Document:

eworld_ex1013.htm

EXHIBIT 10.13

 

 

Canada Revenue Agency

 

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P-051R2 - Carrying on Business in Canada

	
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GST/HST Policy Statement P-051R2

 

Carrying on business in Canada

 

Please note that the following policy statement, although correct at the time of issue, may not have been updated to reflect any subsequent legislative changes.

 

Date of Revision

 

April 29, 2005. This policy statement cancels P-051R1, dated March 8, 1999.

 

Legislative Reference

 

Definition of “business” in subsection 123(1); subsections 143(1), 240(1) and 240(4) of the Excise Tax Act (the Act)

 

National Coding System File Number

 

11635-3

 

Effective Date

 

January 1, 1991 for GST and April 1, 1997 for HST

 

  

1

  

 

Table of Contents

 

	
·  

	
Issue

	
·  

	
Decision

	
·  

	
Discussion

	
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Carrying on a business

	
o  

	
Carrying on business in Canada

	
o  

	
Guidelines

	
·  

	
Examples

	
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Example No. 1 – Lease of Tangible Personal Property

	
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Example No. 2 – Lease of Tangible Personal Property

	
o  

	
Example No. 3 – Lease of Tangible Personal Property

	
o  

	
Example No. 4 – Assignment of Lease

	
o  

	
Example No. 5 – Renewal of Lease

	
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Example No. 6 – Lease of Real Property

	
o  

	
Example No. 7 – Supply of Goods By Way of Sale

	
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Example No. 8 – Supply of Goods By Way of Sale

	
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Example No. 9 – Supply of Goods By Way of Sale

	
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Example No. 10 – Supply of Goods By Way of Sale

	
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Example No. 11 – Supply of Goods By Way of Sale

	
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Example No. 12 – Supply of Goods By Way of Sale

	
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Example No. 13 – Supply of Goods By Way of Sale

	
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Example No. 14 – Electronic Commerce – Digitized Products

	
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Example No. 15 – Electronic Commerce – Software Applications

	
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Example No. 16 – Electronic Commerce – Application Hosting

	
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Example No. 17 – Electronic Commerce – Web Site Hosting

	
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Example No. 18 – Supply of Services

	
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Example No. 19 – Supply of Services

	
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Example No. 20 – Supply of Services

	
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Example No. 21 – Supply of Services

 

  

2

  

 

Issue

 

At issue is whether or not a non-resident person is carrying on business in Canada for GST/HST purposes. This is important in determining if the non-resident is required to register for GST/HST purposes and collect GST/HST on its taxable supplies.

 

Decision

 

The phrase "carrying on business in Canada" is not defined in the Act. Whether a person is carrying on business in Canada for GST/HST purposes is a question of fact requiring consideration of all relevant facts. This policy statement sets out factors and principles to be considered in making such a determination, be it in a traditional or electronic commerce environment.

 

Discussion

 

Every non-resident person who carries on business in Canada, other than a small supplier, must register for GST/HST purposes if the non-resident person makes a taxable supply in Canada Footnote 1.

 

If a non-resident person does not carry on business in Canada and has not registered voluntarily for GST/HST purposes, any supplies made in Canada by the non-resident are deemed to be made outside Canada Footnote 2 and the non-resident is consequently not required to collect tax on those supplies. Tax may nevertheless have to be paid on the taxable importation of goods Footnote 3 or self-assessed by Canadian residents on imported taxable supplies of intangible personal property and services Footnote 4. When an unregistered non-resident person purchases goods in Canada from a registrant for subsequent supply to recipients in Canada, the registrant may be liable to collect tax from the non-resident generally calculated on the fair market value of the goods under the GST/HST drop-shipment rules Footnote 5.

 

Even if a non-resident person is not carrying on business in Canada, the non-resident may register voluntarily for GST/HST if in the ordinary course of carrying on business outside Canada, the non-resident regularly solicits orders for the supply by the non-resident of tangible personal property for export to, or delivery in, Canada, or has entered into an agreement for the supply by the person of services to be performed in Canada or of intangible personal property to be used in Canada Footnote 6.

 

Prior to considering whether a non-resident person is "carrying on business in Canada", it is necessary to establish whether that non-resident is engaged in a "business", and whether that business is "carried on".

 

It should first be noted that the definition of "business" in the Act as set out below differs from the definition of that term in the Income Tax Act Footnote 7. The Act does not have the extended definition of "carrying on business" that is contained in the Income Tax Act Footnote 8. Therefore, a non-resident person considered to be carrying on business for income tax purposes is not necessarily considered to be carrying on business for GST/HST purposes. On the other hand, unlike the definition in the Income Tax Act, the definition of “business” in the Act also includes any activity engaged in on a regular or continuous basis that involves the supply of property by way of lease, licence or similar arrangement. Therefore, where it is determined that a non-resident person is carrying on business in Canada for GST/HST purposes, this does not necessarily mean that the non-resident is considered to be carrying on business in Canada for income tax purposes.

 

It is also important to note that there are specific provisions in the Act that make it unnecessary to determine whether certain persons are carrying on business in Canada in accordance with this policy. For instance, every person who enters Canada for the purpose of making taxable supplies of admissions in respect of a place of amusement, a seminar, an activity, or an event, is automatically required to register for GST/HST and must apply for registration before making such supplies Footnote 9. Similarly, any person (other than a small supplier) who in Canada, be it through an employee or agent or by means of advertising directed at the Canadian market, solicits orders for the supply of prescribed property (such as magazines, books or periodicals) that is to be sent by mail or courier to the recipient at an address in Canada, is deemed to be carrying on business in Canada and is required to be registered Footnote 10.

 

  

3

  

 

Carrying on a business

 

As defined in the Act, "business" Footnote 11:

 

"includes a profession, calling, trade, manufacture or undertaking of any kind whatever, whether the activity or undertaking is engaged in for profit, and any activity engaged in on a regular or continuous basis that involves the supply of property by way of lease, licence or similar arrangement, but does not include an office or employment".

 

The definition of "business" explicitly includes any activity engaged in on a regular or continuous basis that involves the supply of property by way of lease, licence or similar arrangement. In determining whether a person who supplies property by way of lease is considered to be carrying on business for GST/HST purposes, it is important to take into account this aspect of the definition together with the presence of any of the factors in the Guidelines section.

 

The definition only makes reference to what the term business includes. Accordingly, what constitutes a business for GST/HST purposes is not limited by the definition, but also encompasses the commonly accepted meaning of "business" set out in jurisprudence as anything which occupies the time and attention and labour of a man for the purpose of profit is business. As indicated above, the expanded definition of business in the Act provides that a business can exist "whether the activity or undertaking is engaged in for profit".

 

The courts have held that to be carrying on business, the activities in question must be considered to occur on a regular or continuous basis. There are no definitive criteria or thresholds to establish how many activities constitute "regular", or how long a period is necessary to be "continuous". Each case must be determined based on its particular facts, including the history of the person's activities and the person's intention.

 

Carrying on business in Canada

 

The mere fact that a non-resident person undertakes an activity that falls within the definition of a "business" does not mean that the business is being carried on in Canada.

 

It is important to note that a non-resident person may be considered to be carrying on business in Canada even though that person may not have a permanent establishment Footnote 12 in Canada Footnote 13. For more information on the CRA's interpretation of the term permanent establishment, reference should be made to GST/HST Policy Statement P-208R, Meaning of Permanent Establishment in Subsection 123(1) of the Excise Tax Act (the Act) Footnote 14.

 

  

4

  

 

Guidelines

 

The factors that will be considered in determining whether a non-resident person is carrying on business in Canada for GST/HST purposes in a particular situation include:

 

	
·  

	
the place where agents or employees of the non-resident are located;

	
·  

	
the place of delivery;

	
·  

	
the place of payment;

	
·  

	
the place where purchases are made or assets are acquired;

	
·  

	
the place from which transactions are solicited;

	
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the location of assets or an inventory of goods;

	
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the place where the business contracts are made Footnote 15;

	
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the location of a bank account;

	
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the place where the non-resident's name and business are listed in a directory;

	
·  

	
the location of a branch or office;

	
·  

	
the place where the service is performed; and

	
·  

	
the place of manufacture or production.

 

The importance or relevance of a given factor in a specific case depends on the nature of the business activity under review, and, as always, the particular facts and circumstances of each case. The determination of whether a non-resident is carrying on business in Canada for GST/HST purposes does not involve the mechanical application of a numerical test that is simply based on whether a specific number of the above factors are present in any given case. Rather, the determination requires judgment in establishing the importance of each factor in light of the type of supply that is being made in the context of the relevant facts.

 

For instance, the factors that are relevant to the determination of whether a non-resident supplying property by way of lease is carrying on business in Canada will differ from those that are relevant to the determination of whether a non-resident supplying services is carrying on business in Canada. In the case of a supply of property by way of lease, factors that are typically of greater importance include the place where the property is acquired by the non-resident lessor and the place where the property is delivered to the lessee. In the case of a supply of a service that is the principal object of the contract (as opposed to a service that is merely ancillary to the supply of property), factors that are typically of greater importance include the place where the service is performed and the place where employees are located.

 

Some of the factors that are relevant for businesses engaged in conventional business transactions may not be applicable to businesses engaged in electronic commerce (i.e., engaged in the making of supplies delivered by electronic means over the Internet). This would be the case for factors that relate to a physical presence in Canada, such as the place where goods are manufactured. In addition, some factors must be interpreted to take into account the particular nature of electronic commerce. For example, in determining the place where payment is made, it may be more appropriate, depending upon the circumstances, to consider the place where approval for the electronic transfer of funds takes place, rather than the place of posting or receipt of cheques.

 

In general, a non-resident person must have a significant presence in Canada to be considered to be carrying on business in Canada. Generally, isolated transactions carried on in Canada as part of a business that is carried on by a non-resident person outside Canada may not result in the person being considered to be carrying on business in Canada, given that the above-noted factors will usually not be met to a sufficient degree.

 

  

5

  

 

Examples

 

EXAMPLE NO. 1 – LEASE OF TANGIBLE PERSONAL PROPERTY

 

Facts

 

1. A non-resident lessor that has a leasing business outside Canada enters into a sale-leaseback agreement to purchase a conveyance and supply it by way of lease to a resident registrant who will use the conveyance partly in Canada. The lease begins on the day on which the agreement is entered into.

 

2. Pursuant to the agreement, delivery of the conveyance sold to the non-resident lessor occurs in Canada.

 

3. The lessee has physical possession of the conveyance when the agreement is concluded.

 

4. The agreement is concluded outside Canada.

 

5. The conveyance is to be maintained by the lessee at its own expense.

 

6. The non-resident lessor has no agents or employees in Canada.

 

7. Payments are made to the non-resident lessor outside Canada.

 

8. The non-resident lessor does not have a bank account in Canada and is not listed in a directory in Canada.

 

9. The non-resident lessor does not solicit business in Canada.

 

  

6

  

 

LEASE OF TANGIBLE PERSONAL PROPERTY

 

 

Decision

 

The non-resident lessor is carrying on business in Canada.

 

Rationale

 

For GST/HST purposes, a "business" includes any activity engaged in on a regular or continuous basis that involves the supply of property by way of lease. The non-resident lessor is considered to be in the business of supplying tangible personal property by way of lease. For GST/HST purposes, the supply of property under a lease is considered to be made on a regular and continuous basis. The non-resident lessor is considered to have made a separate supply of the property for each period to which a lease payment is attributable Footnote 16. Also, a supply by way of lease, licence or similar arrangement of the use or the right to use tangible personal property is deemed to be a supply of the tangible personal property Footnote 17.

 

In this case, delivery of the conveyance to both the lessor and the lessee under the agreement occur in Canada and the conveyance is based in Canada during the term of the lease. Based on these facts and the application of the GST/HST provisions that relate to the supply of property by way of lease, the non-resident lessor is carrying on business in Canada Footnote 18.

 

  

7

  

 

EXAMPLE NO. 2 – LEASE OF TANGIBLE PERSONAL PROPERTY

 

Facts

 

1. A non-resident lessor engaged in the business of supplying industrial equipment outside Canada by way of lease enters into an agreement to supply equipment by way of lease to a resident registrant.

 

2. The lease agreement for the equipment is concluded outside Canada.

 

3. Pursuant to the lease agreement, the lessee acquires possession of the equipment outside Canada at the beginning of the lease. The lessee subsequently imports the equipment for use at its business facilities in Canada.

 

4. Under the terms of the lease agreement it is the lessee who is responsible for all maintenance and servicing of the equipment during the course of the lease.

 

5. The non-resident lessor does not solicit business in Canada.

 

6. The non-resident lessor has no agents or employees in Canada or facilities (either management, sales or service) of any kind in Canada.

 

7. The non-resident lessor is not listed in any directories in Canada.

 

8. The non-resident lessor has a bank account in Canada.

 

9. The lease payments are made in Canada.

 

LEASE OF TANGIBLE PERSONAL PROPERTY

 

 

Decision

 

The non-resident lessor is not carrying on business in Canada.

 

Rationale

 

The only factors present in Canada in this case are the place of payment and a bank account. These factors are insufficient to support a conclusion that the non-resident is carrying on business in Canada.

 

 

  

8

  

EXAMPLE NO. 3 – LEASE OF TANGIBLE PERSONAL PROPERTY

 

Facts

 

1. A non-resident lessor who is in the business of leasing tangible personal property outside Canada enters into an agreement to supply by way of lease a piece of industrial equipment to a resident registrant who will use the equipment at its business facility in Canada.

 

2. The non-resident lessor acquires the equipment outside Canada from a non-resident supplier.

 

3. The lessee is given physical possession of the equipment at its facility in Canada at the beginning of the lease.

 

4. The lease agreement is concluded in Canada.

 

5. The equipment is to be maintained by the lessee at its own expense.

 

6. The non-resident lessor has no agents or employees in Canada.

 

7. The non-resident lessor is not listed in a directory in Canada.

 

8. The non-resident lessor does not solicit business in Canada.

 

9. Payments under the lease are made in Canada.

 

10. The non-resident lessor has a bank account in Canada.

 

LEASE OF TANGIBLE PERSONAL PROPERTY

 

 

Decision

 

The non-resident lessor is carrying on business in Canada.

 

Rationale

 

In this case, delivery of the equipment to the lessee occurs in Canada, the place of contract is in Canada, payment is made in Canada and the non-resident lessor has a bank account in Canada. Also, the equipment is located in Canada during the term of the lease. Based on these facts and the application of the GST/HST provisions that relate to the supply of property by way of lease, the non-resident lessor is carrying on business in Canada.

 

 

  

9

  

EXAMPLE NO. 4 – ASSIGNMENT OF LEASE

 

Facts

 

1. A resident registrant (the "original lessor") who is in the business of leasing tangible personal property enters into an agreement to supply by way of lease a piece of industrial equipment to another resident registrant (the "lessee") who will use the equipment at its business facilities in Canada.

 

2. Pursuant to the lease, possession of the equipment is given to the lessee in Canada.

 

3. The original lessor subsequently enters into an agreement (the "agreement") to sell, assign, and transfer all rights, title, and interest in the lease and the equipment to a non-registered non-resident (the “non-resident lessor”), resulting in that non-resident becoming the new lessor of the equipment.

 

4. Pursuant to the agreement, delivery of the equipment sold to the non-resident lessor occurs in Canada.

 

5. The lessee has physical possession of the equipment in Canada when the agreement is concluded.

 

6. The agreement is concluded outside Canada.

 

7. Pursuant to the terms of the lease with the original lessor, the equipment is to be maintained by the lessee at its own expense.

 

8. The non-resident lessor has no agents or employees in Canada.

 

9. The lease payments are collected by the original lessor in Canada on behalf of the non-resident lessor. The original lessor forwards the lease payments to the non-resident lessor.

 

10. The non-resident lessor does not have a bank account in Canada and is not listed in a directory in Canada.

 

11. The non-resident lessor does not solicit business in Canada.

 

ASSIGNMENT OF LEASE

 

 

Decision

 

The non-resident lessor is carrying on business in Canada.

 

Rationale

 

In this case, the non-resident lessor is acquiring the equipment in Canada and the lessee has acquired possession of the equipment in Canada and the equipment is also located in Canada during the term of the lease. The lease payments are also made in Canada. Based on these facts and the application of the GST/HST provisions that relate to the supply of property by way of lease, the non-resident lessor is carrying on business in Canada.

 

 

  

10

  

EXAMPLE NO. 5 – RENEWAL OF LEASE

 

Facts

 

1. A non-resident lessor engaged in the business of supplying industrial equipment by way of lease outside Canada enters into an agreement to supply equipment by way of lease to a resident registrant.

 

2. The lease agreement for the equipment is concluded outside Canada.

 

3. Pursuant to the lease agreement, the lessee acquires possession of the equipment outside Canada at the beginning of the lease. The lessee subsequently imports the equipment for use at its business facilities in Canada.

 

4. At the end of the term of the lease agreement, the lessee opts to renew and extend the lease as contemplated in a clause in the original lease agreement.

 

5. The equipment is in the possession of the lessee at its facilities in Canada at the time of the renewal.

 

6. Under the terms of the lease it is the lessee who is responsible for all maintenance and servicing of the equipment during the course of the lease.

 

7. The non-resident lessor does not solicit business in Canada.

 

8. The non-resident lessor has no agents or employees in Canada or facilities (either management, sales or service) of any kind in Canada.

 

9. The non-resident lessor is not listed in any directories in Canada.

 

10. The non-resident lessor does not have a bank account in Canada.

 

11. The lease payments are made outside Canada.

 

RENEWAL OF LEASE

 

 

Decision

 

The non-resident lessor is not carrying on business in Canada.

 

Rationale

 

When the lease agreement is first entered into, there are insufficient factors present in Canada in this case to conclude that the non-resident lessor is carrying on business in Canada. With respect to the subsequent renewal of the lease, although the lessee has physical possession of the equipment in Canada, there are insufficient factors present in Canada to support a conclusion that the non-resident lessor is carrying on business in Canada.

 

 

  

11

  

EXAMPLE NO. 6 – LEASE OF REAL PROPERTY

 

Facts

 

1. A non-resident leasing company purchases an existing commercial building in Canada in which office space is rented out to businesses.

 

2. Pursuant to a lease agreement that is concluded outside Canada, the non-resident lessor leases the entire building to a registrant. The registrant in turn leases out the individual offices to commercial tenants and is fully responsible for the management of the building at its own expense.

 

3. The non-resident lessor's involvement is essentially limited to receiving monthly lease payments from the registrant. These payments are made outside Canada.

 

4. The commercial building is the only asset that the non-resident lessor owns in Canada.

 

5. The non-resident lessor has no agents or employees in Canada.

 

6. The non-resident lessor does not have a bank account in Canada and is not listed in a directory in Canada.

 

7. The non-resident lessor does not solicit business in Canada.

 

LEASE OF REAL PROPERTY

 

 

Decision

 

The non-resident lessor is carrying on business in Canada.

 

Rationale

 

Based on the fact that the building is located in Canada and the application of the GST/HST provisions that relate to the supply of property by way of lease, the non-resident lessor is carrying on business in Canada.

 

 

  

12

  

EXAMPLE NO. 7 – SUPPLY OF GOODS BY WAY OF SALE

 

Facts

 

1. A non-resident manufacturer supplies goods by way of sale on a worldwide basis, including in Canada.

 

2. The goods are manufactured by the non-resident manufacturer at a place outside Canada.

 

3. The non-resident manufacturer solicits orders for the supply of goods in Canada through advertising directed at the Canadian market.

 

4. The contract for the supply of goods is concluded outside Canada.

 

5. Delivery of the goods to the customers occurs in Canada.

 

6. Payment for the goods is made outside Canada.

 

7. The non-resident manufacturer has no bank account in Canada.

 

8. The non-resident manufacturer has no agents or employees in Canada.

 

9. The non-resident manufacturer's inventory of goods is stored outside Canada.

 

SUPPLY OF GOODS BY WAY OF SALE

 

 

Decision

 

The non-resident manufacturer is not carrying on business in Canada.

 

Rationale

 

The only factors present in Canada in this case are the place of delivery and solicitation. These factors are insufficient to support a conclusion that the non-resident manufacturer is carrying on business in Canada.

 

 

  

13

  

EXAMPLE NO. 8 – SUPPLY OF GOODS BY WAY OF SALE

 

Facts

 

1. A non-resident person supplies goods by way of sale on a worldwide basis, including in Canada.

 

2. The goods are purchased by the non-resident supplier outside Canada.

 

3. The non-resident supplier solicits orders for the supply of goods in Canada through advertising directed at the Canadian market.

 

4. An independent sales representative in Canada accepts orders for the goods and concludes contracts on behalf of the non-resident supplier.

 

5. Delivery of the goods to the customers occurs in Canada.

 

6. Payment for the goods is made outside Canada.

 

7. The non-resident supplier has no bank account in Canada.

 

8. The non-resident supplier has no employees in Canada.

 

9. The non-resident supplier's inventory of goods is stored outside Canada.

 

SUPPLY OF GOODS BY WAY OF SALE

 

 

Decision

 

The non-resident supplier is carrying on business in Canada.

 

Rationale

 

The non-resident supplier is carrying on business in Canada based on the fact that the place of contract is in Canada, the goods are delivered in Canada, and the non-resident supplier solicits orders in Canada.

 

 

  

14

  

EXAMPLE NO. 9 – SUPPLY OF GOODS BY WAY OF SALE

 

Facts

 

1. A non-resident person supplies goods by way of sale on a worldwide basis, including in Canada.

 

2. The non-resident supplier solicits orders for the supply of goods in Canada through advertising directed at the Canadian market.

 

3. The contract for the supply of goods is concluded outside Canada.

 

4. Payment for the goods is made outside Canada.

 

5. The non-resident supplier has no bank account in Canada.

 

6. The non-resident supplier has no agents or employees in Canada.

 

7. The goods are manufactured outside Canada.

 

8. The non-resident supplier maintains an inventory of existing goods for sale at a warehouse in Canada where the non-resident supplier rents space.

 

9. Upon receiving orders outside Canada, the non-resident supplier arranges to have the goods shipped from the warehouse to the customers in Canada.

 

10. Delivery of the goods to the customers occurs in Canada.

 

SUPPLY OF GOODS BY WAY OF SALE

 

 

Decision

 

The non-resident supplier is carrying on business in Canada.

 

Rationale

 

The non-resident supplier is carrying on business in Canada based on the fact that the non-resident supplier has an inventory of goods for sale in Canada, the goods are delivered in Canada, and the non-resident supplier solicits orders in Canada.

 

  

15

  

EXAMPLE NO. 10 – SUPPLY OF GOODS BY WAY OF SALE

 

Facts

 

1. As a non-resident person receives orders from its customers located in Canada, the non-resident purchases goods from a registrant in Canada for resale to the customers.

 

2. The registrant delivers the goods directly to the non-resident supplier's customers in Canada on the non-resident supplier's behalf.

 

3. The non-resident supplier does not solicit orders for the supply of its goods in Canada.

 

4. The contract for the supply of goods by the non-resident supplier is concluded outside Canada.

 

5. Payment by the customers for the goods is made outside Canada.

 

6. The non-resident supplier has no bank account in Canada.

 

7. The non-resident supplier has no agents or employees in Canada.

 

SUPPLY OF GOODS BY WAY OF SALE

 

 

Decision

 

The non-resident supplier is not carrying on business in Canada.

 

Rationale

 

The only factors present in Canada in this case are the place of purchase and delivery of the goods. These factors are insufficient to support a conclusion that the non-resident supplier is carrying on business in Canada.

 

  

16

  

 

EXAMPLE NO. 11 – SUPPLY OF GOODS BY WAY OF SALE

 

Facts

 

1. A non-resident manufacturer supplies highly specialized industrial machinery by way of sale on a worldwide basis, including in Canada.

 

2. The machinery requires installation by the non-resident manufacturer and pursuant to the sales agreement is to be supplied by the non-resident manufacturer on an installed basis.

 

3. Employees of the non-resident manufacturer enter Canada to install the machinery at the purchasers’ premises. The installation requires work to be done over a short period of time.

 

4. The non-resident manufacturer solicits orders for the supply of the machinery in Canada through advertising directed at the Canadian market.

 

5. The contract for the supply of the machinery is concluded outside Canada.

 

6. Delivery of the machinery to the purchasers occurs in Canada.

 

7. Payment for the machinery is made outside Canada.

 

8. The non-resident manufacturer has no bank account in Canada.

 

9. The non-resident manufacturer has no agents or employees in Canada other than the employees who install the machinery.

 

SUPPLY OF GOODS BY WAY OF SALE

 

 

Decision

 

The non-resident manufacturer is not carrying on business in Canada.

 

Rationale

 

The only factors present in Canada in this case are the place of delivery and solicitation. These factors are insufficient to conclude that the non-resident manufacturer is carrying on business in Canada. Although employees of the non-resident are in Canada to install the machinery, the supply being made is a supply of tangible personal property in relation to which the installation is merely ancillary.

 

  

17

  

EXAMPLE NO. 12 – SUPPLY OF GOODS BY WAY OF SALE

 

Facts

 

1. A non-resident person supplies goods by way of sale on a worldwide basis, including in Canada.

 

2. The non-resident supplier acquires the services of a manufacturer in Canada to manufacture the goods.

 

3. The non-resident supplier purchases in Canada from various registrants the raw materials necessary to make the goods and has the raw materials suppliers ship the materials to the manufacturer for use in the manufacturing process.

 

4. The non-resident supplier maintains an inventory of the manufactured goods in Canada at the manufacturer’s premises that is drawn upon to fill future orders for the goods for delivery both inside and outside Canada.

 

5. The non-resident supplier solicits orders for the supply of the goods in Canada.

 

6. All contracts for the supply of the goods are concluded outside Canada.

 

7. Payment for the goods is made outside Canada.

 

8. The non-resident supplier has no bank account in Canada.

 

9. The non-resident supplier has no agents or employees in Canada.

 

SUPPLY OF GOODS BY WAY OF SALE

 

 

Decision

 

The non-resident supplier is carrying on business in Canada.

 

Rationale

 

The non-resident supplier is carrying on business in Canada based on the fact that the non-resident supplier purchases the raw materials in Canada, has the goods manufactured in Canada, has an inventory of the goods in Canada for sale, delivers some goods in Canada, and solicits orders for the goods in Canada.

 

  

18

  

EXAMPLE NO. 13 – SUPPLY OF GOODS BY WAY OF SALE

 

Facts

 

1. A non-resident person supplies goods by way of sale on a worldwide basis.

 

2. The non-resident supplier acquires the services of a manufacturer in Canada to manufacture the goods.

 

3. The non-resident supplier purchases in Canada from various registrants the raw materials necessary to make the goods and has the raw materials suppliers ship the materials to the manufacturer for use in the manufacturing process.

 

4. The goods are manufactured in Canada for the non-resident supplier to satisfy existing orders received by the non-resident supplier from its non-resident customers.

 

5. Although the goods may be delivered in Canada to some of the non-resident supplier’s customers, in all cases the goods are exported.

 

6. The contract for the supply of goods is concluded outside Canada.

 

7. Payment for the goods is made outside Canada.

 

8. The non-resident supplier has no bank account in Canada.

 

9. The non-resident supplier has no agents or employees in Canada.

 

10. The non-resident supplier does not solicit orders for the supply of the goods in Canada.

 

SUPPLY OF GOODS BY WAY OF SALE

 

 

Decision

 

The non-resident supplier is not carrying on business in Canada.

 

Rationale

 

The only factors present in Canada in this case are the place of purchase of the raw materials, the place of manufacture of the goods, and, in some circumstances, the place of delivery of the goods (albeit for export). These factors are insufficient to support a conclusion that the non-resident supplier is carrying on business in Canada.

 

  

19

  

EXAMPLE NO. 14 – ELECTRONIC COMMERCE – DIGITIZED PRODUCTS

 

Facts

 

1. A non-resident person supplies downloadable audio files through its Web site.

 

2. The non-resident supplier’s Web site is hosted on its own server at its main office located outside Canada.

 

3. The Web site is advertised on the Internet. The advertisements are directed at the Canadian market.

 

4. The Web site and server are fully interactive: the customer in Canada may view product listings of music and other advertising, place orders (including payment for audio files selected), and download copies of the selected audio files without any contact with the non-resident supplier's personnel.

 

5. The contract is concluded in Canada.

 

6. The customer pays by credit card and an independent service provider located in Canada processes payments for the non-resident supplier.

 

7. Once the audio files are received by the customer, they may be used in Canada.

 

8. All customer service and technical support is provided by means of telephone or e-mail communication by the non-resident supplier's personnel located in its main office outside Canada.

 

9. The non-resident supplier has no agents or employees in Canada.

 

10. The non-resident supplier has no premises or equipment in Canada.

 

11. The non-resident supplier has no bank account in Canada and is not listed in any business directory in Canada.

 

ELECTRONIC COMMERCE – DIGITIZED PRODUCTS

 

 

Decision

 

The non-resident supplier is not carrying on business in Canada.

 

Rationale

 

The only factors present in Canada in this case are the place of contract, solicitation and payment. These factors are insufficient to support a conclusion that the non-resident supplier is carrying on business in Canada.

 

  

20

  

EXAMPLE NO. 15 – ELECTRONIC COMMERCE – SOFTWARE APPLICATIONS

 

Facts

 

1. A non-resident person supplies the right to use various software applications to customers in Canada.

 

2. The non-resident supplier owns a Web site stored on a server in Canada.

 

3. The server that stores and provides access to the Web site is owned and operated by an independent Internet Service Provider and is therefore not at the non-resident supplier's disposal.

 

4. The non-resident supplier advertises its software applications on its Web site, directed at the Canadian market, and also advertises its software applications and Web site in Canadian newspapers.

 

5. The software applications are stored on the server as part of the Web site.

 

6. Customers in Canada can order software applications by completing and submitting order forms on-line.

 

7. Once a form is submitted, the order is processed automatically and the customer is granted a right of access to the selected software applications. Customer access is controlled and monitored by use of a computer-generated user ID and password.

 

8. Customers are invoiced electronically, automatically, according to the number of hours the applications are used, and may pay by credit card or cheque.

 

9. The contract is concluded in Canada.

 

10. An independent service provider located in Canada processes payment for the non-resident supplier.

 

11. An independent contractor located in Canada provides after-sales customer support on behalf of the non-resident supplier.

 

ELECTRONIC COMMERCE – SOFTWARE APPLICATIONS

 

 

Decision

 

The non-resident supplier is carrying on business in Canada.

 

Rationale

 

In addition to the fact that independent contractors located in Canada are used for after-sales support, the non-resident supplier is carrying on business in Canada based on the fact that the non-resident supplier solicits orders in Canada, payments are processed in Canada, the place of contract is in Canada, and activities are carried out by means of the automated, interactive Web site stored on a server in Canada.

 

  

21

  

EXAMPLE NO. 16 – ELECTRONIC COMMERCE – APPLICATION HOSTING

 

Facts

 

1. For a single annual fee, a non-resident application service provider (the “ASP”) supplies access to a highly specialized Web-based software application that it hosts on its servers outside Canada. The software will track and process a customer's real-time data to allow the customer to manage its inventory more efficiently.

 

2. The non-resident ASP provides its customers with technical support that allows them to interact by telephone or e-mail with the non-resident ASP's technicians located outside Canada.

 

3. The non-resident ASP has business customers in various countries including Canada.

 

4. Each of the non-resident ASP's customers can access and use the software application remotely over the Internet with a unique user ID and password.

 

5. The non-resident ASP's Web site includes advertising specifically directed at the Canadian market.

 

6. The agreement for the supply with customers in Canada is concluded on-line and in Canada.

 

7. Payment for the supply is made outside Canada.

 

8. The non-resident ASP has no agents or employees in Canada

 

9. The non-resident ASP has no premises or equipment in Canada.

 

10. The non-resident ASP has no bank account in Canada and is not listed in any business directory in Canada.

 

ELECTRONIC COMMERCE – APPLICATION HOSTING

 

 

Decision

 

The non-resident ASP is not carrying on business in Canada.

 

Rationale

 

The only factors present in Canada in this case are the place of solicitation and the place of contract. These factors are insufficient to support a conclusion that the non-resident ASP is carrying on business in Canada.

 

  

22

  

EXAMPLE NO. 17 – ELECTRONIC COMMERCE – WEB SITE HOSTING

 

Facts

 

1. A non-resident Internet Service Provider (the “ISP”) is in the business of hosting the Web sites of its customers located in various countries including Canada.

 

2. The server on which the Web sites are hosted is permanently located at a particular place in Canada.

 

3. The server is owned by the non-resident ISP.

 

4. Personnel of the non-resident ISP entered Canada to set up the server at its particular location.

 

5. Personnel are not required at the location of the server for its ongoing operation.

 

6. Payment for the supply is made outside Canada.

 

7. The non-resident ISP has no agents or employees in Canada, other than those who set up the server.

 

8. The non-resident ISP has no bank account in Canada and is not listed in any business directory in Canada.

 

9. The place of contract is outside Canada.

 

10. The non-resident ISP has customers in various countries, including Canada.

 

ELECTRONIC COMMERCE – WEB SITE HOSTING

 

 

Decision

 

The non-resident ISP is carrying on business in Canada.

 

Rationale

 

The service that is to be supplied is to be performed in Canada. For GST/HST purposes, a supply of a service will be considered to be performed in Canada if the service includes operations performed by a supplier’s equipment and the equipment is located in Canada. In this case, the Web site hosting service is being performed through the operation of the non-resident ISP’s server located in Canada. The server is automated equipment that operates on its own and does not require personnel at its location for its ongoing operation. The service is also significant in relation to the non-resident ISP’s overall business activity of hosting Web sites.

 

It is important to note that the non-resident ISP’s server that is located in Canada constitutes a permanent establishment of the ISP in Canada Footnote 19. Furthermore, the non-resident ISP would be considered to be resident in Canada in respect of the non-resident ISP’s Web site hosting activities carried on through that establishment Footnote 20. The non-resident ISP would therefore be required to register for GST/HST as a resident person as a result of the taxable supplies of Web site hosting services that the non-resident ISP makes through the permanent establishment, unless the non-resident ISP is a small supplier Footnote 21.

 

  

23

  

EXAMPLE NO. 18 – SUPPLY OF SERVICES

 

Facts

 

1. A large international non-resident corporation specializing in the provision of offshore engineering services has contracted with a Canadian registrant to perform services on an oil rig stationed at a Canadian port. The contract is the non-resident corporation’s only contract in Canada.

 

2. The contract calls for an employee of the non-resident corporation to enter Canada and to perform services for a period of one week on board the rig.

 

3. The non-resident corporation does not solicit business in Canada.

 

4. The contract for the supply is concluded outside Canada.

 

5. Payment for the supply is made outside Canada.

 

6. The non-resident corporation is not listed in any directories nor does it have any bank accounts or offices in Canada.

 

7. With the exception of the employee who temporarily enters Canada to perform the services, the non-resident corporation has no agents or employees in Canada.

 

SUPPLY OF SERVICES

 

 

Decision

 

The non-resident corporation is not carrying on business in Canada for GST/HST purposes.

 

Rationale

 

Although an employee of the non-resident corporation is entering Canada to perform the service to be supplied, in the context of the facts and the overall business activity of the non-resident corporation, this is insufficient to support a conclusion that the non-resident corporation is carrying on business in Canada for GST/HST purposes.

 

  

24

  

EXAMPLE NO. 19 – SUPPLY OF SERVICES

 

Facts

 

1. A non-resident company specializing in the cleaning of power generating facilities has entered into a contract with a registrant to clean the registrant’s power-generating facilities located in Canada.

 

2. The service provided is comprehensive in nature and requires highly specialized equipment and know-how.

 

3. Due to the complexity of the project and the size of the facilities, the project will take at least one month to complete.

 

4. Ten employees of the non-resident company will enter Canada to perform the service.

 

5. The non-resident company will import the equipment necessary to perform the service.

 

6. The contract is concluded outside Canada.

 

7. The non-resident company solicits business in Canada through advertising directed at the Canadian market.

 

8. Payment for the supply is made outside Canada.

 

9. The non-resident company has no agents or employees in Canada other than those performing the cleaning service.

 

10. The non-resident company has no premises in Canada, and, other than the equipment temporarily imported to perform the service, the non-resident company does not have equipment in Canada.

 

11. The non-resident company has no bank account in Canada and is not listed in any business directory in Canada.

 

SUPPLY OF SERVICES

 

 

Decision

 

The non-resident company is carrying on business in Canada.

 

Rationale

 

The service that is to be supplied is to be performed in Canada and several employees of the non-resident company are entering Canada to perform that service. The non-resident company is carrying on business in Canada based on these facts, the significance of the service to the overall business activity of the non-resident company and also because the non-resident company is soliciting business in Canada.

 

  

25

  

EXAMPLE NO. 20 – SUPPLY OF SERVICES

 

Facts

 

1. A non-resident company is in the business of providing consulting and training on how to improve business productivity.

 

2. The supply made by the non-resident company typically involves employees of the non-resident company first visiting a client's business premises to analyze its existing production operations. The non-resident company then makes recommendations to the management of the client on how to improve its productivity. This is followed by the delivery of an in-depth training session to the client's employees on the methodologies to be used to improve productivity taking into account the client's particular operations. The non-resident company's employees will then remain at the client's premises for a period of time to monitor the implementation of the recommended new work processes and respond to client questions.

 

3. Based on the number of employees that the company has and the nature of the work involved, the non-resident company can typically undertake only one contract at a time.

 

4. The non-resident company obtains a contract to supply its service to a Canadian company. This is the non-resident company’s only contract in Canada.

 

5. The contract requires five employees of the non-resident company to enter Canada and to be present at the Canadian company's premises to perform the service. The specific work to be undertaken by the employees involves a two-week analysis of the client's operations, followed by the delivery of a one-month training session to all of the client's employees, followed by a two-week assessment of the implementation of the recommendations. The non-resident company's employees will therefore be present at the client's premises for a period of at least two months.

 

6. The contract for the service is concluded outside Canada.

 

7. The non-resident company does not solicit business in Canada.

 

8. Payment for the supply is made outside Canada.

 

9. The non-resident company has no premises in Canada.

 

10. The non-resident company has no bank account in Canada and is not listed in any business directory in Canada.

 

SUPPLY OF SERVICES

 

 

Decision

 

The non-resident company is carrying on business in Canada.

 

Rationale

 

The service that is to be supplied is to be performed in Canada and several employees of the non-resident company are entering Canada to perform that service. The non-resident company is carrying on business in Canada based on these facts and the significance of the service to the overall business activity of the non-resident company.

 

  

26

  

EXAMPLE NO. 21 – SUPPLY OF SERVICES

 

Facts

 

1. A large non-resident painting company obtains a contract to paint the interior of a Canadian company's commercial building in Canada. The work is expected to take approximately seven months to complete.

 

2. The non-resident company is based outside of Canada and does not have any employees to perform the work. Therefore, as allowed by the terms of the contract, the non-resident company fully subcontracts the job to a Canadian painting company that is a registrant.

 

3. The Canadian company is a contractor that carries on business in Canada. Pursuant to the terms of the subcontract with the non-resident company, the Canadian company is free to undertake the work in the manner that it chooses. The only requirements are that the work be completed within the agreed-upon time frame and painted in the colour stipulated in the contract between the non-resident company and the Canadian building owner.

 

4. The non-resident company will not be in Canada supervising the work performed in Canada by the Canadian company. The non-resident company's involvement regarding the supply will be limited to occasionally contacting the Canadian company from outside Canada to see how the work to be done is progressing.

 

5. The contract between the non-resident company and the Canadian building owner is concluded outside Canada.

 

6. The subcontract between the non-resident company and the Canadian company is concluded in Canada.

 

7. Payment by the building owner for the supply made by the non-resident company is made outside Canada.

 

8. Payment by the non-resident company for the supply made by the Canadian company is made in Canada.

 

9. The non-resident company has no employees or agents in Canada.

 

10. The non-resident company does not solicit business in Canada.

 

11. The non-resident company has no premises or equipment in Canada.

 

12. The non-resident company has no bank account in Canada and is not listed in any business directory in Canada.

 

SUPPLY OF SERVICES

 

 

Decision

 

The non-resident company is not carrying on business in Canada for GST/HST purposes.

 

Rationale

 

There are no factors present in Canada in this case to support a conclusion that the non-resident company is carrying on business in Canada for GST/HST purposes. In particular, the non-resident company has no presence in Canada in the form of employees or agents in Canada.

 

It should be noted that the Canadian painting company in this case would be required to collect GST/HST from the non-resident company in respect of the taxable supply of the painting service that is made in Canada. If the non-resident company were to voluntarily register, the non-resident company would be entitled to an input tax credit in respect of the tax payable on the supply made by the Canadian painting company and would also be required to collect tax on its supply of the painting service made to the building owner.

 

  

27

  

 

Footnotes

 

1 Subsection 240(1) of the Excise Tax Act (the “Act”)

 

2 Subsection 143(1) of the Act

 

3 Division III of the Act

 

4 Division IV of the Act

 

5 Section 179 of the Act

 

6 Subsection 240(3) of the Act

 

7 Subsection 248(1) of the Income Tax Act

 

8 Section 253 of the Income Tax Act provides that: “For the purposes of this Act, where in a taxation year a person who is a non-resident person or a trust to which Part XII.2 applies

 

(a) produces, grows, mines, creates, manufactures, fabricates, improves, packs, preserves or constructs, in whole or in part, anything in Canada whether or not the person exports that thing without selling it before exportation,

 

(b) solicits orders or offers anything for sale in Canada through an agent or servant, whether the contract or transaction is to be completed inside or outside Canada or partly in and partly outside Canada, or

 

(c) disposes of

 

(i) Canadian resource property, except where an amount in respect of the disposition is included under paragraph 66.2(1)(a) or 66.4(1)(a),

 

(ii) property (other than depreciable property) that is a timber resource property or an interest therein or option in respect thereof, or

 

(iii) property (other than capital property) that is real property situated in Canada, including an interest therein or option in respect thereof, whether or not the property is in existence, the person shall be deemed, in respect of the activity or disposition, to have been carrying on business in Canada in the year.”

 

9 Subsection 240(2) of the Act

 

10 Subsection 240(4) of the Act

 

11 Subsection 123(1) of the Act

 

12 Subsection 123(1) of the Act

 

13 For instance, see Example #15

 

14 A non-resident who has a permanent establishment in Canada is considered to be resident in Canada, in respect of, but only in respect of the person's activities carried on through that establishment. This results in the non-resident being required to register for GST/HST as a resident person as a result of taxable supplies the non-resident makes through the permanent establishment, unless the non-resident is a small supplier.

 

15 Any reference in this policy to the “place of contract” or to the place where the agreement or contract “is concluded” signifies the place where the contract or agreement is considered made at law.

 

16 Subsection 136.1(1) of the Act

 

17 Subsection 136(1) of the Act

 

18 The non-resident lessor in this case would be considered to be carrying on business in Canada for GST/HST purposes effective the day on which the lessor entered into the sale-leaseback agreement.

 

19 For further information, refer to Example No. 6 of GST/HST Policy Statement P-208R, Meaning of Permanent Establishment in Subsection 123(1) of the Excise Tax Act (the Act).

 

20 Subsection 132(2) of the Act

 

21 Section 148 of the Act

 

Date Modified: 2005-04-28

 

Important Notices

 

  

28

  

 

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P-208R - Meaning of "Permanent Establishment" in Subsection 123(1) of the Excise Tax Act (the Act)

	
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GST/HST Policy Statement P-208R

 

Meaning of “permanent establishment” in subsection 123(1) of the Excise Tax Act (the Act)

 

Please note that the following policy statement, although correct at the time of issue, may not have been updated to reflect any subsequent legislative changes.

 

Date of Revision

 

March 23, 2005

 

Legislative Reference

 

Definition of “permanent establishment” in subsection 123(1) of the Act

 

National Coding System File Number

 

11680-4

 

Effective Date

 

January 1, 1991 for GST and April 1, 1997 for HST

 

  

29

  

 

Table of Contents

 

	
·  

	
Issue

	
·  

	
Decision

	
o  

	
Fixed place of business through which supplies are made

	
§  

	
i) “Fixed place of business”

	
§  

	
ii) “Through which the particular person makes supplies”

	
o  

	
Fixed place of business of another person

	
o  

	
Electronic Commerce

	
·  

	
Examples

	
o  

	
Example No. 1 – Representative Office of a Foreign Bank

	
o  

	
Example No. 2 – Insurance Company

	
o  

	
Example No. 3 – Employee's home

	
o  

	
Example No. 4 – Travelling Salesperson

	
o  

	
EXAMPLE No. 5 – Electronic commerce – Web site

	
o  

	
Example No. 6 – Electronic commerce – Web site hosting

	
o  

	
Example No. 7 – Electronic Commerce – Data Storage

	
o  

	
Example No. 8 – Electronic commerce – Digitized Products

	
o  

	
Example No. 9 – Storage of goods

	
o  

	
Example No. 10 – Leasing of Equipment

	
o  

	
Example No. 11 – Seabed Exploration

	
o  

	
Example No. 12 – Construction

	
o  

	
Example No. 13 – Dependent Agent

	
o  

	
Example No. 14 – Independent Agent

 

  

30

  

 

Issue

 

At issue is the meaning of the term “permanent establishment” as defined in subsection 123(1) of the Act. The application of various provisions of the Act depends on whether a person has a “permanent establishment”.

 

A non-resident person who has a permanent establishment in Canada is considered to be resident in Canada, in respect of, but only in respect of the person's activities carried on through that establishment 1, resulting in the following:

 

	
·  

	
The non-resident is required to register for GST/HST 2 as a resident person as a result of taxable supplies the non-resident makes through the permanent establishment, unless the non-resident is a small supplier 3.

	
·  

	
If the non-resident is required to register or registers voluntarily, the non-resident is not required to provide and maintain security 4.

	
·  

	
Supplies made in Canada by the non-resident through the permanent establishment are not subject to the special place of supply rules applicable to non-residents 5.

	
·  

	
Supplies acquired by the non-resident through the permanent establishment may not be eligible for zero-rating given that many of the zero-rating rules 6 require that the supply be made to a non-resident person.

	
·  

	
The non-resident may be required to self-assess tax on the taxable importation of property and services acquired for consumption, use or supply through the permanent establishment 7.

 

A person who is resident in Canada and has a permanent establishment outside Canada is deemed to be a non-resident person in respect of, but only in respect of, activities of the person carried on through that establishment 8.

 

Where a person carries on business through a permanent establishment in Canada and a permanent establishment outside Canada, any transfer of personal property or rendering of a service by one permanent establishment to the other is deemed to be a supply of the property or service and the establishments are deemed to be separate persons dealing at arm's length in respect of those supplies 9. As a result, cross-border transactions between permanent establishments of the same person may be subject to GST/HST.

 

A non-resident person who does not have a permanent establishment in Canada may carry on business in Canada and be required to register for GST/HST. For additional information, reference should be made to GST/HST Policy Statement P-051R2, Carrying on Business in Canada.

 

  

31

  

 

Decision

 

Whether a particular person has a permanent establishment in a particular situation is a question of fact that may be determined by applying the principles set out in this policy to the facts of each case.

 

Fixed place of business through which supplies are made

 

A “permanent establishment” of a person is defined under paragraph (a) of the definition to mean:

 

“(a) a fixed place of business of the particular person, including

 

(i) a place of management, a branch, an office, a factory or a workshop, and

 

(ii) a mine, an oil or gas well, a quarry, timberland or any other place of extraction of natural resources, through which the particular person makes supplies, ...”

 

Therefore, in order for a person to have a permanent establishment under paragraph (a) of the definition, the person must both have a fixed place of business and make supplies through that fixed place of business.

 

i) “Fixed place of business”

 

Several specific examples of what constitutes a fixed place of business are listed in the definition of permanent establishment, such as a branch, an office, a factory and a workshop. Although each of the examples listed can each be regarded, prima facie, as constituting a fixed place of business, they must nevertheless satisfy the requirements of the definition as a whole in order to constitute a permanent establishment. Specifically, the person must also be making supplies through such a fixed place of business, as explained in the following section.

 

The determination of whether a fixed place of business exists in cases that do not involve the examples listed in the definition of a “permanent establishment” will be based on the following guidelines.

 

Space

 

For a “place of business” to exist there must be space. A place of business of a person includes any premises used for conducting business activities of the person. If a business does not require actual premises to function, a place of business of a person may exist where it has a certain amount of space at its disposal, such as space at a public warehouse.

 

A person need not have a formal legal right to use the space by owning or leasing it for it to constitute a place of business of the person. Rather, the fact that the space is at the person's disposal is sufficient.

 

The fact that space at the disposal of a particular person is at the place of business of another person does not preclude the possibility that that space may be considered to be a place of business of the particular person. For instance, this could include space at the disposal of a non-resident at its client’s premises that is necessary for the non-resident to perform the service that it has agreed to supply to the client in the ordinary course of its business.

 

The fact that employees of a particular person may be present at the facilities of another person does not, on its own, result in space at those facilities being at the disposal of the particular person. For instance, a supplier’s sales representative may regularly meet in the offices of the employees of their customers merely to take orders. The limited presence of the sales representative at the customer’s premises in this case would not result in the premises being at the disposal of the supplier.

 

Space at the disposal of a person can also exist at the location of equipment or machinery that is at the disposal of the person.

 

  

32

  

 

Continuity and permanency

 

The place of business must be “fixed” in that it must be established at a particular location with a certain degree of continuity and permanency.

 

Typically, a place of business is lasting or intended to last “indefinitely” (i.e., for an indefinite or unspecified amount of time). Generally, the business must be considered as “ongoing”, in that there should be an unbroken succession of business and presence at the place of business. For example, in certain circumstances, an indication of continuity and permanence could be the fact that the physical address of a place of business that is accessible to the general public is listed in a directory or on a Web site.

 

A fixed place of business cannot be of a purely temporary nature (i.e. it must have a certain degree of permanency). However, a place of business may be fixed even though it exists, in practice, for a finite time because the nature of the particular business activity is such that it will only be undertaken for a short period of time such as a field office used for a project of finite duration.

 

Continuity and permanency may also exist in situations where a person returns to the same location for the same business purpose on a recurring basis (e.g., a person operating a booth at an annual exhibition over an extended period of time). In these cases, the determination of whether the place of business is fixed will take into account the period of time the place is used and the frequency of such use.

 

Where the nature of a particular person's business is such that the person's business activity moves within a particular geographic location or area (as can be the case, for example, with certain construction or installation projects), that location or area may nevertheless constitute a fixed place of business where the activity is identifiably being undertaken as a part of a single project.

 

Temporary interruptions of business activity such as those resulting from inclement weather or labour disruptions do not result in a place of business no longer being considered fixed.

 

As personnel are not necessarily required to be present at the location of equipment in order for it to be a place of business as explained below, it follows that personnel are not required to be present at that place of business for any period of time in order for it to be considered fixed. Also, with respect to equipment that is a place of business, it is not necessary that the equipment be affixed to real property to be considered fixed. Rather, the equipment must merely remain at the place of business for a sufficient period of time to be considered fixed.

 

Control

 

There must be control at the place of business. This requirement may be satisfied where there is someone at the place of business who has the authority to make decisions with respect to the operations of the business. In the case of a proprietor who is the owner/operator, authority would rest with that person. In an organization with branch operations, an employee of the branch should have authority to make important business decisions.

 

Control can also exist at a place of business where employees are not required to be present in order for important operational decisions to be made, such as a place of business where operational activities of a business are carried out through automated equipment at the disposal of the business.

 

  

33

  

 

Constant presence and ordinary routine

 

Where the ongoing presence of personnel is required at a particular place to undertake the business activities of a person (as opposed to where, for example, the person undertakes its business activities through the operation of automated equipment as explained below), an indication of constant presence can be the visibility of personnel within a place of business. This aspect is more critical in those circumstances where common facilities are used, such as public warehouses. The constant presence of an employee or representative of the business indicates the presence of the business.

 

The presence of personnel at a location where a business operates equipment at its disposal is not required in order to constitute a place of business if no personnel are required at that location to operate the equipment, as in the case of automated equipment. This includes where personnel of the business may be present at the location of the equipment to initially set it up and to maintain it as required.

 

Also, the day-to-day business must be capable of being carried on and an ordinary routine must exist. Where activities take place with a degree of regularity, be it daily, weekly, monthly, or seasonally, there may be a fixed place of business. Conversely, a place where isolated activities occur would not qualify as a fixed place of business.

 

ii) “Through which the particular person makes supplies”

 

As previously indicated, in order for a “fixed place of business” of a particular person to be considered a permanent establishment of the person, it must also be a place “through which the particular person makes supplies”.

 

The phrase “through which the particular person makes supplies” requires that the activity at the fixed place of business of a person be an essential and significant part of the particular overall business activity of the person. There must be a large degree of involvement through the fixed place of business in making or facilitating supplies by the person. There is no specific set of circumstances that must exist. Rather, each case will be determined on its own facts.

 

There are various indicators that may be used to determine whether supplies are made through a fixed place of business.

 

  

34

  

 

Primary factors

 

The presence of any of these factors is usually enough to indicate that supplies are being made through a fixed place of business:

 

	
·  

	
there is authority at the fixed place of business to enter into contracts or accept purchase orders for the provision of supplies to other persons and that authority is regularly exercised;

	
·  

	
the tangible personal property that is being supplied is physically manufactured or produced at the fixed place of business;

	
·  

	
if the supply is a service, the service is performed at the fixed place of business; or,

	
·  

	
the service of maintaining equipment supplied by the non-resident person, is performed at the fixed place of business (e.g., an authorized factory repair outlet).

 

Other factors

 

Generally, any one of the factors listed below, by itself would not be enough to indicate that supplies are being made through a fixed place of business. However, the presence of a combination of these factors might indicate that supplies are being made through the fixed place of business. The presence of a combination of the following factors with any of the primary factors, would indicate that supplies are being made through a fixed place of business:

 

	
·  

	
soliciting orders;

	
·  

	
taking (receiving) customer orders;

	
·  

	
arranging for customer contracts;

	
·  

	
providing for the storage, packing, shipping, and/or transportation of goods;

	
·  

	
providing general administration of accounts, including collection and depositing payments;

	
·  

	
providing advertising for the supply; and,

	
·  

	
providing for customer follow-up and after-sales support.

 

The above lists are not meant to be exhaustive. Any activity that is not strictly of a preparatory or auxiliary character must be considered.

 

A fixed place of business of a particular person that is used solely for the purpose of carrying on activities that are of a preparatory or auxiliary nature in relation to the particular overall business activity of the person does not constitute a fixed place of business of the person through which the person makes supplies. It therefore does not constitute a permanent establishment of the particular person.

 

“Preparatory” relates to those activities that serve to make the business ready. “Auxiliary” means activities that are designed to help or support the main business.

 

Activities that are generally considered to be of a preparatory or auxiliary character include:

 

	
·  

	
the use of a fixed place of business solely for the purpose of storage, display or delivery of goods or merchandise belonging to the particular person;

	
·  

	
the maintenance of a fixed place of business solely for the purpose of purchasing goods or merchandise or of collecting information for the particular person;

	
·  

	
the maintenance of a fixed place of business solely for the purpose of carrying on any combination of the above activities, provided that the overall activity of the fixed place of business resulting from this combination is still of a preparatory or auxiliary character.

 

It is important to note that where the above activities are in themselves essential and significant business activities of the person, a fixed place of business of the person at which the person undertakes these activities would constitute a permanent establishment. As indicated above, whether an activity is preparatory or auxiliary must always be considered in relation to the overall business activity of the person. For instance, although the storage of goods by their owner as described above is an auxiliary activity, the storage of goods by a person who is in the business of storing goods such as a warehouse operator is not an auxiliary activity as it is a significant and essential part of the warehouse operator’s overall business activity.

 

  

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Fixed place of business of another person

 

A “permanent establishment” of a particular person is defined under paragraph (b) of the definition to also mean:

 

(b) a fixed place of business of another person (other than a broker, general commission agent or other independent agent acting in the ordinary course of business) who is acting in Canada on behalf of the particular person and through whom the particular person makes supplies in the ordinary course of business;

 

The type of person referred to in paragraph (b) is a person who is acting in Canada as an agent of the particular person other than an independent agent acting in the ordinary course of its business. Such a person is commonly referred to as a dependent agent.

 

Whether a person is considered to be an agent for GST/HST purposes is based on a determination of fact and an application of principles of law. For an explanation of the application of law that would apply in determining whether an agency relationship may exist in a particular situation, reference should be made to GST/HST Policy Statement P-182R, Agency.

 

Generally, an agent will be considered to be independent if the agent is both legally and economically independent of the principal on whose behalf the agent is acting. Indicative factors to be considered in determining whether an agent is independent of the principal on whose behalf the agent is acting in a particular situation would include:

 

	
·  

	
Whether the agent is subject to detailed instructions or to comprehensive control by the principal (typically, an independent agent will not be subject to significant control by the principal in terms of how to carry out its work, nor subject to detailed instructions from the principal with respect to the conduct of the work. The principal in this case will be more interested in the results of the agent's work and rely on the special knowledge, skill or strength of the agent);

 

	
·  

	
Whether the entrepreneurial risk must be borne by the agent or the principal;

 

	
·  

	
Whether the agent sells goods in its own name rather than in the name of the principal; and

 

	
·  

	
Whether the agent acts as an agent for other persons.

 

In determining whether an independent agent is acting in the ordinary course of its business with respect to particular activities, consideration should be given as to whether those activities are typical of the activities that would usually be carried out in the course of the particular trade, as the case may be, of the independent agent.

 

In order for paragraph (b) to apply, it must be established that the dependent agent has its own fixed place of business. Such a determination will be based on the previously explained principles used to determine whether a particular person has a fixed place of business.

 

It must also be established that the dependent agent is a person through whom the particular person is making supplies. This does not necessarily require that the dependent agent must have the authority to conclude contracts on behalf of the particular person. Whether a particular person is considered to be making supplies through the dependent agent in a particular situation will be based on the existence of factors such as the previously listed factors used to determine whether supplies are made through a fixed place of business.

 

  

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Electronic Commerce

 

In an electronic commerce environment, non-resident suppliers can make supplies into Canada with the assistance of computer equipment, such as servers, located in Canada, and Web sites stored on such servers. The issue for GST/HST purposes is whether a non-resident person making supplies into Canada through a Web site or server in Canada is considered to have a permanent establishment in Canada.

 

A Web site, which merely consists of software and electronic data, is not tangible property, and therefore does not have a location that can constitute a place of business. As a result, the Web site of a non-resident person, including a Web site that is being hosted in a typical Web site hosting arrangement, does not, in itself, constitute a permanent establishment of the non-resident person for GST/HST purposes.

 

As previously explained, a location in Canada where automated equipment is operated by a non-resident can constitute a permanent establishment in Canada of the non-resident in certain circumstances. Computer equipment, such as a server on which a Web site is stored is tangible property having a physical location. Therefore, the location of a server in Canada may constitute a place of business of a non-resident person if it is at the disposal of the person, such as where it is owned (or leased) and used by the person. A non-resident person who has its Web site hosted on a server of an independent internet service provider (ISP) in Canada would not generally be regarded as having the ISP's server and its location at its disposal.

 

A server at a particular location in Canada can only qualify as a permanent establishment if its degree of permanence at that location is of a sufficient period of time to be considered fixed. The determination of whether a server is fixed is not based on whether the server may be moved to another location, but rather on whether it is actually moved to another location.

 

As is the case with any automated equipment, a server that is at the disposal of a non-resident person can qualify as a permanent establishment of the non-resident person for GST/HST purposes, even if no personnel are required at its location to operate it. However, the functions carried out by the non-resident person through the server must, on their own, be an essential and significant part of the business activity of the non-resident as a whole.

 

For example, although the operation of a server by a non-resident ISP that is in the business of hosting the Web sites of other businesses would be considered to be an essential and significant part of that non-resident's particular business activity, a server will not result in a non-resident person having a permanent establishment at its location if the operations carried on through that server are restricted to preparatory or auxiliary activities.

 

The fixed place of business of an ISP that hosts the Web sites of non-resident persons on its servers in Canada will not generally result in the non-residents having a permanent establishment in Canada either because the ISP does not usually act as agent in making supplies on behalf of the non-resident persons or because the ISP is an independent agent acting in the ordinary course of its business, as evidenced by the fact that it typically hosts the Web sites of many different businesses.

 

  

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Examples

 

EXAMPLE NO. 1 – REPRESENTATIVE OFFICE OF A FOREIGN BANK

 

Facts

 

1. A non-resident bank wants to expand into Canada and sets up a representative office (RO) in Toronto.

 

2. The RO is organized as a branch of the non-resident bank and is not a separate legal entity.

 

3. It is staffed with employees of the non-resident bank, including a manager, although the manager's authority is strictly limited to routine activities. Any major or capital expenses and staffing decisions are handled by the non-resident bank's home office.

 

4. The manager does not have the authority to accept or reject any potential client for the non-resident bank.

 

5. The activities carried on by the RO in Canada include organizing free seminars and meeting with Canadian residents, and providing these Canadian residents with free meals, advice, pamphlets, booklets, audio tapes, and forms. All of these activities are undertaken to inform the Canadian residents about the services offered by the non-resident bank and to induce them to do business with the non-resident bank.

 

6. If a Canadian resident wishes to do business (e.g., open an account, apply for a loan, etc.) with the non-resident bank, the RO will provide the necessary assistance. However, the actual banking transactions will be undertaken or carried out by the non-resident bank outside of Canada rather than by the RO in Canada.

 

7. No supplies are made in Canada by the RO or by the non-resident bank. The only activities carried out by the RO are those of assisting the non-resident bank in carrying out its activities outside of Canada.

 

Decision

 

The RO is not considered to be a permanent establishment of the non-resident bank.

 

Rationale

 

The making of supplies through a fixed place of business is a prerequisite to the place qualifying as a “permanent establishment” under subsection 123(1) of the Act. The non-resident bank cannot be considered to be making supplies in Canada through its RO as the activities of the RO are merely ancillary and incidental to the business carried on by the bank outside Canada.

 

Control by the manager is severely limited. All non-routine decisions have to be deferred to the home office. All important business decisions are made at the non-resident bank's home office and not at the RO. The manager is given a budget to support the activities of the RO, which are essentially limited to promoting the availability of banking services outside Canada.

 

 

  

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EXAMPLE NO. 2 – INSURANCE COMPANY

 

Facts

 

1. A non-resident insurer is in the business of selling casualty (fire, auto, theft, etc.) insurance in Canada.

 

2. The non-resident insurer maintains an office in Canada as required by the Office of the Superintendent of Financial Institutions.

 

3. All insurance contracts are written through the Canadian office, including the contracts that are referred to the non-resident insurer by independent brokers.

 

4. All insurance contracts are reviewed and given final approval by the non-resident home office and then returned to the Canadian office where the Chief Canadian Agent (CCA) initials them.

 

5. The CCA is an employee of the non-resident insurer who represents the insurer in Canada as well as performing regulatory reporting functions such as:

 

	
·  

	
ensuring the proper level of funds is invested in Canada for the amount of insurance business that is written in Canada; and

 

	
·  

	
tracking the investments and re-investing the funds as necessary, as well as requesting additional funds as needed.

 

6. The Canadian office also carries out administrative functions (bank deposits, renewal/non-compliance notices, requests for supplementary information) and serves as a place of service for legal documents, i.e., the Canadian office is responsible for responding to claims by the insured.

 

Decision

 

The non-resident insurer has a permanent establishment in Canada through which supplies of insurance are made.

 

Rationale

 

The non-resident insurer has a fixed place of business in Canada, namely the office of the CCA (which, for the purposes of this illustration, is an office of the non-resident and not of another person), through which the non-resident makes supplies of insurance. The business activities conducted at the fixed place of business are considered to be an essential and significant part of the insurance business of the non-resident.

 

 

  

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EXAMPLE NO. 3 – EMPLOYEE'S HOME

 

Facts

 

1. A non-resident agricultural machinery manufacturing company wants to expand into Canada.

 

2. Because of the high cost of shipping equipment overseas, the company decided to send an employee to see if the employee can develop the territory. The employee is expected to work from home. There is no office or any physical location where equipment is stored.

 

3. The employee has a computer, a fax, a phone, and a photocopier in the employee’s “office” — a converted room in the employee’s apartment. The company’s phone and fax numbers are listed in the phone book, but a P.O. box number is listed as the mailing address. There is no other publicly accessible address.

 

4. The employee is identified on the lease as the lessee of the apartment.

 

5. The employee pays expenses that are within the employee’s limited authorization directly and is reimbursed.

 

6. When the employee receives an order, the order is forwarded to the head office located outside Canada for final approval. Usually, the employee's recommendations are accepted.

 

7. The order is processed at the head office. The equipment is shipped to Canada. Once the equipment has been imported and cleared the Canadian border, it is sent to the customer's location. The employee arranges for the installation of the equipment by subcontractors.

 

8. The employee determines, in conjunction with the head office, what type of advertising and promotion is done in Canada.

 

9. All day-to-day and routine business activities are carried on by the employee within certain parameters that have been determined by the head office in consultation with the employee.

 

Decision

 

The non-resident machinery manufacturing company has a permanent establishment in Canada at the apartment of the employee.

 

Rationale

 

The employee has a work area available in the employee’s residence and, as such, there is space available to the employee to conduct the employer’s business. There is a phone number and a mailing address, and although no customers go to the place of business, there is a location.

 

The employee has limited authority. The employee does not have absolute contracting authority, although the employee’s recommendations are usually approved by the home office (de facto authority), and all expenses (other than those below an established limit) have to be approved by the head office. Larger expenses are forwarded to the head office to be approved and paid from there. Constant presence is assured by either the employee's physical presence or by an answering machine.

 

These factors indicate that there is a fixed place of business, that significant and essential business activities of the company are being conducted at the fixed place of business through the receiving of orders in respect of which the recommendations of the employee are usually accepted by the non-resident, and that supplies are therefore made by the non-resident through the fixed place of business..

 

 

  

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EXAMPLE NO. 4 – TRAVELLING SALESPERSON

 

Facts

 

1. A non-resident individual who is a vendor of herbal remedies travels throughout south-eastern Ontario and Western Quebec during the summer months following a circuit designed to coincide with local fairs.

 

2. The vendor has travelled this route for the last several years.

 

3. Depending upon the vendor’s scheduling and the timing of various fairs in other small communities, the vendor may participate and set up a display at these small (usually weekend) events as the vendor’s route is traversed.

 

4. The vendor travels in a motor home, which acts as office, residence and warehouse. If the vendor runs short of a particular commodity, distributors are available in Canada from which the vendor can obtain additional supplies. The vendor carries a portable fold-up display booth in the cargo area of the motor home that the vendor sets up at the various fairs from which the goods are sold.

 

Decision

 

The non-resident vendor has a permanent establishment in Canada.

 

Rationale

 

The non-resident vendor has a fixed place of business. Consistent with the vendor's particular type of business, the vendor returns to the same location on a recurring basis for the same business purpose. The vendor conducts significant and essential business at that fixed place of business. Supplies are made through it, either by immediate sale or by taking orders for future delivery (in which case, the point of sale would still be the vendor’s fixed place of business — the display booth).

 

 

  

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EXAMPLE NO. 5 – ELECTRONIC COMMERCE – WEB SITE

 

Facts

 

1. A non-resident business enters into an agreement with an independent Canadian Internet Service Provider (ISP) for its Web site to be hosted by the ISP.

 

2. The Web site provides detailed information about the non-resident business and its products.

 

3. The Web site is hosted on a server that is owned by the ISP and is located on an ongoing basis at a place in Canada.

 

4. The ISP is responsible for the server on which the Web site is hosted.

 

5. The hosting fee charged by the ISP to the non-resident business is based on bandwidth used to store the software and data required by the Web site.

 

Decision

 

The non-resident business does not have a permanent establishment in Canada as a result of its Web site being hosted on the server in Canada.

 

Rationale

 

The Web site of the non-resident business does not constitute a permanent establishment of the non-resident business. The Web site is not tangible property that has a physical location and therefore cannot constitute a place of business.

 

The server on which the Web site is stored is tangible property that has a physical location and may thus constitute a place of business. However, the server in this case cannot be a permanent establishment of the non-resident business as it is not at its disposal (not used and owned or leased by the non-resident business).

 

 

  

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EXAMPLE NO. 6 – ELECTRONIC COMMERCE – WEB SITE HOSTING

 

Facts:

 

1. A non-resident ISP is in the business of hosting the Web sites of its various customers.

 

2. The server on which the Web sites are hosted is permanently located at a particular place in Canada.

 

3. The server is owned by the non-resident ISP.

 

4. Personnel of the ISP entered Canada to initially set up the server at its particular location.

 

5. Personnel are not required at the location of the server for its ongoing operation.

 

Decision

 

The server of the non-resident ISP that is located in Canada constitutes a permanent establishment of the ISP in Canada.

 

Rationale

 

The location of a server in Canada may constitute a place of business of a non-resident person if it is at the disposal of the person, such as where it is owned (or leased) and used by the person. In this example, the server on which the Web sites are being hosted is at the disposal of the ISP, as the ISP owns and uses the server. The server is automated equipment that operates on its own. Personnel are not required at its location in order for it to constitute a place of business. The server is a fixed place of business as it is indefinitely located at a particular place. Furthermore, the ISP is considered to be making supplies (i.e. Web site hosting) through that fixed place of business. Given that the nature of the ISP's business is the hosting of Web sites, the functions carried out through the operation of the server are considered to be a significant and essential part of the ISP's business.

 

 

  

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EXAMPLE NO. 7 – ELECTRONIC COMMERCE – DATA STORAGE

 

Facts:

 

1. A non-resident company is in the business of supplying goods to customers worldwide.

 

2. The non-resident leases a server that is permanently located at a particular place in Canada.

 

3. The non-resident uses the server to store its business records, including the billing information for all of its customers.

 

4. Personnel are not required at the location of the server for its ongoing operation.

 

Decision

 

The non-resident does not have a permanent establishment in Canada as a result of the server in Canada.

 

Rationale

 

The location of a server in Canada may constitute a place of business of a non-resident person if it is at the disposal of the person, such as where it is owned (or leased) and used by the person. In this example, the server is at the disposal of the non-resident as it is leased and used by the non-resident and is a fixed place of business of the non-resident. However, it is not a fixed place of business through which the non-resident makes supplies because the function carried out through its operation is an auxiliary activity in relation to the non-resident's business of selling goods.

 

 

  

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EXAMPLE NO. 8 – ELECTRONIC COMMERCE – DIGITIZED PRODUCTS

 

Facts

 

1. A non-resident company operates a Web site offering various digitized music files for downloading by subscribers.

 

2. The digitized products are stored on the server as part of the Web site.

 

3. Subscribers pay a fixed periodic fee to access the Web site and download the digitized products.

 

4. The Web site through which the digitized products are accessed by subscribers is stored on a server that is permanently located at a particular place in Canada.

 

5. The server is leased by the non-resident.

 

6. All functions relating to the supply of the digitized products are automatically performed through the operation of the server, including the ordering by customers of the software applications, the processing of those orders, and payment processing.

 

7. Personnel are not required at the location of the server for its ongoing operation.

 

Decision

 

The server on which the non-resident's Web site is stored constitutes a permanent establishment of the non-resident in Canada.

 

Rationale

 

The location of a server in Canada may constitute a place of business of a non-resident person if it is at the disposal of the person, such as where it is owned (or leased) and used by the person. In this example, the server on which the Web site is being hosted is at the disposal of the non-resident as the non-resident leases and uses the server. The server is automated equipment that operates on its own. Personnel are not required at its location in order for it to constitute a place of business. The server is a fixed place of business as it is permanently located at a particular place. Furthermore, the non-resident is considered to be making supplies through that fixed place of business. As the nature of the non-resident's business is the supply of on-line access to the music files, the functions carried out through the operation of the server are considered to be a significant and essential part of the non-resident's business.

 

 

  

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EXAMPLE NO. 9 – STORAGE OF GOODS

 

Facts

 

1. A non-resident is in the business of supplying goods by way of sale. On a regular basis, the non-resident purchases the goods from a registrant in Canada for resale. For logistical purposes, the non-resident has the registrant ship the goods to a public warehouse in Canada for storage until they are resold and shipped to the non-resident’s customers.

 

2. The non-resident enters into a long-term agreement with the public warehouse to rent space in the warehouse to store the goods. The space is a designated area in the warehouse that is used exclusively for the storage of the non-resident’s goods and allows the non-resident to easily load the goods for transport to its customers. The non-resident has unrestricted access to the area in the warehouse so that the goods may be picked up for transport at any time.

 

3. Goods of the non-resident that are shipped to the warehouse are received and moved by employees of the warehouse to the designated area and stored there until they are picked up by the non-resident for delivery to its customers.

 

4. The non-resident uses its own trucks to transport the goods from the warehouse to its customers’ locations. The drivers employed by the non-resident load the goods in the quantities specified by the non-resident.

 

5. The non-resident’s goods are shipped to and from the warehouse several times a week.

 

6. The non-resident does not solicit orders for supplies of the goods in Canada and only sells them to customers located outside Canada. Delivery of all goods supplied by the non-resident occurs outside Canada.

 

7. The non-resident does not undertake any activities at the warehouse other than those previously described. Also, the non-resident does not does not have any employees or agents in Canada other than as described above.

 

Decision

 

The non-resident does not have a permanent establishment in Canada as a result of the storage of its goods at the public warehouse.

 

Rationale

 

The area in the warehouse is space that is at the disposal of the non-resident notwithstanding that it is in the premises of another person. However, it is not a fixed place of business through which the non-resident makes supplies because the activity undertaken at the warehouse is an auxiliary activity in relation to the non-resident's business of selling goods. Specifically, the area at the warehouse is used by the non-resident solely for the purpose of storing goods.

 

 

  

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EXAMPLE NO. 10 – LEASING OF EQUIPMENT

 

Facts

 

1. A non-resident company owns industrial equipment that it supplies by way of lease to a Canadian company pursuant to a long-term lease.

 

2. The equipment is delivered to the Canadian company at its manufacturing facility in Canada.

 

3. Personnel of the non-resident company enter Canada for a few days at the beginning of the lease to assist the Canadian company in setting up the equipment at its factory in Canada.

 

4. The Canadian company is responsible for the ongoing operation and maintenance of the equipment.

 

5. Throughout the term of the lease, personnel of the Canadian company will operate the equipment to manufacture its products at its factory.

 

Decision

 

The non-resident does not have a permanent establishment in Canada as a result of the equipment being located in Canada.

 

Rationale

 

Although the non-resident is making supplies to the Canadian company, the non-resident does not have a permanent establishment in Canada merely as a result of the equipment being located in Canada. The non-resident neither operates nor controls the use of the equipment. The equipment and its location are not considered to be at the disposal of the non-resident. The equipment is under the control of the Canadian company that is fully responsible for its operation and maintenance at its manufacturing facility.

 

 

  

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EXAMPLE NO. 11 – SEABED EXPLORATION

 

Facts

 

1. A non-resident company is hired by a Canadian resident company to perform hydrocarbon exploration and development under an exploration licence on the seabed of the continental shelf of Canada off the coast of Nova Scotia.

 

2. The non-resident company has expertise in offshore hydrocarbon exploration and development in the North Atlantic.

 

3. The non-resident company will import their own vessel and equipment. The vessel captain, geologist and seismologist are employed by the non-resident company. The Canadian company employs the remaining workers.

 

4. The non-resident company will anchor the vessel at the port of Halifax whenever the vessel captain believes the weather inclement or they require provisions.

 

5. The Canadian company has contracted with the non-resident company for the next three seasons as exploration can only be conducted between April and November due to weather and sea conditions.

 

Decision

 

The non-resident company has a permanent establishment in Canada.

 

Rationale

 

The business of the non-resident company is seabed exploration and development. In light of the nature of the non-resident company’s business it is considered to be conducting significant and essential business activities in Canada.

 

The non-resident company conducts the activities over and on the seabed of the continental shelf of Canada. “Canada” includes the seabed of the continental shelf of Canada.

 

The non-resident company is also considered to be making supplies through a fixed place of business in Canada. Although the vessel is transportable within the exploration area, the business activities being conducted through the operation of the vessel are confined to a single contract and to a specific geographical area (i.e. the area defined in the exploration licence) thus constituting a place of business in Canada. The activities are of a sufficient duration for the place of business to be considered fixed.

 

 

  

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EXAMPLE NO. 12 – CONSTRUCTION

 

Facts

 

1. A non-resident construction firm wins a bid to re-engineer and resurface all the existing runways and build additional runways at an international airport in Canada.

 

2. The non-resident company will import specialized machinery and its experienced personnel will enter Canada to perform the work.

 

3. The project is expected to last a total of thirteen months, including preparatory work.

 

Decision

 

The non-resident company has a permanent establishment in Canada.

 

Rationale

 

There is a fixed place of business as the construction work is being carried out by the non-resident company pursuant to a single contract within a specific geographical location (the area surrounding the airport) for a sufficient period of time.

 

The non-resident company is considered to be making supplies through this fixed place of business because the construction work is an essential and significant activity that is the very nature of its business activity.

 

 

  

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EXAMPLE NO. 13 – DEPENDENT AGENT

 

Facts

 

1. An established non-resident company is in the business of supplying highly specialized software that it has developed for use by software development companies.

 

2. Recognizing the potentially valuable Canadian market for this product, a Canadian company enters into an exclusive agency agreement with the non-resident company to solicit and make supplies of the software in Canada on behalf of the non-resident. The Canadian company is the sole agent of the non-resident company in Canada.

 

3. The Canadian company's only business activity is the supply of the software on behalf of the non-resident company. The agency agreement explicitly prohibits the Canadian company from making supplies of any other type of software in Canada on behalf of any other person.

 

4. The non-resident company has established a standard software agreement that is to be used by the Canadian company. Pursuant to the terms of the agency agreement, the Canadian company may enter into the standard software agreement in Canada with recipients on behalf of and in the name of the non-resident company. The Canadian company does not require the final approval of the non-resident company to conclude the contract in its name unless the standard agreement is modified. As is often the case, if any modifications to the agreement are requested, the Canadian company is to formally advise the non-resident company and obtain its approval of the modifications.

 

5. At no time does the Canadian company obtain ownership of the software supplied to Canadian customers, nor does it incur any risk of loss with respect to the software supplied to Canadian customers.

 

6. Pursuant to the terms of the agency agreement, the Canadian company is to follow the established detailed instructions of the non-resident company with respect to all aspects of the supply of the software and the conduct of the Canadian company's work including the manner in which: the Canadian company is to identify itself as an agent of the non-resident company, clients are to be solicited and the product marketed, agreements for the supply are to be concluded. Training by the non-resident company in these areas is provided to the personnel of the Canadian company.

 

7. The price of the software is established and may only be modified by the non-resident company. Payments for the software are made by Canadian customers to the Canadian company in the name of the non-resident company and subsequently transmitted by the Canadian company to the non-resident company.

 

8. The Canadian company is subsequently paid a commission by the non-resident company. The commission received by the Canadian company for each particular supply of the software product is equal to a fixed percentage of the price of the software. The Canadian company is also fully reimbursed by the non-resident company for any pre-approved marketing expenses incurred by the Canadian company.

 

9. Following receipt of payment for the software, the non-resident sends the software from its location outside Canada to the Canadian customer.

 

10. The Canadian company has an office in Canada from which its personnel conducts its business. Agreements are typically concluded at these premises and it is identified, including on the non-resident's Web site, as the contact point for both existing and prospective Canadian customers.

 

Decision

 

The non-resident company has a permanent establishment in Canada.

 

Rationale

 

The Canadian company is acting as an agent on behalf of the non-resident company with respect to the supplies of software. The Canadian company is not an independent agent as it is subject to detailed instructions and comprehensive control by the non-resident company. Another indication that the Canadian company is not an independent agent is that it does not act on behalf of any supplier other than the non-resident company.

 

The Canadian company has its own fixed place of business in Canada (its office) and the supplies being made by the non-resident through the Canadian company are significant and essential activities.

 

 

  

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EXAMPLE NO. 14 – INDEPENDENT AGENT

 

Facts

 

1. A Canadian company is in the business of acting as an agent in supplying various types of industrial tools in Canada on behalf of Canadian and non-resident manufacturers to Canadian retailers.

 

2. The Canadian company has extensive knowledge of the industrial tool industry and is renowned in the industry for being able to achieve high sales levels.

 

3. The Canadian company has an office in Canada from which it conducts all of its business.

 

4. The Canadian company has a standard agency agreement that it enters into with each manufacturer that wishes to have it act as its agent. Under the agreement, the Canadian company is to act as a non-exclusive agent on behalf of the manufacturer in supplying tools. The agreement provides that the Canadian company will undertake its best efforts to achieve high sales levels of the particular manufacturer's products. Within the scope of the authority conferred by the agency agreement, the Canadian company is free to conduct its business of selling the products in the manner that it deems appropriate.

 

5. The Canadian company enters into a contract for the supply of tools to Canadian customers on behalf of a particular non-resident manufacturer in the name of the manufacturer. The agreements are typically concluded by the Canadian company from its Canadian office.

 

6. The Canadian company does not obtain ownership of the tools.

 

7. The Canadian company accepts payments from customers at its office. Orders accepted and transmitted by the Canadian company to the non-resident manufacturer are automatically approved, processed and shipped from its location outside Canada.

 

8. The Canadian company is paid a commission by the manufacturer that is generally equal to a fixed percentage of the value of sales achieved. This commission rate takes into account the fact that the Canadian company is to incur any marketing and sales expenses on its own behalf to promote the manufacturer's products.

 

9. Pursuant to the agreement, if the Canadian company manages to achieve a certain level of sales beyond what has been initially targeted, including where the company negotiates a higher price (which it has the freedom to do under the agreement), its commission rate on those additional sales is increased.

 

Decision

 

The non-resident manufacturer does not have a permanent establishment in Canada as a result of the agreement it enters into with the Canadian company.

 

Rationale

 

The Canadian company is acting as an agent in making supplies on behalf of the non-resident manufacturer and has its own fixed place of business in Canada. However, this does not result in the non-resident having a permanent establishment in Canada given that the Canadian company is an independent agent acting in the ordinary course of its business.

 

The Canadian company is an independent agent because it is not subject to detailed instructions and comprehensive control by the non-resident manufacturer with respect to the manner in which it conducts its business. The Canadian company also acts on behalf of numerous suppliers.

 

  

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Footnotes

 

1 Subsection 132(2) of the Act

 

2 Subsection 240(1) of the Act

 

3 Section 148 of the Act

 

4 Unless the non-resident only has a permanent establishment in Canada based on the fixed place of business of another person acting in Canada on behalf of the non-resident (subsection 240(6) of the Act).

 

5 Subsection 143(1) of the Act

 

6 Part V of Schedule VI to the Act

 

7 Section 218 of the Act

 

8 Subsection 132(3) of the Act

 

9 Subsection 132(4) of the Act and Section 220 of the Act

 

Date Modified: 2005-03-23

 

Important Notices

 

 

52CCIT EX 10.3 6/30/2013

EXHIBIT 10.3
AGREEMENT OF SALE AND PURCHASE

THIS AGREEMENT OF SALE AND PURCHASE ("Agreement") is made this 28 day of March, 2013 by and between 55 CORPORATE UNIT IV LLC, a limited liability company organized under the laws of the State of Delaware having an address c/o Mack-Cali Realty Corporation, 343 Thornall Street, Edison, New Jersey 08837 ("Seller") and SERIES C, LLC, a limited liability company organized under the laws of the State of Arizona having its main office at 2325 East Camelback Road, Suite 1100, Phoenix, Arizona 85016 ("Purchaser").

1n consideration of the mutual promises, covenants, and agreements set forth herein, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Seller and Purchaser agree as follows:

ARTICLE I DEFINITIONS

Section 1.1              Definitions.      For   purposes   of   this  Agreement,  the  following capitalized terms have the meanings set forth in this Section 1.1:

"Additional Earnest Money Deposit" shall have the meaning ascribed to such term in
Section 4.1(b).

"Affiliate" means, with respect to any person or entity, any other person or entity that controls, is controlled by or is under common control with the first such person or entity. As used in this definition, "control" means the ability to control and direct the day-to-day operations and affairs of such person or entity.

"Assignment" has the meaning ascribed to such term in Section 10.3(b) and shall be in the form attached hereto as Exhibit A.

"Authorities"  means the various federal, state and local governmental and quasi­ governmental bodies or agencies having jurisdiction over the Real Property and Improvements, or any portion thereof.

"Broker" has the meaning ascribed to such term in Section 16.1.

"Business  Day"  means any day other than a  Saturday, Sunday or a day on which national banking associations are authorized or required to close.

"Certificate   as  to  Foreign   Status"   has the meaning ascribed to such term in
Section 10.3(d) and shall be in the form attached as Exhibit B.

"Certifying Person" has the meaning ascribed to such term in Section 4.3(a).

"Closing" means the consummation of the purchase and sale of the Property contemplated by this Agreement, as provided for in Article X.

"Closing Date" means the date on which the Closing of the transaction contemplated hereby actually occurs.

"Closing Statement" has the meaning ascribed to such term in Section 10.4(a).

"Closing Surviving Obligations" means the rights, liabilities and obligations set forth in Sections  3.2,  5.3,  5.4,  8.1  (subject  to  Section  8.3),  8.2,  8.3,  10.4,  10.6,  11.1,  11.2,  12.1, Article XIV, 16.1, 18.2 and 18.8, and any other provisions which pursuant to their terms survives the Closing hereunder.

"Code" has the meaning ascribed to such term in Section 4.3.

"Condo  Association"  has  the  meaning  ascribed  to  such  term  in  the  definition  of
Operating Agreement hereunder.

"Data Room" has the meaning ascribed to such term in Section 5.2(a). "Deed" has the meaning ascribed to such term in Section 10.3(a). "Division" has the meaning ascribed to such term in Section 18.14(a). "Documents" has the meaning ascribed to such term in Section 5.2(a).

"Earnest Money Deposit" means the Initial Earnest Money Deposit and the Additional
Earnest Money Deposit.

"Effective  Date"  means  the  date  on  which  this  Agreement  has  been  executed  and delivered by both Seller and Purchaser.

"Environmental  Laws"  means  each  and  every  federal,  state,  county  and  municipal statute,   ordinance,   rule,   regulation,   code,   order,   requirement,   directive,   binding   written interpretation and binding written policy pertaining to Hazardous Substances issued by any Authorities and in effect  as of the date of this Agreement with respect to or which otherwise pertains to or affects the Real Property or the Improvements, or any portion thereof, the use, ownership, occupancy  or operation  of the Real Property or the Improvements,  or any portion thereof, or Purchaser, and as same have been amended, modified or supplemented from time to time prior to the Effective Date, including but not limited to the Comprehensive  Environmental Response, Compensation and Liability Act of 1980 (42 U.S.C. § 9601 et seq.), the Hazardous Substances  Transportation  Act  (49  U.S.C.  §  1802  et  seq.),  the  Resource  Conservation  and Recovery Act (42 U.S.C. § 6901 et seq.), as amended by the Hazardous and Solid Wastes Amendments  of 1984, the  Water Pollution  Control  Act (33 U.S.C.  § 1251  et seq.),  the Safe Drinking Water Act (42 U.S.C. § 300f et seq.), the Clean Water Act (33 U.S.C. § 1321 et seq.), the Clean Air Act (42 U.S.C. § 7401 et seq.), the Solid Waste Disposal Act (42 U.S.C. § 6901 et seq.), the Toxic Substances Control Act (15 U.S.C. § 2601 et seq.), the Emergency Planning and Community Right-to-Know Act of 1986 (42 U.S.C. § 11001 et seq.), the Radon Gas and Indoor Air Quality Research Act of 1986 (42 U.S.C. § 7401 et seq.), the National Environmental Policy Act (42 U.S.C. § 4321  et seq.), the Superfund  Amendment  Reauthorization  Act of 1986  (42

U.S.C. § 9601 et seq.), the Occupational Safety and Health Act (29 U.S.C. § 651 et seq.) (collectively, the "Environmental Statutes"), and any and all rules and regulations which have become effective prior to the date of this Agreement  under any and all of the Environmental Statutes.

"Escrow Agent" means First American Title Insurance Company, having an address at
The  Esplanade  Commercial  Center,  2425  E.  Camelback  Road,  Suite  300,  Phoenix,  Arizona
85016, Attention: Brandon Grajewski.

"Existing Survey" means Seller's existing survey of the Real Property entitled, "As-built Plan for a Portion of 55 Corporate Drive, Bridgewater, NJ" dated January 10, 2011, prepared by Lous J. Weber & Associates, Inc., consisting of four  (4) sheets.

"Evaluation Period" has the meaning ascribed to such term in Section 5.1.

"Governmental  Regulations"  means all statutes, ordinances, rules and regulations of the Authorities applicable to Seller or the use or operation of the Real Property or the Improvements or any portion thereof.

"Hazardous  Substances"  means (a) asbestos, radon gas and urea formaldehyde foam insulation, (b) any solid, liquid, gaseous or thermal contaminant, including smoke vapor, soot, fumes, acids, alkalis, chemicals, petroleum products or byproducts, polychlorinated biphenyls, phosphates, lead or other heavy metals and chlorine, (c) any solid or liquid waste (including, without limitation, hazardous waste), hazardous air pollutant, hazardous substance, hazardous chemical substance and mixture, toxic substance, pollutant, pollution, regulated substance and contaminant, and (d) any other chemical, material or substance, the use or presence of which, or exposure to the use or presence of which, is prohibited, limited or regulated by any Environmental Laws.

"Improvements"  means all buildings, structures, fixtures and any other improvements constituting part of Unit IV.

"Initial  Earnest  Money  Deposit"  shall have the meaning ascribed to  such term in
Section 4.l(a).

"Lease" means that certain Lease Agreement between Seller, as the Lessor, and Sanofi
US Services Inc. (f/k/a sanofi-aventis U.S. Inc.), as the Lessee ("Tenant"), dated November 20,
2007, for the lease of the Property, and a certain Guaranty of the Lease Agreement by Sanofi (f/k/a sanofi-aventis; "Guarantor"), to Seller dated of even date with the Lease Agreement, as such Lease Agreement has been amended by a certain First Amendment to Lease Agreement between Seller and Tenant, dated April 30, 2008, a certain Second Amendment to Lease Agreement between Seller and Tenant, dated May 30, 2008, a certain Third Amendment to Lease Agreement between Seller and Tenant, dated February 15, 2010, a certain Fourth Amendment to Lease Agreement between Seller and Tenant, dated February 28, 2013, a certain letter from Seller's counsel to Tenant updating the notice address provisions of the Lease Agreement, dated February 4, 2011, a certain Memorialization Agreement, between Seller and Tenant, dated February 22, 2011, and a certain Waiver Date Confirmation, between Seller and Tenant, dated February 28, 2013.

"Leasing  Commission  Agreement"  means that certain brokerage agreement entered into between Seller and Cushman & Wakefield of New Jersey (the "Leasing Broker") on May
10,2006.

"Licensee Parties" has the meaning ascribed to such term in Section 5.1.

"Licenses and Permits" means, collectively, all of Seller's right, title and interest, to the extent assignable, in and to licenses, permits, certificates of occupancy, approvals and entitlements now or hereafter issued, approved or granted by the Authorities in connection solely with the Real Property and the Improvements, together with all renewals and modifications thereof, but expressly reserving unto the Seller or it affiliate all licenses, permits, approvals and entitlements with respect to the remaining "Future Development Options" and "Future Development Area" as described in the Master Deed, and all rights of the Declarant under that certain Option Agreement and Memorandum of Expansion Option Agreement, recorded November 7, 2005 in Deed Book 5824, Page 2068, and assigned to Tenant by Memorandum of Assignment of Expansion Option Agreement, recorded May 18,2006 in Deed Book 5895, Page756, as any of the foregoing documents have been amended.

"Master Deed" means that certain Master Deed Creating 55 Corporate Drive Condominium (the "Condominium"),  made by Gale 55 Corporate Associates, LLC, dated November 4, 2005 and recorded on November 7, 2005 in the office of the Clerk of Somerset County, New Jersey in Deed Book 5824, Page 1836  et seq., as amended by that certain First Amendment to Master Deed Creating 55 Corporate Drive Condominium, made by 55 Corporate Drive Condominium Association, LLC, dated November 20, 2007 and recorded on December
13, 2005 in the office of the Clerk of Somerset County, New Jersey in Deed Book 6092, Page
3236 et seq.(the "First Amendment to Master Deed"), and as further amended by that certain
Second Amendment to Master Deed Creating 55 Corporate Drive Condominium, made by SLG
55 Corporate LLC, GKK 55 Corporate LLC, SLG 55 Corporate II LLC, and GKK 55 Corporate
II LLC, dated December 18, 2008 and recorded on December 19, 2008 in the office of the Clerk
of Somerset County, New Jersey in Book OPR6181, Page 849 et seq.(the "Second Amendment to Master Deed"), as the same may be further amended pursuant to Section 7.2 hereof.

"Operating Agreement" means that certain Operating Agreement of 55 Corporate Drive
Condominium Association, LLC (the "Condo Association"), dated as of October 25, 2005.

"Permitted Outside Parties" has the meaning ascribed to such term in Section 5.2(b).

"Property" has the meaning ascribed to such term in Section 2.1.

"Purchase Price" has the meaning ascribed to such term in Section 3.I.

"Purchaser's  Affiliates"  means any past, present or future: (i) shareholder, partner, member, manager or owner of Purchaser; (ii) entity in which Purchaser or any past, present or future shareholder, partner, member, manager or owner of Purchaser has or had an interest; (iii) entity that, directly or indirectly, controls, is controlled by or is under common control with Purchaser  and  (iv) the  heirs,  executors,  administrators,  personal  or  legal  representatives, successors and assigns of any or all of the foregoing.

"Purchaser's Information" has the meaning ascribed to such term in Section 5.3(c).

"Real Property" means that certain real property situated at 55 Corporate Drive in the Township of Bridgewater ("Bridgewater"), County of Somerset, and State of New Jersey and identified as Unit IV in 55 Corporate Drive Condominium, a condominium, pursuant to the Master Deed, together with any Limited Common Elements (as defined in the Master Deed) appurtenant thereto and an undivided percentage interest in the General Common Elements (as defined in the Master Deed) appurtenant thereto, in accordance with, and subject to, the terms, conditions, easements, covenants, restrictions, limitations and other provisions set forth in the Master Deed.

"Scheduled  Closing Date" means ten (10) days after the expiration of the Evaluation
Period, or such earlier or later date to which Purchaser and Seller may hereafter agree in writing.

"Seller's Affiliates" means any past, present or future: (i) shareholder, partner, member, manager or owner of Seller; (ii) entity in which Seller or any past, present or future shareholder, partner, member, manager or owner of Seller has or had an interest; (iii) entity that, directly or indirectly, controls, is controlled by or is under common control with Seller and (iv) the heirs, executors, administrators, personal or legal representatives, successors and assigns of any or all of the foregoing.

"Significant  Portion"  means,  for  purposes of  the  casualty  provisions set  forth  in Article XI hereof, loss or damage caused by fire or other casualty to the Real Property and the Improvements or a portion thereof, which is uninsured (other than deductibles) or would entitle the Tenant to terminate the Lease or permanently abate any Rental pursuant to the terms thereof.

"SNDA" has the meaning ascribed to such term in Section 7.4.

"Strict Representations" means only the representations and warranties made by Seller in clauses (a),(b),(c),(f), (g), (i), (I) and (m) of Section 8.1.

"Tenant" has the meaning ascribed to such term in Section 1.1 under the definition of
"Lease" or its successors and assigns.

"Termination  Surviving  Obligations"  means the rights, liabilities and obligations set forth in Sections 5.2, 5.3, 5.4, 12.1, Articles XIII and XIV, 16.1, 17.1, 18.2 and 18.8, and any other provisions which pursuant to their terms survive any termination of this Agreement.

"Title Defects" has the meaning ascribed to such term in Section 6.2(a).

"To Seller's Knowledge", or "Knowledge of Seller", or similar use of the word "Knowledge" as it relates to Seller means the present actual (as opposed to constructive or imputed) knowledge solely of Stephen Trapp, Senior Vice President Development for Mack-Cali Realty Corporation, the general partner of Mack-Cali Realty, L.P., without any independent investigation or inquiry whatsoever.

"Unit IV" means Unit IV in 55 Corporate Drive Condominium, a condominium, as such unit is described in the Master Deed.

Section 1.2             References:    Exhibits    and   Schedules.       Except   as   otherwise specifically indicated, all references in this Agreement to Articles or Sections refer to Articles or 

Sections of this Agreement, and all references to Exhibits or Schedules refer to Exhibits or Schedules attached hereto, all of which Exhibits and Schedules are incorporated into, and made a part of, this Agreement by reference. The words "herein," "hereof," "hereinafter" and words and phrases of similar import refer to this Agreement as a whole and not to any particular Section or Article.

ARTICLE II
AGREEMENT OF PURCHASE AND SALE

Section 2.1             Agreement.     Seller  hereby  agrees to  sell,  convey  and  assign  to Purchaser, and Purchaser hereby agrees to purchase and accept from Seller, on the Closing Date and subject to the terms and conditions of this Agreement, all of the following (collectively, the "Property"):

(a)    the Real Property;

(b)     the Improvements;

(c)    all of Seller's right, title and interest as lessor in and to the Lease;

(d)    to the extent assignable, the Licenses and Permits; and

(e)       all of Seller's right, title and interest, to the extent assignable or transferable, in and to all other intangible rights, titles, interests, privileges and appurtenances owned by Seller and related to or used exclusively in connection with the ownership, use or operation of the Real Property and/or the Improvements including but not limited to any assignable warranties with respect to the Improvements.

No personal property or service contracts are included in this sale.

Section 2.2             Indivisible Economic Package.  Purchaser has no right to purchase, and Seller has no obligation to sell, less than all of the Property, it being the express agreement and understanding of Purchaser and Seller that, as a material inducement to Seller and Purchaser to enter into this Agreement, Purchaser has agreed to purchase, and Seller has agreed to sell, all of the Property, subject to and in accordance with the terms and conditions hereof.

ARTICLE III CONSIDERATION

Section 3.1             Purchase Price.  The purchase price for the Property (the "Purchase Price") shall be Seventy-Two Million, Three Hundred Fourteen Thousand, Five Hundred Twenty-Eight Dollars ($72,314,528.00) in lawful currency of the United States of America, payable as provided in Section 3.3.

Section 3.2             Assumption  of  Obligations.    As  additional consideration for the purchase and sale of the Property, at Closing Purchaser will assume all of the covenants and obligations of Seller pursuant to the Lease, Master Deed, Operating Agreement and Licenses and Permits, as more fully set forth in this Agreement.

Section 3.3             Method  of Payment  of Purchase  Price.   No later than 2:00 p.m. Eastern Time on the Closing Date, Purchaser shall pay the Purchase Price (less the Earnest Money Deposit), together with all other costs and amounts to be paid by Purchaser at the Closing pursuant to the terms of this Agreement ("Purchaser's Costs"), by Federal Reserve wire transfer of immediately available funds to the account of Escrow Agent.   Escrow Agent, following

written authorization  by the parties at Closing, which shall be given prior to 2:00 p.m. Eastern Time on the Closing Date, shall (i) pay to Seller by Federal Reserve wire transfer of immediately available funds to an account designated by Seller, the Purchase Price, less any costs or other amounts to be paid by Seller at Closing pursuant to the terms of this Agreement, (ii) pay to the appropriate payees, out of the proceeds of Closing payable to Seller, all costs and amounts to be paid by Seller at Closing pursuant to the terms of this Agreement, and (iii) pay Purchaser's Costs to the appropriate payees at Closing pursuant to the terms of this Agreement .

ARTICLE IV EARNEST MONEY DEPOSIT AND ESCROW INSTRUCTIONS

Section 4.1     The Earnest Money Deposit.

(a)       Within  five  (5)  Business  Days  after  the  Effective  Date, Purchaser shall deposit with the Escrow Agent, by Federal Reserve wire transfer of immediately  available  funds,  the  sum  of  One Million  Eight  Hundred  Thousand Dollars  ($1,800,000.00)  as  an  initial  earnest  money  deposit  on  account  of  the Purchase  Price  (the  "Initial  Earnest  Money  Deposit").    TIME  IS  OF  THE ESSENCE with respect to the deposit of the Initial Earnest Money Deposit.

(b)      If Purchaser does not elect to terminate this Agreement in accordance  with  Section  5.3(c)  prior to the expiration  of the  Evaluation  Period, then, within three (3) Business Days after the expiration of the Evaluation Period, Purchaser shall deposit with the Escrow Agent, by Federal Reserve wire transfer of immediately available funds, an additional sum of One Million Eight Hundred Thousand    Dollars  ($1,800,000.00)  as  an  additional  earnest  money  deposit  on account of the Purchase Price (the "Additional Earnest Money Deposit").  TIME IS OF THE ESSENCE with respect to the deposit of the Additional Earnest Money Deposit.

Section 4.2             Escrow Instructions.   The Earnest Money Deposit shall be held in escrow by the Escrow Agent in an interest-bearing account, in accordance with the provisions of Article XVII.  In the event this Agreement is not terminated by Purchaser pursuant to the terms hereof by the end of the Evaluation Period in accordance with the provisions of Section 5.3(c) herein, the Earnest Money Deposit and the interest earned thereon shall become non-refundable to  Purchaser,  except  in  certain  limited  circumstances  expressly  set  forth  elsewhere  in  this Agreement.  In the event this Agreement is terminated by Purchaser prior to the expiration of the Evaluation Period, the Initial Earnest Money Deposit, together with all interest earned thereon, shall be refunded to Purchaser.

Section 4.3             Designation  of Certifying Person.   In order  to  assure compliance with the requirements of Section 6045 of the Internal Revenue Code of 1986, as amended (the "Code"), and any related reporting requirements of the Code, the parties hereto agree as follows:

(a)       Provided  the  Escrow  Agent  shall  execute  a  statement  in writing  (in  form  and  substance  reasonably  acceptable  to  the  parties  hereunder) pursuant to which it agrees to assume all responsibilities  for information reporting required under Section 6045(e) of the Code, Seller and Purchaser shall designate the Escrow Agent as the person to be responsible for all information  reporting under

Section 6045(e)  of  the  Code  (the "Certifying  Person").    If  the  Escrow  Agent refuses  to  execute  a statement  pursuant  to which  it  agrees  to be  the Certifying Person,  Seller  and  Purchaser  shall  agree  to  appoint  another  third  party  as  the Certifying Person.

(b)     Seller and Purchaser each hereby agree:

(i)        to provide to the Certifying Person all information and certifications regarding such party, as reasonably requested by the Certifying Person or otherwise required to be provided by a party to the transaction described herein under Section 6045 of the Code; and

(ii)       to   provide   to   the   Certifying  Person   such  party's taxpayer identification  number and a statement (on Internal Revenue Service Form W-9 or an acceptable substitute form, or on any other form the applicable  current or future Code sections  and regulations might require and/or any form requested by the Certifying Person), signed  under  penalties  of perjury, stating  that  the  taxpayer identification number supplied by such party to the Certifying Person is correct.

ARTICLEV INSPECTION OF PROPERTY

Section 5.1             Evaluation  Period.   For a period ending at 5:00p.m. Eastern Time on April 11, 2013 (the "Evaluation Period"), Purchaser and its authorized agents and representatives  (for purposes  of this Article V, the "Licensee Parties") shall have the right to perform inspections of the Property.  Purchaser shall not communicate with or contact the Tenant or Guarantor  unless  a representative  of Seller shall be included  in the communication  and/or contact.  Purchaser shall not communicate with any of the Authorities without the prior written consent of Seller, which will not be unreasonably  withheld,  conditioned  or delayed. Notwithstanding anything to the contrary contained herein, no physical testing or sampling shall be conducted upon the Real Property without Seller's specific prior written consent, which will not be unreasonably withheld, conditioned or delayed.  Purchaser will provide to Seller notice of the intention  of Purchaser  or the other Licensee Parties to conduct such physical sampling or testing at least three (3) Business Days prior to such intended sampling or testing, which notice shall set forth the testing or sampling contemplated to be made.  At Seller's option, Seller and/or its consultants may be present for any such testing or sampling and may require that such testing or sampling be done during normal business hours. TIME IS OF THE ESSENCE with respect to the provisions of this Section 5.1.

Section 5.2     Document Review.

(a)       Prior to the Effective Date, Purchaser has had the opportunity to review the Lease, Master Deed and related condominium association documents as posted 

in Broker's  on-line data room (the "Data Room").    In addition, during the Evaluation  Period, Purchaser  and the Licensee  Parties shall have the right to review and inspect, at Purchaser's  sole cost and expense, all of the following which, to Seller's Knowledge, are in Seller's possession or control (collectively, the "Documents"):  the  Lease,  all  existing  environmental  reports  and  studies  of the

Real Property (which Purchaser shall have the right to have updated at Purchaser's sole cost and expense), real estate tax bills, together with assessments (special or otherwise), ad  valorem and  personal property tax bills  covering the period of Seller's  ownership of the Property; engineering reports and studies; the Leasing Commission Agreement; and the Licenses and Permits.  The Documents shall be available through the Data Room or for inspection (and copying) at Seller's Affiliate's offices in Roseland, New Jersey.  Purchaser shall not have the right to review or inspect materials not directly related to the leasing, maintenance and/or management of the Property, including, without limitation,    Seller's internal memoranda, financial projections, budgets, appraisals, proposals for work not actually undertaken, accounting and tax records and similar proprietary, elective or confidential information.

(b)       Purchaser acknowledges that any and all of the Documents may be proprietary and confidential in nature and are being provided to Purchaser solely to assist Purchaser in determining the desirability of purchasing the Property. Subject only to the provisions of Article XII, Purchaser agrees not to disclose the contents of the Documents or any of the provisions, terms or conditions contained therein to any party outside of Purchaser's organization other than its attorneys, partners, accountants, Licensee Parties or lenders (collectively, for purposes of this Section 5.2(b), the "Permitted  Outside Parties").   Purchaser further agrees that within its organization, or as to the Permitted Outside Parties, the Documents will be disclosed and exhibited only to those persons within Purchaser's organization or within the Permitted Outside Parties who are involved in the determination of the desirability of Purchaser's acquisition of the Property.  Purchaser agrees not to divulge the contents of such Documents and other information except in strict accordance with  the  confidentiality standards set  forth  in  this  Section 5.2  and Article XII. In permitting Purchaser and the Permitted Outside Parties to review the Documents and other information to assist Purchaser, Seller has not waived any privilege or claim of confidentiality with respect thereto, and no third party benefits or relationships of any kind, either express or implied, have been offered, intended or created by Seller, and any such claims are expressly rejected by Seller and waived by Purchaser and the Permitted Outside Parties, for whom, by its execution of this Agreement, Purchaser is acting as an agent with regard to such waiver.

(c)       Purchaser acknowledges that some of the Documents may have been prepared by third parties and may have been prepared prior to Seller's ownership of the Property. PURCHASER HEREBY ACKNOWLEDGES THAT EXCEPT AS MAY BE EXPRESSLY SET FORTH ELSEWHERE IN THIS AGREEMENT OR ANY OF THE CLOSING DOCUMENTS, SELLER HAS NOT MADE AND DOES NOT MAKE ANY REPRESENTATION  OR WARRANTY  REGARDING  THE TRUTH, ACCURACY  OR COMPLETENESS  OF THE DOCUMENTS OR THE SOURCES THEREOF. EXCEPT AS MAY BE EXPRESSLY SET FORTH 

ELSEWHERE IN THIS AGREEMENT OR ANY OF THE CLOSING DOCUMENTS, SELLER HAS NOT UNDERTAKEN  ANY INDEPENDENT  INVESTIGATION  AS TO THE TRUTH, ACCURACY  OR COMPLETENESS  OF THE DOCUMENTS AND IS PROVIDING THE DOCUMENTS SOLELY AS AN ACCOMMODATION TO PURCHASER.

Section 5.3     Entry and Inspection Obligations; Termination of Agreement.

(a)       Purchaser   agrees  that   in   inspecting  or   examining  the Property, Purchaser and the other Licensee Parties will not unreasonably interfere with the use and occupancy of the Property by Tenant; damage any part of the Property or the property of Tenant; injure or otherwise cause bodily harm to Seller or Tenant or any of their respective agents,  consultants and employees, or to any other person or entity; permit any liens to attach to the Real Property by reason of the exercise of Purchaser's  rights under this Article V; or reveal or disclose any information obtained concerning the Property and the Documents to anyone outside Purchaser's  organization, except in accordance with the confidentiality standards set forth in Section 5.2(b) and Article XII.  Purchaser will (i) maintain commercial general liability (occurrence) insurance on terms and in amounts reasonably satisfactory to Seller, and Workers' Compensation insurance in statutory limits for its  employees (if  any), and, if  Purchaser or  any  Licensee Party performs  any physical inspection or sampling at the Real Property in accordance with Section 5.I, then Purchaser or such Licensee Party shall maintain errors and omissions insurance and contractor's pollution liability insurance on terms and in amounts reasonably acceptable to Seller, and, in the case of the commercial general liability insurance and the errors and omissions insurance, insuring Seller, Mack-Cali Realty, L.P., Mack-Cali Realty Corporation, and such other parties as Seller shall reasonably request as additional insureds, covering any accident or event arising in connection with the presence of Purchaser or the other Licensee Parties on the Real Property or Improvements, and deliver evidence of insurance verifying such coverage to Seller prior to entry upon the Real Property or Improvements.  Purchaser further agrees that in inspecting or examining the Property, Purchaser shall (i) promptly pay when due the costs of all inspections, examinations, testing and sampling done with regard to the Property; (ii) cause any inspection, examination, testing or sampling to be conducted in accordance with standards customarily employed in the industry and in compliance with all Governmental Regulations; (iii) upon Seller's written request, furnish to Seller copies of any studies, reports or test results received by Purchaser   regarding   the   Property;   and   (v) restore   the   Real   Property   and Improvements as near as possible to the condition in which the same were found before any such examination, testing or sampling was undertaken.

(b)       Purchaser hereby indemnifies, defends and holds Seller and its partners, members, agents, directors, officers, employees, successors and assigns harmless from and against any and all liens, claims, causes of action, damages, liabilities, demands, suits, and obligations to third parties, together with all losses, penalties, costs and expenses relating to any of the foregoing (including but not limited to court costs and reasonable attorneys' fees) (collectively, "Losses"), to the extent arising out of any inspections, investigations, examinations, sampling or tests conducted by Purchaser or any of the Licensee Parties with respect to the Property or 

any violation of the provisions of this Section 5.3, but excluding any Losses arising from the discovery of pre-existing conditions.

(c)       In the event that Purchaser determines, after its inspection of the Documents and Real Property and Improvements, that it does not want to proceed with the transaction as set forth in this Agreement, Purchaser shall have the right to terminate this Agreement by providing written notice to Seller prior to the expiration of the Evaluation Period, WITH TIME BEING OF THE ESSENCE WITH RESPECT THERETO. In the event Purchaser terminates this Agreement in accordance with this Section 5.3(c), or in accordance with any other provision of this Agreement that expressly provides Purchaser with the right to do so, Purchaser shall receive a prompt refund of the Initial Earnest Money Deposit, together with all interest which has accrued thereon, and except with respect to the Termination Surviving Obligations, this Agreement shall be null and void and the parties shall have no further obligations to each other under this Agreement.  In the event this Agreement is terminated for any reason, Purchaser shall promptly return to Seller all copies Purchaser has made of the Documents and, upon written request from Seller, Purchaser shall promptly deliver to Seller copies of any studies, reports or test results regarding any part of the Property obtained by Purchaser in connection with Purchaser's inspection of the Property (collectively, "Purchaser's Information").

	
			
	Section 5.4
	Sale  "As  Is"
	THE  TRANSACTION   CONTEMPLATED  BY

	THIS    AGREEMENT
	HAS    BEEN
	NEGOTIATED    BETWEEN    SELLER    AND

PURCHASER.  THIS  AGREEMENT REFLECTS  THE  MUTUAL  AGREEMENT OF SELLER  AND PURCHASER,  AND PURCHASER  HAS THE  RIGHT  TO  CONDUCT ITS OWN INDEPENDENT EXAMINATION  OF THE PROPERTY. EXCEPT  FOR THE MATTERS  EXPRESSLY  REPRESENTED IN  THIS  AGREEMENT OR  IN  ANY OF THE  CLOSING  DOCUMENTS,  PURCHASER  HAS NOT RELIED  UPON AND WILL NOT RELY UPON, EITHER  DIRECTLY  OR INDIRECTLY, ANY REPRESENTATION OR WARRANTY  OF SELLER  OR ANY OF  SELLER'S AGENTS OR REPRESENTATIVES, AND  PURCHASER   HEREBY  ACKNOWLEDGES THAT  NO SUCH REPRESENTATIONS OR WARRANTIES  HAVE BEEN MADE.  ALL OF THE FOLLOWING   PROVISIONS    OF   THIS   SECTION 5.4  ARE   LIMITED    BY   AND SUBJECT  TO ANY REPRESENTATIONS AND WARRANTIES EXPRESSLY SET FORTH IN THIS AGREEMENT OR IN ANY OF THE CLOSING DOCUMENTS.

SELLER  SPECIFICALLY DISCLAIMS, AND NEITHER  SELLER  NOR ANY OF SELLER'S AFFILIATES NOR ANY OTHER  PERSON  IS MAKING,  ANY REPRESENTATION, WARRANTY  OR  ASSURANCE  WHATSOEVER  TO PURCHASER,  AND NO WARRANTIES OR REPRESENTATIONS OF ANY KIND OR CHARACTER,  EITHER   EXPRESS   OR  IMPLIED,   ARE  MADE  BY  SELLER   OR RELIED  UPON BY PURCHASER  WITH  RESPECT  TO THE STATUS OF TITLE  TO OR  THE  MAINTENANCE,  REPAIR,  CONDITION,  DESIGN  OR  MARKETABILITY OF   THE   PROPERTY,  OR   ANY  PORTION   THEREOF,  INCLUDING   BUT  NOT LIMITED       TO       (a) ANY      IMPLIED      OR      EXPRESS       WARRANTY       OF MERCHANTABILITY, (b) ANY IMPLIED  OR EXPRESS  WARRANTY  OF  FITNESS FOR A PARTICULAR  PURPOSE,  (c) ANY IMPLIED  OR EXPRESS  WARRANTY OF CONFORMITY TO MODELS  OR SAMPLES  OF MATERIALS, (d) ANY RIGHTS  OF 

PURCHASER  UNDER APPROPRIATE STATUTES TO CLAIM DIMINUTION  OF CONSIDERATION, (e) ANY CLAIM BY PURCHASER  FOR DAMAGES BECAUSE OF DEFECTS, WHETHER KNOWN OR UNKNOWN, WITH RESPECT  TO THE IMPROVEMENTS, (t) THE  FINANCIAL  CONDITION  OR  PROSPECTS OF  THE PROPERTY   AND  (g) THE   COMPLIANCE  OR  LACK  THEREOF  OF  THE   REAL PROPERTY  OR THE  IMPROVEMENTS WITH  GOVERNMENTAL REGULATIONS, INCLUDING  WITHOUT LIMITATION ENVIRONMENTAL  LAWS, NOW EXISTING OR HEREAFTER  ENACTED   OR   PROMULGATED,  IT   BEING   THE   EXPRESS INTENTION  OF   SELLER    AND   PURCHASER    THAT,   EXCEPT    AS   MAY   BE EXPRESSLY SET FORTH TO     THE CONTRARY ELSEWHERE IN     THIS AGREEMENT, THE  PROPERTY  WILL  BE CONVEYED  AND TRANSFERRED  TO PURCHASER  IN ITS PRESENT CONDITION  AND STATE OF REPAIR, "AS IS" AND "WHERE IS,"  WITH  ALL  FAULTS. PURCHASER  REPRESENTS THAT  IT  IS  A KNOWLEDGEABLE,   EXPERIENCED   AND   SOPHISTICATED  PURCHASER   OF REAL  ESTATE,  AND THAT  IT  IS  RELYING  SOLELY  ON ITS  OWN  EXPERTISE AND THAT OF PURCHASER'S CONSULTANTS IN PURCHASING  THE PROPERTY. PURCHASER   HAS  BEEN   GIVEN  A  SUFFICIENT   OPPORTUNITY  HEREIN   TO CONDUCT  AND  HAS  CONDUCTED  OR  WILL  CONDUCT  SUCH  INSPECTIONS, INVESTIGATIONS AND OTHER INDEPENDENT EXAMINATIONS OF  THE PROPERTY  AND  RELATED   MATTERS   AS  PURCHASER   DEEMS   NECESSARY, INCLUDING   BUT  NOT  LIMITED   TO  THE  PHYSICAL   AND  ENVIRONMENTAL CONDITIONS THEREOF, AND WILL  RELY  UPON  SAME  AND NOT  UPON  ANY STATEMENTS OF SELLER  (EXCLUDING  THE  LIMITED  MATTERS  EXPRESSLY REPRESENTED  BY  SELLER   IN  SECTION 8.1  HEREOF  OR  IN  THE   CLOSING DOCUMENTS) NOR OF ANY OFFICER, DIRECTOR, EMPLOYEE,   AGENT, MEMBER  OR  ATTORNEY  OF  SELLER. PURCHASER  ACKNOWLEDGES THAT ALL  INFORMATION  OBTAINED   BY  PURCHASER   WAS  OBTAINED   FROM   A VARIETY   OF   SOURCES,   AND   SELLER   WILL   NOT  BE  DEEMED   TO   HAVE REPRESENTED OR WARRANTED THE COMPLETENESS, TRUTH  OR ACCURACY OF ANY OF THE  DOCUMENTS  OR OTHER  SUCH INFORMATION HERETOFORE OR HEREAFTER  FURNISHED TO PURCHASER (EXCLUDING ANY SUCH MATTERS THAT MAY BE EXPRESSLY REPRESENTED BY SELLER      IN SECTION 8.1 HEREOF OR  IN  THE  CLOSING  DOCUMENTS).     UPON CLOSING, PURCHASER  WILL  ASSUME THE RISK THAT ADVERSE MATTERS, INCLUDING, BUT     NOT LIMITED TO, ADVERSE PHYSICAL     AND    ENVIRONMENTAL CONDITIONS, MAY NOT HAVE BEEN REVEALED BY  PURCHASER'S INSPECTIONS  AND   INVESTIGATIONS.  PURCHASER   ACKNOWLEDGES  AND AGREES   THAT,   UPON   CLOSING,   SELLER   WILL   SELL   AND   CONVEY   TO PURCHASER, AND PURCHASER WILL ACCEPT THE PROPERTY, "AS IS, WHERE IS," WITH ALL FAULTS. PURCHASER  FURTHER  ACKNOWLEDGES AND AGREES THAT THERE     ARE     NO ORAL AGREEMENTS, WARRANTIES     OR REPRESENTATIONS  COLLATERAL  TO  OR  AFFECTING  THE   PROPERTY   BY SELLER,  ANY  AGENT  OF  SELLER   OR  ANY  THIRD  PARTY.  SELLER   IS  NOT LIABLE OR     BOUND IN ANY MANNER BY ANY ORAL OR     WRITTEN STATEMENTS, REPRESENTATIONS OR  INFORMATION  PERTAINING TO  THE PROPERTY  FURNISHED  BY ANY EMPLOYEE, REAL ESTATE  BROKER,  AGENT, OR  OTHER  PERSON  OR ENTITY,  UNLESS THE  SAME ARE SPECIFICALLY SET FORTH  IN  THIS  AGREEMENT OR  INCORPORATED HEREIN  BY REFERENCE. PURCHASER  ACKNOWLEDGES THAT  THE  PURCHASE  PRICE  REFLECTS THE "AS  IS,  WHERE  IS"  NATURE  OF  THIS  SALE  AND ANY FAULTS,  LIABILITIES, DEFECTS OR OTHER  ADVERSE  MATTERS  THAT  MAY BE ASSOCIATED  WITH THE  PROPERTY.  PURCHASER,  WITH  PURCHASER'S COUNSEL,  HAS  FULLY REVIEWED THE DISCLAIMERS AND WAIVERS SET FORTH IN     THIS AGREEMENT AND UNDERSTANDS THEIR  

SIGNIFICANCE AND AGREES  THAT THE  DISCLAIMERS AND OTHER  AGREEMENTS  SET  FORTH  HEREIN  ARE  AN INTEGRAL   PART  OF  THIS  AGREEMENT,   AND  THAT  SELLER   WOULD  NOT HAVE AGREED TO SELL THE PROPERTY  TO PURCHASER FOR THE PURCHASE PRICE WITHOUT  THE DISCLAIMERS  AND OTHER AGREEMENTS SET FORTH IN THIS AGREEMENT.

IF  PURCHASER  DOES  NOT  TERMINATE  THIS  AGREEMENT  PURSUANT TO  SECTION  5.3(c)  HEREOF,   THEN  PURCHASER  AND  PURCHASER'S AFFILIATES  HEREBY FURTHER  COVENANT AND AGREE  NOT TO SUE SELLER AND SELLER'S AFFILIATES  AND RELEASE SELLER  AND SELLER'S AFFILIATES OF AND FROM AND WAIVE ANY CLAIM OR CAUSE OF ACTION, INCLUDING WITHOUT  LIMITATION ANY STRICT  LIABILITY  CLAIM OR CAUSE OF ACTION, THAT   PURCHASER    OR   PURCHASER'S  AFFILIATES    MAY   HAVE   AGAINST SELLER  OR SELLER'S AFFILIATES  UNDER ANY ENVIRONMENTAL LAW, NOW EXISTING  OR HEREAFTER ENACTED  OR PROMULGATED, RELATING  TO ENVIRONMENTAL    MATTERS   OR   ENVIRONMENTAL    CONDITIONS   IN,   ON, UNDER, ABOUT OR MIGRATING FROM OR ONTO THE PROPERTY  AT OR PRIOR TO  THE  TIME  OF  THE  EXPIRATION  OF  THE  EVALUATION  PERIOD, INCLUDING,    WITHOUT    LIMITATION,  THE    COMPREHENSIVE ENVIRONMENTAL RESPONSE, COMPENSATION  AND LIABILITY ACT, OR BY VIRTUE OF ANY COMMON LAW RIGHT, NOW EXISTING OR HEREAFTER CREATED,   RELATED   TO   ENVIRONMENTAL   CONDITIONS   OR ENVIRONMENTAL  MATTERS IN, ON, UNDER, ABOUT OR MIGRATING  FROM OR ONTO THE PROPERTY.   IF PURCHASER CLOSES THIS TRANSACTION, THEN PURCHASER  AND PURCHASER'S AFFILIATES  HEREBY  FURTHER  COVENANT AND AGREE  NOT TO SUE SELLER  AND SELLER'S AFFILIATES AND RELEASE SELLER  AND SELLER'S AFFILIATES  OF AND FROM  AND WAIVE  ANY CLAIM OR CAUSE OF ACTION, INCLUDING WITHOUT LIMITATION ANY STRICT LIABILITY   CLAIM  OR  CAUSE  OF  ACTION,  THAT  PURCHASER  OR PURCHASER'S AFFILIATES  MAY HAVE AGAINST SELLER OR SELLER'S AFFILIATES   UNDER  ANY  ENVIRONMENTAL   LAW,  NOW  EXISTING  OR HEREAFTER ENACTED OR PROMULGATED, RELATING  TO ENVIRONMENTAL MATTERS OR ENVIRONMENTAL  CONDITIONS IN, ON, UNDER, ABOUT OR MIGRATING  FROM  OR  ONTO  THE  PROPERTY,  INCLUDING,  WITHOUT LIMITATION, THE COMPREHENSIVE ENVIRONMENTAL  RESPONSE, COMPENSATION  AND LIABILITY ACT, OR BY VIRTUE OF ANY COMMON LAW RIGHT,  NOW EXISTING  OR HEREAFTER  CREATED,  RELATED  TO ENVIRONMENTAL    CONDITIONS   OR   ENVIRONMENTAL    MATTERS   IN,   ON, UNDER, ABOUT OR MIGRATING FROM OR ONTO THE PROPERTY. THE TERMS AND CONDITIONS  OF  THIS  SECTION 5.4 WILL  EXPRESSLY  SURVIVE  ANY SUBSEQUENT TERMINATION  OF THIS AGREEMENT  OR THE CLOSING, AS THE CASE  MAY  BE,  AND  WILL   NOT  MERGE   WITH   THE   PROVISIONS   OF  ANY CLOSING DOCUMENTS AND ARE HEREBY DEEMED INCORPORATED INTO THE DEED AS FULLY AS IF SET FORTH AT LENGTH THEREIN.

ARTICLE VI TITLE MATTERS

Section 6.1             Survey.    Purchaser  acknowledges  receipt  of  the  Existing  Survey. Any  modification,  update  or  recertification  of  the  Existing  Survey  shall  be  at  Purchaser's election and sole cost and expense.

Section 6.2     Title Review.

(a)                             Not later than that date which is three (3) Business Days prior to the expiration of the Evaluation Period (the "Title Objection Date"), Purchaser may provide Seller with a copy of a title insurance commitment (the "Title Commitment") issued by Escrow Agent  and  an  updated  survey  for  Unit  IV,  together  with  a  written  notice  objecting  to  any exceptions, encumbrances or other matters set forth in the Title Commitment or on the updated survey (any such defects, encumbrances or other matters to which Purchaser objects in writing prior to the Title Objection Date are called herein "Title Defects").  (For the avoidance of doubt, all  matters  shown  on  the  Existing  Survey  are  conclusively  deemed  to  be  acceptable  to Purchaser.) In the event Seller does not receive written notice of any Title Defects by the Title Objection  Date,  TIME  BEING  OF THE  ESSENCE,  then Purchaser  will be deemed  to have accepted the exceptions to title set forth on the Title Commitment and all matters set forth on the updated survey as permitted exceptions   ("Permitted Exceptions").

(b)                             After  the Title Objection  Date, if the Escrow  Agent raises any new exception to title to the Real Property, Purchaser's  counsel shall have five (5) Business Days after he or she receives notice of such exception (the "New Objection Date") to provide Seller with written notice if Purchaser objects to such new exception, in which event such new exception shall constitute a Title Defect and the Scheduled Closing Date shall be extended as necessary to afford Seller and Purchaser the consideration and response periods contemplated by Section 6.3(a) and as otherwise contemplated therein.  In the event Seller does not receive notice of  such  new  exception  by  the  New  Objection  Date,  TIME  BEING  OF  THE  ESSENCE, Purchaser will be deemed to have accepted the new exception as a Permitted Exception.

(c)                     All   taxes,   water   rates    or   charges,    sewer   rents   and assessments, plus interest and penalties thereon, which on the Closing Date are liens against the Real Property and which Seller is obligated to pay and discharge will be credited against the Purchase Price (subject to the provision for apportionment of taxes, water rates and sewer rents herein contained) and shall not be deemed a Title Defect.  If on the Closing Date there shall be security interests filed against the Real Property, such items shall not be Title Defects if (i) the personal property  covered  by such security interests  is no longer in or on the Real Property, (ii) such personal  property is owned or leased  by the Tenant, or (iii) the security interest was filed more than five (5) year prior to the Closing Date and was not renewed.

(d)       If on the Closing Date the Real Property shall be affected by any lien   which  Seller has elected  to attempt to remove or is otherwise  obligated  to remove pursuant  to  the  express  provisions  of  this  Agreement,  then  Seller  shall  not  be  required  to discharge or satisfy the same of record provided that Escrow Agent either omits the lien as an exception from the Title Commitment or insures against collection thereof from out of the Real Property,  and  a  credit  is  given  to  Purchaser  for  the  recording  charges  for  a  satisfaction  or discharge of such lien.

(e)                             No franchise, transfer, inheritance, income, corporate or other tax open, levied or imposed against Seller or any former owner of the Property, that may be a lien against the Property on the Closing Date, shall be an objection to title if the Escrow Agent insures against 

collection thereof from or out of the Real Property and/or the Improvements, and provided  further  that  Seller  deposits  with  the  Escrow  Agent  a sum  of  money  or  a  parental guaranty  reasonably  sufficient  to secure  a release of the Property from  the lien thereof.   If a search of title discloses judgments, bankruptcies, or other returns against other persons having names the same as or similar to that of Seller, Seller will deliver to Purchaser an affidavit stating that such judgments, bankruptcies or other returns do not apply to Seller, and such search results shall not be deemed Title Defects.

Section 6.3     Title Defect.

(a)       In the event Seller receives notice of any Title Defect within the time periods required under Section 6.2 above ("Title Defect Notice"), Seller shall notify Purchaser within ten (I 0) days after receiving  the Title Defect Notice whether  Seller  will  attempt  to  remove  the  Title  Defect,  in  which  event  the Scheduled Closing Date shall be extended to the extent reasonably necessary for up to thirty (30) days.  If Seller (i) fails to so notify Purchaser within such ten (I 0) day period that it elects to attempt to remove the Title Defect,  (ii) notifies  Purchaser within such period that it will not attempt to remove such title Defect, or (iii) having elected to attempt to do so, Seller is unable to effect such cure within the thirty (30) day extension period set forth above, then Purchaser shall have the right, by written notice  given  to  Seller  within  five (5)  days  after  receiving  Seller's  notice  of  its election not to remove the Title Defects (or, if no such notice is given, within five (5) days after the expiration of the ten (10) day period in which Seller had the right to elect to attempt  to remove  the Title Defects),  or, if applicable,  within five (5) days after the expiration of the thirty (30) day extension  period, to (x) waive the Title Defect and close title in accordance with the provisions of this Agreement on the Scheduled Closing Date (if the Scheduled Closing Date is then being extended pursuant to this Section 6.3, then the extension shall end, and the Scheduled Closing Date shall occur, on the fifth (5th) Business Day after giving written notice of such waiver to Seller), or (y) terminate this Agreement,  in which  case Purchaser  shall receive  a prompt refund of the Earnest Money  Deposit,  together  with all interest which has accrued thereon, and except with respect to the Termination Surviving Obligations, this Agreement  shall be null and void and the parties shall have no further obligations to each other under this Agreement.  If Purchaser fails to elect to terminate this Agreement by notice given to Seller within such five (5) day period, then Purchaser shall be deemed to have waived such Title Defect, and Purchaser shall  close  title  in  accordance  with  the  provisions  of  this  Agreement  on  the Scheduled  Closing  Date  (if  the Scheduled  Closing  Date  is  then  being  extended pursuant to this Section 6.3, then the extension shall end, and the Scheduled Closing Date shall occur, on the fifth (5th) Business Day after the expiration of such five (5) day period).

Notwithstanding any provision of this Article VI to the contrary, Seller shall be obligated to cure exceptions to title to the Property, in the manner described above, relating to liens and security interests securing any financings of Seller, and any mechanic's  liens resulting from work at the

Property commissioned  by  Seller  or  a  Seller  Affiliate; provided,  however,  that  any  such mechanic's lien may be cured by bonding in accordance with New Jersey law.

ARTICLE VII

INTERIM OPERATING COVENANTS

Section 7.1             Interim   Operating   Covenants.     From  the  Effective  Date  until Closing, Seller shall continue to perform its obligations and enforce its rights and Tenant's obligations under the  Lease in the ordinary course of Seller's  business and substantially in accordance with Seller's past and present practice.

Section 7.2             Amendment of Master Deed.  Seller shall have the right, but not the obligation, to enter into, or cause 55 Corporate Drive Condominium Association, LLC to enter into, an amendment of the Master Deed substantially in the form attached hereto as  Exhibit C. Purchaser shall not unreasonably withhold, condition or delay its consent to any modifications of the amendment of the Master Deed attached hereto as  Exhibit C.  Any notice of disapproval of any such modifications shall set forth the reasons that such modifications are not acceptable to Purchaser and proposed revisions which will render such modifications acceptable to Purchaser. If Purchaser fails to disapprove any proposed modifications of the amendment of Master Deed within five (5) Business Days after notice from Seller, then Purchaser shall be deemed to have approved such modifications.  Seller shall have the right, but not the obligation, on or before the Closing Date to record an amendment of the Master Deed in accordance with this Section 7.2 in the Somerset County Clerk's Office.  In the alternative, Seller shall have the right, but not the obligation, to deliver an amendment of the Master Deed in accordance with this Section 7.2 to Escrow Agent at the Closing, whereupon Purchaser shall cause Escrow Agent to record such amendment of the Master Deed in the Somerset County Clerk's Office prior to recordation of the Deed.

Section 7.3             Maintenance  Bond.   Pursuant to the New Jersey Municipal Land Use Law and certain development approvals granted, and resolutions adopted, by the Township of Bridgewater (the "Township") in connection with the development of Unit IV, Seller posted a two-year maintenance bond with the Township with respect to certain site improvements and placed money in escrow with the Township (collectively, the "Bond and Escrows") to cover the estimated cost of inspecting those site improvements at the expiration of the bonding period. After the date hereof and prior to the Closing, Seller shall have the right to perform, and to require the Tenant to perform, any and all work required by the Township necessary to cause the cancellation and release of the Bond and Escrows to Seller (any and all such work hereinafter referred to as the "Work").  If, as of the Closing Date, the Bond and Escrows have not been cancelled and released to Seller, then after the Closing (i) Purchaser shall use commercially reasonable efforts to cause the Tenant to perform the Work (to the extent such Work is the obligation of Tenant pursuant to the Lease or the Master Deed), (ii) Seller shall have the right to maintain an enforcement action against the Tenant to cause the Tenant to perform the Work (to the extent such Work is the obligation of Tenant pursuant to the Lease or the Master Deed); provided, however, in no event may Seller seek to terminate the Lease or Tenant's occupancy thereunder or threaten to do so, and (iii) subject to (a) the rights of Tenant under the Lease, and (b) satisfaction of the Entry Requirements, Seller shall have the right to access the Property and to perform the  Work.   As used  herein, the "Entry Requirements" shall include delivery to Purchaser prior to entry upon the Property of evidence of (i) commercial general liability (occurrence) insurance on terms and in amounts reasonably satisfactory to Purchaser, and (ii) Workers' Compensation insurance in statutory limits for its employees (if any) and in amounts reasonably  acceptable  to  Purchaser, and,  in  the  case  of  the  commercial  general  liability insurance, insuring Purchaser, any lender to Purchaser, Purchaser's property manager and such other parties as Purchaser shall reasonably request as additional insureds, and covering any accident or event arising in connection with the presence of Seller or any of Seller's Affiliates on the Property.   Seller shall indemnify, defend and hold Purchaser and Purchaser's  Affiliates harmless for, from and against any and all Losses to the extent arising out of such entry, or performance of the Work, by Seller or Seller's agents, employees, contractors or representatives. If the Bond and Escrows are released to Purchaser, Purchaser shall immediately return the Bond and Escrows to Seller, it being 

understood that Seller reserves the right to receive the Bond and Escrows. The terms of this Section 7.3 shall survive the Closing.

Section 7.4     SNDA.   Within three (3) Business Days after receiving a request therefor from Purchaser, Seller shall request that Tenant execute, have acknowledged and deliver, prior to the  Closing Date,  a  subordination, non-disturbance and  attornment agreement in  the  form required by the Lease ("SNDA").  Purchaser shall provide such SNDA to Seller simultaneously with its request for Seller to seek to have it executed by Tenant.  Seller shall use commercially reasonable efforts (which, for the avoidance of doubt, do not include the obligation to pay any amounts, incur any obligations or liabilities or initiate any legal action) to have Tenant execute the SNDA; provided, however, the Scheduled Closing Date shall not be delayed, and Purchaser's obligations to close title shall not be affected, by Tenant's failure to execute the SNDA.

ARTICLE VIII REPRESENTATIONS AND WARRANTIES

Section 8.1             Seller's Representations and Warranties. Subject to the limitations set forth below in this Section 8.1 and in Section 8.3 of this Agreement, the following constitute the sole representations and warranties of Seller to Purchaser, which representations and warranties shall be true and accurate in all material respects as of the Effective Date and the expiration of the Evaluation Period and, solely with respect to the Strict Representations, as of the Scheduled Closing Date:

(a)       Status.  Seller is a limited liability company, duly organized and validly existing under the laws of the State of Delaware.

(b) .     Authority.  The execution and delivery of this Agreement and the performance of Seller's  obligations hereunder have been or will be du1y authorized by all necessary action on the part of Seller, and this Agreement constitutes the legal, valid and binding obligation of Seller.

(c)       Non-Contravention.     The execution and delivery of  this Agreement by Seller and the consummation by Seller of the transactions contemplated hereby will not violate any judgment, order, injunction, decree, regulation or ruling of any court or Authority or conflict with, result in a breach of, or constitute a default under the organizational documents of Seller, any note or other evidence of indebtedness, any mortgage, deed of trust or indenture, or any lease or other material agreement or instrument to which Seller is a party or by which it is bound.

(d)         Suits and Proceedings.  To Seller's Knowledge, there are no legal  actions,  suits  or  similar  proceedings pending   and  served,  or  threatened   in writing   against  Seller  or  the  Property   which  (i) are  not  adequately  covered   by existing insurance and (ii) if adversely  determined, would  have  a material  adverse effect  on  (x)  the  continued   operation of  the  Property as  currently  operated,  (y) Seller's ability  to consummate the  transactions contemplated hereby,  or  (iii)  the value of the Property.

(e) .         Environmental  Reports.   The  copies  of  the  environmental reports  and studies  that Seller shall make available  to Purchaser and/or its consultants for review  pursuant  to Section  5.2  above  

constitute all of the  environmental reports  and  studies  that  Seller  has  in its possession or  control   with  respect  to  the  Real  Property. Seller makes no representation or warranty, however, as to the accuracy or completeness of the content of such reports or studies or as to whether Purchaser has the legal right to rely on such reports or studies.

(f)         Leasing Commission Agreements.  A true, correct  and complete  copy of the Leasing  Commission Agreement shall be made available  to Purchaser for review  pursuant  to Section  5.2  of  this  Agreement.  All amounts due and payable under the Leasing Commission Agreement have been paid in full or will be paid in full prior to the Scheduled Closing Date.

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

(h)        Tenant  and Lease.   The  Tenant  is the only  tenant  of the Property.    To Seller's Knowledge: (i) the Lease constitutes all of the agreements between  Seller and the Tenant or Guarantor with respect  to the Tenant's use and occupancy of the Property, and (ii) Seller  has made  available  to Purchaser, and will  make  available  to Purchaser in accordance with  Section 5.2, a true, accurate  and complete copy of the Lease for review and copying  by Purchaser.

(i)         Service Contracts.  Seller is not a party to any service  contract  that might affect the Real Property after the Closing.

(j)         Anti-Terrorism. Neither Seller, nor any member  of Seller nor any of their respective officers,  directors, or members  is named by any Executive Order  of the United  States Treasury  Department as a terrorist, a "Specially Designated National  and  Blocked  Person," or any other banned  or blocked  person, entity, nation or transaction pursuant  to any law, order, rule or  regulation  that   is  enforced   or   administered  by   the   Office   of   Foreign   Assets   Control (collectively, an "Identified Terrorist".)  Seller is not engaging  in this transaction on the behalf of any Identified  Terrorist.

(k)    Status Under Master Deed.   Seller has no Knowledge, and has not received written  notice,  that there are any outstanding assessments by the Condo  Association  against  the Real Property under the Master  Deed or other outstanding amounts due from Seller to the Condo Association or another  unit owner  under the Master Deed, and Seller has no Knowledge, and has not received  written  notice,  that Seller  is currently  in breach  of its obligations under the Master Deed.   To Seller's Knowledge, the Master  Deed  has not been modified  or amended,  except  for any  modifications or  amendments identified   in the  definition of  "Master Deed"  hereunder  or other modifications or amendments of record.

(I)         Knowledge.    Stephen  Trapp  is the  primary  Seller  representative having direct  knowledge of the operation  and condition  of the Property and the facts and circumstances with respect to which the representations and warranties  are made in this Agreement.

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

(n)        ISRA. Seller  has no Knowledge that the Real  Property  has been  used to refine, produce, store, handle, transfer  or process  any Hazardous Substances, except  as disclosed in the Environmental Reports  or as permitted  under the Lease  and except  as customarily occurs in  connection  with  the  construction, use  and  operation   of  commercial  office  buildings   and associated  improvements.     The term  "Environmental Reports" means  the  reports  and  studies referenced  in clause (e) of Section 8.1.

If, before the expiration of the Evaluation  Period, Seller acquires Knowledge  of any fact or condition which constitutes a material change in any of the representations and warranties set forth in Section 8.1, Seller shall (a) promptly notify Purchaser in writing of such fact or condition, and (b) have the right to cure such fact or condition  before the Closing,  and the existence  of such fact or condition shall not be a ground  for Purchaser  terminating this Agreement,  provided  that (i) Seller, promptly, after discovering the fact or condition, assures Purchaser  in writing that Seller is capable of  curing,  and  intends  to  cure,  such  fact  or  condition  prior  to  the  Closing  and  (ii)  Seller  acts diligently to cure the fact or condition and completes such cure prior to the Scheduled Closing Date. Subject to Seller's right to cure as set forth in the preceding sentence, provided a material change in any representation  or warranty is not the result of the willful breach of this Agreement by Seller and does not relate to a Strict Representation, Purchaser's exclusive remedy  upon being advised of any material change in the representations and warranties shall be the termination of this Agreement.   If Purchaser  desires  to terminate  this Agreement  due to a material  change  in any representation  or warranty, Purchaser  shall notify Seller within five (5) Business  Days after receipt of a notice from Seller  advising  of any such  change,  whereupon,  the Earnest  Money  Deposit  shall be returned  to Purchaser  and, except as expressly provided herein, this Agreement and all rights and obligations of the respective parties hereunder shall be null and void.   For the avoidance of doubt,  Purchaser shall have  no  right  to  terminate  this  Agreement  on  account  of  (and  Seller  shall  have  no  liability  in connection with) any change in a representation or warranty occurring after the expiration of the Evaluation  Period,   unless the change relates  to a Strict  Representation or is caused  by a willful breach of this Agreement by Seller.

Section 8.2     Purchaser's     Representations     and     Warranties.     Purchaser
represents and warrants  to Seller the following:

(a)        Status.  Purchaser  is  a  duly  organized and  validly  existing limited liability  company  under the laws of the State of Arizona.

(b)        Authority.  The  execution   and  delivery   of  this  Agreement and   the   performance   of   Purchaser's   obligations  hereunder    have   been   duly authorized by all necessary action on the part of Purchaser and this Agreement constitutes the legal, valid and binding obligation of Purchaser.

(c)      Non-Contravention.    The execution and delivery of this Agreement by Purchaser and the consummation by Purchaser of the transactions contemplated   hereby  will  not  violate  any  judgment,  order,  injunction,  decree, regulation or ruling of any court or Authority or conflict with, result in a breach of or constitute a default under the organizational documents of Purchaser, any note or other evidence of indebtedness,  any mortgage,  deed of trust or indenture,  or any lease or other material agreement or instrument to which Purchaser is a party or by which it is bound.

(d)       Consents. No consent, waiver, approval or authorization is required   from  any  person  or  entity  (that  has  not  already  been  obtained)  in connection  with 

the execution and delivery of this Agreement by Purchaser or the performance by Purchaser of the transactions contemplated hereby.

(e)       Anti-Terrorism. Neither Purchaser, nor any officer, director, shareholder, partner, investor or member of Purchaser is an Identified Terrorist. Purchaser is not engaging in this transaction on the behalf of, either directly or indirectly, any Identified Terrorist.

Section 8.3             Survival  of  Representations,  Warranties  and  Covenants.    The representations  and warranties of Seller set forth in Section 8.1 or elsewhere in this Agreement will survive the Closing for a period of nine (9) months, after which time they will merge into the Deed.  Purchaser will not have any right to bring any action against Seller as a result of any breach  of  such  representations  or  warranties  unless  and  until  the  aggregate  amount  of  all liabilities and losses arising out of all such breaches exceeds Fifty Thousand Dollars ($50,000). In addition, in no event will Seller's liability for all such breaches exceed, in the aggregate, the sum of Two Million Dollars ($2,000,000).   Seller shall have no liability with respect to any of Seller's representations or warranties herein if, prior to the Closing, Purchaser obtains actual knowledge (from whatever source, including, without limitation, as a result of Purchaser's due diligence tests, investigations  and inspections  of the Property, the Tenant's estoppel certificate, or   written   disclosure   by   Seller  or   Seller's   agents  and   employees)   that   any  of   Seller's representations or warranties herein are inaccurate, and Purchaser nevertheless consummates the transaction  contemplated  by this Agreement.   Except as set forth  in the final sentence of this Section 8.3, Purchaser shall conclusively be deemed to have actual knowledge that a representation or warranty was inaccurate if  (i) Purchaser or any of its directors, officers, employees, agents, consultants or representatives had actual knowledge that the representation or warranty was inaccurate, incomplete or misleading, or had actual knowledge of any information or fact which would render the representation or warranty inaccurate, incomplete or misleading, or (ii) this Agreement, any Exhibit or any Documents made available through the Data Room in accordance with  Section  5.2,  or  any studies,  tests,  analysis, investigations  or  reports  prepared  by  or  for Purchaser, its employees, agents, attorneys, accountants, investors or other representatives contains infom1ation which  is  inconsistent  with  a  representation or  warranty.    The  Closing  Surviving Obligations  and the Termination  Surviving  Obligations will survive Closing without limitation unless a specified period is otherwise provided in this Agreement.   All other covenants and agreements made or undertaken by Seller under this Agreement, unless otherwise specifically provided herein, will not survive the Closing but will be merged into the Deed and other Closing documents delivered at the Closing.  Notwithstanding anything to the contrary contained in this Section 8.3, as to the content of Documents made available to Purchaser through the Data Room, Purchaser  shall not be deemed to have actual knowledge thereof   nor that a representation  or warranty of Seller made herein is inaccurate to the extent that such content is contradictory to a representation or warranty of Seller set forth in this Agreement and Seller had Knowledge of such inaccuracy.

ARTICLE IX
CONDITIONS PRECEDENT TO CLOSING

Section 9.1             Conditions Precedent to Obligation of Purchaser. The obligation of Purchaser to consummate the transaction hereunder shall be subject to the fulfillment on or before the Closing Date of all of the following conditions, any or all of which may be waived by Purchaser in its sole discretion:

(a)       Seller  shall  have delivered to  Purchaser  all  of  the  items required to be delivered to Purchaser pursuant to the terms of this Agreement, including but not limited to, those provided for in Section 10.3.

(b)       Seller   shall   have   delivered   to   Purchaser   an   estoppel certificate executed by the Tenant and, except as otherwise set forth in this Section
9.l(b), in the form, or, if no form is specified, limited to the substance, required by
the Lease.  Notwithstanding the foregoing sentence, such estoppel certificate must certify that the full amount of the Building IV Work Allowance (as defined in the Lease) has been paid to Tenant.   In the event that this condition precedent to Closing is not satisfied on or before the Scheduled Closing Date, then Seller shall have the right to postpone the Closing for up to fourteen (14) days to enable Seller to attempt to satisfy this condition precedent.

(c)      Seller shall have performed and observed, in all material respects, all covenants and agreements of this Agreement to be performed and observed by Seller as of the Closing Date.

Section 9.2      Conditions Precedent to Obligation to Seller. The obligation of Seller to consummate the transaction hereunder shall be subject to the fulfillment on or before the date of Closing (or as otherwise provided) of all of the following conditions, any or all of which may be waived by Seller in it sole discretion:

(a)      Seller shall have received the Purchase Price as adjusted pursuant to, and payable in the manner provided for, in this Agreement.

(b)       Purchaser shall  have  delivered to  Seller all  of  the  items required to be delivered to Seller pursuant to the terms of this Agreement, including but not limited to, those provided for in Section 1 0.2.

(c)       Purchaser shall have performed and observed, in all material respects, all covenants and agreements of this Agreement to be performed and observed by Purchaser as of the Closing Date.

ARTICLE X CLOSING

Section 10.1            Closing.  The consummation of the transaction contemplated by this Agreement  by  delivery  of documents  and  payments  of money  shall  take  place at 2:00  p.m. Eastern  Time  on  the  Scheduled  Closing  Date  at  the  offices  of  Escrow  Agent.    Seller  and Purchaser  each  hereby  agrees  to  reasonably  cooperate  to  conduct  the  closing  by  overnight courier through an escrow arrangement with Escrow Agent.  At Closing, the events set forth in this Article X will occur, it being understood that the performance or tender of performance of all matters set forth in this Article X are mutually concurrent conditions which may be waived by the party for whose benefit they are intended.  The acceptance of the Deed by Purchaser shall be deemed to be full perfom1ance and discharge of each 

and every agreement and obligation on the part of Seller to be performed hereunder unless otherwise specifically  provided herein or in the Closing Documents.

Section  10.2            Purchaser's Closing  Obligations. On the Closing Date, Purchaser, at its sole cost and expense, will deliver the following items to Seller (through Escrow Agent) at Closing as provided herein:

(a)                             The Purchase Price, after all adjustments  are made as herein provided, by Federal Reserve wire transfer of immediately available funds, in accordance with the timing and other requirements of Section 3.3;

(b)                                  Two counterpart originals of the Assignment, duly executed by Purchaser;

(c)                             Evidence  reasonably  satisfactory  to  Escrow  Agent  that the person executing the Assignment on behalf of Purchaser has full right, power and authority to do so;

(d)                             A  counterpart  of  the Closing  Statement,  duly  executed  by Purchaser (a copy of which will be binding on Purchaser if delivered electronically to Seller and Escrow Agent at Closing);

(e)        Such other documents as may be reasonably necessary or appropriate to effect the consummation of the transaction which is the subject of this Agreement.

Section  10.3     Seller's  Closing  Obligations.  At the Closing, Seller will deliver to
Purchaser (through Escrow Agent) the following documents:

(a)       A bargain and sale deed with covenants against the grantor's acts  (the  "Deed"),   duly  executed  and  acknowledged   by  Seller,  conveying  to Purchaser the Real Property and the Improvements subject only to the Permitted Exceptions.   Pursuant to Article 8 of the Master Deed, the Deed shall include the provisions of Article 8 of the Master Deed, and Purchaser shall be required to countersign  the Deed at Closing  in order to acknowledge  the powers of attorney granted pursuant to Article 8 of the Master Deed;

(b)        Two counterpart originals  of an assignment  and assumption of  Seller's   interest  in  the  Lease,  the  Licenses  and  Permits  and  any  assignable

warranties  with  respect  to  the  Improvements  the  ("Warranties"),  in  the  form attached hereto as Exhibit A (the "Assignment"), duly executed by Seller;

(c)       Evidence  reasonably  satisfactory  to Escrow  Agent  that  the person executing the documents delivered by Seller pursuant to this Section 10.3 on behalf of Seller has full right, power, and authority to do so;

(d)     A   certificate   in   the   form   attached   hereto   as   Exhibit

B("Certificate as  to  Foreign  Status")  certifying  that  Seller  is  not  a  "foreign person"  as  defined  in  Section 1445  of  the  Internal  Revenue  Code  of  1986,  as amended;

(e)       To  the  extent    that  originals  are  in  Seller's   possession  or control, a counterpart original of the Lease and original Licenses and Permits, or, to the extent that originals of any of the foregoing items are not in Seller's  possession or control, a certified true copy of the Lease and copies of the Licenses and Permits;

(f)        A  counterpart  of  the  Closing  Statement,  duly  executed  by Seller (a copy of which will be binding if delivered electronically to Purchaser and Escrow Agent at Closing);

(g)       A  letter  from  Seller  to  Tenant  requesting  that  future  rent under the Lease be paid to Purchaser;

(h)     An executed affidavit of title in the form of Exhibit E; and

(i)       Such other documents as may be reasonably necessary or appropriate  to effect the consummation of the transaction  which is the subject of this Agreement.

Section 10.4     Prorations.

(a)     Seller and Purchaser agree to adjust, as of 11:59 p.m. on the day preceding the Closing Date (the "Proration Time"), the following (collectively, the "Proration Items"):

(i)     Rents, in accordance with Section 10.4(b) below.

(ii)       In   the   event   that   there   shall   be   any   expenses attributable   to  the  operation,   maintenance   or  ownership   of  the Property  that  are not  paid  directly  by  the  Tenant  under  the  Lease ("Other Proration Items"), then Seller will be responsible for the amounts thereof relating to the period up to and including the Closing Date,  and  Purchaser  will  be  responsible  for  the  amounts  thereof relating  to the period  after the  Closing  Date.    Accordingly,  to the extent that Seller prepaid for any Other Proration Items that are attributable to the period after the Closing Date, Seller will receive a credit therefor at Closing.   Conversely, at Closing, to the extent that Seller  has  not  yet  paid  for  any  Other  Proration  Items  that  are attributable  to  the  period  on  or  prior  to  the  Closing  Date,  then Purchaser  shall receive a credit for such Other  Proration  Items and shall pay such expenses when due, or, if past-due at Closing, within seven (7) days after Closing.

Seller will be charged and credited for the amounts of all of the Proration Items relating to the period up to and including the Proration Time, and Purchaser will be charged and credited for all of the Proration Items relating to the period after the Proration Time.  The estimated Closing prorations shall be set forth on a preliminary closing statement to be prepared by Seller and submitted to Purchaser prior to the Closing Date (the "Closing Statement").   The Closing Statement, once agreed upon, shall be signed by Purchaser and Seller.  The prorations shall be paid at Closing by Purchaser to Seller (if the prorations result in a net credit to Seller) or by Seller to Purchaser (if the prorations result in a net credit to Purchaser) 

by increasing or reducing the cash to be delivered by Purchaser in payment of the Purchase Price at the Closing.  If the actual amounts of the Proration Items are not known as of the Closing Date, the prorations will be made at Closing on the basis of the best evidence then available; thereafter, when actual figures are received, re-prorations will be made on the basis of the actual figures, and a final cash settlement will be made between Seller and Purchaser. No prorations will be made in relation to insurance premiums, and Seller's insurance policies will not be assigned to Purchaser.  The provisions of this Section l0.4(a) will survive the Closing for twelve (12) months.

(b)       Purchaser will receive a credit on the Closing Statement for the prorated amount (as of the Proration Time) of all Rental (as defined below in this paragraph) previously paid to or collected by Seller and attributable to any period following the Proration Time.  After the Closing, Seller will cause to be paid or turned over to Purchaser all Rental, if any, received by Seller after Closing and attributable to any period following the Proration Time. "Rental" as used herein includes fixed monthly rentals, additional rentals, percentage rentals, escalation rentals (which include building operation and maintenance costs and expenses and real estate taxes as provided for under the Lease, to the extent the same exceeds any expense stop specified in the Lease), retroactive rentals, all administrative charges, utility charges, tenant or real property or condominium association dues, and other sums and charges payable by the Tenant under the Lease.   Rental is "Delinquent"  when it was due prior to the Closing Date, and payment thereof has not been made on or before the Proration Time.  Delinquent Rental will not be prorated.    Purchaser agrees to  use good faith collection procedures with respect to  the collection of any Delinquent Rental, but Purchaser will have no liability for the failure to collect any such amounts and will not be required to pursue legal action to enforce collection of any such amounts owed to Seller by the Tenant. Seller reserves the right to pursue a collection action against the Tenant for Delinquent Rental; provided, however, in no event may Seller seek to terminate the Lease or Tenant's occupancy thereunder or threaten to do so.  All sums collected by Purchaser from and after Closing from the Tenant will be applied first to amounts due from the Tenant for the month of Closing, then to current amounts due subsequent to Closing, then to amounts owed by the Tenant to Seller. Purchaser and Seller shall promptly remit to the other any sums received by either party that are due to the other pursuant to this Section 10.4(b).

(c)       Seller and Purchaser hereby acknowledge that, pursuant to the terms of the Fourth Amendment to Lease, the Basic Rent was increased, which increase in Basic Rent is retroactive to the Basic Rent Commencement Date (as defined in the Lease). Supplementing the terms of Section 10.4(b), Seller reserves the right to pursue a collection action against Tenant for any increased Basic Rent due to Seller for the period prior to the Closing; provided, however, in no event may Seller seek to terminate the Lease or Tenant's occupancy thereunder or threaten to do so.  Notwithstanding the terms of Section 10.4(b), if after the Closing Purchaser receives any increased Basic Rent due with respect to the period prior to the Closing, then Purchaser shall immediately remit such amount to Seller, it being understood that any increased Basic Rent due with respect to the period prior to the Closing pursuant to the Fourth Amendment to Lease shall remain the property of Seller and shall not be applied against any Rental due after the Closing.

Section 10.5           Costs  of  Title  Company   and  Closing  Costs.  Costs incurred in connection with this transaction will be allocated as follows:

(a)       Seller shall pay (i) Seller's attorney's fees; (ii) one-half (1/2) of any escrow fees payable to the Escrow Agent; (iii) the cost to prepare and record discharges of any encumbrances that Seller is removing pursuant to the terms of this Agreement; 

(iv) one-half of any costs incurred in connection with the transfer of the Warranties; and (v) all realty transfer fees and taxes which by law are payable by sellers of property.

(b)       Purchaser shall pay (i) Purchaser's  attorney's fees; (ii) the cost of recording the Deed to the Real Property and any other documents, other than the cost to record discharges of any encumbrances that Seller is removing pursuant to the terms of this Agreement; (iii) the cost of all title searches and title insurance premiums; (iv) one-half (112) of any escrow fees payable to the Escrow Agent; (v) the cost of any updated survey that Purchaser elects to obtain;  (vi) one-half of any costs incurred in connection with the transfer of the Warranties; and (vii) all realty transfer fees and taxes which by law are payable by purchasers of property, including, without limitation, the "Mansion Tax".

(c)       Any other costs and expenses of Closing not provided for in this Section 10.5 shall be allocated between Purchaser and Seller in accordance with the custom in the area in which the Property is located.

Section 10.6          Like-Kind   Exchange. Purchaser  hereby  acknowledges  that  Seller may now or hereafter desire to enter into a partially or completely nontaxable exchange (a "Section 1031 Exchange")  involving the Property (and/or any one or more of the properties comprising the Property) under Section 1031 of the Internal Revenue Code of 1986, as amended, and the Treasury Regulations promulgated thereunder.    In connection therewith, and notwithstanding anything herein to the contrary, Purchaser shall cooperate with Seller and shall take, and consent to Seller taking, any action in furtherance of effectuating a Section 1031 Exchange (including, without limitation, any action undertaken pursuant to Revenue Procedure 2000-37, 2000-40 IRB, as may hereafter be amended or revised (the "Revenue  Procedure")), including, without limitation, (a) permitting Seller or an "exchange accommodation titleholder" (within the meaning of the Revenue Procedure) ("EAT") to assign, or cause the assignment of, this Agreement and all of Seller's rights hereunder with respect to any or all of the Property to a "qualified intermediary" (as defined in Treasury Regulations Section 1.1031(k)-1(g)(4)(iii)) (a "Q!"); (b) permitting Seller to assign this Agreement and all of Seller's rights and obligations hereunder with respect to any or all of the Property and/or to convey, transfer or sell any or all of the Property, to (i) an EAT; (ii) any one or more limited liability compm1ies ("LLCs")  that are wholly-owned by an EAT; or (iii) any one or more LLCs that are wholly-owned by Seller and/or any Affiliate of Seller and to thereafter permit Seller to assign its interest in such one or more LLCs to an EAT; and (c) pursuant to the terms of this Agreement, having any or all of the Property conveyed by an EAT or any one or more of the LLCs referred to in (b)(ii) or (b)(iii) above, and allowing for the consideration therefor to be paid by an EAT, any such LLC or a QI; provided, however, that Purchaser shall not be required to delay the Closing or incur additional expense; and provided further that Seller shall provide whatever safeguards are reasonably requested by Purchaser, and not inconsistent with Seller's desire to effectuate a Section 1031 Exchange involving any of the Property, to ensure that all of Seller's  obligations under this Agreement shall be satisfied in accordance with the terms thereof.

ARTICLE XI CONDEMNATION AND CASUALTY
Section 11.1           Casualty.  If, prior to the Closing Date, all or a Significant Portion of the Real Property and Improvements is destroyed or damaged by fire or other casualty, then 

Purchaser shall have the right to terminate this Agreement upon notice to Seller within fifteen (15) days after such damage or destruction (time being of the essence with respect to such notice).  If this Agreement is so terminated, the Earnest Money Deposit and all interest accrued thereon will be returned to Purchaser and thereafter neither Seller nor Purchaser will have any further rights or obligations to the other hereunder except with respect to the Termination Surviving Obligations. If less than a Significant Portion of the Real Property and Improvements is destroyed or damaged as aforesaid or a Significant Portion of the Real Property and Improvements is destroyed or damaged and Purchaser does not elect to terminate this Agreement, the parties will proceed to Closing pursuant to the terms hereof without abatement of the Purchase Price, and Seller's insurance proceeds shall be disbursed and applied for the benefit of Purchaser in accordance with the terms and conditions of the Lease, which obligation shall survive Closing; provided, however, that, at Closing, Purchaser shall receive a credit against the Purchase Price in the amount of any deductible under Seller's insurance policy.

Section 11.2           Condemnation  of Property.   In the event that a condemnation or eminent domain proceeding is commenced against the Property or any part thereof, and it results in the Lease being terminated pursuant to the terms thereof, then this Agreement shall automatically terminate.  If this Agreement is so terminated, the Earnest Money Deposit and all interest accrued thereon will be returned to Purchaser and thereafter neither Seller nor Purchaser will have any further rights or obligations to the other hereunder except with respect to the Termination Surviving Obligations. If the Lease is not so terminated, the parties will proceed to Closing pursuant to the terms hereof without abatement of the Purchase Price, except that the Seller shall assign and/or pay over or credit to Purchaser at Closing all right, title and interest of Seller in and to any net compensation paid or to be paid to the owner of the Property as a result of such condemnation.

ARTICLE XII CONFIDENTIALITY

Section 12.1           Confidentiality.  Seller and Purchaser each expressly acknowledge and agree that the transactions contemplated by this Agreement and the terms, conditions, and negotiations concerning the same will be held in the strictest confidence by each of them and, except as otherwise set forth in Section 5.2(b), will not be disclosed by either of them except to their respective legal counsel, accountants, consultants, officers, directors,  and except and only to the extent that such disclosure may be necessary for their respective performances hereunder. Purchaser further acknowledges and agrees that, unless and until the Closing occurs, all information obtained by Purchaser in connection with the Property will not be disclosed by Purchaser to any third persons without the prior written consent of Seller.  Nothing contained in this Article XII will preclude or limit either party to this Agreement from disclosing or accessing any information otherwise deemed confidential under this Article XII in response to lawful process or subpoena or other valid or enforceable order of a court of competent jurisdiction or any filings with governmental authorities required by reason of the transactions provided for herein or otherwise required pursuant to an opinion of counsel.  In addition, prior to, at or after Closing, any release to the public of information with respect to the sale contemplated herein or any matters set forth in this Agreement will be made only in a form approved by Purchaser and Seller and their respective counsel, which approval shall not be unreasonably withheld or delayed.  The provisions of this Article XII will survive the Closing or any termination of this Agreement.

ARTICLE XIII REMEDIES

Section 13.1           Default  by  Seller.    In the event the Closing and the transactions contemplated hereby do not occur as herein provided by reason of any default of Seller, Purchaser may, as Purchaser's sole and exclusive remedy, elect by notice to Seller within ten (10) Business Days following the Scheduled Closing Date, either of the following: (a) terminate this Agreement, in which event Seller will reimburse Purchaser's  actual, reasonable out-of­ pocket transaction costs up to $75,000.00 and Purchaser will receive from the Escrow Agent the Earnest Money Deposit, together with all interest accrued thereon, whereupon Seller and Purchaser will have no further rights or obligations under this Agreement, except with respect to the Termination Surviving Obligations; or (b) seek to enforce specific performance of Seller's obligation to convey the Property to Purchaser in accordance with the terms and conditions of this Agreement (it being understood and agreed that the remedy of specific performance shall not be available to enforce other obligations of Seller hereunder).  Notwithstanding the forgoing, if Purchaser elects to terminate this Agreement pursuant to clause (a) above, or is deemed to have so terminated this Agreement, on account of Seller voluntarily having transferred title to the Real Property to a third party in willful violation of this Agreement and thereby rendering specific performance unobtainable, then  Purchaser shall  have  the  right  to  seek,  in  addition to  the $75,000.00 of out-of-pocket transaction costs, any actual direct damages (which, for the avoidance of doubt, shall include the amount by which the sales price to such third party exceeds the Purchase Price hereunder, but shall exclude consequential damages) to which Purchaser is entitled at law, provided that the aggregate amount of such transaction costs and damages shall not exceed an amount equal to the Earnest Money Deposit. Purchaser expressly waives its rights to seek damages in the event of Seller's default hereunder, except as expressly set forth in the preceding sentence.   Purchaser shall be deemed to have elected to terminate this Agreement pursuant to clause (a) above if Purchaser fails to file suit for specific performance against Seller in a court having jurisdiction in the county and state in which the Property is located on or before sixty (60) days following the Scheduled Closing Date.  Notwithstanding the foregoing, nothing contained in this Section 13.1 will limit Purchaser's remedies at law, in equity or as herein provided in pursuing remedies for a breach by Seller of any of the Termination Surviving Obligations or Closing Surviving Obligations.

Section 13.2           Default   by   Purchaser.       In   the   event   the   Closing   and  the consummation of the transactions contemplated herein do not occur as provided herein by reason of any default of Purchaser, Purchaser and Seller agree it would be impractical and extremely difficult to prove the damages which Seller may suffer.  Purchaser and Seller hereby agree that (a) an amount equal to the Earnest Money Deposit, together with all interest accrued thereon, is a reasonable estimate of the total net detriment Seller would suffer in the event Purchaser defaults and fails to complete the purchase of the Property, and (b) such amount will be the full, agreed and  liquidated  damages  for  Purchaser's  default  and  failure  to  complete  the  purchase  of the Property, and will be Seller's  sole and exclusive remedy (whether at law or in equity) for any default of Purchaser resulting in the failure of consummation of the Closing, whereupon this Agreement will terminate and Seller and Purchaser will have no further rights or obligations hereunder, except with respect to the Termination Surviving Obligations.   The payment of such amount  as  liquidated  damages  is  not  intended  as  a  forfeiture  or  penalty  but  is  intended  to constitute liquidated damages to Seller. Notwithstanding the foregoing, nothing contained herein will limit Seller's  remedies at law, in equity, or as herein provided in the event of a breach by Purchaser of any of the Termination Surviving Obligations or Closing Surviving Obligations.

ARTICLE XIV NOTICES
                 Section 14.1             Notices.
      (a)      All notices or other communications required or permitted hereunder  shall  be  in  writing,  and  shall  be  given  by  any  nationally  recognized overnight delivery service with proof of delivery, facsimile or electronic mailing of a ".pdf' copy thereof, provided that a copy thereof also be delivered by nationally recognized overnight delivery service to the extent such notice is given by facsimile or electronic mail, sent to the intended addressee at the address set forth below, or to such other address or to the attention of such other person as the addressee will have designated by written notice sent in accordance herewith. Unless changed in accordance with the preceding sentence, the addresses for notices given pursuant to this Agreement will be as follows:
If to Purchaser:    Series C, LLC
                               c/o Cole Real Estate Investments
                                      2325 E. Camelback Road, Suite 1100
           Phoenix, AZ  85016
                Attn: Legal Department
           Tel.: (602) 778-8700
           Fax: (480) 449-7012
                            E-Mail: dhaug@colecapital.com

with a copy to:                        Snell & Wilmer L.L.P. One Arizona Center
              400 E. Van Buren Street
       Phoenix, AZ 85004
                Attn: Kevin T. Lytle, Esq. 
          Tel.: (602) 382-6065
        Fax:(602)382-6070
                   E-mail: klytle@swlaw.com

If to Seller:     55 Corporate Unit IV LLC
c/o Mack-Cali Realty Corporation
343 Thornall Street
Edison, New Jersey 08837-2206
with separate notices to the attention of:

Mr. Mitchell E. Hersh
Fax:     732-205-9040
E-Mail:  mhersh@mack-cali.com and
Roger W. Thomas, Esq. Fax:     732-205-9015
E-Mail:  rthomas@mack-cali.com

with a copy to:      Michael E. Rothpletz, Jr., Esq.
Drinker Biddle & Reath LLP
500 Campus Drive

Florham Park, New Jersey 07932
Fax: 973-360-9831
E-Mail: michael.rothpletz@dbr.com

If to Escrow Agent:     First American Title Insurance Company
2425 E. Camelback Road, Suite 300
Phoenix, AZ  85016
Attn:     Mr. Brandon Grajewski
Tel.:     (602) 567-8145
Fax:     (602) 567-8101
E-Mail: bgrajewski@firstam.com

(b)        Notices given by facsimile  or electronic  mail  shall be deemed  received and effective  upon  the day of transmission  (provided  transmission  occurs on a Business  Day prior to 9:00 p.m. in the time zone of the recipient), while overnight delivery service as aforesaid shall  be  deemed  received  and  effective  on  the  first  Business  Day  following  such  dispatch. Notices  may  be  given by  counsel  for the  parties  described  above,  and  such  notices  shall be deemed given by said party, for all purposes hereunder.

ARTICLE XV ASSIGNMENT

Section 15.1     Assignment: Binding Effect.  Except in accordance with this Section
15.1, Purchaser will not have the right to assign this Agreement.   After the expiration of the Evaluation Period, Purchaser shall have the right to assign this Agreement to an Affiliate of Purchaser, provided (a) written notice of the proposed assignment (including the name of the assignee) is delivered to Seller not less than five (5) Business Days prior to the Scheduled Closing Date, (b) an originally executed assignment and assumption agreement, in form reasonably satisfactory to Seller, is delivered to Seller and Escrow Agent prior to Closing pursuant to which the assignee assumes all obligations and liabilities of Purchaser under this Agreement, and (c) Purchaser shall remain primarily liable hereunder as a principal (and not a guarantor or surety) for all obligations and liabilities arising or accruing through the completion of the Closing, including, without limitation, the payment of the Purchase Price to Seller and the performance of the other conditions precedent to Seller's obligation to consummate the Closing; provided, however, if the Closing occurs and the Purchaser has complied with all of its obligations hereunder through the Closing, the Purchaser (but not its assignee) shall be relieved of all obligations of Purchaser arising under this Agreement before, on and after such Closing.

ARTICLE XVI BROKERAGE

Section 16.1          Brokers.  Seller has retained Eastdil Secured, L.L.C. ("Broker") in connection with this sale of the Property.  If the Closing occurs, Seller agrees to pay Broker a brokerage commission pursuant to a separate agreement by and between Seller and Broker. Seller shall indemnify, defend and hold Purchaser harmless from and against any and all loss, cost, damage, liability or expense, including reasonable attorneys' fees, which Purchaser may sustain, incur or be 

exposed to by reason of a claim for a fee or commission resulting from any other such claim made through or under Seller or Seller's breach of this obligation.  Purchaser represents that it has not dealt with any brokers, finders or salesmen in connection with this transaction other than Broker, and agrees to indemnify, defend and hold Seller harmless from and against any and all loss, cost, damage, liability or expense, including reasonable attorneys' fees, which Seller may sustain, incur or be exposed to by reason of a claim for a fee or commission resulting from this representation being untrue or inaccurate in any material respect. The provisions of this Article XVI will survive the Closing or termination of this Agreement.

ARTICLE XVII ESCROW AGENT

Section 17.1    Escrow.

(a)       Escrow  Agent  will  hold  the  Earnest  Money  Deposit  in escrow in an interest-bearing account of the type generally used by Escrow Agent for the  holding of  escrow funds until  the earlier of  (i) the Closing, or  (ii) the termination of this Agreement in accordance with any right hereunder. In the event Purchaser has not terminated this Agreement by the end of the Evaluation Period, the Earnest Money Deposit shall be non-refundable to Purchaser except in certain limited circumstances expressly set forth elsewhere in this Agreement, but shall be credited against the Purchase Price at the Closing.   All interest earned on the Earnest Money Deposit shall be paid to and be for the benefit of Purchaser unless the Earnest Money Deposit is paid to Seller as liquidated damages pursuant to this Agreement. In the event this Agreement is terminated prior to the expiration of the Evaluation Period, the  Initial  Earnest Money Deposit  and  all interest  accrued thereon will be returned by the Escrow Agent to  Purchaser.   In the event the Closing occurs, the Earnest Money Deposit will be released to Seller, and Purchaser shall receive all of the interest earned on the Earnest Money Deposit.  In all other instances, Escrow Agent shall not release the Earnest Money Deposit to either party until Escrow Agent has been requested by Seller or Purchaser to release the Earnest Money Deposit and has given the other party five (5) Business Days to dispute, or consent to, the release of the Earnest Money Deposit.   Purchaser represents that its tax  identification  number, for  purposes  of reporting  the interest  earnings,  is 43-1987351.

(b)        Escrow Agent shall not be liable to any party for any act or omission,  except for bad faith, gross negligence  or willful breach or misconduct, and the parties agree to indemnify Escrow Agent and hold Escrow Agent harmless from any and all other claims, damages, losses or expenses arising in connection herewith.     The   parties   acknowledge   that   Escrow   Agent  is   acting  solely   as stakeholder  for  their  mutual  convenience.    In the  event  Escrow  Agent  receives written notice of a dispute between the parties with respect to the Earnest Money Deposit and the interest earned thereon (the "Escrowed  Funds"),  Escrow Agent shall not be bound  to release and deliver the Escrowed  Funds  to either party but may either (i) continue to hold the Escrowed  Funds  until otherwise directed in a writing signed by all parties hereto or (ii) deposit the Escrowed Funds with the clerk of any court of competent jurisdiction.   Upon such deposit, Escrow Agent will be released from all duties and responsibilities  hereunder.   Escrow Agent shall have the right to consult with separate counsel of its own choosing (if it deems such 

consultation  advisable)  and  shall  not be liable  for  any  action  taken,  suffered  or omitted by it in accordance with the advice of such counsel.

(c)       Escrow  Agent  shall  not  be  required  to  defend  any  legal proceeding which may be instituted against it with respect to the Escrowed Funds, the Property or the subject matter of this Agreement unless requested to do so by Purchaser  or  Seller  and  is  indemnified  to  its  satisfaction  against  the  cost  and expense of such defense.   Escrow Agent shall not be required to institute legal proceedings  of any kind and shall have no  responsibility  for the genuineness or validity of any document or other item deposited with it or the collectibility of any check delivered in connection with this Agreement.  Escrow Agent shall be fully protected in acting in accordance with any written instructions given to it hereunder and believed by it to have been signed by the proper parties.

ARTICLE XVIII MISCELLANEOUS

Section 18.1           Waivers.   No waiver of any breach  of any covenant  or provisions contained herein will be deemed a waiver of any preceding or succeeding breach thereof, or of any other covenant or provision contained herein.  No extension of time for performance of any obligation or act will be deemed an extension of the time for performance of any other obligation or act.

Section 18.2     Recovery  of  Certain  Fees.     In the event  a party  hereto  files  any action or suit against  another  party hereto  by reason of  any breach  of any of the covenants, agreements or provisions contained in this Agreement, then in that event the prevailing party will be  entitled  to  have  and  recover  certain  fees  from  the  other  party  including  all  reasonable attorneys'   fees  and  costs  resulting  therefrom.  For  purposes   of  this  Agreement,  the  term "attorneys'  fees" or "attorneys'  fees and costs" shall mean the reasonable  and actual fees and expenses of counsel to the parties hereto, which may include printing, photocopying, duplicating and  other  expenses,  air  freight  charges,  and fees  billed  for  law  clerks,  paralegals  and  other persons not admitted to the bar but performing services under the supervision of an attorney, and the costs and fees incurred in connection with the enforcement or collection of any judgment obtained in any such proceeding.  The provisions of this Section 18.2 shall survive the entry of any judgment, and shall not merge, or be deemed to have merged, into any judgment.

Section 18.3           Construction.      Headings  at  the  beginning  of  each  Article and Section are solely for the convenience of the parties and are not a part of this Agreement. Whenever required by the context of this Agreement, the singular will include the plural and the masculine will include the feminine and vice versa. This Agreement will not be construed as if it had been prepared by one of the parties, but rather as if both parties had prepared the same. All exhibits and schedules referred to in this Agreement are attached and incorporated by this reference, and any capitalized term used in any exhibit or schedule which is not defined in such exhibit  or  schedule will  have  the  meaning attributable to  such  term  in  the  body  of  this Agreement.  In the event the date on which Purchaser or Seller is required to take any action under the terms of this Agreement is not a Business Day, the action will be taken on the next succeeding Business Day.

Section 18.4           Counterparts;   Delivery.     This  Agreement  may  be  executed in multiple counterparts, each of which, when assembled to include an original   (or electronic) signature 

for each party contemplated to sign this Agreement, will constitute a complete and fully executed original. All such fully executed counterparts will collectively constitute a single agreement. This Agreement shall also be binding on Purchaser and Seller if signed and delivered electronically by each party.

Section 18.5                   Severability.    If any term or other provision of this Agreement is invalid, illegal, or incapable of being enforced by any rule of law or public policy, all of the other conditions and provisions of this Agreement will nevertheless remain in full force and effect, so long as the economic or legal substance of the transactions contemplated hereby is not affected in any adverse manner to either party. Upon such determination that any term or other provision is invalid, illegal, or incapable of being enforced, the parties hereto will negotiate in good faith to modify this Agreement so as to reflect the original intent of the parties as closely as possible in an acceptable manner to the end that the transactions contemplated hereby are fulfilled to the extent possible.

Section 18.6           Entire Agreement.   This Agreement is the final expression of, and contains the entire agreement between, the parties with respect to the subject matter hereof, and supersedes all prior understandings with respect thereto.  This Agreement may not be modified, changed, supplemented or terminated, nor may any obligations hereunder be waived, except by written instrument, signed by the party to be charged or by its agent duly authorized in writing, or as otherwise expressly permitted herein.

Section 18.7                        Governing   Law.     THIS  AGREEMENT  WILL  BE  CONSTRUED, PERFORMED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE IN WHICH THE PROPERTY IS LOCATED.

Section 18.8                 No Recording.   The parties hereto agree that neither this Agreement nor any affidavit or memorandum concerning it will be recorded and any recording of this Agreement or any such affidavit or memorandum by Purchaser will be deemed a default by Purchaser hereunder.

Section 18.9           Further Actions. The parties agree to execute such instructions to the Title Company and such other instruments and to do such further acts as may be reasonably necessary to carry out the provisions of this Agreement.
Section 18.10           Exhibits.     The  following  sets  forth  a  list  of  Exhibits  to  the Agreement:

Exhibit A ­- Assignment
Exhibit B - Certificate as to Foreign Status.­
Exhibit C -Amendment to Master Deed
Exhibit D -  Bulk Sales Escrow Agreement
Exhibit E - Affidavit of Title

Section 18.11         No Partnership.  Notwithstanding anything to the contrary contained herein, this Agreement shall not be deemed or construed to make the parties hereto partners or joint venturers, it being the intention of the parties to merely create the relationship of Seller and Purchaser with respect to the Property to be conveyed as contemplated hereby.

Section 18.12         Limitations on Benefits.  It is the explicit intention of Purchaser and Seller that no person or entity other than Purchaser, Seller and their permitted successors and assigns is or shall be entitled to bring any action to enforce any provision of this Agreement against any of the parties hereto, and the covenants, undertakings and agreements set forth in this Agreement shall be solely for the benefit of, and shall be enforceable only by, Purchaser, Seller or their respective successors and assigns as permitted hereunder.  Nothing contained in this Agreement shall under any circumstances whatsoever be deemed or construed, or be interpreted, as making any third party a beneficiary of any term or provision of this Agreement or any instrument or document delivered pursuant hereto, and Purchaser and Seller expressly reject any such intent, construction or interpretation of this Agreement.

Section 18.13         Discharge of Obligations. The acceptance of the Deed by Purchaser shall be deemed to be a full performance and discharge of every representation and warranty made by Seller herein and every agreement and obligation on the part of Seller to be performed pursuant to the provisions of this Agreement, except those which are herein specifically stated to survive the Closing or are contained in the Closing Documents.

Bulk Sales.  Subject to the terms hereof, Purchaser shall deliver a Notification of Sale, Transfer,or Assignment in Bulk (Form C-9600), together with a fully executed copy of this Agreement (the"Tax Notification") to Seller and to the New Jersey Division of Taxation (the "Division"), each by registered or  certified mail or overnight delivery so  that such Tax  Notification is received by Seller and the Division not less than twenty (20) days prior to the Scheduled Closing Date (it being understood that the Closing shall not be delayed in connection with Purchaser's failure to deliver the Tax Notification).    Seller shall have the right, but not the obligation, to prepare and deliver to the Division the Asset Transfer Tax Declaration (the "TTD") in the form prescribed by the Division.  Promptly after written request by Purchaser, Seller shall provide all information reasonably requested by Purchaser and not otherwise available to Purchaser to enable Purchaser to complete the Tax Notification. If, at any time prior to Closing, the Division informs Purchaser in writing that a possible claim (the "Claim") for taxes imposed or to be imposed on Seller ("Taxes") exists and the amount thereof (the "Deficiency"), then Purchaser shall promptly notify Seller of the amount of the Deficiency and provide Seller with copies of any notices received from the Division in connection therewith.  Notwithstanding anything to the contrary contained herein, Seller shall have the right to negotiate with the Division regarding the Claim  and  the  Deficiency;  provided,  however,  that  Closing  shall  not  be delayed  as  a result thereof.   If prior to Closing, the Division notifies Purchaser of a Claim and Deficiency, then at Closing Purchaser shall withhold a portion of the Purchase Price equal to the amount of the Deficiency (as the same may be modified pursuant to any revised Claim delivered to Seller or Purchaser by the Division), which amount so withheld shall be placed in an escrow account (the "Tax Escrow"), which Tax Escrow shall be held pursuant to an escrow agreement in the form annexed  hereto  as  Exhibit  D.   The  escrow agent  shall  be the Escrow  Agent  ("Tax Escrow Agent").    If, after Closing, the Division or Seller requests that Purchaser pay all or any portion of the Deficiency on behalf of Seller, then Purchaser shall direct Tax Escrow Agent to, and Tax Escrow Agent shall (subject to the terms of the escrow agreement), release to the Division such amount from the Tax Escrow.  If the Division notifies Purchaser or Seller (a copy of such notice received by Seller only shall be delivered by Seller to Purchaser and Tax Escrow Agent prior to the release of funds from the Tax Escrow pursuant to this sentence) that the Deficiency has been fully paid or that Purchaser has no further liability for the Deficiency, then Purchaser shall direct the Tax  Escrow  Agent  to, and Tax Escrow  Agent shall,  promptly  release such difference  to Seller (subject to the terms of the escrow agreement).

[Remainder of Page Intentionally Left Blank]

IN  WITNESS  WHEREOF,  Seller  and  Purchaser  have  respectively  executed  this
Agreement as of the Effective Date.

PURCHASER:
SERIES C, LLC

    
By: /s/ Todd J. Weiss
Name: Todd J. Weiss
                                                                     Title: Authorized Officer
 

SELLER:

55 CORPORATE   UNIT IV LLC
By: MC 55 Corporate Drive LLC, sole member

       By: MC 55 Corporate Manager L.L.C., managing member

By: Mack-Cali Realty, L.P., sole member

		
	      
	By: Mack-Cali Realty Corporation, general partner

By: /s/ Mitchell E. Hersh
Name: Mitchell E. Hersh
Title: President and Chief Executive Officer

As to Article IV and XVII only: ESCROW AGENT:
FIRST AMERICAN TITLE INSURANCE
COMPANY
By: /s/ Brandon Grajeski
Name: Brandon Grajeski
Title: Authorized Agent

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