Teruya Brothers, Ltd. & Subsidiaries - Page 7

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               Teruya may cancel the proposed purchase should the sale                
               of the Royal Towers apartment fail to proceed according                
               to present plans.                                                      
          Early in 1995, the boards of directors of Times and Teruya                  
          approved the sale and purchase of Kupuohi I for $8.9 million and            
          Kaahumanu for $3.73 million.                                                
               In August 1995, Teruya entered into an “exchange agreement”            
          with TGE, whereby TGE agreed to act as an “exchange party to                
          complete the exchange” of Royal Towers for replacement property             
          to be designated by Teruya, with the stated purpose of qualifying           
          the exchange under section 1031.  TGE agreed to acquire the                 
          replacement property with proceeds from the sale of Royal Towers            
          and additional funds from Teruya as necessary to effect the                 
          acquisition.  Paragraph 6 of the exchange agreement states:                 
               Notwithstanding the foregoing, if * * * [Teruya] is                    
               unable to locate suitable Replacement Property by the                  
               date specified in the Acquisition Agreement [for Royal                 
               Towers], then the Acquisition Agreement and this                       
               Exchange Agreement shall be terminated and the parties                 
               shall have no further obligations to each other * * *.                 
               Teruya transferred Royal Towers to TGE, and on August 24,              
          1995, TGE sold Royal Towers to Savio for $11,932,000.  At that              
          time, Teruya had a $670,506 basis in Royal Towers.                          
               Also, on August 24, 1995, TGE applied the proceeds from the            
          sale of Royal Towers, as well as $724,554 in additional funds               
          from Teruya, to acquire Kupuohi I and Kaahumanu from Times for              

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Last modified: May 25, 2011