Document:

PURCHASE AND SALE CONTRACT

Exhibit 10.13

 

 

 

 

 

 

PURCHASE AND SALE
CONTRACT

 

 

 

BETWEEN

 

 

 

CENTURY SUN RIVER, LIMITED
PARTNERSHIP

an Arizona limited
partnership

 

 

 

AS SELLER

 

 

 

 

 

 

AND

 

 

 

 

HOLLAND ACQUISITION CO.,
LLC,

a Washington limited liability
company

 

 

 

AS PURCHASER

 

 

 

 

 

SUNRIVER VILLAGE

 

	
Article I
	
DEFINED
TERMS
	
1

	
Article
II
	
PURCHASE
AND SALE, PURCHASE PRICE & DEPOSIT
	
1

	
2.1
	
Purchase
and Sale
	
1

	
2.2
	
Purchase
Price and Deposit
	
1

	
2.3
	
Escrow
Provisions Regarding Deposit
	
2

	
Article
III
	
FEASIBILITY
PERIOD
	
3

	
3.1
	
Feasibility
Period
	
3

	
3.2
	
Expiration
of Feasibility Period
	
3

	
3.3
	
Conduct
of Investigation
	
3

	
3.4
	
Purchaser
Indemnification
	
4

	
3.5
	
Property
Materials
	
5

	
3.6
	
Property
Contracts
	
5

	
Article
IV
	
TITLE
	
6

	
4.1
	
Title
Documents
	
6

	
4.2
	
Survey
	
6

	
4.3
	
Objection
and Response Process
	
6

	
4.4
	
Permitted
Exceptions
	
6

	
4.5
	
Existing
Deed of Trust
	
7

	
4.6
	
Subsequently
Disclosed Exceptions
	
7

	
4.7
	
Housing
Assistance Program Vouchers
	
7

	
Article
V
	
CLOSING
	
8

	
5.1
	
Closing
Date
	
8

	
5.2
	
Seller
Closing Deliveries
	
8

	
5.3
	
Purchaser
Closing Deliveries
	
9

	
5.4
	
Closing
Prorations and Adjustments
	
10

	
5.5
	
Post
Closing Adjustments
	
13

	
Article
VI
	
REPRESENTATIONS
AND WARRANTIES OF SELLER AND PURCHASER
	
13

	
6.1
	
Seller's
Representations
	
13

	
6.2
	
AS-IS
	
14

	
6.3
	
Survival
of Seller's Representations
	
15

	
6.4
	
Definition
of Seller's Knowledge
	
16

	
6.5
	
Representations
and Warranties of Purchaser
	
16

	
Article VII
	
OPERATION
OF THE PROPERTY
	
17

	
7.1
	
Leases
and Property Contracts
	
17

	
7.2
	
General
Operation of Property
	
17

	
7.3
	
Liens
	
17

	
7.4
	
Rent-Ready
Units
	
18

	
Article
VIII
	
PURCHASER
FINANCING AND SEC CLEARANCE
	
18

	
8.1
	
Purchaser
Financing
	
18

	
8.2
	
SEC
Clearance Period
	
18

	
Article
IX
	
CONDITIONS
PRECEDENT TO CLOSING
	
18

	
9.1
	
Purchaser's
Conditions to Closing
	
19

	
9.2
	
Seller's
Conditions to Closing
	
19

	
Article
X
	
BROKERAGE
	
20

	
10.1
	
Indemnity
	
20

	
10.2
	
Broker
Commission
	
21

	
Article
XI
	
DEFAULTS
AND REMEDIES
	
21

	
11.1
	
Purchaser
Default
	
21

	
11.2
	
Seller
Default
	
21

	
Article
XII
	
RISK
OF LOSS OR CASUALTY
	
22

	
12.1
	
Major
Damage
	
22

	
12.2
	
Minor
Damage
	
23

	
12.3
	
Closing
	
23

	
12.4
	
Repairs
	
23

	
Article
XIII
	
EMINENT
DOMAIN
	
23

	
13.1
	
Eminent
Domain
	
23

	
Article
XIV
	
MISCELLANEOUS
	
24

	
14.1
	
Binding
Effect of Contract
	
24

	
14.2
	
Exhibits
and Schedules
	
24

	
14.3
	
Assignability
	
24

	
14.4
	
Captions
	
24

	
14.5
	
Number
and Gender of Words
	
24

	
14.6
	
Notices
	
24

	
14.7
	
Governing
Law and Venue
	
26

	
14.8
	
Entire
Agreement
	
26

	
14.9
	
Amendments
	
27

	
14.10
	
Severability
	
27

	
14.11
	
Multiple
Counterparts/Facsimile Signatures
	
27

	
14.12
	
Construction
	
27

	
14.13
	
Confidentiality
	
27

	
14.14
	
Time
of the Essence
	
27

	
14.15
	
Waiver
	
27

	
14.16
	
Attorneys'
Fees
	
28

	
14.17
	
Time
Zone/Time Periods
	
28

	
14.18
	
1031
Exchange
	
28

	
14.19
	
No
Personal Liability of Officers, Trustees or Directors
	
28

	
14.20
	
ADA
Disclosure
	
28

	
14.21
	
No
Recording
	
29

	
14.22
	
Relationship
of Parties
	
29

	
14.23
	
AIMCO
Marks
	
29

	
14.24
	
Non-Solicitation
of Employees
	
29

	
14.25
	
Survival
	
29

	
14.26
	
Multiple
Purchasers
	
29

	
14.27
	
WAIVER
OF JURY TRIAL
	
29

	
Article
XV
	
LEAD–BASED
PAINT DISCLOSURE
	
30

	
15.1
	
Disclosure
	
30

 

EXHIBITS AND SCHEDULES

 

EXHIBITS

 

Exhibit
A          Legal Description

Exhibit
B          Form of Special Warranty
Deed

Exhibit
C          Form of Bill of Sale

Exhibit
D          Form of General
Assignment and Assumption

Exhibit
E           Form of Assignment
and Assumption of Leases and Security Deposits

Exhibit
F           Form of Notice to
Vendor regarding Termination of Contract

Exhibit
G          Form of Tenant
Notification

Exhibit
H          Form of Lead Paint
Disclosure

Exhibit
I            Arizona
Affidavit of Real Property Value

 

 

SCHEDULES

 

Schedule
1       Defined Terms

 

PURCHASE AND SALE CONTRACT

 

THIS
PURCHASE AND SALE CONTRACT (this "Contract") is entered
into as of the 10th day of May, 2011 (the "Effective
Date"), by and between CENTURY SUN RIVER, LIMITED PARTNERSHIP, an
Arizona limited partnership, having an address at 4582 South Ulster Street
Parkway, Suite 1100, Denver, Colorado 80237 ("Seller"), and
HOLLAND ACQUISITION CO., LLC, a Washington limited liability company,
having a principal address at 1111 Main Street, Suite 710, Vancouver,
Washington  98660 ("Purchaser").

NOW,
THEREFORE, in consideration of mutual covenants set forth herein, Seller and
Purchaser hereby agree as follows:

RECITALS

 

A.       
Seller owns the real estate located in Maricopa County, Arizona as more
particularly described in Exhibit A attached hereto and made a part
hereof, and the improvements thereon, commonly known as Sun River
Village.

B.        
Purchaser desires to purchase, and Seller desires to sell, such land,
improvements and certain associated property, on the terms and conditions set
forth below.

Article I
DEFINED
TERMS

Unless
otherwise defined herein, any term with its initial letter capitalized in this
Contract shall have the meaning set forth in Schedule 1 attached hereto
and made a part hereof. 

Article
II
PURCHASE AND SALE, PURCHASE PRICE & DEPOSIT

2.1             
Purchase and Sale.  Seller agrees to
sell and convey the Property to Purchaser and Purchaser agrees to purchase the
Property from Seller, all in accordance with the terms and conditions set forth
in this Contract.

2.2             
Purchase Price and Deposit.  The total purchase price
("Purchase Price") for the Property shall be an amount equal to
$18,700,000.00, payable by Purchaser, as follows:

2.2.1       
Within 2 Business Days following the Effective Date, Purchaser shall
deliver to First American Title Insurance Company, 633 Third
Avenue, New York, New York  10017, Attn:  Linda J.
Isaacson, (212) 850-0664, (212) 331-1467 (fax) ("Escrow Agent"
or "Title Insurer") an initial deposit (the "Initial
Deposit") of $250,000.00 by wire transfer of immediately available funds
("Good Funds").  

2.2.2       
On or before the day that the Feasibility Period expires, Purchaser shall
deliver to Escrow Agent an additional deposit (the "Additional
Deposit") of $250,000.00 by wire transfer of Good Funds.  

2.2.3       
The balance of the Purchase Price for the Property shall be paid to and
received by Escrow Agent by wire transfer of Good Funds no later than 10:00 a.m.
on the Closing Date.

2.3             
Escrow Provisions Regarding Deposit.

2.3.1       
Escrow Agent shall hold the Deposit and make delivery of the Deposit to
the party entitled thereto under the terms of this Contract.  Escrow Agent
shall invest the Deposit in an FDIC-insured, interest-bearing bank account or
FDIC-insured money market fund reasonably approved by Purchaser and Seller, and
all interest and income thereon shall become part of the Deposit and shall be
remitted to the party entitled to the Deposit pursuant to this Contract.

2.3.2       
Escrow Agent shall hold and apply the Deposit in strict accordance with
the terms of this Contract.  The tax identification numbers of the parties
shall be furnished to Escrow Agent upon request.

2.3.3       
Except for the return of the Deposit to Purchaser as a result of
Purchaser exercising its termination right under Section 3.2 below (in which event Escrow Agent shall
promptly release the Deposit to Purchaser on demand), if prior to the Closing
Date either party makes a written demand upon Escrow Agent for payment of the
Deposit, Escrow Agent shall give written notice to the other party of such
demand.  If Escrow Agent does not receive a written objection from the
other party to the proposed payment within 5 Business Days after the giving of
such notice, Escrow Agent is hereby authorized to make such payment.  If
Escrow Agent does receive such written objection within such 5-Business Day
period, Escrow Agent shall continue to hold such amount until otherwise directed
by written instructions from the parties to this Contract or a final judgment or
arbitrator's decision.  However, Escrow Agent shall have the right at any
time to deliver the Deposit and interest thereon, if any, with a court of
competent jurisdiction in the state in which the Property is located. 
Escrow Agent shall give written notice of such deposit to Seller and
Purchaser.  Upon such deposit, Escrow Agent shall be relieved and
discharged of all further obligations and responsibilities hereunder.  Any
return of the Deposit to Purchaser provided for in this Contract shall be
subject to Purchaser’s obligations set forth in Section 3.5.2.

2.3.4       
The parties acknowledge that Escrow Agent is acting solely as a
stakeholder at their request and for their convenience, and that Escrow Agent
shall not be deemed to be the agent of either of the parties and shall not be
liable for any act or omission on its part unless taken or suffered in bad faith
in willful disregard of this Contract or involving gross negligence. 
Seller and Purchaser jointly and severally shall indemnify and hold Escrow Agent
harmless from and against all costs, claims and expenses, including reasonable
attorney's fees, incurred in connection with the performance of Escrow Agent's
duties hereunder, except with respect to actions or omissions taken or suffered
by Escrow Agent in bad faith, in willful disregard of this Contract or involving
gross negligence on the part of the Escrow Agent.

2.3.5       
The parties shall deliver to Escrow Agent an executed copy of this
Contract.  Escrow Agent shall execute the signature page for Escrow Agent
attached hereto which shall confirm Escrow Agent's
agreement to comply with the terms of Seller's closing instruction letter
delivered at Closing and the provisions of this Section 2.3.

2.3.6       
Escrow Agent, as the person responsible for closing the transaction
within the meaning of Section 6045(e)(2)(A) of the Internal Revenue Code of
1986, as amended (the "Code"), shall file all necessary
information, reports, returns, and statements regarding the transaction required
by the Code including, but not limited to, the tax reports required pursuant to
Section 6045 of the Code.  Further, Escrow Agent agrees to indemnify and
hold Purchaser, Seller, and their respective attorneys and brokers harmless from
and against any Losses resulting from Escrow Agent's failure to file the reports
Escrow Agent is required to file pursuant to this section.

Article
III
FEASIBILITY PERIOD

3.1             
Feasibility Period.  Subject to the terms of
Sections 3.3 and 3.4, the rights of Tenants under the Leases,
and the provisions of the Arizona Residential Landlord and Tenant Act (A.R.S.
Title 33, Chapter 10), from the Effective Date to and including June 9, 2011
(the "Feasibility Period"), Purchaser, and its agents,
contractors, engineers, surveyors, attorneys, and employees (collectively,
"Consultants") shall, at no cost or expense to Seller, have the
right from time to time to enter onto the Property to conduct and make any and
all customary studies, tests, examinations, inquiries, inspections and
investigations of or concerning the Property, review the Materials and otherwise
confirm any and all matters which Purchaser may reasonably desire to confirm
with respect to the Property and Purchaser’s intended use thereof (collectively,
the "Inspections").

3.2             
Expiration of Feasibility Period.  If any of the
matters in Section 3.1 or any
other title or survey matters are unsatisfactory to Purchaser for any reason, or
for no reason whatsoever, in Purchaser's sole and absolute discretion, then
Purchaser shall have the right to terminate this Contract by giving written
notice to that effect to Seller and Escrow Agent no later than 5:00 p.m. on or
before the date of expiration of the Feasibility Period.  If Purchaser
provides such notice, this Contract shall terminate and be of no further force
and effect subject to and except for the Survival Provisions, and Escrow Agent
shall return the Initial Deposit to Purchaser.  If Purchaser fails to
provide Seller with written notice of termination prior to the expiration of the
Feasibility Period, Purchaser's right to terminate under this Section 3.2 shall be permanently waived and this
Contract shall remain in full force and effect, the Deposit shall be
non-refundable except as otherwise expressly set forth in this Contract, and
Purchaser's obligation to purchase the Property shall be conditional only as
provided in Section 8.2.1 and
Section 9.1.

3.3             
Conduct of Investigation.  Purchaser shall not permit
any mechanics' or materialmen's liens or any other liens to attach to the
Property by reason of the performance of any work or the purchase of any
materials by Purchaser or any other party in connection with any Inspections
conducted by or for Purchaser.  Purchaser shall give reasonable advance
notice to Seller prior to any entry onto the Property and shall permit Seller to
have a representative present during all Inspections conducted at the
Property.  Purchaser shall take all reasonable actions and implement all
protections necessary to ensure that all actions taken in connection with the Inspections, and all equipment, materials and
substances generated, used or brought onto the Property pose no material threat
to the safety of persons, property or the environment.  

3.4             
Purchaser Indemnification.

3.4.1       
Purchaser shall indemnify, hold harmless and, if requested by Seller (in
Seller's sole discretion), defend (with counsel approved by Seller) Seller,
together with Seller's affiliates, parent and subsidiary entities, successors,
assigns, partners, managers, members, employees, officers, directors, trustees,
shareholders, counsel, representatives, agents, Property Manager, Regional
Property Manager, and AIMCO (collectively, including Seller, "Seller's
Indemnified Parties"), from and against any and all damages, mechanics'
liens, materialmen's liens, liabilities, penalties, interest, losses, demands,
actions, causes of action, claims, costs and expenses (including reasonable
attorneys' fees, including the cost of in-house counsel and appeals)
(collectively, "Losses") arising from or related to Purchaser's or
its Consultants' entry onto the Property, and any Inspections or other acts by
Purchaser or Purchaser’s Consultants with respect to the Property during the
Feasibility Period or otherwise.

3.4.2       
Notwithstanding anything in this Contract to the contrary, Purchaser
shall not be permitted to perform any invasive tests on the Property without
Seller's prior written consent, which consent shall not be unreasonably
withheld, conditioned or delayed.  If Purchaser desires to perform any
invasive tests.  Purchaser shall give prior written notice thereof to
Seller, which notice shall be accompanied by a detailed description and plan of
the invasive tests Purchaser desires to perform.  Further, Seller shall
have the right, without limitation, to disapprove any and all entries, surveys,
tests (including, without limitation, a Phase II environmental study of the
Property), investigations and other matters that in Seller's reasonable judgment
could result in any injury to the Property or breach of any contract, or expose
Seller to any Losses or violation of applicable law, or otherwise adversely
affect the Property or Seller's interest therein.  Purchaser shall, at
Purchaser's sole cost and expense, and in accordance with all applicable
environmental laws, dispose of any hazardous materials which have been
specifically removed from or at the Property by Purchaser or its agents,
representatives, employees or designees in connection with Purchaser's
environmental studies.  Purchaser shall use reasonable efforts to minimize
disruption to Tenants in connection with Purchaser's or its Consultants'
activities pursuant to this Section.  No consent by Seller to any such
activity shall be deemed to constitute a waiver by Seller or assumption of
liability or risk by Seller.  Purchaser hereby agrees to restore, at
Purchaser's sole cost and expense, the Property to the same condition existing
immediately prior to Purchaser's exercise of its rights pursuant to this Article III.  Purchaser
shall maintain and cause its third party consultants to maintain (a) casualty
insurance and commercial general liability insurance with coverages of not less
than $1,000,000.00 for injury or death to any one person and $3,000,000.00 for
injury or death to more than one person and $1,000,000.00 with respect to
property damage, and (b) worker's compensation insurance for all of their
respective employees in accordance with the law of the state in which the
Property is located.  Purchaser shall deliver proof of the insurance
coverage required pursuant to this Section 3.4.2 to Seller (in the form of a
certificate of insurance) prior to the earlier to occur of (i) Purchaser's or
Purchaser's Consultants' entry onto the Property, or (ii) the expiration of 5
days after the Effective Date.

3.5             
Property Materials.

3.5.1       
Within 5 Business Days after the Effective Date, and to the extent the
same have not already been provided by Seller to Purchaser, Seller agrees to
use reasonable efforts to deliver to Purchaser, or at Seller's option make
available at the Property, copies of such documents and information concerning
the Property that are in Seller's possession or reasonable control, other than
such documents and information that Seller deems to be confidential or
proprietary (collectively, the "Materials").

3.5.2       
Except as expressly set forth in Seller's Representations, Seller makes
no representations or warranties, express, written, oral, statutory, or implied,
and all such representations and warranties are hereby expressly excluded and
disclaimed.  All Materials are provided for informational purposes only,
and Purchaser shall not in any way be entitled to rely upon the completeness or
accuracy of the Materials, and will instead in all instances rely exclusively on
its own Inspections and Consultants with respect to all matters which it deems
relevant to its decision to acquire, own and operate the Property.  All
Materials and Third-Party Reports shall be returned to Seller or destroyed by
Purchaser if this Contract is terminated for any reason.

3.5.3       
Not later than 5 Business Days after the Effective Date, and to the
extent the same has not already been provided by Seller to Purchaser, Seller
shall deliver to Purchaser (or otherwise make available to Purchaser as provided
under Section 3.5.1) the most
recent rent roll for the Property, which is the rent roll Seller uses in the
ordinary course of operating the Property (the "Rent Roll"). 
Seller makes no representations or warranties regarding the Rent Roll other than
the express representation set forth in Section 6.1.5.

3.5.4       
Not later than 5 Business Days after the Effective Date, and to the
extent the same has not already been provided by Seller to Purchaser, Seller
shall deliver to Purchaser (or otherwise make available to Purchaser as provided
under Section 3.5.1) a list
of all current Property Contracts (the "Property Contracts
List").  Seller makes no representations or warranties regarding
the Property Contracts List other than the express representations set forth in
Section 6.1.6.  

3.6             
Property Contracts.  On or before the expiration of
the Feasibility Period, Purchaser may deliver written notice to Seller (the
"Property Contracts Notice") specifying any Property Contracts
which Purchaser desires to terminate at the Closing (the "Terminated
Contracts"); provided that (a) the effective date of such termination on
or after Closing shall be subject to the express terms of such Terminated
Contracts, and (b) if any such Property Contract cannot by its terms be
terminated at Closing, it shall be assumed by Purchaser and not be a Terminated
Contract.  To the extent that any such Terminated Contract requires payment
of a penalty, premium, or damages, including liquidated damages, for
cancellation, Seller shall be solely responsible for the payment of any such
cancellation fees, penalties, or damages, including liquidated damages.  If
Purchaser fails to deliver the Property Contracts Notice on or before the
expiration of the Feasibility Period, then there shall be no Terminated
Contracts and Purchaser shall assume all Property Contracts at the
Closing.  If Purchaser delivers the Property Contracts Notice to Seller on
or before the expiration of the Feasibility Period, then Seller shall execute
and deliver, on or before Closing, a vendor termination notice (in the form
attached hereto as Exhibit F) for each
Terminated Contract informing the vendor(s) of the
termination of such Terminated Contract as of the Closing Date (subject to any
delay in the effectiveness of such termination pursuant to the express terms of
each applicable Terminated Contract).  To the extent that any Property
Contract to be assigned to Purchaser requires vendor consent, then, prior to the
Closing, Purchaser and Seller shall attempt to obtain from each applicable
vendor a consent to such assignment.

Article
IV
TITLE

4.1             
Title Documents.  Within 10 days after the
Effective Date, Seller shall cause to be delivered to Purchaser a standard form
commitment or preliminary title report ("Title Commitment") to
provide a standard American Land Title Association owner’s title insurance
policy for the Land and Improvements, using the current policy jacket
customarily provided by the Title Insurer, in an amount equal to the Purchase
Price (the "Title Policy"), together with copies of all
instruments identified as exceptions therein (together with the Title
Commitment, referred to herein as the "Title Documents"). 
Seller shall be responsible only for payment of the base premium for the Title
Policy.  Purchaser shall be solely responsible for payment of all other
costs relating to procurement of the Title Commitment, the Title Policy, and any
requested endorsements.  

4.2             
Survey.  Subject to Section 3.5.2, within 3 Business Days after the
Effective Date, Seller shall deliver to Purchaser any existing survey of the
Property (the "Existing Survey").  Purchaser may, at its sole
cost and expense, order a new or updated survey of the Property either before or
after the Effective Date (such new or updated survey, together with the Existing
Survey, is referred to herein as the "Survey").  

4.3             
Objection and Response Process.  On or before the date
which is 20 days after the Effective Date (the "Objection
Deadline"), Purchaser shall give written notice (the "Objection
Notice") to the attorneys for Seller of any matter set forth in the
Title Documents and the Survey to which Purchaser objects (the
"Objections").  If Purchaser fails to tender an Objection
Notice on or before the Objection Deadline, Purchaser shall be deemed to have
approved and irrevocably waived any objections to any matters covered by the
Title Documents and the Survey.  On or before 25 days after the Effective
Date (the "Response Deadline"), Seller may, in Seller's sole
discretion, give Purchaser notice (the "Response Notice") of those
Objections which Seller is willing to cure, if any.  If Seller fails to
deliver a Response Notice by the Response Deadline, Seller shall be deemed to
have elected not to cure or otherwise resolve any matter set forth in the
Objection Notice.  If Purchaser is dissatisfied with the Response Notice or
the lack of Response Notice, Purchaser may, as its exclusive remedy, exercise
its right to terminate this Contract prior to the expiration of the Feasibility
Period in accordance with the provisions of Section 3.2.  If Purchaser fails to timely
exercise such right, Purchaser shall be deemed to accept the Title Documents and
Survey with resolution, if any, of the Objections set forth in the Response
Notice (or if no Response Notice is tendered, without any resolution of the
Objections) and without any reduction or abatement of the Purchase Price.

4.4             
Permitted Exceptions.  The Deed delivered pursuant to
this Contract shall be subject to the following, all of which shall be deemed
"Permitted Exceptions":

4.4.1       
All matters shown in the Title Documents and the Survey, other than (a)
those Objections, if any, which Seller has agreed to cure pursuant to the
Response Notice under Section 4.3,
(b) mechanics' liens and taxes due and payable with respect to the period
preceding Closing, (c) the standard exception regarding the rights of parties in
possession, which shall be modified to be limited to those parties in possession
pursuant to the Leases, and (d) the standard exception pertaining to taxes and
assessments, which shall be limited to taxes and assessments not yet due and
payable as of the Closing Date; 

4.4.2       
All Leases;

4.4.3       
Applicable zoning and governmental regulations and ordinances;

4.4.4       
Any defects in or objections to title to the Property, or title
exceptions or encumbrances, arising by, through or under Purchaser.

4.5             
Existing Deed of Trust.  It is understood and agreed
that, whether or not Purchaser gives an Objection Notice with respect thereto,
any deeds of trust and/or mortgages which secure the Note (collectively, the
"Deed of Trust") shall not be deemed Permitted Exceptions, whether
Purchaser gives further written notice of such or not, and shall be paid off,
satisfied, discharged and/or cured from proceeds of the Purchase Price at
Closing.

4.6             
Subsequently Disclosed Exceptions.  If at any time
after the expiration of the Feasibility Period, any update to the Title
Commitment or Existing Survey discloses any additional item that materially
adversely affects title to the Property which was not disclosed on any version
of or update to the Title Commitment delivered to Purchaser during the
Feasibility Period (the "New Exception"), Purchaser shall have a
period of 5 days from the date of its receipt of such update (the "New
Exception Review Period") to review and notify Seller in writing of
Purchaser's approval or disapproval of the New Exception.  If Purchaser
fails to notify Seller of its approval or disapproval of a New Exception within
the New Exception Review Period, Purchaser shall be deemed to have elected to
approve and irrevocably waive any objections to the New Exception.  If
Purchaser disapproves of the New Exception, Seller may, in Seller's sole
discretion, notify Purchaser as to whether it is willing to cure the New
Exception.  If Seller fails to deliver a notice to Purchaser within 3 days
after the expiration of the New Exception Review Period, Seller shall be deemed
to have elected not to cure the New Exception.  If Purchaser is
dissatisfied with Seller's response, or lack thereof, Purchaser may, as its
exclusive remedy elect either:  (i) to terminate this Contract, in which
event the Deposit shall be promptly returned to Purchaser or (ii) to waive the
New Exception and proceed with the transactions contemplated by this Contract,
in which event Purchaser shall be deemed to have approved the New
Exception.  If Purchaser fails to notify Seller of its election to
terminate this Contract in accordance with the foregoing sentence within 6 days
after the expiration of the New Exception Review Period, Purchaser shall be
deemed to have elected to approve and irrevocably waive any objections to the
New Exception. 

4.7             
Housing Assistance Program Vouchers.  Purchaser
acknowledges that the HAP Tenant Based Voucher Contract(s) require(s) the
satisfaction by Purchaser of certain requirements as set forth therein and
established by the local housing authorities (collectively, the “Housing
Authority”) to allow for the assumption of the HAP Tenant Based Voucher
Contract(s). Purchaser agrees that, at the Closing, either
(a) Purchaser shall assume all obligations under the HAP Tenant Based Voucher
Contract(s) and accept title to the applicable Property subject to the same, or
(b) the existing HAP Tenant Based Voucher Contract(s) shall be terminated, and
Purchaser shall enter into replacement HAP Tenant Based Voucher Contract(s)
which are acceptable to the Housing Authority (collectively, the foregoing (a)
and (b) referred to herein as the "HAP Tenant Based Voucher
Assumption").  Purchaser shall indemnify and hold the Seller and
the Seller’s Indemnified Parties harmless from and against any and all claims,
losses, damages, and expenses (including reasonable attorneys’ fees) that may be
incurred by Seller and/or any of the Seller’s Indemnified Parties from and after
the Closing Date, in connection with the HAP Tenant Based Voucher
Assumption.

Article
V
CLOSING

5.1             
Closing Date.  The Closing shall occur on July 11,
2011 (the "Closing Date") through an escrow with Escrow Agent,
whereby Seller, Purchaser and their attorneys need not be physically present at
the Closing and may deliver documents by overnight air courier or other
means.  Notwithstanding the foregoing to the contrary, if required in order
to obtain any necessary consents or approvals pursuant to Section 9.2.5, Seller may extend the Closing
Date to a date not later than thirty-five (35) days following the Closing Date
specified in the first sentence of this paragraph. 

5.1.1           
Purchaser's Extension.  Provided that Purchaser is not in
default under this Contract, Purchaser shall be permitted one 15-day extension
of the Closing Date as specified in the first sentence of Section 5.1, by: (i) delivering written notice to
Seller no later than 10 days prior to the scheduled Closing Date, and (ii)
simultaneously with such notice to Seller, delivering to Escrow Agent an amount
equal to $50,000.00, which amount when received shall be added to and become
part of the Deposit hereunder, shall be non-refundable (except as otherwise
expressly provided herein with respect to the Deposit), and shall be held,
credited and disbursed in the same manner as provided hereunder with respect to
the Deposit.

5.2             
Seller Closing Deliveries.  Except for the closing
statement which shall be delivered on or before the Closing Date, Seller shall
deliver to Escrow Agent, each of the following items no later than 1 Business
Day prior to the Closing Date:

5.2.1       
Special Warranty Deed (the "Deed") in the form attached as
Exhibit B to Purchaser, subject to the Permitted Exceptions.

5.2.2       
A Bill of Sale in the form attached as Exhibit C.

5.2.3       
A General Assignment in the form attached as Exhibit D (the
"General Assignment").

5.2.4       
An Assignment of Leases and Security Deposits in the form attached as
Exhibit E (the "Leases Assignment").

5.2.5       
Seller's counterpart signature to the closing statement prepared by Title
Insurer.

5.2.6       
A title affidavit or an indemnity form reasonably acceptable to Seller,
which is sufficient to enable Title Insurer to delete the standard pre-printed
exceptions to the title insurance policy to be issued pursuant to the Title
Commitment.

5.2.7       
A certification of Seller's non-foreign status pursuant to Section 1445
of the Internal Revenue Code of 1986, as amended.

5.2.8       
Resolutions, certificates of good standing, and such other organizational
documents as Title Insurer shall reasonably require evidencing Seller's
authority to consummate this transaction.

5.2.9       
An updated Rent Roll effective as of a date no more than 3 Business Days
prior to the Closing Date; provided, however, that the content of such updated
Rent Roll shall in no event expand or modify the conditions to Purchaser's
obligation to close as specified under Section 9.1.

5.2.10    An updated
Property Contracts List effective as of a date no more than 3 Business Days
prior to the Closing Date; provided, however, that the content of such updated
Property Contracts List shall in no event expand or modify the conditions to
Purchaser's obligation to close as specified under Section 9.1.

5.2.11    Any cancellation
fees or penalties due to any vendor under any Terminated Contract as a result of
the termination thereof.

5.2.12    Such notices,
transfer disclosures, affidavits or other similar documents that are required by
applicable laws to be executed by Seller or otherwise reasonably necessary in
order to consummate the transactions contemplated under terms of the
Contract.

5.2.13    An executed copy
of an Arizona Affidavit of Real Property Value, attached hereto as Exhibit
I (the “Real Property Affidavit”).

5.3             
Purchaser Closing Deliveries.  Except for:
(i) the closing statement which shall be delivered on or before the Closing
Date, and (ii) the balance of the Purchase Price which is to be delivered
at the time specified in Section 2.2.3, Purchaser shall deliver to
Escrow Agent, each of the following items no later than 1 Business Day prior to
the Closing Date:

5.3.1       
The full Purchase Price (with credit for the Deposit), plus or minus the
adjustments or prorations required by this Contract.

5.3.2       
Purchaser’s counterpart signature to the closing statement prepared by
Title Insurer.

5.3.3       
A countersigned counterpart of the General Assignment.

5.3.4       
A countersigned counterpart of the Leases Assignment.

5.3.5       
Notification letters to all Tenants prepared and executed by Purchaser in
the form attached hereto as Exhibit G, which shall be delivered to all
Tenants by Purchaser immediately after Closing.

5.3.6       
Resolutions, certificates of good standing, and such other organizational
documents as Title Insurer shall reasonably require evidencing Purchaser's
authority to consummate this transaction.

5.3.7       
Such notices, transfer disclosures, affidavits or other similar documents
that are required by applicable law to be executed by Purchaser or otherwise
reasonably necessary in order to consummate the transactions contemplated under
this Contract.

5.3.8       
A countersigned counterpart of the Real Property Affidavit.

5.4             
Closing Prorations and Adjustments.

5.4.1       
General.  All normal and customarily proratable items,
including, without limitation, collected rents, operating expenses, personal
property taxes, other operating expenses and fees, shall be prorated as of the
Closing Date, Seller being charged or credited, as appropriate, for all of same
attributable to the period up to the Closing Date (and credited for any amounts
paid by Seller attributable to the period on or after the Closing Date, if
assumed by Purchaser) and Purchaser being responsible for, and credited or
charged, as the case may be, for all of the same attributable to the period on
and after the Closing Date.  Seller shall prepare a proration schedule (the
"Proration Schedule") of the adjustments described in this
Section 5.4 prior to Closing and
shall use good faith efforts to deliver such Proration Schedule 2 days prior to
Closing.  

5.4.2       
Operating Expenses.  All of the operating, maintenance, taxes
(other than real estate taxes), and other expenses incurred in operating the
Property that Seller customarily pays, and any other costs incurred in the
ordinary course of business for the management and operation of the Property,
shall be prorated on an accrual basis.  Seller shall pay all such expenses
that accrue prior to the Closing Date and Purchaser shall pay all such expenses
that accrue from and after the Closing Date.

5.4.3       
Utilities.  The final readings and final billings for
utilities will be made if possible as of the Closing Date, in which case Seller
shall pay all such bills as of the Closing Date and no proration shall be made
at the Closing with respect to utility bills.  Otherwise, a proration shall
be made based upon the parties' reasonable good faith estimate.  Seller
shall be entitled to the return of any deposit(s) posted by it with any utility
company, and Seller shall notify each utility company serving the Property to
terminate Seller's account, effective as of noon on the Closing Date. 
Seller shall have no responsibility or liability for Purchaser's failure to
arrange utility service for the Property as of the Closing Date.  Purchaser
shall indemnify, hold harmless and, if requested by Seller (in Seller's sole
discretion), defend (with counsel approved by Seller) Seller's Indemnified
Parties from and against any and all Losses arising from or related to
Purchaser's failure to arrange utility service as of the Closing Date.

5.4.4       
Real Estate Taxes.  Any real estate ad valorem or similar
taxes for the Property, or any installment of assessments payable in
installments which installment is payable in the
calendar year of Closing, shall be prorated to the date of Closing, based upon
actual days involved.  The proration of real property taxes or installments
of assessments shall be based upon the assessed valuation and tax rate figures
(assuming payment at the earliest time to allow for the maximum possible
discount) for the year in which the Closing occurs to the extent the same are
available; provided, however, that in the event that actual figures (whether for
the assessed value of the Property or for the tax rate) for the year of Closing
are not available at the Closing Date, the proration shall be made using figures
from the preceding year (assuming payment at the earliest time to allow for the
maximum possible discount).  The proration of real property taxes or
installments of assessments shall be final and not subject to re-adjustment
after Closing.

5.4.5       
Property Contracts.  Purchaser shall assume at Closing the
obligations under the Property Contracts assumed by Purchaser; however,
operating expenses shall be prorated under Section 5.4.2.

5.4.6       
Leases.

5.4.6.1           
All collected rent (whether fixed monthly rentals, additional rentals,
escalation rentals, retroactive rentals, operating cost pass-throughs or other
sums and charges payable by Tenants under the Leases), income and expenses from
any portion of the Property shall be prorated as of the Closing Date. 
Purchaser shall receive all collected rent and income attributable to dates from
and after the Closing Date.  Seller shall receive all collected rent and
income attributable to dates prior to the Closing Date.  In addition, if
Purchaser elects to terminate any utility rebilling contract associated with the
Property, then Seller shall receive a credit at Closing equal to the average of
the amount of the monthly utility bill associated with the Property for the
preceding 12 months, multiplied by 3.  Notwithstanding the foregoing, no
prorations shall be made in relation to either (a) non-delinquent rents which
have not been collected as of the Closing Date, or (b) delinquent rents
existing, if any, as of the Closing Date (the foregoing (a) and (b) referred to
herein as the "Uncollected Rents").  In adjusting for
Uncollected Rents, no adjustments shall be made in Seller's favor for rents
which have accrued and are unpaid as of the Closing, but Purchaser shall pay
Seller such accrued Uncollected Rents as and when collected by Purchaser. 
For a period of 180 days following Closing, Purchaser agrees to bill Tenants of
the Property for all Uncollected Rents and to take reasonable actions (which
shall not include an obligation to commence legal action) to collect Uncollected
Rents.  Notwithstanding the foregoing, Purchaser's obligation to collect
Uncollected Rents shall be limited to Uncollected Rents of not more than 90 days
past due, and Purchaser's collection of rents shall be applied, first, towards
current rent due and owing under the Leases, second, to Purchaser’s reasonable
third-party costs of such collection, and third, to Uncollected Rents. 
After the Closing, Seller shall continue to have the right, but not the
obligation, in its own name, to demand payment of and to collect Uncollected
Rents owed to Seller by any Tenant, which right shall include, without
limitation, the right to continue or commence legal actions or proceedings
against any Tenant and the delivery of the Leases Assignment shall not
constitute a waiver by Seller of such right; provided however, that the
foregoing right of Seller shall be limited to actions seeking monetary damages
and, in no event, shall Seller seek to evict any Tenants in any action to
collect Uncollected Rents.  Purchaser agrees to cooperate with Seller in
connection with all efforts by Seller to collect such Uncollected Rents and to
take all steps, whether before or after the Closing Date, as may be necessary to
carry out the intention of the foregoing; provided, however, that Purchaser's
obligation to cooperate with Seller pursuant to this
sentence shall not obligate Purchaser to terminate any Tenant lease with an
existing Tenant or evict any existing Tenant from the Property.

5.4.6.2           
At Closing, Purchaser shall receive a credit against the Purchase Price
in an amount equal to the received and unapplied balance of all cash (or cash
equivalent) Tenant Deposits, including, but not limited to, security, damage,
pet or other refundable deposits paid by any of the Tenants to secure their
respective obligations under the Leases, together, in all cases, with any
interest payable to the Tenants thereunder as may be required by their
respective Tenant Lease or state law (the "Tenant Security Deposit
Balance").  Any cash (or cash equivalents) held by Seller which
constitutes the Tenant Security Deposit Balance shall be retained by Seller in
exchange for the foregoing credit against the Purchase Price and shall not be
transferred by Seller pursuant to this Contract (or any of the documents
delivered at Closing), but the obligation with respect to the Tenant Security
Deposit Balance nonetheless shall be assumed by Purchaser.  The Tenant
Security Deposit Balance shall not include any non-refundable deposits or fees
paid by Tenants to Seller, either pursuant to the Leases or otherwise.

5.4.7       
Insurance.  No proration shall be made in relation to
insurance premiums and insurance policies will not be assigned to
Purchaser.  Seller shall have the risk of loss of the Property until 11:59
p.m. the day prior to Closing Date (“Risk of Loss Transfer”),
after which time the risk of loss shall pass to Purchaser and Purchaser shall be
responsible for obtaining its own insurance thereafter.

5.4.8       
Employees.  All of Seller's and Seller's manager's on-site
employees shall have their employment at the Property terminated as of the
Closing Date.

5.4.9       
Closing Costs.  Purchaser shall pay any transfer, mortgage
assumption, sales, use, gross receipts or similar taxes, any premiums or fees
required to be paid by Purchaser with respect to the Title Policy pursuant to
Section 4.1, and one-half of the
customary closing costs of the Escrow Agent.  Seller shall pay the base
premium for the Title Policy to the extent required by Section 4.1, the cost of recording any instruments
required to discharge any liens or encumbrances against the Property not caused
by Purchaser's actions and one-half of the customary closing costs of the Escrow
Agent.   

5.4.10    Utility
Contracts.  Intentionally deleted.

5.4.11   
Possession.  Possession of the Property, subject to the
Leases, Property Contracts, other than Terminated Contracts, and Permitted
Exceptions, shall be delivered to Purchaser at the Closing upon release from
escrow of all items to be delivered by Purchaser pursuant to Section
5.3.  To the extent reasonably
available to Seller, originals or copies of the Leases and Property Contracts,
lease files, warranties, guaranties, operating manuals, keys to the property,
and Seller's books and records (other than proprietary information)
(collectively, "Seller's Property-Related Files and Records")
regarding the Property shall be made available to Purchaser at the Property
after the Closing.  Purchaser agrees, for a period of not less than three
(3) years after the Closing (the "Records Hold Period"), to (a)
provide and allow Seller reasonable access to Seller's Property-Related Files
and Records for purposes of inspection and copying thereof, and (b) reasonably
maintain and preserve Seller's Property-Related Files and Records.  If at
any time after the Records Hold Period, Purchaser desires to dispose of Seller's
Property-Related Files and Records, Purchaser must first
provide Seller prior written notice (the "Records Disposal
Notice").  Seller shall have a period of 30 days after receipt of
the Records Disposal Notice to enter the Property (or such other location where
such records are then stored) and remove or copy those of Seller's
Property-Related Files and Records that Seller desires to retain.  

5.5             
Post Closing Adjustments.  Purchaser or Seller may
request that Purchaser and Seller undertake to re-adjust any item on the
Proration Schedule (or any item omitted therefrom), with the exception of real
property taxes which shall be final and not subject to readjustment, in
accordance with the provisions of Section 5.4 of this Contract; provided, however, that
neither party shall have any obligation to re-adjust any items (a) after the
expiration of 60 days after Closing, or (b) subject to such 60-day period,
unless such items exceed $5,000.00 in the aggregate.

Article
VI
REPRESENTATIONS AND WARRANTIES OF SELLER AND PURCHASER

6.1             
Seller's Representations.  Except, in all cases, for
any fact, information or condition disclosed in the Title Documents, the
Permitted Exceptions, the Property Contracts, or the Materials, or which is
otherwise known by Purchaser prior to the Closing, Seller represents and
warrants to Purchaser the following (collectively, the "Seller's
Representations") as of the Effective Date and as of the Closing Date;
provided that Purchaser's remedies if any such Seller's Representations are
untrue as of the Closing Date are limited to those set forth in Section
9.1.

6.1.1       
Seller is validly existing and in good standing under the laws of the
state of its formation set forth in the initial paragraph of this Contract; and,
subject to Section 9.2.5 has
or at the Closing shall have the entity power and authority to sell and convey
the Property and to execute the documents to be executed by Seller and prior to
the Closing will have taken as applicable, all corporate, partnership, limited
liability company or equivalent entity actions required for the execution and
delivery of this Contract, and the consummation of the transactions contemplated
by this Contract.  The compliance with or fulfillment of the terms and
conditions hereof will not conflict with, or result in a breach of, the terms,
conditions or provisions of, or constitute a default under, any contract to
which Seller is a party or by which Seller is otherwise bound, which conflict,
breach or default would have a material adverse affect on Seller's ability to
consummate the transaction contemplated by this Contract or on the
Property.  Subject to Section 9.2.5, this Contract is a valid and
binding agreement against Seller in accordance with its terms;

6.1.2       
Seller is not a "foreign person," as that term is used and defined in the
Internal Revenue Code, Section 1445, as amended;

6.1.3       
Except for (a) any actions by Seller to evict Tenants under the Leases,
or (b) any matter covered by Seller's current insurance policy(ies), to Seller's
knowledge, there are no material actions, proceedings, litigation or
governmental investigations or condemnation actions either pending or threatened
in writing against the Property, which will adversely impact Seller's ability to
convey the Property;

6.1.4       
To Seller's knowledge: (a) Seller has not received any written notice of
any material default by Seller under any of the Property Contracts that will not
be terminated on the Closing Date, and (b) Seller has not given any written
notice of any material default by a vendor to such vendor under any Property
Contracts that will not be terminated on the Closing Date;

6.1.5       
To Seller's knowledge, the Rent Roll (as updated pursuant to Section
5.2.9) is accurate in all
material respects;

6.1.6       
To Seller's knowledge, the Property Contracts List (as updated pursuant
to Section 5.2.10) is
accurate in all material respects;

6.1.7       
To Seller’s knowledge, neither the Property nor Seller’s operation of the
Property is in material violation of any federal, state, county or municipal
law, ordinance, order, regulation or requirement affecting the Property;

6.1.8       
To Seller’s knowledge: (a) no hazardous or toxic materials or other
substances regulated by applicable federal or state environmental laws are
stored by Seller on, in or under the Property in quantities which violate
applicable laws governing such materials or substances, and (b) the Property is
not used by Seller for the storage, treatment, generation or manufacture of any
hazardous or toxic materials or other substances in a manner which would
constitute a violation of applicable federal or state environmental laws;
and

6.1.9       
Seller is the sole owner of the Property. 

6.2             
AS-IS.  Except as otherwise expressly set forth in
Seller's Representations:

6.2.1       
The Property is expressly purchased and sold "AS IS," "WHERE IS," and
"WITH ALL FAULTS."  

6.2.2       
The Purchase Price and the terms and conditions set forth herein are the
result of arm's-length bargaining between entities familiar with transactions of
this kind, and said price, terms and conditions reflect the fact that Purchaser
shall have the benefit of, but is not relying upon, any information provided by
Seller or Broker or statements, representations or warranties, express or
implied, made by or enforceable directly against Seller or Broker, including,
without limitation, any relating to the value of the Property, the physical or
environmental condition of the Property, any state, federal, county or local
law, ordinance, order or permit; or the suitability, compliance or lack of
compliance of the Property with any regulation, or any other attribute or matter
of or relating to the Property (other than any covenants of title contained in
the Deed conveying the Property and Seller's Representations).  Purchaser
agrees that Seller shall not be responsible or liable to Purchaser for any
defects, errors or omissions in the Materials, or on account of any conditions
affecting the Property.  

6.2.3       
Purchaser, its successors and assigns, and anyone claiming by, through or
under Purchaser, hereby fully releases Seller's Indemnified Parties from, and
irrevocably waives its right to maintain, any and all claims and causes of
action that it or they may now have or hereafter acquire against Seller's
Indemnified Parties with respect to any and all Losses arising from or related to any defects, errors, omissions in the
Materials or other conditions affecting the Property.  

6.2.4       
Purchaser represents and warrants that, as of the date hereof and as of
the Closing Date, it has and shall have reviewed and conducted such independent
analyses, studies (including, without limitation, environmental studies and
analyses concerning the presence of lead, asbestos, water intrusion and/or
fungal growth and any resulting damage, PCBs and radon in and about the
Property), reports, investigations and inspections as it deems appropriate in
connection with the Property.  If Seller  provides or has provided any
documents, summaries, opinions or work product of consultants, surveyors,
architects, engineers, title companies, governmental authorities or any other
person or entity with respect to the Property, including, without limitation,
the offering prepared by Broker, Purchaser and Seller agree that Seller has done
so or shall do so only for the convenience of both parties, Purchaser shall not
rely thereon and the reliance by Purchaser upon any such documents, summaries,
opinions or work product shall not create or give rise to any liability of or
against Seller's Indemnified Parties.  Purchaser acknowledges and agrees
that no representation has been made and no responsibility is assumed by Seller
with respect to current and future applicable zoning or building code
requirements or the compliance of the Property with any other laws, rules,
ordinances or regulations, the financial earning capacity or expense history of
the Property, the continuation of contracts, continued occupancy levels of the
Property, or any part thereof, or the continued occupancy by tenants of any
Leases or, without limiting any of the foregoing, occupancy at Closing. 

6.2.5       
Prior to Closing, Seller shall have the right, but not the obligation, to
enforce its rights against any and all Property occupants, guests or
tenants.  Purchaser agrees that the departure or removal, prior to Closing,
of any of such guests, occupants or tenants shall not be the basis for, nor
shall it give rise to, any claim on the part of Purchaser, nor shall it affect
the obligations of Purchaser under this Contract in any manner whatsoever; and
Purchaser shall close title and accept delivery of the Deed with or without such
tenants in possession and without any allowance or reduction in the Purchase
Price under this Contract.

6.2.6       
Purchaser hereby releases Seller from any and all claims and liabilities
relating to the matters set forth in this Section.  

6.3             
Survival of Seller's Representations.  Seller and
Purchaser agree that Seller's Representations shall survive Closing for a period
of 6 months (the "Survival Period").  Seller shall have no
liability after the Survival Period with respect to Seller's Representations
contained herein except to the extent that Purchaser commenced litigation
against Seller during the Survival Period for breach of any of Seller's
Representations.  Under no circumstances shall Seller be liable to
Purchaser for more than $300,000 in any individual instance or in the aggregate
for all breaches of Seller's Representations, nor shall Purchaser be entitled to
bring any claim for a breach of Seller's Representations unless the claim for
damages (either in the aggregate or as to any individual claim) by Purchaser
exceeds $5,000.  In the event that Seller breaches any representation
contained in Section 6.1 and
Purchaser had knowledge of such breach prior to the Closing Date, and elected to
close regardless, Purchaser shall be deemed to have waived any right of
recovery, and Seller shall not have any liability in connection therewith.

6.4             
Definition of Seller's Knowledge.  Any representations
and warranties made "to the knowledge of Seller" shall not be deemed to imply
any duty of inquiry.  For purposes of this Contract, the term Seller's
"knowledge" shall mean and refer only to actual knowledge of the
Regional Property Manager and the Community Manager and shall not be construed
to refer to the knowledge of any other partner, officer, director, agent,
employee or representative of Seller, or any affiliate of Seller, or to impose
upon such Regional Property Manager and Community Manager any duty to
investigate the matter to which such actual knowledge or the absence thereof
pertains, or to impose upon such Regional Property Manager and Community Manager
any individual personal liability.  As used herein, the term
"Regional Property Manager" shall refer to Heather Stidham
who is the regional property manager handling this Property and the term
"Community Manager" shall refer to Heather Stidham who is
the community manager handling this Property.

6.5             
Representations and Warranties of Purchaser.  For the
purpose of inducing Seller to enter into this Contract and to consummate the
sale and purchase of the Property in accordance herewith, Purchaser represents
and warrants to Seller the following as of the Effective Date and as of the
Closing Date:

6.5.1       
Purchaser is a limited liability company duly organized, validly existing
and in good standing under the laws of Washington.

6.5.2       
Purchaser, acting through any of its or their duly empowered and
authorized officers or members, has all necessary entity power and authority to
own and use its properties and to transact the business in which it is engaged,
and has full power and authority to enter into this Contract, to execute and
deliver the documents and instruments required of Purchaser herein, and to
perform its obligations hereunder; and no consent of any of Purchaser's
partners, directors, officers or members are required to so empower or authorize
Purchaser.  The compliance with or fulfillment of the terms and conditions
hereof will not conflict with, or result in a breach of, the terms, conditions
or provisions of, or constitute a default under, any contract to which Purchaser
is a party or by which Purchaser is otherwise bound, which conflict, breach or
default would have a material adverse affect on Purchaser's ability to
consummate the transaction contemplated by this Contract.  This Contract is
a valid, binding and enforceable agreement against Purchaser in accordance with
its terms.

6.5.3       
No pending or, to the knowledge of Purchaser, threatened litigation
exists which if determined adversely would restrain the consummation of the
transactions contemplated by this Contract or would declare illegal, invalid or
non-binding any of Purchaser's obligations or covenants to Seller.

6.5.4       
Other than Seller's Representations, Purchaser has not relied on any
representation or warranty made by Seller or any representative of Seller
(including, without limitation, Broker) in connection with this Contract and the
acquisition of the Property.

6.5.5       
The Broker and its affiliates do not, and will not at the Closing, have
any direct or indirect legal, beneficial, economic or voting interest in
Purchaser (or in an assignee of Purchaser, which pursuant to Section
14.3, acquires the Property at the
Closing), nor has Purchaser or any affiliate of Purchaser granted (as of the
Effective Date or the Closing Date) the Broker or any of
its affiliates any right or option to acquire any direct or indirect legal,
beneficial, economic or voting interest in Purchaser.

6.5.6       
Purchaser is not a Prohibited Person.

6.5.7       
To Purchaser's knowledge, none of its investors, affiliates or brokers or
other agents (if any), acting or benefiting in any capacity in connection with
this Contract is a Prohibited Person.

6.5.8       
The funds or other assets Purchaser will transfer to Seller under this
Contract are not the property of, or beneficially owned, directly or indirectly,
by a Prohibited Person. 

6.5.9       
The funds or other assets Purchaser will transfer to Seller under this
Contract are not the proceeds of specified unlawful activity as defined by 18
U.S.C. § 1956(c)(7).

Article
VII
OPERATION OF THE PROPERTY

7.1             
Leases and Property Contracts.  During the period
of time from the Effective Date to the Closing Date, in the ordinary course of
business Seller may enter into new Property Contracts, new Leases, renew
existing Leases or modify, terminate or accept the surrender or forfeiture of
any of the Leases, modify any Property Contracts, or institute and prosecute any
available remedies for default under any Lease or Property Contract without
first obtaining the written consent of Purchaser; provided, however, Seller
agrees that, without the prior written consent of Purchaser, which consent shall
not be unreasonably withheld, conditioned or delayed, any new or renewed Leases
shall not have a term in excess of 1 year and any new Property Contract shall be
terminable upon 30 days notice without penalty.

7.2             
General Operation of Property.  Except as specifically
set forth in this Article VII,
Seller shall operate the Property after the Effective Date in the ordinary
course of business, and except as necessary in Seller's sole discretion to
address (a) any life or safety issue at the Property or (b) any other matter
which in Seller's reasonable discretion materially adversely affects the use,
operation or value of the Property, Seller will not make any material
alterations to the Property or remove any material Fixtures and Tangible
Personal Property without the prior written consent of Purchaser which consent
shall not be unreasonably withheld, denied or delayed.

7.3             
Liens.  Other than utility easements and temporary
construction easements granted by Seller in the ordinary course of business,
Seller covenants that it will not voluntarily create or cause any lien or
encumbrance to attach to the Property between the Effective Date and the Closing
Date (other than Leases and Property Contracts as provided in Section
7.1) unless Purchaser approves such
lien or encumbrance, which approval shall not be unreasonably withheld,
conditioned or delayed.  If Purchaser approves any such subsequent lien or
encumbrance, the same shall be deemed a Permitted Encumbrance for all purposes
hereunder.

7.4             
Rent-Ready Units.  Seller agrees that, at the Closing,
Purchaser shall receive a credit against the Purchase Price for the Property in
an amount equal to the product of (a) the number of Tenant Units on the date of
the Closing that are vacant (and have been vacant for more than 4 days prior to
the Closing) and not in Rent-Ready Condition, and (b) $500.00.

Article
VIII
PURCHASER FINANCING AND SEC CLEARANCE

8.1             
Purchaser Financing. 
Purchaser assumes full responsibility to obtain the funds required for
settlement.  Prior to expiration of the Feasibility Period, Purchaser shall
complete a detailed loan application with the lender of its choice (the
"Selected Lender") for financing Purchaser's acquisition of the
Property on terms and conditions satisfactory to Purchaser, in Purchaser's sole
and absolute discretion ("Loan Application").  Purchaser
agrees to notify Seller upon receipt of such Loan Application, and shall
promptly provide a copy of the same to Seller. 

8.2             
SEC Clearance Period.    

8.2.1       
Purchaser acknowledges that prior to consummating the transaction
contemplated in this Contract, Seller must satisfy certain requirements imposed
by the Securities and Exchange Commission ("SEC") relating to
filing an information statement.  Seller agrees to notify Purchaser in
writing upon satisfaction of its SEC requirements relating to this transaction
(the "SEC Notification").  If after the expiration of the
Feasibility Period but prior to Purchaser's receipt of the SEC Notification, and
provided Purchaser is not otherwise in default under this Contract, the Selected
Lender requires a Material Modification (defined below) to the Loan Application,
Purchaser shall have the right to terminate this Contract ("Seller's Loan
Termination Right") by delivering written notice to Seller ("SEC
Termination Notice") on or prior to the date which is two Business Days
after Purchaser's receipt of the SEC Notification, in which event this Contract
shall be of no further force and effect, subject to and except for the Survival
Provisions.  If Purchaser terminates the Contract pursuant to this
Section 8.2.1
Purchaser shall be entitled to the return of its Deposit.  If Purchaser
fails to provide Seller with the SEC Termination Notice on or prior to the date
which is 2 Business Days after Purchaser's receipt of the SEC Notification, in
strict accordance with the notice provisions of this Contract, Purchaser's right
to terminate under this Section 8.2.1 shall be permanently
waived, this Contract shall remain in full force and effect, and the Deposit
shall be nonrefundable, except as otherwise expressly set forth herein.

The
term "Material Modification" shall mean either (i) the interest
rate at which Selected Lender is willing to loan to Purchaser has increased by
more than 50 basis points, or (ii) the principal amount that the Selected Lender
is willing to loan to Purchaser has decreased by more than $300,000.00.  

 

Article
IX
CONDITIONS PRECEDENT TO CLOSING

9.1             
Purchaser's Conditions to Closing.  Purchaser's
obligation to close under this Contract shall be subject to and conditioned upon
the fulfillment of the following conditions precedent:

9.1.1       
All of the documents required to be delivered by Seller to Purchaser at
the Closing pursuant to the terms and conditions hereof shall have been
delivered;

9.1.2       
Each of Seller's Representations shall be true in all material respects
as of the Closing Date;

9.1.3       
Seller shall have complied with, fulfilled and performed in all material
respects each of the covenants, terms and conditions to be complied with,
fulfilled or performed by Seller hereunder;

9.1.4       
Neither Seller nor Seller's general partner shall be a debtor in any
bankruptcy proceeding; and

9.1.5       
There shall not be pending, to the knowledge of either Seller or
Purchaser, any litigation or threatened litigation against Seller which, if
determined adversely, would restrain the consummation of any of the transactions
contemplated by this Contract or declare illegal, invalid or nonbinding any of
the covenants or obligations of the Seller.

Notwithstanding
anything to the contrary, there are no other conditions to Purchaser's
obligation to Close except as expressly set forth in this Section 9.1.  If any condition set forth in
this Section 9.1 is not met,
Purchaser may (a) waive any of the foregoing conditions and proceed to Closing
on the Closing Date with no offset or deduction from the Purchase Price,
(b) terminate this Contract and receive a return of the Deposit from the
Escrow Agent, or (c) if such failure constitutes a default by Seller of its
covenants hereunder, exercise any of its remedies pursuant to Section 11.2.

9.2             
Seller's Conditions to Closing.  Without limiting any
of the rights of Seller elsewhere provided for in this Contract, Seller's
obligation to close with respect to conveyance of the Property under this
Contract shall be subject to and conditioned upon the fulfillment of the
following conditions precedent:

9.2.1       
All of the documents and funds required to be delivered by Purchaser to
Seller at the Closing pursuant to the terms and conditions hereof shall have
been delivered;

9.2.2       
Each of the representations, warranties and covenants of Purchaser
contained herein shall be true in all material respects as of the Closing
Date;

9.2.3       
Purchaser shall have complied with, fulfilled and performed in all
material respects each of the covenants, terms and conditions to be complied
with, fulfilled or performed by Purchaser hereunder;

9.2.4       
Neither Purchaser nor Purchaser's Manager shall be a debtor in any
bankruptcy proceeding;

9.2.5       
Seller shall have received all consents, documentation and approvals
necessary to consummate and facilitate the transactions contemplated hereby,
including, without limitation, a tax free exchange pursuant to Section 14.18 (and the amendment of Seller's
(or Seller's affiliates') partnership or other organizational documents in
connection therewith) (a) from Seller's partners, members, managers,
shareholders or directors to the extent required by Seller's (or Seller's
affiliates') organizational documents, and (b) as required by law; and

9.2.6       
There shall not be any pending litigation or, to the knowledge of either
Purchaser or Seller, any litigation threatened in writing against Purchaser,
which, if adversely determined, would restrain the consummation of any of the
transactions contemplated by this Contract or declare illegal, invalid or
nonbinding any of the covenants or obligations of the Purchaser.

If
any of the conditions to Seller's obligation to close set forth in Sections 9.2.1, 9.2.2, 9.2.3, 9.2.4, or
9.2.6 with respect to the conveyance of the
Property under this Contract are not met, Seller may (a) waive any of the
foregoing conditions and proceed to Closing on the Closing Date, (b) terminate
this Contract, or (c) if such failure constitutes a default by Purchaser,
exercise any of its remedies pursuant to Section 11.1.  If the condition to Seller's
obligation to close set forth in Section 9.2.5
with respect to the conveyance of the Property under this Contract is not met
and Seller has not delivered the SEC Notification to Purchaser, Seller may (a)
waive such condition and proceed to Closing on the Closing Date, or (b)
terminate this Contract.  If the condition to Seller's obligation to close
set forth in Section 9.2.5 with respect to the
conveyance of the Property under this Contract is not met, and Seller has
delivered the SEC Notification to Purchaser, then Seller may (a) waive such
condition and proceed to Closing on the Closing Date, or (b) terminate this
Contract, in which event the Deposit shall be returned to Purchaser, and Seller
shall pay Purchaser its direct and actual out-of-pocket expenses (documented by
paid invoices to third parties) in connection with this transaction, in an
amount not to exceed $75,000.00, and reimburse Purchaser for its rate lock fee
in an amount not to exceed 1% of Purchaser's loan amount.  Upon the request
of Seller, Purchaser agrees that it shall promptly deliver to Seller an
assignment of all of Purchaser's right, title and interest in and to (together
with possession of) all plans, studies, surveys, reports, and other materials
paid for with the out-of-pocket expenses reimbursed by Seller pursuant to the
preceding sentence.

Article
X
BROKERAGE

10.1         
Indemnity.  Seller represents and warrants to
Purchaser that it has dealt only with Transwestern, 2415 East
Camelback Rd., Suite 520, Phoenix, Arizona  85016, (602)
386-1181, (602) 956-5333 (fax) ("Broker") in connection with
this Contract.  Seller and Purchaser each represents and warrants to the
other that, other than Broker, it has not dealt with or utilized the services of
any other real estate broker, sales person or finder in connection with this
Contract, and each party agrees to indemnify, hold harmless, and, if requested
in the sole and absolute discretion of the indemnitee, defend (with counsel
approved by the indemnitee) the other party from and against all Losses relating
to brokerage commissions and finder's fees arising from or attributable to the
acts or omissions of the indemnifying party.  

10.2         
Broker Commission.  If Closing occurs, Seller agrees
to pay Broker a commission according to the terms of a separate contract. 
Broker shall not be deemed a party or third party beneficiary of this
Contract.  As a condition to Seller's obligation to pay the commission,
Broker shall execute the signature page for Broker attached hereto solely for
purposes of confirming the matters set forth therein.

Article
XI
DEFAULTS AND REMEDIES

11.1         
Purchaser Default.  If Purchaser defaults on its
obligations hereunder to (a) deliver the Initial Deposit or Additional Deposit
(or any other deposit or payment required of Purchaser hereunder), (b) deliver
to Seller the deliveries specified under Section 5.3 on the date required thereunder, or (c)
deliver the Purchase Price in accordance with Article II and close on the
purchase of the Property on the Closing Date, then, immediately and without the
right to receive notice or to cure pursuant to Section 2.3.3, Purchaser shall forfeit the
Deposit, and the Escrow Agent shall deliver the Deposit to Seller, and neither
party shall be obligated to proceed with the purchase and sale of the
Property.  If Purchaser defaults on any of its other representations,
warranties or obligations under this Contract, and such default continues for
more than 10 days after written notice from Seller, then Purchaser shall forfeit
the Deposit, and the Escrow Agent shall deliver the Deposit to Seller, and
neither party shall be obligated to proceed with the purchase and sale of the
Property.  The Deposit is liquidated damages and recourse to the Deposit
is, except for Purchaser's indemnity and confidentiality obligations hereunder,
Seller's sole and exclusive remedy for Purchaser's failure to perform its
obligation to purchase the Property or breach of a representation or
warranty.  Seller expressly waives the remedies of specific performance and
additional damages for such default by Purchaser.  SELLER AND PURCHASER
ACKNOWLEDGE THAT SELLER'S DAMAGES WOULD BE DIFFICULT TO DETERMINE, AND THAT THE
DEPOSIT IS A REASONABLE ESTIMATE OF SELLER'S DAMAGES RESULTING FROM A DEFAULT BY
PURCHASER IN ITS OBLIGATION TO PURCHASE THE PROPERTY.  SELLER AND PURCHASER
FURTHER AGREE THAT THIS SECTION 11.1 IS INTENDED TO AND DOES LIQUIDATE
THE AMOUNT OF DAMAGES DUE SELLER, AND SHALL BE SELLER'S EXCLUSIVE REMEDY AGAINST
PURCHASER, BOTH AT LAW AND IN EQUITY, ARISING FROM OR RELATED TO A BREACH BY
PURCHASER OF ITS OBLIGATION TO CONSUMMATE THE TRANSACTIONS CONTEMPLATED BY THIS
CONTRACT, OTHER THAN WITH RESPECT TO PURCHASER'S INDEMNITY AND CONFIDENTIALITY
OBLIGATIONS HEREUNDER.  FURTHER, THE LIQUIDATED DAMAGE PROVISIONS OF THIS
SECTION WILL NOT ACT TO LIMIT THE AMOUNT OF DAMAGES RECOVERABLE BY SELLER
AGAINST PURCHASER UNDER A.R.S. §§ 12 1103, 12 1191, 33 420, OR 33 713, OR
RECOVERABLE BY SELLER AGAINST PURCHASER IN THE EVENT THAT PURCHASER IMPROPERLY
RECORDS A LIS PENDENS OR OTHER DOCUMENT OR INSTRUMENT AGAINST THE PROPERTY.

11.2         
Seller Default.  If Seller (i) defaults on its
obligations hereunder to deliver to Escrow Agent the deliveries specified under
Section 5.2 on the date required
thereunder, or to close on the sale of the Property on the Closing Date, or (ii)
prior to the Closing defaults on its covenants or obligations under this
Contract, and such default continues for more than 10 days after written notice
from Purchaser, then, at Purchaser's election and as Purchaser's exclusive remedy, Purchaser may either (a) terminate this Contract, and
all payments and things of value, including the Deposit, provided by Purchaser
hereunder shall be returned to Purchaser and Purchaser may recover, as its sole
recoverable damages (but without limiting its right to receive a refund of the
Deposit), its direct and actual out-of-pocket expenses and costs (documented by
paid invoices to third parties) in connection with this transaction, which
damages shall not exceed $50,000 in the aggregate, or (b) subject to the
conditions below, seek specific performance of Seller’s obligation to close on
the sale of the Property pursuant to this Contract (but not damages). 
Purchaser may seek specific performance of Seller's obligation to close on the
sale of the Property pursuant to this Contract only if, as a condition precedent
to initiating such litigation for specific performance, Purchaser shall (x) not
otherwise be in default under this Contract; and (y) file suit therefor with the
court on or before the 90th day after the Closing Date.  If Purchaser fails
to file an action for specific performance within 90 days after the Closing
Date, then Purchaser shall be deemed to have elected to terminate the Contract
in accordance with subsection (a) above.  Purchaser agrees that it shall
promptly deliver to Seller an assignment of all of Purchaser's right, title and
interest in and to (together with possession of) all plans, studies, surveys,
reports, and other materials paid for with the out-of-pocket expenses reimbursed
by Seller pursuant to the first sentence of this Section 11.2.  SELLER AND PURCHASER FURTHER
AGREE THAT THIS SECTION 11.2 IS INTENDED TO AND DOES LIMIT THE AMOUNT
OF DAMAGES DUE PURCHASER AND THE REMEDIES AVAILABLE TO PURCHASER, AND SHALL BE
PURCHASER'S EXCLUSIVE REMEDY AGAINST SELLER, BOTH AT LAW AND IN EQUITY ARISING
FROM OR RELATED TO A BREACH BY SELLER OF ITS COVENANTS OR ITS OBLIGATION TO
CONSUMMATE THE TRANSACTIONS CONTEMPLATED BY THIS CONTRACT.  UNDER NO
CIRCUMSTANCES MAY PURCHASER SEEK OR BE ENTITLED TO RECOVER ANY SPECIAL,
CONSEQUENTIAL, PUNITIVE, SPECULATIVE OR INDIRECT DAMAGES, ALL OF WHICH PURCHASER
SPECIFICALLY WAIVES, FROM SELLER FOR ANY BREACH BY SELLER, OF ITS COVENANTS OR
ITS OBLIGATIONS UNDER THIS CONTRACT.  PURCHASER SPECIFICALLY WAIVES THE
RIGHT TO FILE ANY LIS PENDENS OR ANY LIEN AGAINST THE PROPERTY UNLESS AND UNTIL
IT HAS IRREVOCABLY ELECTED TO SEEK SPECIFIC PERFORMANCE OF THIS CONTRACT AND HAS
FILED AND IS DILIGENTLY PURSUING AN ACTION SEEKING SUCH REMEDY.

Article
XII
RISK OF LOSS OR CASUALTY

12.1         
Major Damage.  In the event that the Property is
damaged or destroyed by fire or other casualty prior to Risk of Loss Transfer,
and the cost for demolition, site cleaning, restoration, replacement, or other
repairs (collectively, the "Repairs") is more than $1,870,000.00
(a "Major Damage"), then Seller shall have no obligation to make
such Repairs, and shall notify Purchaser in writing of such damage or
destruction (the "Damage Notice").  If there is a Major
Damage, then Purchaser may elect, by delivering written notice to Seller on or
before the earlier of (x) Closing and (y) the date which is ten (10) days after
Purchaser's receipt of the Damage Notice, to terminate this Contract, in which
event the Deposit shall be returned to Purchaser.  In the event Purchaser
fails to timely terminate this Contract pursuant to this Section 12.1, this transaction shall be closed in
accordance with Section 12.3
below.

12.2         
Minor Damage.  In the event that the Property is
damaged or destroyed by fire or other casualty prior to Risk of Loss Transfer,
and the cost of Repairs is equal to or less than $1,870,000.00, then this
transaction shall be closed in accordance with Section 12.3, notwithstanding such
casualty.  In such event, Seller may at its election endeavor to make such
Repairs to the extent of any recovery from insurance carried on the Property, if
such Repairs can be reasonably effected before the Closing.  Regardless of
Seller's election to commence such Repairs, or Seller's ability to complete such
Repairs prior to Closing, this transaction shall be closed in accordance with
Section 12.3 below.

12.3         
Closing.  In the event Purchaser fails to terminate
this Contract following a casualty as set forth in Section 12.1, or in the event of a casualty as set
forth in Section 12.2, then this
transaction shall be closed in accordance with the terms of the Contract, at
Seller's election, either (i) for the full Purchase Price, notwithstanding
any such casualty, in which case Purchaser shall, at Closing, execute and
deliver an assignment and assumption (in a form reasonably required by Seller)
of Seller's rights and obligations with respect to the insurance claim related
to such casualty, and thereafter Purchaser shall receive all insurance proceeds
pertaining to such claim, less any amounts which may already have been spent by
Seller for Repairs (plus a credit against the Purchase Price at Closing in the
amount of any deductible payable by Seller in connection therewith); or (ii) for
the full Purchase Price less a credit to Purchaser in the amount necessary to
complete such Repairs (less any amounts which may already have been spent by
Seller for Repairs). 

12.4         
Repairs.  To the extent that Seller elects to
commence any Repairs prior to Closing, then Seller shall be entitled to receive
and apply available insurance proceeds to any portion of such Repairs completed
or installed prior to Closing, with Purchaser being responsible for completion
of such Repairs after Closing.  To the extent that any Repairs have been
commenced prior to Closing, then the Property Contracts shall include, and
Purchaser shall assume at Closing, all construction and other contracts entered
into by Seller in connection with such Repairs; provided however, that (except
in the event of emergency, as determined in Seller’s sole discretion) Seller
will consult with Purchaser prior to entering into any such contract if
Purchaser will likely have to assume such Contract.  Notwithstanding the
foregoing to the contrary, Seller retains the sole right and authority to enter
into any such contract.

Article
XIII
EMINENT DOMAIN

13.1         
Eminent Domain.  In the event that, at the time of
Closing, any material part of the Property is (or previously has been) acquired,
or is about to be acquired, by any governmental agency by the powers of eminent
domain or transfer in lieu thereof (or in the event that at such time there is
any notice of any such acquisition or intent to acquire by any such governmental
agency), Purchaser shall have the right, at Purchaser's option, to terminate
this Contract by giving written notice within 10 days after Purchaser's receipt
from Seller of notice of the occurrence of such event, and if Purchaser so
terminates this Contract, Purchaser shall recover the Deposit hereunder. 
If Purchaser fails to terminate this Contract within such 10-day period, this
transaction shall be closed in accordance with the terms of this Contract for
the full Purchase Price and Purchaser shall receive the full benefit of any
condemnation award.  It is expressly agreed
between the parties hereto that this section shall in no way apply to customary
dedications for public purposes which may be necessary for the development of
the Property.

Article
XIV
MISCELLANEOUS

14.1         
Binding Effect of Contract.  This Contract shall not
be binding on either party until executed by both Purchaser and Seller. 
Neither the Escrow Agent's nor the Broker's execution of this Contract shall be
a prerequisite to its effectiveness.  Subject to Section 14.3, this Contract shall be binding upon and
inure to the benefit of Seller and Purchaser, and their respective successors
and permitted assigns.

14.2         
Exhibits and Schedules.  All Exhibits and Schedules,
whether or not annexed hereto, are a part of this Contract for all
purposes.

14.3         
Assignability.  Except to the extent required to
comply with the provisions of Section 14.18 related to a 1031 Exchange, this
Contract is not assignable by Purchaser without first obtaining the prior
written approval of Seller.  Notwithstanding the foregoing, Purchaser may
assign this Contract, without first obtaining the prior written approval of
Seller, to one or more entities so long as (a) Purchaser is an affiliate of the
purchasing entity(ies), (b) Purchaser is not released from its liability
hereunder, and (c) Purchaser provides written notice to Seller of any proposed
assignment no later than 10 days prior to the Closing Date.  As used
herein, an affiliate is a person or entity controlled by, under common control
with, or controlling another person or entity.

14.4         
Captions.  The captions, headings, and arrangements
used in this Contract are for convenience only and do not in any way affect,
limit, amplify, or modify the terms and provisions hereof.

14.5         
Number and Gender of Words.  Whenever herein the
singular number is used, the same shall include the plural where appropriate,
and words of any gender shall include each other gender where
appropriate.

14.6         
Notices.  All notices, demands, requests and other
communications required or permitted hereunder shall be in writing, and shall be
(a) personally delivered with a written receipt of delivery; (b) sent by a
nationally-recognized overnight delivery service requiring a written
acknowledgement of receipt or providing a certification of delivery or attempted
delivery; (c) sent by certified or registered mail, return receipt requested; or
(d) sent by confirmed facsimile transmission or electronic delivery with an
original copy thereof transmitted to the recipient by one of the means described
in subsections (a) through (c) no later than 3 Business Days thereafter. 
All notices shall be deemed effective when actually delivered as documented in a
delivery receipt; provided, however, that if the notice was sent by overnight
courier or mail as aforesaid and is affirmatively refused or cannot be delivered
during customary business hours by reason of the absence of a signatory to
acknowledge receipt, or by reason of a change of address with respect to which
the addressor did not have either knowledge or written notice delivered in
accordance with this paragraph, then the first attempted delivery shall be
deemed to constitute delivery.  Each party shall be entitled to change its
address for notices from time to time by delivering to
the other party notice thereof in the manner herein provided for the delivery of
notices.  All notices shall be sent to the addressee at its address set
forth following its name below: 

To
Purchaser:

 

HOLLAND
ACQUISITION CO., LLC

1111
Main Street

Suite
710

Vancouver,
Washington  98660

Attention: 
Eli Hanacek

Telephone: 
360-992-7442

Facsimile: 
360-992-7052

Email: 
eli@hollandpartners.net

 

with
a copy to:

 

OREGON
LAW GROUP, P.C.

1675
SW Marlow Avenue

Suite
306

Portland,
Oregon  97225

Attention: 
Elia Popovich, Esq.

Telephone: 
971-285-4261

Facsimile: 
971-285-4258

Email: 
elia@oregonlawgroup.com

 

To
Seller:

c/o AIMCO
4582 South Ulster Street Parkway
Suite
1100
Denver, Colorado  80237
Attention:  Mark
Reoch
Telephone:  303-691-4337 

Facsimile: 
303-300-3261 

Email: 
mark.reoch@aimco.com 

And:

c/o
AIMCO

4582
South Ulster Street Parkway 

Suite
1100

Denver,
Colorado  80237

Attention: 
Trent Johnson

Telephone: 
303-757-8101

Facsimile: 
720-200-6881

Email: 
trent.johnson@aimco.com

with a copy to:

TRANSWESTERN

2415
East Camelback Rd.

Suite
520

Phoenix,
Arizona  85016

Attention: 
Jack Hannum
Telephone:  602-386-1181
Facsimile:  602-
956-5333

Email: 
Jack.Hannum@transwestern.net

and
a copy to:

BROWNSTEIN HYATT FARBER SCHRECK LLP

410
17th Street

Suite
2200

Denver,
Colorado  80202

Attention: 
Gregory A. Vallin, Esq.
Telephone:  303-223-1103
Facsimile:
 303-223-0903
Email:  gvallin@bhfs.com

 

Any
notice required hereunder to be delivered to the Escrow Agent shall be delivered
in accordance with above provisions as follows:

FIRST
AMERICAN TITLE INSURANCE COMPANY

633
Third Avenue

New
York, New York  10017

Attention: 
Linda J. Isaacson

Telephone: 
212-850-0664

Email: 
LIsaacson@firstam.com

 

Unless
specifically required to be delivered to the Escrow Agent pursuant to the terms
of this Contract, no notice hereunder must be delivered to the Escrow Agent in
order to be effective so long as it is delivered to the other party in
accordance with the above provisions.

14.7         
Governing Law and Venue.  The laws of the State of
Arizona shall govern the validity, construction, enforcement, and
interpretation of this Contract, unless otherwise specified herein except for
the conflict of laws provisions thereof.  All claims, disputes and other
matters in question arising out of or relating to this Contract, or the breach
thereof, shall be decided by proceedings instituted and litigated in a court of
competent jurisdiction in the state in which the Property is situated, and the
parties hereto expressly consent to the venue and jurisdiction of such
court.

14.8         
Entire Agreement.  This Contract embodies the entire
Contract between the parties hereto concerning the subject matter hereof and
supersedes all prior conversations, proposals, negotiations, understandings and
contracts, whether written or oral.

14.9         
Amendments.  This Contract shall not be amended,
altered, changed, modified, supplemented or rescinded in any manner except by a
written contract executed by all of the parties; provided, however, that, (a)
the signature of the Escrow Agent shall not be required as to any amendment of
this Contract other than an amendment of Section 2.3, and (b) the signature of the Broker
shall not be required as to any amendment of this Contract.

14.10     
Severability.  In the event that any part of this
Contract shall be held to be invalid or unenforceable by a court of competent
jurisdiction, such provision shall be reformed, and enforced to the maximum
extent permitted by law.  If such provision cannot be reformed, it shall be
severed from this Contract and the remaining portions of this Contract shall be
valid and enforceable.

14.11     
Multiple Counterparts/Facsimile Signatures.  This
Contract may be executed in a number of identical counterparts.  This
Contract may be executed by facsimile signatures or electronic delivery of
signatures which shall be binding on the parties hereto, with original
signatures to be delivered as soon as reasonably practical thereafter.

14.12     
Construction.  No provision of this Contract shall be
construed in favor of, or against, any particular party by reason of any
presumption with respect to the drafting of this Contract; both parties, being
represented by counsel, having fully participated in the negotiation of this
instrument.

14.13     
Confidentiality.  Seller and Purchaser shall not
disclose the terms and conditions contained in this Contract and shall keep the
same confidential, provided that each may disclose the terms and conditions of
this Contract (a) as required by law, (b) to consummate the terms of this
Contract, or any financing relating thereto, or (c) to its lenders, attorneys
and accountants.  Furthermore, Seller may disclose the terms and conditions
of this Contract as is necessary, in Seller's sole discretion, in order for
Seller to fulfill the conditions set forth in Section 9.2.5, and to make any public disclosures
required under federal or state securities laws or regulations.  Any
information obtained by Purchaser in the course of its inspection of the
Property, and any Materials provided by Seller to Purchaser hereunder, shall be
confidential and Purchaser shall be prohibited from making such information
public to any other person or entity other than its Consultants, without
Seller's prior written authorization, which may be granted or denied in Seller's
sole discretion.  In addition, each party shall use its reasonable efforts
to prevent its Consultants from divulging any such confidential information to
any unrelated third parties except for the limited purpose of analyzing and
investigating such information for the purpose of consummating the transaction
contemplated by this Contract.  Unless and until the Closing occurs,
Purchaser shall not market the Property (or any portion thereof) to any
prospective purchaser or lessee without the prior written consent of Seller,
which consent may be withheld in Seller's sole discretion.

14.14     
Time of the Essence.  It is expressly agreed by the
parties hereto that time is of the essence with respect to this Contract and any
aspect thereof.

14.15     
Waiver.  No delay or omission to exercise any right or
power accruing upon any default, omission, or failure of performance hereunder
shall impair any right or power or shall be construed to be a waiver thereof,
but any such right and power may be exercised from time to time and as often as may be deemed expedient.  No
waiver, amendment, release, or modification of this Contract shall be
established by conduct, custom, or course of dealing and all waivers must be in
writing and signed by the waiving party.

14.16     
Attorneys' Fees.  In the event either party hereto
commences litigation against the other to enforce its rights hereunder, the
prevailing party in such litigation shall be entitled to recover from the other
party its reasonable attorneys' fees and expenses incidental to such litigation,
including the cost of in-house counsel and any appeals. 

14.17     
Time Zone/Time Periods.  Any reference in this
Contract to a specific time shall refer to the time in the time zone where the
Property is located.  (For example, a reference to 3:00 p.m. refers to 3:00
p.m. MST if the Property is located in Denver, Colorado.)  Should the
last day of a time period fall on a weekend or legal holiday, the next Business
Day thereafter shall be considered the end of the time period.

14.18     
1031 Exchange.  Seller and Purchaser acknowledge
and agree that the purchase and sale of the Property may be part of a tax-free
exchange for either Purchaser or Seller pursuant to Section 1031 of the Code,
the regulations promulgated thereunder, revenue procedures, pronouncements and
other guidance issued by the Internal Revenue Service.  Each party hereby
agrees to cooperate with each other and take all reasonable steps on or before
the Closing Date to facilitate such exchange if requested by the other party,
provided that (a) no party making such accommodation shall be required to
acquire any substitute property, (b) such exchange shall not affect the
representations, warranties, liabilities and obligations of the parties to each
other under this Contract, (c) no party making such accommodation shall incur
any additional cost, expense or liability in connection with such exchange
(other than expenses of reviewing and executing documents required in connection
with such exchange), and (d) no dates in this Contract will be extended as a
result thereof.

14.19     
No Personal Liability of Officers, Trustees or
Directors.  Purchaser acknowledges that this Contract is entered
into by Seller which is an Arizona limited partnership, and Purchaser agrees
that none of Seller's Indemnified Parties shall have any personal liability
under this Contract or any document executed in connection with the transactions
contemplated by this Contract.  Seller acknowledges that this Contract is
entered into by Purchaser which is a Washington limited liability company, and
Seller agrees that none of Purchaser, or Purchaser’s partners, managers,
members, employees, officers, directors, trustees, shareholders, counsel,
representatives, or agents shall have any personal liability under this Contract
or any document executed in connection with the transactions contemplated by
this Contract.

14.20     
ADA Disclosure.  Purchaser
acknowledges that the Property may be subject to the federal Americans With
Disabilities Act (the "ADA") and the federal Fair Housing Act (the
"FHA").  The ADA requires, among other matters, that tenants
and/or owners of "public accommodations" remove barriers in order to make the
Property accessible to disabled persons and provide auxiliary aids and services
for hearing, vision or speech impaired persons.  Seller makes no warranty,
representation or guarantee of any type or kind with respect to the Property's
compliance with the ADA or the FHA (or any similar state or local law), and
Seller expressly disclaims any such representations.

14.21     
No Recording.  Purchaser shall not cause or allow this
Contract or any contract or other document related hereto, nor any memorandum or
other evidence hereof, to be recorded or become a public record without Seller's
prior written consent, which consent may be withheld at Seller's sole
discretion.  If Purchaser records this Contract or any other memorandum or
evidence thereof, Purchaser shall be in default of its obligations under this
Contract.  Purchaser hereby appoints Seller as Purchaser's attorney-in-fact
to prepare and record any documents necessary to effect the nullification and
release of the Contract or other memorandum or evidence thereof from the public
records.  This appointment shall be coupled with an interest and
irrevocable.

14.22     
Relationship of Parties.  Purchaser and Seller
acknowledge and agree that the relationship established between the parties
pursuant to this Contract is only that of a seller and a purchaser of
property.  Neither Purchaser nor Seller is, nor shall either hold itself
out to be, the agent, employee, joint venturer or partner of the other
party.

14.23     
AIMCO Marks.  Purchaser agrees that Seller, the
Property Manager or AIMCO, or their respective affiliates, are the sole owners
of all right, title and interest in and to the AIMCO Marks (or have the right to
use such AIMCO Marks pursuant to license agreements with third parties) and that
no right, title or interest in or to the AIMCO Marks is granted, transferred,
assigned or conveyed as a result of this Contract.  Purchaser further
agrees that Purchaser will not use the AIMCO Marks for any purpose.

14.24     
Non-Solicitation of Employees.  Prior to the
expiration of the Feasibility Period, Purchaser acknowledges and agrees that,
without the express written consent of Seller, neither Purchaser nor any of
Purchaser's employees, affiliates or agents shall solicit any of Seller's
employees or any employees located at the Property (or any of Seller's
affiliates' employees located at any property owned by such affiliates) for
potential employment.

14.25     
Survival.  Except for (a) all of the provisions of
this Article XIV (other than
Section 14.18); (b) Sections
2.3, 3.3, 3.4, 3.5, 4.7, 5.4, 5.5, 6.2, 6.3, 6.5, 10.1, and 12.4; (c) any other provisions in this
Contract, that by their express terms survive the termination of this Contract
or the Closing; and (d) any payment or indemnity obligation of Purchaser under
this Contract (the foregoing (a), (b), (c) and (d) referred to herein as the
"Survival Provisions"), none of the terms and provisions of this
Contract shall survive the termination of this Contract, and if the Contract is
not so terminated, all of the terms and provisions of this Contract (other than
the Survival Provisions, which shall survive the Closing) shall be merged into
the Closing documents and shall not survive Closing.

14.26     
Multiple Purchasers.  As used in this Contract, the
term "Purchaser" includes all entities acquiring any interest in
the Property at the Closing, including, without limitation, any assignee(s) of
the original Purchaser pursuant to Section 14.3 of this Contract.  In the event
that "Purchaser" has any obligations or makes any covenants,
representations or warranties under this Contract, the same shall be made
jointly and severally by all entities being a Purchaser hereunder.  

14.27     
WAIVER OF JURY TRIAL.  THE PARTIES HERETO WAIVE TRIAL BY
JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM BROUGHT BY ANY PARTY AGAINST ANY OTHER PARTY ON ANY MATTER ARISING OUT OF
OR IN ANY WAY CONNECTED WITH THIS CONTRACT.

Article
XV
LEAD–BASED PAINT DISCLOSURE

15.1         
Disclosure.  Seller and Purchaser hereby acknowledge
delivery of the Lead Based Paint Disclosure attached as Exhibit H
hereto.  

[Remainder of Page Intentionally Left Blank]

           
NOW, THEREFORE, the parties hereto have executed this Contract as of the date
first set forth above.

 

Seller:

 

CENTURY
SUN RIVER, LIMITED PARTNERSHIP,

an
Arizona limited partnership

 

By:      
CPF XIV/SUN RIVER, INC.,

           
an Arizona corporation,

           
its managing general partner

 

 

By:
 /s/Trent A. Johnson

Name:
 Trent A. Johnson

Title:
 Vice President

 

 

Purchaser:

 

HOLLAND
ACQUISITION CO., LLC,

a
Washington limited liability company

 

By:      
CLYDE HOLLAND PARTNERS, LLC,

           
a Washington limited liability company,

           
its Manager

 

 

By:
 /s/Eli Hanacek

Name: 
Eli Hanacek, COOcbna8k2004ltcompamendex101.htm

Exhibit 10.1

COMMUNITY BANK SYSTEM, INC.

2004 LONG-TERM INCENTIVE COMPENSATION PROGRAM,

AS TO BE AMENDED

1.           Preamble.  Effective as of July 1, 1984, the Board of Directors of Community Bank System, Inc. adopted the Community Bank System, Inc. Long Term Incentive Compensation Program (“1984 Program”). The 1984 Program provided for the granting of incentive stock options, non-statutory stock options, retroactive stock appreciation rights, and restricted stock awards. The 1984 Program also provided that no option could be granted under that program after June 30, 1994.  The 1984 Program was replaced with the Community Bank System, Inc. 1994 Long-Term Incentive Compensation Program which became effective July 1, 1994.

This document sets forth the terms of the Community Bank System, Inc. 2004 Long Term Compensation Program (“2004 Program”), which shall become effective as of July 1, 2004, contingent upon the approval of the 2004 Program by the shareholders of Community Bank System, Inc. Options and other rights described in this 2004 Program document shall be granted after June 30, 2004 in accordance with the terms of this 2004 Program document.

2.           Purpose.  The purpose of the 2004 Program is to promote the interests of the Bank by providing current and future directors, officers, key employees and advisors with an equity or equity-based interest in the Bank, so that the interests of such directors, officers, employees and advisors will be closely associated with the interest of shareholders by reinforcing the relationship between shareholder gains and compensation.

3.           Eligibility. Directors and officers of the Bank or its Subsidiaries, key employees of the Bank or its Subsidiaries, and Advisors to the Board of Directors shall be eligible to participate in the 2004 Program. Employee participants shall be selected by the Committee based upon such factors as the employee’s past and potential contributions to the success, profitability, and growth of the Bank.

4.           Definitions. As used in this 2004 Program,

(a)          “Advisor” shall mean any natural person who is engaged to render bona fide consulting or advisory services to the Board of Directors, other than a person who provides such services in connection with the offer or sale of securities in a capital-raising transaction.

(b)          “Bank” shall mean Community Bank System, Inc.

(c)          “Board of Directors” shall mean the Board of Directors of the Bank.

(d)          “Committee” shall mean the committee appointed by the Board of Directors to administer the 2004 Program in accordance with Paragraph 16.

(e)          “Common Stock” shall mean the Common Stock, no par value, of the Bank.

 

 

  

  

  

 

(f)          “Deferred Stock Award” shall mean an award of Common Stock to an Eligible Employee, Director or Advisor that is subject to the restrictions described in Paragraph 11.

(g)         “Director” shall mean a member of the Board of Directors.

(h)         “Eligible Employees” shall mean persons treated by the Bank for payroll and employment tax purposes as common law employees of the Bank and described in Paragraph 3.

(i)          “Incentive Stock Option” shall mean the right granted to an Eligible Employee to purchase Common Stock under this 2004 Program, the grant, exercise and disposition of which are intended to comply with, and to be governed by, Internal Revenue Code Section 422.

(j)          “Market Value per Share” shall mean the fair market value per share of the shares of Common Stock, as determined in good faith and consistently applied by the Committee, based upon the last sale before or the first sale after the applicable grant, the closing price on the trading day before or the trading day of the applicable grant, or any other reasonable basis using actual transactions in Common Stock, as reported by the securities market(s) on which Common Stock is traded.

(k)         “Non-Statutory Stock Option” shall mean the right granted to an Eligible Employee, Director or Advisor to purchase Common Stock under this 2004 Program, the grant, exercise and disposition of which are not intended to be subject to the requirements and limitations of Internal Revenue Code Section 422.

(l)          “Optionee” shall mean the Eligible Employee, Director or Advisor to whom an Option Right is granted pursuant to an agreement evidencing an outstanding Incentive Stock Option or Non-Statutory Stock Option.

(m)        “Option Right” shall mean the right to purchase a share of Common Stock upon exercise of an outstanding Incentive Stock Option or Non-Statutory Stock Option.

(n)         “Restricted Stock Award” shall mean an award of Common Stock to an Eligible Employee or Advisor that is subject to the restrictions described in Paragraph 10 and subject to tax under Internal Revenue Code Section 83.

(o)         “Retroactive Stock Appreciation Rights” shall mean an Eligible Employee’s right to receive payments described in Paragraph 9.

(p)         “Subsidiary” shall mean any corporation in which (at the time of determination) the Bank owns or controls, directly or indirectly, 50 percent or more of the total combined voting power of all classes of stock issued by the corporation.

5.           Shares Available Under the 2004 Program.

(a)         The shares of Common Stock which may be made the subject of Option Rights, Restricted Stock Awards or Deferred Stock Awards pursuant to this 2004 Program may be either 

 

 

  

  

  

 

(i) shares of original issue, (ii) treasury shares, (iii) shares held in a grantor trust maintained by the Bank, or (iv) a combination of the foregoing.

(b)         Subject to adjustments in accordance with Paragraph 13 of this 2004 Program, the maximum number of shares of Common Stock that may be the subject of Option Rights, Retroactive Stock Appreciation Rights, Restricted Stock Awards or Deferred Stock Awards granted pursuant to this 2004 Program shall be 4,900,000 shares of Common Stock, which equals the sum of the number of shares of Common Stock initially authorized by the shareholders of the Bank to be made available for awards under this 2004 Plan (4,000,000), plus 900,000 additional shares of Common Stock authorized by the shareholders of the Bank to be made available effective as of May 25, 2011.

(c)         Notwithstanding any other term or provision of the 2004 Program, if any shares of Common Stock covered by an award under the 2004 Program are forfeited or an award is settled in cash or otherwise terminated without delivery of shares of Common Stock, then the shares of Common Stock covered by that award will again be available for future awards under the 2004 Program.  Notwithstanding anything in the 2004 Program to the contrary, shares of Common Stock withheld from awards for the payment of tax withholding obligations, shares of Common Stock surrendered to pay the exercise price of Incentive Stock Options or Non-Statutory Stock Options, and shares of Common Stock that were not issued as a result of the net exercise of Incentive Stock Options or Non-Statutory Stock Options will also become available for future awards under the 2004 Program.

(d)         Except in connection with a corporate transaction involving the Bank (including, without limitation, any stock dividend, distribution (whether in the form of cash, Common Stock, other securities or other property), stock split, extraordinary cash dividend, recapitalization, change in control, reorganization, merger, consolidation, split-up, spin-off, combination, repurchase or exchange of Common Stock or other securities, or similar transaction(s)), the Bank may not, without obtaining shareholder approval: (a) amend the terms of outstanding Option Rights or Retroactive Stock Appreciation Rights to reduce the exercise price of such outstanding Option Rights or Retroactive Stock Appreciation Rights; (b) cancel outstanding Option Rights or Retroactive Stock Appreciation Rights in exchange for Option Rights or Retroactive Stock Appreciation Rights with an exercise price that is less than the exercise price of the original Option Rights or Retroactive Stock Appreciation Rights; or (c) cancel outstanding Option Rights or Retroactive Stock Appreciation Rights with an exercise price above the Market Value per Share in exchange for cash or other securities.

6.           Grants of Option Rights Generally.  The Committee, or the full Board of Directors, may, from time to time and upon such terms and conditions as it may determine, authorize the granting of Option Rights to Directors, Eligible Employees or Advisors.  Each such grant may utilize any or all of the authorizations, and shall be subject to all of the limitations, contained in the following provisions:

(a)         Each grant shall specify whether it is intended as a grant of Incentive Stock Options or Non-Statutory Stock Options.

(b)         Each grant shall specify the number of shares of Common Stock to which it pertains.

 

  

  

  

 

(c)         Each grant shall specify an option price not less than 100 percent of the Market Value per Share on the date the Option Right is granted.

(d)         Successive grants may be made to the same Optionee whether or not any Option Rights previously granted to such Optionee remain unexercised.

(e)         Upon exercise of an Option Right, the entire option price shall be payable (i) in cash, (ii) by the transfer to the Bank by the Optionee of shares of Common Stock with a value (Market Value per Share times the number of shares) equal to the total option price, (iii) by a combination of such methods of payment described in (i) and (ii) above, or (iv) any other lawful means of payment acceptable to the Committee.  Payment may not be made with Common Stock issued to the Optionee by the Bank upon his or her prior exercise of an incentive stock option under this 2004 Program or any other option plan unless the Common Stock received upon that prior exercise shall have been held by the Optionee for at least one year.

(f)          Each grant of Option Rights shall be evidenced by an agreement executed on behalf of the Bank by any officer designated by the Committee for this purpose and delivered to and accepted by the Optionee and shall contain such terms and provisions, consistent with this 2004 Program, as the Committee may approve.

(g)         As soon as practicable after each January 1,  each non-employee member of the Board of Directors (or of the board of directors of a Subsidiary whom the Board of Directors has specifically selected, in a written resolution, for participation in this 2004 Program) who has (i) attended at least 75 percent of the Board of Directors or Board committee meetings he or she was scheduled to attend during the immediately preceding calendar year, (ii) served as a director of the Bank or a Subsidiary on the last day of such calendar year, and (iii) completed at least six months of service on the Board of Directors (or on the board of directors of a Subsidiary) shall be granted a Non-Statutory Stock Option, provided that the first such annual grant of a Non-Statutory Stock Option to an individual director shall be to purchase 2,320 shares of Common Stock, and each subsequent annual grant of a Non-Statutory Stock Option to the director shall be to purchase 4,000 shares of Common Stock. Notwithstanding the foregoing, to the extent that the Committee determines that grants may be exempt from Section 16(b) of the Securities Exchange Act of 1934, as amended (“Rule 16b-3”), each Non-Statutory Stock Option granted pursuant to the preceding sentence shall relate to a number of shares of Common Stock which shall be determined based on the financial performance of the Bank. Such financial performance of the Bank shall be determined based on factors including but not limited to the Bank’s return on assets, measures of the Bank’s asset quality, the growth in the Bank’s earnings per share, and the Bank’s CAMELS rating. Each Non-Statutory Stock Option granted pursuant to this paragraph shall be granted at an option price per share equal to the Market Value per Share on the date of grant and shall be fully exercisable upon its date of grant, provided that shares of Common Stock acquired pursuant to the exercise of such a Non-Statutory Stock Option may not be sold or otherwise transferred by a director within six months of such grant.

7.           Special Rules for Grants of Incentive Stock Options.

 

  

  

  

 

(a)         Notwithstanding Paragraph 6(c), the option price per share of an Incentive Stock Option shall not be less than 100 percent of the Market Value per Share on the date of the grant of the option; provided, however, that, if an Incentive Stock Option is granted to any Eligible Employee who, immediately after such option is granted, is considered to own stock possessing more than ten percent of the combined voting power of all classes of stock of the Bank, or any of its subsidiaries, the option price per share shall be not less than 110 percent of the Market Value per Share on the date of the grant of the option, and such option may be exercised only within five years of the date of the grant.

 

(b)         The period of each Incentive Stock Option by its terms shall be not more than ten years from the date the option is granted as specified by the Committee.

(c)         The Committee shall establish the time or times within the option period when the Incentive Stock Option may be exercised in whole or in such parts as may be specified from time to time by the Committee, except that Incentive Stock Options shall not be exercisable earlier than one year, nor later than ten years, following the date the option is granted. The date of grant of each Option Right shall be the date of its authorization by the Committee.

(d)         Except as provided in Paragraph 14, or as may be provided by the Committee at the time of grant, (i) in the event of the Optionee’s termination of employment due to any cause, including death or retirement, rights to exercise Incentive Stock Options shall cease, except for those which are exercisable as of the date of termination, and (ii) rights that are exercisable as of the date of termination shall remain exercisable for a period of three months following a termination of employment for any cause other than death or disability, and for a period of one year following a termination due to death or disability. However, no Incentive Stock Option shall, in any event, be exercised after the expiration of ten years from the date such option is granted, or such earlier date as may be specified in the option.

(e)         No Incentive Stock Options shall be granted hereunder to any Optionee that would allow the aggregate fair market value (determined at the time the option is granted) of the stock subject of all post-1986 incentive stock options, including the Incentive Stock Option in question, which such Optionee may exercise for the first time during any calendar year, to exceed $100,000. The term “post-1986 incentive stock options” shall mean all rights, which are intended to be “incentive stock options” under the Internal Revenue Code, granted on or after January 1, 1987 under any stock option plan of the Bank or its Subsidiaries. If the Bank shall ever be deemed to have a “parent”, as such term is used for purposes of Section 422 of the Internal Revenue Code, then rights intended to be “incentive stock options” under the Internal Revenue Code, granted after January 1, 1987 under such parent’s stock option plans, shall be included with the terms of the definition of “post-1986 incentive stock options”.

8.           Special Rules for Grants of Non-Statutory Stock Options.

(a)         Except as provided in Paragraph 14, or as may be provided by the Committee at the time of grant, (i) in the event of the Optionee’s termination of employment due to death or disability, rights to exercise Non-Statutory Stock Options that are exercisable as of the date of termination shall remain exercisable for two years following termination, (ii) in the event of the Optionee’s termination of employment due to any other reason, the rights to exercise Non-Statutory Stock Options that are exercisable as of the date of termination shall remain exercisable for three months following termination, and (iii) the right to exercise Non-Statutory Stock Options that are not exercisable as of the date of termination shall be forfeited.

 

  

  

  

 

(b)         The Bank shall not issue stock certificates to an Optionee who exercises a Non-Statutory Stock Option, unless payment of the required lawful withholding taxes has been made to the Bank by check, payroll deduction or other arrangements satisfactory to the Committee.

(c)         Notwithstanding any other provision of this 2004 Program to the contrary and except as provided in Paragraph 14 hereof, Non-Statutory Stock Options issued pursuant to Paragraph 6(g) shall be exercisable until the earlier of (i) the expiration date that the Committee specifies in the grant of the Non-Statutory Stock Options, or (ii) termination of the Optionee’s service on the Board of Directors for Just Cause, or (iii) an earlier date designated by the Committee.  For  purposes of this Paragraph 8(c), “Just Cause” shall mean, in the good faith determination of the Committee, the Optionee’s personal dishonesty, incompetence, willful misconduct, breach of fiduciary duty involving personal profit, intentional failure to perform stated duties, or willful violation of any law, rule or regulation (other than traffic violations or similar offenses) or final cease and desist order. Additionally, in the event that the Committee, in its sole discretion, determines that an Optionee who has left service with the Bank or Subsidiary engaged in misconduct which would have constituted Just Cause for dismissal if the Optionee were then serving with the Bank or a Subsidiary, then the Committee may rescind, without the consent of the Optionee, any or all unexercised Option Rights held by the Optionee.

9.           Retroactive Stock Appreciation Rights.

Upon such conditions and limitations it deems advisable, the Committee may authorize (a) the surrender of the right to exercise all or a portion of an Option Right granted under the 2004 Program that is exercisable at the time of surrender, and (b) the payment in exchange for the surrender of an amount of up to the excess of the Market Value per Share at the time of surrender of the shares covered by the option, or portion thereof, surrendered over the option price of such shares. Such payment shall be made only in shares of Common Stock based on the Market Value per Share on the date of the surrender and payment. The shares of Common Stock covered by any Option Right, or portion thereof, as to which the right to purchase has been so surrendered shall not again be available for purposes of Option Rights under the 2004 Program.

10.         Restricted Stock Awards.

(a)         Shares of Common Stock granted pursuant to a Restricted Stock Award issued under the 2004 Program (except as otherwise provided in the 2004 Program) shall not be sold, exchanged, transferred, assigned, pledged, hypothecated, or otherwise disposed of, for the period of time determined by the Committee in its absolute discretion (the “Forfeiture Period”). Except as provided in Paragraph 14, or as may be provided by the Committee at the time of grant, if the recipient’s employment with the Bank or any of its Subsidiaries terminates prior to the expiration of the Forfeiture Period for any reason other than death or disability, the recipient shall, on the date employment terminates, forfeit and surrender to the Bank the number of shares of Common Stock with respect to which the Forfeiture Period has not expired as of the date employment terminates.  If Common Stock is forfeited, dividends paid on those shares during the Forfeiture Period may be retained by the recipient.

 

  

  

  

 

(b)         Upon each grant of a Restricted Stock Award, the Committee shall fix the Forfeiture Period.  The Committee also shall determine whether to (i) issue certificates for the awarded shares of Common Stock to the grantee prior to the expiration of the Forfeiture Period, or (ii) transfer certificates for the awarded shares of Common Stock to an escrow agent, which agent shall hold the certificates until the expiration of the Forfeiture Period. Each certificate of Common Stock issued to the grantee pursuant to the Restricted Stock Award prior to the expiration of the Forfeiture Period shall bear a legend to reflect the Forfeiture Period until the Forfeiture Period expires. As a condition to issuance of Common Stock, the Committee may require the recipient to enter into an agreement providing for the Forfeiture Period and such other terms and conditions that it prescribes, including, but not limited to, a provision that Common Stock issued to the recipient may be held by an escrow agent until the Forfeiture Period lapses.  The Committee also may require a written representation by the recipient that he or she is acquiring the shares for investment.

(c)         When the Forfeiture Period with respect to shares of Common Stock held in escrow lapses, a certificate for such shares shall be issued, free of any escrow; such certificate shall not bear a legend relating to the Forfeiture Period.

(d)         Each recipient shall agree, at the time he or she receives a Restricted Stock Award and as a condition thereof, to pay or make arrangements satisfactory to the Committee regarding the payment to the Bank of any federal, state or local taxes of any kind required by law to be withheld with respect to any award or with respect to the lapse of any restrictions on shares of restricted Common Stock awarded under this 2004 Program, or the waiver of any forfeiture hereunder, and also shall agree that the Bank may, to the extent permitted by law, deduct such taxes from any payments of any kind due or to become due to such recipient from the Bank, sell by public or private sale, with ten days notice or such longer notice as may be required by applicable law, a sufficient number of shares of Common Stock so awarded in order to cover all or part of the amount required to be withheld, or pursue any other remedy at law or in equity. In the event that the recipient of shares of Common Stock under this 2004 Program shall fail to pay to the Bank all such federal, state and local taxes, or to make arrangements satisfactory to the Committee regarding the payment of such taxes, the shares to which such taxes relate shall be forfeited and returned to the Bank.

(e)         The Committee shall have the authority at any time to accelerate the time at which any or all or the restrictions set forth in this 2004 Program with respect to any or all shares of restricted Common Stock awarded hereunder shall lapse.

(f)          If a recipient dies, or terminates employment with the Bank because of disability before the expiration of a Forfeiture Period, the Forfeiture Period on any Common Stock owned by the recipient shall lapse on the date of death or on the date that employment terminates because of disability, provided such date is not less than four years subsequent to the date of the award. If the date of death or disability is within four years of the date of the awards, the Committee, in its sole discretion, can waive the Forfeiture Period as to any or all of the stock.

 

  

  

  

 

11.         Deferred Stock Awards. The Committee may make awards to Directors, Eligible Employees or Advisors, in lieu of cash compensation for future services, in the form of freely-transferable shares of Common Stock whose delivery is deferred for later distribution in accordance with the Director’s, Eligible Employee’s or Advisor’s election.  A Director’s deferral and distribution elections, as well as all other rights with respect to deferred Director compensation, shall be governed by the terms of the separate Community Bank System, Inc. Deferred Compensation Plan for Directors, as that plan may be amended from time to time.  Deferral and distribution elections by Eligible Employees and Advisors shall be made pursuant to such separate plans or agreements as shall be acceptable to the Committee in its sole discretion.

 

12.         Transferability.  No Incentive Stock Option shall be transferable by an Optionee other than by will or the laws of descent and distribution. Incentive Stock Options shall be exercisable during the Optionee’s lifetime only by the Optionee. Other rights granted pursuant to this 2004 Program also shall not be subject to assignment, alienation, lien, transfer, sale or exchange, except to the extent provided otherwise by the Committee at the time the right is granted.

13.         Adjustments.  The Committee shall make or provide for such adjustments in the maximum number of shares of Common Stock specified in Paragraph 5 of this 2004 Program, in the numbers of shares of Common Stock covered by other rights granted hereunder, and in the prices per share applicable under all such rights, as the Committee determines is equitably required to prevent dilution or enlargement of the rights of Optionees that otherwise would result from any stock dividend, stock split, combination of shares, recapitalization or other change in the capital structure of the Bank, merger, consolidation, spin-off, reorganization, partial or complete liquidation, issuance of rights or warrants to purchase securities, or any other transaction or event having an effect similar to any of the foregoing.

14.         Change in Control.

(a)         Notwithstanding any other term or provision of this 2004 Program, in the event the employment of an Eligible Employee is terminated for any reason, including the Eligible Employee’s voluntary termination for “good reason” (as defined in (c) below), but not including the Eligible Employee’s voluntary termination without “good reason” or the Eligible Employee’s termination for “cause” (as defined in (d) below), within one year following a “Change in Control” (as defined in (b) below):

(i)          all Option Rights granted to the Eligible Employee under this 2004 Program prior to the date of termination, but not exercisable as of such date, shall become exercisable automatically as of the later of the date of termination or one year after the date the Option Right was granted;

(ii)         any Option Right that is exercisable as of the date of termination, or that becomes exercisable pursuant to (i) above, shall remain exercisable until the end of the exercise period provided in the original grant of the Option Right (determined without regard to the Eligible Employee’s termination of employment); and

(iii)        any Forfeiture Period (with respect to a Restricted Stock Award) that shall be unexpired as of the date of termination shall expire automatically as of such date.

 

  

  

  

 

(b)         For purpose of this 2004 Program, a “Change of Control” shall mean the occurrence of any one of the following events: (1) any “person” including a “group” as determined in accordance with the Section 13(d)(3) of the Securities Exchange Act of 1934 (“Exchange Act”), is or becomes the beneficial owner, directly or indirectly, of securities of the Bank representing 30 percent or more of the combined voting power of the Bank’s then outstanding securities; (2) as a result of, or in connection with, any tender offer or exchange offer, merger or other business combination (a “Transaction”), the persons who were directors of the Bank before the Transaction shall cease to constitute a majority of the Board of Directors of the Bank or any successor to the Bank; (3) the Bank is merged or consolidated with another corporation and as a result of the merger or consolidation less than 70 percent of the outstanding voting securities of the surviving or resulting corporation shall be owned in the aggregate by the former stockholders of the Bank, other than (A) affiliates within the meaning of the Exchange Act, or (B) any party to the merger or consolidation; (4) a tender offer or exchange offer is made and consummated for the ownership of securities of the Bank representing 30 percent or more of the combined voting power of the Bank’s then outstanding voting securities; or (5) the Bank transfers substantially all of its assets to another corporation which is not controlled by the Bank. The following events shall also constitute a “Change in Control” for purposes of this Plan: (i) the election of a director of the Bank who is not nominated by its Board of Directors; (ii) the approval, by the Bank’s stockholders, of a proposal to pursue a transaction in which the Bank would not be the surviving or controlling entity.

(c)         For purposes of this Paragraph 14, “good reason” shall mean action taken by the Bank that results in:  (1) an involuntary and material adverse change in the Eligible Employee’s title, duties, responsibilities, or total remuneration; (2) an involuntary and material relocation of the office from which the Eligible Employee is expected to perform the Eligible Employee’s duties; or (3) an involuntary and material adverse change in the general working conditions (including travel requirements) applicable to the Eligible Employee.

(d)         Termination “for cause” for purposes of this Paragraph 14 shall include, but not be limited to, any of the following:  (1) any act of dishonesty, misconduct or fraud, acts of moral turpitude, or the commission of a felony; (2) unreasonable neglect or refusal to perform the duties assigned to the Eligible Employee, unless cured with in 30 days; (3) breach of duty or obligation to the Bank or receipt of financial or other economic profit or gain as a result of or in any way arising out of the Eligible Employee’s position with the Bank and failure to account to the Bank for such profits or other gains; or (4) disclosure of confidential or private Bank information or aiding a competitor of the Bank (or any affiliate of the Bank) to the detriment of the Bank (or any affiliate of the Bank).

15.         Fractional Shares. The Bank shall not be required to issue any fractional shares of Common Stock pursuant to this 2004 Program. The Committee may provide for the elimination of fractions or for the settlement of fractions in cash.

16.         Administration of the 2004 Program.

(a)         This 2004 Program shall be administered by the Committee, which shall consist of at least three members of the Board of Directors each of whom shall (1) meet the independence requirements of the New York Stock Exchange listing standards and any other applicable laws, rules and regulations governing independence, as determined by the Board of Directors; (2) qualify as “non-employee directors” as defined under Section 16 of the Securities Exchange Act of 1934, as amended; and (3) qualify as “outside directors” under Section 162(m) of the Internal Revenue Code. Members of the Committee and the Chair of the Committee shall be appointed by the Board of Directors and may be replaced at any time by the Board of Directors.  At any time deemed necessary or appropriate by the Board of Directors, the full Board of Directors may act as the Committee.

 

  

  

  

 

(b)         The Committee shall have the power to interpret and construe any provision of this 2004 Program. The interpretation and construction by the Committee of any provision of this 2004 Program or of any agreement evidencing the grant of rights hereunder, and any determination by the Committee pursuant to any provision of this 2004 Program or of any such agreement, shall be final and binding. No member of the Committee shall be liable for any such action or determination made in good faith.

(c)         Notwithstanding any other provision of this Plan, the Committee may impose such conditions on the exercise of any right granted hereunder (including, without limitation, the right of the Committee to limit the time of exercise to specified periods) as may be required to satisfy the requirements of Section 16 (or any successor rule) of the Securities Exchange Act of 1934, as may be amended from time to time, or any successor statute.

17.         Amendments, Termination, Etc.

(a)         This 2004 Program may be amended from time to time by resolutions of the Board of Directors, provided that no such amendment shall (i) increase the maximum numbers of shares of Common Stock specified in Paragraph 5 of this 2004 Program (except that adjustments authorized by Paragraph 13 of this 2004 Program shall not be limited by this provision), or (ii) change the definition of “Eligible Employees”, without further approval by the stockholders of the Bank.

(b)         The Committee may, with the concurrence of the affected Optionee, cancel any agreement evidencing Option Rights granted under this 2004 Program. In the event of such cancellation, the Committee may authorize the granting of new Option Rights (which may or may not cover the same number of shares which had been the subject of the prior agreement) in such manner, at such option price and subject to the same terms and conditions as, under this 2004 Program, would have been applicable had the canceled Option Rights not been granted.

(c)         In the case of any Option Right not immediately exercisable in full, the Committee in its discretion may accelerate the time at which the Option Right may be exercised, subject to the limitation described in Paragraph 7(c).

(d)         Notwithstanding any other provision of the 2004 Program to the contrary, (i) the 2004 Program may be terminated at any time by resolutions of the Board of Directors, and (ii) no rights shall be granted pursuant to this 2004 Program after June 30, 2014.

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