVES ANY OBJECTION, INCLUDING ANY OBJECTION TO THE LAYING OF VENUE OR BASED ON
THE GROUNDS OF FORUM NON CONVENIENS, WHICH IT MAY NOW OR HEREAFTER HAVE TO THE BRINGING OF ANY
ACTION OR PROCEEDING IN SUCH JURISDICTION IN RESPECT OF ANY LOAN DOCUMENT OR OTHER DOCUMENT RELATED
THERETO, AND (2) IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS OUT OF ANY OF THE AFOREMENTIONED
COURTS IN ANY SUCH ACTION OR PROCEEDING BY THE MAILING OF COPIES THEREOF BY CERTIFIED MAIL, RETURN
RECEIPT REQUESTED, POSTAGE PREPAID, AT ITS ADDRESS FOR NOTICES DESIGNATED HEREIN. EACH GUARANTOR
WAIVES PERSONAL SERVICE OF ANY SUMMONS, COMPLAINT OR OTHER PROCESS, WHICH MAY BE MADE BY ANY OTHER
MEANS PERMITTED BY THE LAW OF SUCH STATE.

     SECTION 3.11 Waiver of Jury Trial, Etc. EACH GUARANTOR HEREBY (a) EXPRESSLY AND
IRREVOCABLY WAIVES ANY RIGHT TO TRIAL BY JURY OF ANY CLAIM, DEMAND, ACTION OR CAUSE OF ACTION
ARISING UNDER ANY LOAN DOCUMENT OR IN ANY WAY CONNECTED WITH OR RELATED OR INCIDENTAL TO THE
DEALINGS OF THE PARTIES TO THE LOAN DOCUMENTS OR ANY OF THEM WITH RESPECT TO ANY LOAN DOCUMENT, OR
THE TRANSACTIONS RELATED THERETO, IN EACH CASE WHETHER NOW EXISTING OR HEREAFTER ARISING, AND
WHETHER FOUNDED IN CONTRACT OR TORT OR OTHERWISE; AND EACH GUARANTOR HEREBY AGREES AND CONSENTS
THAT ANY SUCH CLAIM, DEMAND, ACTION OR CAUSE OF ACTION SHALL BE DECIDED BY COURT TRIAL WITHOUT A JURY, AND THAT
ADMINISTRATIVE AGENT OR ANY LENDER MAY FILE AN ORIGINAL COUNTERPART OR A COPY OF THIS SECTION WITH
ANY COURT AS WRITTEN EVIDENCE

					
	 	 	 	 	 
	 
	 	Page 7
	 	Guaranty

 

 

OF THE CONSENT OF EACH GUARANTOR TO THE WAIVER OF ITS RIGHT TO TRIAL
BY JURY; AND (b) EXPRESSLY AND IRREVOCABLY WAIVES, TO THE MAXIMUM EXTENT NOT PROHIBITED BY LAW, ANY
RIGHT IT MAY HAVE TO CLAIM OR RECOVER IN ANY SUCH ACTION ANY SPECIAL, EXEMPLARY, PUNITIVE OR
CONSEQUENTIAL DAMAGES, OR DAMAGES OTHER THAN, OR IN ADDITION TO, ACTUAL DAMAGES; PROVIDED THAT THE
WAIVER CONTAINED IN THIS SECTION 3.11 SHALL NOT APPLY TO THE EXTENT THAT THE PARTY AGAINST WHOM
DAMAGES ARE SOUGHT HAS ENGAGED IN GROSS NEGLIGENCE OR WILLFUL MISCONDUCT.

     SECTION 3.12 Entire Agreement. THIS GUARANTY AND THE OTHER LOAN DOCUMENTS REPRESENT
THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR,
CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL
AGREEMENTS BETWEEN THE PARTIES.

[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK

SIGNATRUES BEGIN ON NEXT PAGE.]

					
	 	 	 	 	 
	 
	 	Page 8
	 	Guaranty

 

 

     IN WITNESS WHEREOF, each Guarantor has caused this Guaranty to be duly executed and delivered
by an officer duly authorized as of the date first above written.

	 	 	 	 	 	 	 
	 	 	QUEST KANSAS GENERAL PARTNER,	 	 
	 	 	L.L.C., a Delaware limited liability company, as
Guarantor	 	 
	 
	 	 	 	 	 	 
	 

	 	By:
	 	Quest Midstream Partners, L.P.,	 	 
	 

	 	 	 	a Delaware limited partnership,	 	 
	 

	 	 	 	its Sole Member	 	 
	 
	 	 	 	 	 	 
	 

	 	By:
	 	Quest Midstream GP, LLC,	 	 
	 

	 	 	 	a Delaware limited liability
company, its	 	 
	 

	 	 	 	General Partner	 	 
	 
	 	 	 	 	 	 
	 

	 	By:	 	/s/ Michael A. Forbau	 	 
	 

	 	 
	 	 

Michael A. Forbau
	 	 
	 

	 	 	 	Vice President-Commercial	 	 
	 
	 	 	 	 	 	 
	 	 	QUEST KANSAS PIPELINE, L.L.C.,	 	 
	 	 	a Delaware limited liability company,	 	 
	 	 	as Guarantor	 	 
	 
	 	 	 	 	 	 
	 

	 	By:
	 	Quest Midstream Partners, L.P.,	 	 
	 

	 	 	 	a Delaware limited partnership,	 	 
	 

	 	 	 	its Sole Member	 	 
	 
	 	 	 	 	 	 
	 

	 	By:
	 	Quest Midstream GP, LLC,	 	 
	 

	 	 	 	a Delaware limited liability company,	 	 
	 

	 	 	 	its General Partner	 	 
	 
	 	 	 	 	 	 
	 

	 	By:	 	/s/ Michael A. Forbau	 	 
	 

	 	 	 	 

Michael A. Forbau
	 	 
	 

	 	 	 	Vice President-Commercial	 	 

					
	 	 	 	 	 
	 
	 	Signature Page — 1
	 	Guaranty

 

 

	 	 	 	 	 	 	 
	 	 	QUEST PIPELINE (KPC),	 	 
	 	 	a Kansas general partnership, as Guarantor	 	 
	 
	 	 	 	 	 	 
	 

	 	By:
	 	Quest Kansas General Partner, L.L.C.,	 	 
	 

	 	 	 	a Delaware limited liability company,	 	 
	 

	 	 	 	a general partner	 	 
	 
	 	 	 	 	 	 
	 

	 	By:
	 	Quest Midstream Partners, L.P.,
a Delaware limited partnership,
its Sole Member	 	 
	 
	 	 	 	 	 	 
	 

	 	By:
	 	Quest Midstream GP, LLC,	 	 
	 

	 	 	 	a Delaware limited liability company,	 	 
	 

	 	 	 	its General Partner	 	 
	 
	 	 	 	 	 	 
	 

	 	By:	 	/s/ Michael A. Forbau	 	 
	 

	 	 
	 	 

Michael A. Forbau
	 	 
	 

	 	 	 	Vice President— Commercial	 	 
	 
	 	 	 	 	 	 
	 

	 	By:
	 	Quest Kansas Pipeline, L.L.C.,	 	 
	 

	 	 	 	a Delaware limited liability company,	 	 
	 

	 	 	 	a general partner	 	 
	 
	 	 	 	 	 	 
	 

	 	By:
	 	Quest Midstream Partners, L.P.,	 	 
	 

	 	 	 	a Delaware limited partnership,	 	 
	 

	 	 	 	its Sole Member	 	 
	 
	 	 	 	 	 	 
	 

	 	By:
	 	Quest Midstream GP, LLC,	 	 
	 

	 	 	 	a Delaware limited liability company,	 	 
	 

	 	 	 	its General Partner	 	 
	 
	 	 	 	 	 	 
	 

	 	By:	 	/s/ Michael A. Forbau	 	 
	 

	 	 
	 	 

Michael A. Forbau
	 	 
	 

	 	 	 	Vice President— Commercial	 	 

					
	 	 	 	 	 
	 
	 	Signature Page — 2
	 	Guaranty

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