Document:

Exhibit
10.8

CONTRIBUTION AGREEMENT

by and among

BREOF UVA GP LLC

and

BREOF UVA LLC

and

PPC-UVA
15TH STREET
LIMITED PARTNERSHIP

and

PPC
CHARLOTTESVILLE GP, INC.

and

BEHRINGER HARVARD UVA, LLC

February 1, 2007

 

CONTRIBUTION AGREEMENT

This CONTRIBUTION AGREEMENT (this “Agreement”) is
entered into as of February 1, 2007, by and among (i) BREOF UVA GP
LLC, a Delaware limited liability company, (ii) BREOF UVA
LLC, a Delaware limited liability company, (iii) PPC-UVA 15TH STREET LIMITED PARTNERSHIP, a Texas
limited partnership, and (iv) PPC CHARLOTTESVILLE GP,
INC., a Texas corporation (each a “Transferor”
and collectively the “Transferors”)
and BEHRINGER HARVARD UVA, LLC, a Delaware
limited liability company (the “BH Investor”).

RECITALS:

WHEREAS, Transferors own, directly, one hundred
percent (100%) of the membership interest (the “Project
Owner Membership Interest”) of PPC Charlottesville Limited
Partnership, a Delaware limited partnership (the “Project Owner”), which Project
Owner Membership Interest constitutes all of the issued and outstanding equity
interests in the Project Owner; and

WHEREAS, the Project Owner holds that certain
leasehold interest in that certain ground lease (“Ground Lease”)
for that certain parcel of real property located in Albemarle County, Virginia
more particularly described on Exhibit B attached hereto and made a
part hereof for all purposes (“Land”); and

WHEREAS, prior to the Closing Date, the Project Owner
will construct and complete that certain student housing project (the “Project”) to be located on the Land; and

WHEREAS, in connection with the construction of the
Project, Project Owner has entered into a Construction Loan Agreement with
Keybank (the “Senior Lender”), providing for a
loan in the amount of Twenty Nine Million Nine Hundred Eighteen Thousand Five
Hundred Forty-Three Dollars ($29,918,543.00) secured, in part, by a first lien
deed of trust on the Project (such loan and the documents evidencing and
securing such loan being collectively referenced as the “Construction
Loan”); and

WHEREAS, Transferors and BH Investor wish to enter
into a joint venture evidenced by a limited partnership (“Transferee”);
and

WHEREAS, Transferors wish to cause the transfer to
Transferee of the leasehold interest in the Ground Lease and the other property
set forth herein subject to the Construction Loan in exchange for fifty percent
(50%) of the Membership Interest in Transferee (the “Transfer”) upon the terms and
conditions, and for the consideration, hereinafter set forth; and

WHEREAS, BH Investor wishes to contribute cash to
Transferee in exchange for fifty percent (50%) of the Membership Interest in
Transferee; and

WHEREAS, the capitalized terms used in these Recitals
and the other Sections in this Agreement are defined in Exhibit A.

NOW, THEREFORE, in consideration of the foregoing, the
covenants contained herein and for other good and valuable consideration, the
parties hereto agree as follows:

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ARTICLE I.

TRANSFER

1.1          Transfer.

(a)           Transfer.  Subject to the terms and conditions
hereinafter set forth, Transferors agree to or to cause Project Owner to, sell,
convey, transfer and assign to Transferee all right, title and interest of
Project Owner and/or Transferors in the following:

(1)           that certain leasehold
interest in that certain tract or parcel of land situated in the City of
Charlottesville, Albemarle County, Virginia more particularly described by
metes and bounds on Exhibit B attached hereto and made a part
hereof, together with all and singular the rights and appurtenances pertaining
to such property, including any right, title and interest in and to adjacent
streets, alleys or rights-of-way (the property described in clause (1) of this Section
1.1(a) being herein referred to collectively as the “Land”);

(2)           the buildings and other
improvements on the Land, including specifically, without limitation, that
certain apartment building and retail shops (the property described in clause
(2) of this Section 1.1(a) being herein referred to collectively as the “Improvements”);

(3)           the Personal Property upon the
Land or within the Improvements;

(4)           all right, title and interest
in all oral or written agreements pursuant to which any portion of the Land or
Improvements is used or occupied by anyone other than Project Owner and/or
Transferors (the property described in clause (4) of this Section 1.1(a)
being herein referred to collectively as the “Leases”);
and

(5)           all right, title and interest
in and to (i) all assignable contracts and agreements relating to the
upkeep, repair, maintenance or operation of the Land, Improvements or Personal
Property which will extend beyond the date of Closing (as such term is defined
in Section 1.3 hereof) (collectively, the “Operating Agreements”); (ii) all
warranties and guaranties (express or implied) issued in connection with the
Improvements or the Personal Property; (iii) all licenses, permits,
certificates of occupancy and other consents or approvals from governmental
authorities or private parties which relate to the Land, Improvements, or
Personal Property; (iv) all other intangible property associated with the
use or operation of the Land, Improvements or Personal Property, including
specifically, without limitation, the use of any and all trade names, logos,
web domain names, phone numbers and other intellectual property used in the
operation of the Land, Improvements or Personal Property, provided, however,
that the use of the name “Grandmarc” shall be limited to use solely in
connection with the Project; and (v) all plans, specifications, drawings
(including CAD drawings), reports, studies, books, records and other documents
pertaining to the Land, Improvements or Personal Property (the property
described in this Section 1.1(a)(5) being sometimes herein referred to
collectively as the “Intangibles”).

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(b)           Contributed
Property Defined.  The Land, the
Improvements, the Personal Property, the Leases and the Intangibles are
hereinafter sometimes referred to collectively as the “Contributed Property”.

(c)           Permitted Exceptions.  The Contributed Property shall be conveyed
subject to the matters which are deemed Permitted Exceptions.

(d)           Treatment as Contribution.  The transfer, conveyance and assignment of
the Contributed Property subject to the Construction Loan shall constitute a
capital contribution to Transferee.

(e)           BH Investor.  Subject to the terms and conditions
hereinafter set forth, BH Investor agrees to contribute cash to Transferee in
the amount set forth in Section 1.2(b) below (the “BH Contribution”).The BH Contribution shall
constitute a capital contribution to Transferee.

1.2          Consideration.

(a)           Transferors.  In consideration of Transferors’ contribution
of the Contributed Property subject to the Construction Loan, Transferors shall
each receive an interest as a partner of Transferee as more fully set forth in
that certain limited partnership agreement of Transferee in substantially the
form attached hereto as Exhibit C (the “LP Agreement”).  In
connection with the foregoing, the parties hereby acknowledge and agree that,
for purposes of this Agreement and as more fully set forth in the LP Agreement,
the Transferors or their assigns shall each receive a credit to their capital
account equal to Six Million Forty Thousand Dollars ($6,040,000.00).

(b)           BH Investor.  In consideration of BH Investor’s
contribution of cash in the amount of Six Million Forty Thousand Dollars
($6,040,000.00), BH Investor shall receive an interest as a partner of
Transferee as more fully set forth in the LP Agreement.  In connection with the foregoing, the parties
hereby acknowledge and agree that, for purposes of this Agreement and as more
fully set forth in the LP Agreement, the BH Investor shall receive a credit to
its capital account equal to Six Million Forty Thousand Dollars ($6,040,000.00).

1.3          Closing.

(a)           Time.  The Closing of the transaction contemplated
herein (the “Closing”) shall be
held, unless the parties otherwise mutually agree, on the later of (i) August
15, 2007 or (ii) within 30 calendar days after the date of delivery of the
Completion Notice provided that prior to the closing, all of the Conditions to
Close set forth in Section 1.4 have been met and the Closing Deliveries
set forth in Section 1.5 have been delivered.  Notwithstanding the foregoing, if a mechanics lien(s) is filed against
the Project, and Project Owner is actively contesting such mechanics lien(s),
the Closing Date may be extended by either BH Investor or Transferors for up to
60 additional calendar days to permit Project Owner to remove such mechanics lien(s)
as a lien against the Project or Transferors may purchase or cause to be
purchased a bond in the amount of one hundred fifty percent (150%) of the lien
amount and proceed to Closing.

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(b)           Completion Notice. 
Promptly following the Completion Date, Transferors shall deliver to BH
Investor a written notice (the “Completion
Notice”) certifying that the Completion Date has occurred.  BH Investor shall then specify a Closing Date
pursuant to Section 1.3(a) above.

(c)           Business Day.  Notwithstanding the foregoing Section
3.1(a), if the Closing Date would occur on a day which is not a Business
Day, then the Closing Date shall be delayed until the second Business Day
thereafter.

(d)           Closing.  Based upon the
representations, warranties and covenants, and subject to the terms, provisions
and conditions contained in this Agreement, at the Closing, Transferors shall
contribute the Contributed Property to Transferee subject only to the Permitted
Exceptions and BH Investor shall contribute the BH Contribution to Transferee.

(e)           Closing Accommodation Transactions.  As
a condition precedent to the Closing, the parties acknowledge that the
transactions set forth on Exhibit D attached hereto and made a part
hereof, must be completed in the order set forth on Exhibit D prior to
the Closing.

1.4          Conditions
to the Closing.

(a)           Joint Condition.  The obligations of each party to consummate
the transactions provided for in this Agreement are subject to the condition
that on the Closing Date there shall be no action, suit or proceeding (other
than such an action, suit or proceeding directly or indirectly instituted by a
party to this Agreement) shall be threatened or pending, and no injunction,
order, decree or ruling shall be in effect, seeking to restrain or prohibit, or
to obtain damages or other relief in connection with, the execution and
delivery of this Agreement or the consummation of the transactions contemplated
by this Agreement.

(b)           BH Investor’s Conditions to
Closing.  The obligations of BH
Investor to consummate the transactions contemplated by this Agreement are
subject to the satisfaction, at or prior to the Closing Date, of the following
conditions:

(1)           Transferors’ Representations True.  Transferors’ representations and warranties
made in this Agreement shall be true and correct in all material respects as of
the Closing Date, except as affected by the transactions contemplated hereby,
and Transferors shall have delivered to BH Investor a closing certificate to
that effect.

(2)           Transferors’ Compliance with
Agreement.  Transferors, in all
material respects, shall have performed each agreement, and shall have complied
with each covenant, to be performed or complied with by it on or prior to the
Closing Date under this Agreement, and Transferors hall have delivered to BH Investor
a closing certificate to that effect.

The
closing certificates to be delivered by Transferors referred to in Sections 1.4(b)(1)
and (2) are referred to herein collectively as the “Transferors Closing Certificate.”

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(c)           Transferors’ Conditions to Closing.  The obligations of Transferors to consummate
the transactions contemplated by this Agreement are subject to the
satisfaction, at or prior to the Closing Date, of the following conditions:

(1)           BH Investor’s Representations True.  BH Investor’s representations and warranties
made in this Agreement shall be true and correct in all material respects as of
the Closing Date, except as affected by the transactions contemplated hereby,
and BH Investor shall have delivered to Transferors a closing certificate to
that effect.

(2)           BH Investor’s Compliance with
Agreement.  BH Investor, in all
material respects, shall have performed each agreement, and complied with each
covenant to be performed or complied with by it on or prior to the Closing Date
under this Agreement, and BH Investor shall have delivered to Transferors a
closing certificate to that effect.

The
closing certificates to be delivered by BH Investor referred to in Sections
1.4(c)(1) and (2) are referred to herein collectively as the “BH Investor Closing Certificate.”

1.5          Closing
Deliveries of Transferors.

At the Closing, Transferors shall deliver or cause
Project Owner to deliver to BH Investor, as appropriate, the following, all of
which shall be in a form reasonably satisfactory to BH Investor:

(a)           The Transferors Closing Certificate.

(b)           A certificate of the Secretary of
each Transferor certifying true and correct copies of the required resolutions
of each Transferor duly authorizing the execution, delivery and performance of
this Agreement and all related documents and agreements, such resolutions being
in full force and effect as of the Closing Date and such other evidence as BH
Investor or the Title Company shall reasonably require to evidence the
authority of Transferors,

(c)           A fully executed copy of the LP
Agreement dated as of the Closing Date.

(d)           An executed assignment of Ground
Lease in the form attached hereto as Exhibit E , a written consent from
the lessor under the Ground Lease approving such assignment and evidence of
payment to the lessor under the Ground Lease of any transfer fee required
pursuant to the Ground Lease.

(e)           An executed Bill of Sale and
Assignment (the “Bill of Sale”) in
the form attached hereto as Exhibit F.

(f)            An executed Assignment and
Assumption of Contracts (the “Assignment of
Contracts”) in the form attached hereto as Exhibit G.

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(g)           A certificate dated within thirty
(30) days of the Closing Date, of the Secretary of State of the State in which
each Transferor was formed establishing that each Transferor is in existence
and is in good standing in such state.

(h)           A letter to each tenant of the
Project in the form of Exhibit H attached hereto and made a part hereof.

(i)            A FIRPTA Affidavit in the form of Exhibit
I attached hereto and made a part hereof, duly executed by Transferor.

(j)            A current rent roll for the Project
certified by Transferors to be true and correct as of the Closing Date.

(k)           A “bills paid affidavit” verifying
that there are no unpaid bills, expenses or claims with respect to the Project
and indemnifying BH Investor from any loss or liability relating to such
matters.

(l)            A certificate from the Architect of
the Project stating that the design of the Project is in compliance with all
applicable laws.

(m)          Original Leases, original Operating
Agreements and all other documents described in Section 1.1 hereof.

(n)           Possession and occupancy of the
Project, subject to the Permitted Exceptions.

(o)           All available keys (including
security deposit box keys) or access cards used with respect to the Project in
Transferor’s possession.

(p)           The Title Policy pursuant to Section
1.6 hereof.

(q)           If available under
local practice, certificates from the taxing authorities of the Commonwealth of Virginia and
from Albemarle County, Virginia, or other evidence dated within thirty (30)
days prior to the Closing Date, evidencing that Project Owner has paid all
property and other state and local taxes due and owing.

(r)            The written consent
of Senior Lender to the transfer if required and executed assumption documents
in connection with the Construction Loan in form and substance reasonably
acceptable to BH Investor.

(s)           A certificate
executed by Transferors listing the Contracts.

(t)            Such other
instruments and documents as are reasonably requested by Transferee to carry
out and effect the purpose and intent of this Agreement.

1.6          Closing
Deliveries of BH Investor.

At the Closing, BH Investor shall deliver to
Transferors the following, which shall be in a form reasonably satisfactory to
Transferors:

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(a)           The BH Investor
Closing Certificate.

(b)           A certificate of the Secretary of BH Investor
certifying true and correct copies of the required resolutions of BH Investor
duly authorizing the execution, delivery and performance of this Agreement and
all related documents and agreements, such resolutions being in full force and
effect as of the Closing Date and such other evidence as Transferee,
Transferors or the Title Company shall reasonably require to evidence the
authority of BH Investor

(c)           Executed
counterparts to the document set forth in Section 1.5(c) above.

(d)           Such other
instruments and documents as are reasonably requested by Transferors and/or
Title Company to carry out and effect the purpose and intent of this Agreement.

1.7          Title
and Survey.

(a)           Commitment for Title
Insurance.  Transferor shall deliver to BH Investor and
the surveyor described in Section 1.8(b) below (a) a current title
commitment (the “Title Commitment”)
covering the Project, showing all matters affecting title to the Project and
binding Republic Title of Texas, Inc., 2626 Howell Street, 10th Floor, Dallas, Texas 75204,
Attn: Jeanne Ragland (the “Title Company”)
to issue at Closing an Owner’s Policy of Title Insurance, on the form
customarily used in the area in which the Project is located, in the full
amount of the appraised value of the, and (b) legible copies of all instruments
(the “Exception Instruments”)
referenced in the Title Commitment.

(b)           Survey. 
Transferors shall, at Transferors’ expense, furnish to BH Investor a
current Survey (the “Survey”) of
the Project prepared by a reputable and duly licensed surveyor or surveying
firm which (a) locates all easements (whether of record or apparent from an
inspection of the Project) and rights-of-way on or adjacent to the Project
(identified by recording data, if applicable), (b) shows the Improvements
situated on the Land and the dimensions of all buildings thereon, (c) show the
location and size of all streets (existing or proposed) on or adjacent to the
Project, (d) shows any encroachments or protrusions, railroads, rivers, creeks,
or other water courses, fences, utilities (including size and location), and
other matters located on or affecting the Project (and any recording
information relating thereto), (e) sets forth the number of square feet
comprising the Project, together with a legal description of the boundaries of
the Project by metes and bounds; (f) certifies that the Land does not lie
within the 100-year flood plain as established by the U.S. Army Corps of
Engineers, (g) contains a certification by the surveyor in the form of Exhibit
J attached hereto, and (h) in general, complies with the standards for an
American Land Title Association survey.

(c)           Obligation to Cure Liens.  Notwithstanding
anything to the contrary contained in this Article 1.7, if at Closing
there are any Money Liens against all or any part of the Project, Transferors
shall cause the same to be discharged of record.  Notwithstanding the foregoing, Transferors
shall not be required to remove any lienevidencing the existing
financing with Senior Lender which is being assumed by Transferee.

 7
 

(d)           Owner’s Policy of
Title Insurance.  At Closing, Transferor shall cause the Title
Company to issue to Transferee the Title Policy covering the Project, in the
full amount of the appraised value of the Project, on the form customarily used
in the area in which the Project is located, insuring that Transferee is the
owner of the leasehold title to the Project, subject only to the Permitted
Exceptions, and with the standard printed exceptions modified as follows: (a)
the exception for restrictive covenants shall either be deleted or shall list
specific restrictions; (b) the exception for ad valorem taxes shall reflect
only taxes for the current year and subsequent years, and subsequent
assessments for prior years due to changes in land usage or ownership, and
shall be endorsed “not yet due and payable”; (c) there shall be no exception
for “visible and apparent easements,” for “public or private roads” or the
like; (d) there shall be no exception for “rights of parties in possession,”
although there may be an exception for Leases specifically described in the
Title Policy and for tenants as tenants only under residential leases and under
retail leases; and (e) any reference to submitting claims under the Title
Policy to arbitration shall be deleted.

1.8          Actions
of the Parties Pending Closing.

(a)           Reasonable Best Efforts.  Each of the parties will use their reasonable
best efforts to obtain all necessary consents and approvals and to cause the
conditions to the obligations of the parties hereunder to be satisfied and to
cause the Closing to be consummated as promptly as practicable, and will
cooperate with one another in connection with the foregoing.

(b)           Conduct of Business.  The Transferors shall, at their expense
(taking into account the use by the Project Owner of the proceeds of the
Construction Loan to fund such construction), cause the Project Owner to
construct and complete the Project on the Land, in substantial accordance with
the Plans and in accordance with the requirements of the Mezzanine Loan.  From the execution of this Agreement until
the Closing, Transferors will cause the Project Owner to operate in the
ordinary course of business consistent with the prudent construction and
operation of the Project and in accordance the requirements of the Mezzanine
Loan. Without limitation, the Project Owner shall not take any action, or fail
to take any action, as a result of which any of the changes or events listed in
Section 2.10(a) (“Changes”)
would occur.  Transferors shall maintain
and preserve the Project Owner and its business, franchises and authorizations,
and use commercially reasonable efforts to maintain and preserve its prospects,
goodwill and advantageous business relationships.  Transferors will cause Project Owner to (i)
maintain and operate the Project in a manner consistent with that of a first
class student living facility, reasonable wear and tear and damage from
casualty excepted, (ii) continue all insurance policies relative to the Project
(or if such insurance is canceled or expires, comparable insurance consistent
with similar projects in the Albemarle County metropolitan area) in full force
and effect, (iii) after the Completion Date not remove any item of Personal
Property from the Land or Improvements unless replaced by a comparable item of
Personal Property, (iv) maintain all permits, licenses and occupancy
certificates, including, without limitation, all development, building and use
permits and certificates of occupancy, (v) perform, when due, all material
obligations under any and all material agreements relating to the Project and
otherwise in accordance with applicable laws, ordinances, rules, and
regulations, including compliance with environmental laws and architectural
barrier laws including but not limited to the Americans with 

 8
 

Disabilities Act, the Fair
Housing Amendment Act, the HUD/FHAA Guidelines and the HUD Design Manual, (vi)
comply with all requirements such that any tax abatements or tax credits are
realized and (vii) promptly forward to BH Investor any material notices of
violations Governmental Requirements or Restrictions which Transferors receive
or become aware.  Transferors will not
permit either Project Owner or Transferee to have any employees.  Transferors will comply with all terms of the
Mezzanine Loan.

(c)           Access.  During the term of this Agreement, BH
Investor, and its agents, consultants and designees shall have reasonable
access to the Project for purposes of observing, testing and inspecting the
work.  No such observation, test or
inspection or failure to do so shall relieve Transferors from their obligations
under this Agreement.  In exercising its
access rights, BH Investor shall exercise and shall cause its designees to
exercise due care and to endeavor not to increase the cost of the General
Contractor’s performance beyond de minimis amounts or to delay to any material
extent the work on the Project.  BH
Investor shall indemnify, defend and hold harmless Transferors and Project
Owner from and against all liability, loss, cost or expense (including
reasonable attorneys’ fees and expenses of litigation) arising from any
wrongful acts committed by Transferee or its designees, agents or consultants
while on the Land.

(d)           Ownership of the Project. 
Transferors’ shall not permit Project Owner to sell or dispose of the
Project or any portion thereof except for Permitted Dispositions.  Transferors will not permit any Liens,
encumbrances or other title exceptions (other than the Permitted Exceptions and
normal utility easements, solely for benefit of the Project, incident to the
development and operation of the Project) to encumber the Land or the Project.

(e)           Service Contracts.  Transferors will not permit Project Owner to
enter into any Service Contracts other than those described on Exhibit L
unless either (i) such Service Contract is terminable on not more than
30 days notice without the payment of any termination fee or penalty or
(ii) such Service Contract has been approved in writing by BH Investor.

(f)            Utility Contracts.  Transferors will not permit Project Owner to
enter into any agreement with any utility company (public or private) to
provide utility services to the Project unless either (i) such
utility contract is terminable on not more than 30 days notice without the
payment of any termination fee or penalty or (ii) such utility contract has
been approved in writing by BH Investor except as set forth on Exhibit L
attached hereto.

1.9          Termination
Prior to Closing.

(a)           Reasons for Termination.  This Agreement may be terminated before the
Closing:

(1)           By Mutual Consent.  By the mutual consent of BH Investor and
Transferors.

(2)           By BH Investor.  By BH Investor after compliance with the
procedure set forth in this Section 1.9, if (i) any of Transferors’ representations
or warranties contained in this Agreement is or becomes untrue in any material
respect, (ii)

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Transferors fail to perform
any of their covenants or agreements contained in this Agreement in any
material respect or (iii) Transferors fail to provide any of the Closing
Deliveries set forth in Section 1.5 herein.

(3)           By Transferors.  By Transferors after compliance with the
procedure set forth in this Section 1.9, if (i) any of BH Investor’s
representations or warranties contained in this Agreement is or becomes untrue,
in any material respect, (ii) BH Investor fails to perform its covenants or
agreements contained in this Agreement in any material respect or (iii) BH
Investor fails to provide any of the Closing Deliveries set forth in Section
1.6 herein.

(4)           Outside Date.  By BH Investor if the Closing Date shall not
have occurred on or before December 31, 2007.

(5)           Mezzanine Loan.  By BH Investor if there is any default by
Mezzanine Borrower pursuant to the documents evidencing or securing the Mezzanine
Loan after any applicable notice and cure period contained therein; provided BH
Investor shall still be entitled to pursue any rights and remedies pursuant to
the Mezzanine Loan.

(b)           Notice of Problems; Termination.  BH Investor or Transferors (the “Notifying Party”) will promptly give
written notice to the other (the “Receiving
Party”) if it becomes aware of the occurrence or failure to occur,
or the impending or threatened occurrence or failure to occur, of any fact or
event that would cause or constitute, or would be likely to cause or constitute
(i) any of its representations or warranties contained in this Agreement being
or becoming untrue in any material respect, (ii) its failure to perform in any
material respect any covenants or agreements contained in this Agreement, (iii)
its failure to provide any of the Closing Deliveries or (iv) any condition to
the obligations of the Receiving Party to consummate the transactions provided
for in this Agreement being or becoming impossible to satisfy.  No such notice shall affect the
representations, warranties, covenants, agreements or conditions of the parties
hereunder, or prevent any party from relying on the representations and
warranties contained herein.

The
Notifying Party shall have 30 days from the date of said notice to cure any
matter referred to in Sections 1.9(b)(i), (ii) or (iii)
provided that the cure period shall not extend beyond December 31, 2007.  Upon receipt of a notice referred to in Section
1.9(b)(iv), or the failure of the Notifying Party so to cure a matter
referred to in Sections 1.9(b)(i), (ii) or (iii), the
Receiving Party may terminate this Agreement by written notice to the Notifying
Party.

(c)           Effect of Termination.  Upon termination of this Agreement pursuant
to this Article, no party shall have any continuing obligation to the other
party arising out of this Agreement, or out of actions taken in connection with
this Agreement; provided, however, that (i) no such termination shall relieve a
party of liability for breach of, or misrepresentation under, or nonperformance
of this Agreement prior to such termination, provided that such liability shall
not include consequential, special, punitive or exemplary damages (ii) no such
termination shall affect the rights and obligations under the Mezzanine 

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Loan, and (iii) Article
IV and Article V of this Agreement and the indemnification
obligations under this Agreement shall survive termination of this Agreement.

(d)           Additional Notice and Cure.  If Transferors fail to pay when due any monetary
amount needed to comply with the provisions of Section 1.8(b) hereof,
Transferors shall have a period of five business days after written notice of
such failure by BH Investor to cure or if Transferors fail to perform any
non-monetary covenant or obligation contained in Section 1.8(b) hereof,
Transferors shall have a period of 20 days after written notice by BH Investor
of such failure to cure unless such failure is not reasonably susceptible of
cure within 20 days and in such event if Transferors promptly commence such
cure and diligently pursue the same to completion, the cure period shall be
extended for such period of time that is reasonably necessary to effect such a
cure but in no event shall such period exceed 60 days.

1.10        Casualty
and Condemnation.

(a)           Transferors shall
give BH Investor prompt notice of any fire or other casualty affecting the
Project.  BH Investor or its designated
agents may enter upon the Project from time to time during normal business
hours and upon advance notice to Transferors in accordance with this Agreement
for the purpose of inspecting any such casualty.

(b)           In the event of loss or damage to the Project
or any portion thereof (the “premises in
question”) which is not “major” (as hereinafter defined), this
Agreement shall remain in full force and effect provided Project Owner performs
any necessary repairs or, at Transferors’ option, reduces the cash portion of
the BH Contribution in an amount equal to the cost of such repairs, Transferors
thereby retaining all of Transferors’ right, title and interest to any claims
and proceeds Project Owner may have with respect to any casualty insurance
policies or condemnation awards relating to the premises in question.  In the event that Project Owner elects to
perform repairs upon the Project, Project Owner shall use reasonable efforts to
complete such repairs promptly and the date of Closing shall be extended a
reasonable time (but in no event more than thirty (30) days unless such repairs
are not capable of being completed within thirty days and Transferors are
causing Project Owner to diligently pursue the completion of such repairs, in
which case the time shall be extended up to one hundred eighty (180) days) in
order to allow for the completion of such repairs.

(c)           In the event of a “major” loss or
damage, BH Investor may terminate this Agreement by written notice to
Transferors.  If BH Investor does not
send written notice to Transferors that BH Investor has elected to proceed with
Closing within ten (10) days after Transferors send BH Investor written notice
of the occurrence of major loss or damage, then BH Investor shall be deemed to
have elected to terminate this Agreement. 
If BH Investor sends notice to Transferors within such ten (10) day
period that BH Investor desires to proceed with Closing, this Agreement shall
remain in effect, provided that Transferors shall assign to Transferee at
Closing all of Transferor’s right, title and interest to any resulting
insurance proceeds (including any rent loss insurance applicable to any period
on or after the Closing due Transferors as a result of such major loss or
damage.  Upon Closing, full risk of loss
with respect to the Project shall pass to Transferee and Transferee shall
receive a credit at Closing for any deductible amount under such insurance
policies.  For purposes of this 

 11
 

Sections 1.10, “major” loss or damage refers to the
following:  (i) loss or damage to the
Project or any portion thereof such that the cost of repairing or restoring the
premises in question to a condition substantially identical to that of the
premises in question prior to the event of damage would be, in the certified
opinion of a mutually acceptable architect, equal to or greater than Five
Hundred Thousand Dollars ($500,000.00), and (ii) any loss due to a condemnation
that adversely impacts the use or operation of the Project or that involves
more than a de minimis amount of the Land.

ARTICLE II.

REPRESENTATIONS AND WARRANTIES OF TRANSFERORS

Transferors hereby represent and warrant on their own
behalf and on behalf of Project Owner, to BH Investor.

2.1          Existence;
Good Standing.

(a)           Each Transferor is duly organized,
validly existing and in good standing under the laws of its state of
organization, and has the requisite power and authority to carry on its
business as conducted since the date of its formation.

(b)           Project Owner is a
Delaware limited partnership duly organized, validly existing and in good
standing under the laws of its state of organization, and has the requisite
power and authority to carry on its business as conducted since the date of its
formation.  The Project Owner is duly
qualified to do business in Virginia and is in good standing in the
Commonwealth of Virginia, the only jurisdiction in which it is required to be
so qualified or otherwise conducts operations.

2.2          Title
to Project Owner Membership Interest.

Transferors (i) are the sole record and beneficial
owners and (ii) have good and valid title to the Project Owner Membership
Interest, free and clear of any and all Liens, except in connection with the
Mezzanine Loan and the Construction Loan.

2.3          Power
and Authority.

(a)           Transferors have the full legal
right, power and authority to enter into this Agreement and all agreements and
other documents executed and delivered by it pursuant to this Agreement and to
cause Project Owner to and the other transactions contemplated hereby or
thereby.

(b)           Transferors have duly and properly
taken all action required by law and by its Certificate of Formation and
Operating Agreement or comparable organizational documents (“Organizational Documents”) to authorize the
execution, delivery and performance of this Agreement and any related documents
and the consummation of the Membership Interest Purchase and the other
transactions contemplated hereby and thereby.

(c)           This Agreement and all agreements and
documents executed by Transferors and delivered to Transferee in connection
herewith have been duly executed and delivered by 

 12
 

Transferors and constitute
the legal, valid and binding obligations of Transferors, enforceable against
Transferors in accordance with their respective terms.

2.4          No
Violation.

The execution and delivery of this Agreement, and the
agreements executed and delivered by Transferors in connection herewith, do
not, and the consummation of the actions contemplated hereby or thereby will
not, (a) violate, contravene or conflict with any provision of the
Organizational Documents of the Project Owner or Transferors, (b) violate,
contravene or conflict with any provisions of, result in the acceleration of
any obligation under, constitute a default or breach under, or give any right
of termination or cancellation under, any mortgage, Lien, lease, agreement,
note, instrument, debenture, license, order, arbitration award, judgment or
decree to which any of the Project Owner or Transferors are a party or by which
any of the Project Owner or Transferors are bound, (c) violate, contravene or
conflict with any law, rule or regulation applicable to any of the Project
Owner or Transferors, or (d) result in any Lien, other than pursuant to the
Construction Loan or Mezzanine Loan, on any of the Project Owner’s or
Transferors’ assets.

2.5          Consents.

No consent, authorization, permit, license or filing
with any governmental authority, lender, lessor, landlord, manufacturer,
supplier or other person or entity, except for Senior Lender and the lessor
under the Ground Lease, is required to authorize, or is required in connection
with, the execution and delivery by Transferors of this Agreement and the agreements
and documents contemplated hereunder to be entered into by the Transferors or
the transfer of the Contributed Property.

2.6          Legal
Proceedings.

None of the Project Owner, nor any of its assets are
subject to any pending, nor do Transferors or the Project Owner have knowledge
of any threatened, action, suit, litigation, governmental investigation,
condemnation or other proceeding against or relating to or affecting the
Project Owner or the Transferors or any of their respective assets or the
transactions contemplated by this Agreement (excluding immaterial tort
litigation which is fully insured by Project Owner’s liability insurance and
routine litigation regarding enforcement of Tenant Leases).  To Transferor or Project Owner’s knowledge,
no basis for any such action, suit, litigation, governmental investigation,
condemnation or other proceeding exists.

2.7          Brokers
and Finders Fees.

No person is entitled to any fee from either the
Project Owner or Transferors as a broker or finder in connection with the transfer
of the Contributed Property.

2.8          Licenses
and Permits.

The Project Owner possesses all discretionary
approvals from Governmental Authorities to permit development of the Project
and will, as part of the development of the Project, obtain all additional
Governmental Authorizations necessary or appropriate for the development and
construction of the Project.  The Project
Owner is not in default, nor has it received any written notice of, nor is
there, to the knowledge of Transferors or the Project Owner, any threat to
revoke or challenge any such 

 13
 

Governmental Authorizations.  None of the Project Owner or the Transferors
with respect to the Project Owner or the Project has been notified by any
person or authority that such person or authority has rescinded, restricted, or
not renewed, or intends to rescind, restrict or not renew, any Governmental
Authorizations or that penalties or other disciplinary action has been, is
threatened to, or will be assessed or taken against the Project Owner or the
Project.

2.9          Property.

(a)           Parties in Possession.  There are no parties in possession of any
portion of the Project except Project Owner and tenants under the Tenant Leases
or the Retail Leases.

(b)           Service Contracts.  The Service Contracts delivered to BH Investor
are true, correct and complete copies of all material contracts and agreements
relating to the ownership, operation or leasing of the Project entered into by
Project Owner (except Tenant Leases, the documents evidencing the Construction
Loan, the documents or agreements described or listed on the Permitted
Exceptions).

(c)           Rollback Taxes.  The Land has not undergone a change in use or
zoning that would trigger rollback taxes under Virginia Code Section 58.1-3237.

(d)           Utilities.  All utilities required for the construction
and operation Project, including, without limitation, storm sewer, sanitary
sewer, natural gas, water, electricity and telephone are available in adequate
capacity to the Land.

(e)           Equipment.  All machinery, equipment, computer hardware
and software, vehicles or other Personal Property owned by the Project Owner
for the conduct of the businesses of the Project Owner (i) have been maintained
by Transferors or the Project Owner in accordance with customary maintenance
practices and (ii) are in good condition and repair.

(f)            Contracts.  On the Closing Date, the only written
agreements, contracts, notes, bonds, debentures, indentures, mortgages,
promises and understandings to which the Project Owner is a party or assignee
(the “Contracts”) will be only of
the type that are Permitted Obligations. 
The Project Owner is not in breach or default of any material provision
of any Contract such that the breach or default would have a material adverse
impact on the development, use and/or economic benefit of the Project, nor has
Transferors or the Project Owner received any notice or other communication
alleging such a breach or default.  None
of the Transferors or the Project Owner has received any notice of termination
or other indication that any party to any Contract will terminate, fail to
renew, fail to recognize the validity of, any material Contract.  All rights of the Project Owner under the
Contracts will be enforceable by the Transferee after the Closing without the
consent or agreement of any other party.

(g)           Structure.  The foundation, walls and all structural
components of the Improvements are structurally sound and Seller has no
knowledge of any material defects or damage to any of the foregoing.

 14

 

(h)           Pending Action.  There is no pending condemnation,
expropriation, eminent domain, litigation, administrative action or other legal
proceeding affecting all or any portion of the Property, and Transferors have
not received any written or oral notice of any of the same and has no knowledge
that any such proceeding is contemplated.

(i)            Leases.  The Leases are in full force and effect and
no default on the part of Project Owner exists. All repairs, alterations, and
other work required to be performed by Project Owner under the Leases have been
fully performed and paid for in full by Project Owner.

(j)            Obligations.  All obligations of Project Owner arising from
the ownership and operation of the Project and business operated thereon,
including but not limited to salaries, taxes, charges, operating expenses and
the like, have been paid as they became due or will be paid at or prior to
Closing.  Except for obligations for
which provisions are herein made for proration or other adjustment at Closing,
there will be no obligations of Project Owner with respect to the Project
outstanding as of the Closing Date.

(k)           No Rights.  No person or entity has the right to acquire
the Project except that the lessor under the Ground Lease has the right to the
surrender of the Project by the lessee under the Ground Lease upon the
termination of the Ground Lease.

2.10        Conduct
of Business.

(a)           Changes.  Since their date of formation neither of the
Project Owner nor Transferors have (i) authorized or issued any equity securities; granted any
option or right to purchase any equity securities; issued any security
convertible into equity securities; granted any registration rights; or
purchased, redeemed, retired, or otherwise acquired any equity securities; (ii)
amended its organizational documents other than to change its name;
(iii) sold or transferred any assets except in the ordinary course of
business consistent with the construction and operation of the Project;
(iv) mortgaged or pledged any assets or been subjected to any Lien or
other encumbrance other than pursuant to the Construction Loan, the Mezzanine
Loan and the Permitted Exceptions; (v) incurred or become subject to any
debt, liability or lease obligation, other than pursuant to the Construction
Loan or the Mezzanine Loan, or, with respect to the Project Owner, the
Permitted Obligations; (vi) incurred obligations or entered into contracts
other than the Construction Loan, the Mezzanine Loan or the Permitted
Obligations or construction contracts for the Project; (vii) suffered any
damage, destruction or loss of any assets that would adversely impact the
operation or use of the Project; (viii) waived or relinquished any
material rights or canceled or compromised any material debt or claim owing to
it, in either case, without adequate consideration or not in the ordinary
course of business consistent with the construction and operation of the
Project; or (ix) agreed to do any of the foregoing.

(b)           No Adverse Change.  Since the date of formation of the Project
Owner, the Project Owner has conducted its business only in the ordinary course
for the acquisition of the Land and the construction and operation of the
Project consistent with prevailing industry practices.

 15
 

2.11        Books
and Records.

The Project Owner’s books and records, including
without limitation all financial records, business records, minute books and
equity transfer records, (a) are complete and correct in all material
respects and all transactions to which the Project Owner is or has been a party
are accurately reflected therein, (b) have been maintained in accordance with
customary and sound business practices in the Project Owner’s industry, and
(c) accurately reflect the assets, liabilities, financial position and
results of operations of the Project Owner in all material respects.  All computer-generated reports and
other computer data included in such books and records are complete and correct
in all material respects and were prepared in accordance with sound business
practices based upon authentic data.

2.12        Compliance
with Laws.

None of the Project Owner or the Transferors with
respect to the Project Owner or the Project has violated any judgment, writ,
decree, order, law, statute, rule or regulation to which it is subject or a
party, or by which the businesses or assets of the Project Owner are bound or
affected (collectively, “Legal Requirements”), other than any Legal Requirement the
violation of which would not have a materially adverse effect on the Project
Owner.  None of the Project Owner or the
Transferors with respect to the Project Owner or the Project has received
notice of any actual, alleged or potential violation of a Legal Requirement by
the Project Owner or the Transferors with respect to the Project Owner or the
Project other than violations that have been corrected and for which no legal
action is pending or threatened.  The
Project has been constructed in a good and workmanlike manner and is in
compliance with all architectural barrier requirements including but not
limited to the Americans with Disabilities Act, the Fair Housing Amendment Act,
the HUD/FHAA Guidelines and the HUD Design Manual.  None of the Project Owner or the Transferors
with respect to the Project Owner or the Project, nor any of their former or
current officers, directors, employees (which Project Owner is not permitted to
have pursuant to the terms of this Agreement), agents or representatives
(acting on behalf of the Project or the Project Owner) has made or agreed to
make, directly or indirectly, any (i) bribes or kickbacks, illegal
political contributions, payments from funds not recorded on books and records,
or funds to governmental officials (or any such official’s family members or
affiliates) for the purpose of affecting their action or the action of the
government they represent, to obtain favorable treatment in securing business
or licenses or to obtain special concessions, (ii) illegal payments from
corporate funds to obtain or retain business or (iii) payments from
corporate funds to governmental officials for the purpose of affecting their
action or the action of the government they represent, to obtain favorable
treatment in securing business or licenses or to obtain special concessions.

2.13        Environmental
Matters.

(a)           None of the Project Owner, nor the
Transferors with respect to the Project or the Project Owner, has received
notice of any obligation, liability, order, settlement, judgment, injunction or
decree relating to or arising under Environmental Laws which has not been
resolved to the satisfaction of the appropriate Governmental Authorities.

(b)           To Transferor’s knowledge, the
Project Owner’s use, handling, manufacture, treatment, processing, storage,
generation, Release, discharge and disposal of Hazardous 

 16
 

Materials in connection with
past operations materially complied with applicable Environmental Laws then in
effect.

(c)           For purposes of this Agreement:

(1)           “Environmental Laws” collectively shall mean all present
and future laws (whether common law, statute, rule, order, regulation or
otherwise), permits, and other requirements or guidelines of governmental
authorities applicable to the Project and relating to the environment and
environmental conditions or to any Hazardous Materials or Hazardous Materials
Activity (including the Comprehensive Environmental Response Compensation, and
Liability Act of 1980, 42 U.S.C. §§ 9601 et seq., the Federal
Resource Conservation and Recovery Act of 1976, 42 U.S.C. §§ 6901 et
seq., the Hazardous Materials Transportation Act, 49 U.S.C. §§ 6901 et
seq., the Federal Water Pollution Control Act, 33 U.S.C. §§ 1251 et
seq., the Clean Air Act, 33 U.S.C. §§ 7401 et seq., the Clean Air Act,
42 U.S.C. §§ 7401 et seq., the Toxic Substances Control Act, 15
U.S.C. §§ 2601-2629, the Safe Drinking Water Act, 42 U.S.C.
§§ 300f-300j, the Emergency Planning and Community Right-To-Know
Act, 42 U.S.C. §§ 1101 et seq., the Clean Water Act, 33 U.S.C. §
1251 et seq. and any so-called “Super Fund” or “Super Lien” law,
environmental laws administered by the Environmental Protection Agency, or any
similar state and local laws and regulations, as well as all amendments thereto
and all regulations, orders, decisions, and decrees now or hereafter
promulgated thereunder).

(2)           “Environmental Liabilities” means, all liabilities, obligations,
responsibilities, remedial actions, losses, damages, costs and expenses
(including all reasonable fees, disbursements and expenses of counsel, experts
and consultants and costs of investigation and feasibility studies), fines,
penalties, sanctions and interest incurred as a result of any claim or demand
by any other person arising under any Environmental Law.

(3)           “Release” means any spilling, leaking, pumping, pouring,
emitting, emptying, discharging, injecting, escaping, leaching, dumping,
disposing or migrating into or through the environment or any natural or
man-made structure.

2.14        No Bankruptcy.

No bankruptcy, insolvency, rearrangement or similar
action involving the Project Owner or Transferors, whether voluntary or
involuntary, is pending or threatened, and neither the Project Owner nor
Transferors have ever: (i) filed a voluntary petition in bankruptcy; (ii) been
adjudicated a bankrupt or insolvent or filed a petition or action seeking any
reorganization, arrangement, recapitalization, readjustment, liquidation, dissolution
or similar relief under any federal bankruptcy act or any other laws; (iii)
sought or acquiesced in the appointment of any trustee, receiver or liquidator
of all or any substantial part of its properties, the Project or any portion
thereof; or (iv) made an assignment for the benefit of creditors or admitted in
writing its or his inability to pay its or his debts generally as the same
become due.

 17
 

2.15        Terrorism.

To Transferors knowledge, none of Transferors or
Project Owner, nor any of their respective partners, members, shareholders or
other equity owners, and none of their respective employees, officers,
directors, representatives or agents, (i) is a person or entity with whom U.S.
persons or entities are restricted from doing business under regulations of the
Office of Foreign Asset Control (“OFAC”)
of the Department of the Treasury (including those named on OFAC’s Specially
Designated and Blocked Persons List) or under any statute, executive order
(including the September 24, 2001, Executive Order Blocking Property and
Prohibiting Transactions with Persons Who Commit, Threaten to Commit, or
Support Terrorism), or other governmental action relating to terrorist
activities or money laundering and (ii) is engaged in any dealings or
transactions or be otherwise associated with such persons or entities.

2.16        Full
Disclosure.

The representations and warranties of the Transferors
contained in this Agreement and the instruments, documents, certificates and
schedules delivered herewith contain no untrue statement of a material fact
and, when taken together as a whole, do not omit to state a material fact
necessary in order to make the statements contained herein or therein not
misleading.

ARTICLE III.

REPRESENTATIONS AND WARRANTIES OF BH INVESTOR

BH Investor hereby represents and warrants to
Transferors as follows:

3.1          Existence.

BH Investor is a Delaware limited liability company
duly organized, validly existing and in good standing under the laws of the
State of Delaware, and has the requisite power and authority to own its assets
and to carry on its business as it is now being conducted.

3.2          Power
and Authority.

(a)           BH Investor has the full legal right,
power and authority to enter into this Agreement and all agreements and other
documents executed and delivered by it pursuant to this Agreement and to
consummate the joint venture and other transactions contemplated hereby or
thereby;

(b)           BH Investor has duly and properly
taken all action required by law and its Organizational Documents to authorize
the execution, delivery and performance of this Agreement and any related
documents and the consummation of the joint venture; and

(c)           This Agreement and all agreements and
documents executed by BH Investor and delivered to Transferors in connection
herewith have been duly executed and delivered by BH Investor and constitute
the legal, valid and binding obligations of BH Investor enforceable against BH
Investor in accordance with their respective terms.

 18
 

3.3          No
Violation.

The execution and delivery of this Agreement and the
agreements executed and delivered by BH Investor pursuant to this Agreement, do
not, and the consummation of the actions contemplated hereby or thereby will
not, (i) violate, contravene or conflict with any provision of the
Organizational Documents of BH Investor, (ii) violate, contravene or conflict
with any provisions of, result in the acceleration of any obligation under,
constitute a default or breach under, or give any right of termination or
cancellation under, any material mortgage, Lien, lease, agreement, rent,
contract, note, instrument, debenture, license, order, arbitration award,
judgment or decree to which BH Investor is a party or by which BH Investor is
bound, or (iii) violate, contravene or conflict with any law, rule or regulation
to which BH Investor is subject.

3.4          Brokers
and Finders Fees.

No person is entitled to any fee from BH Investor as a
broker or finder as a result of creation of the joint venture.

3.5          No Bankruptcy.

No bankruptcy, insolvency, rearrangement or similar
action involving BH Investor, whether voluntary or involuntary, is pending or
threatened, and BH Investor has never: (i) filed a voluntary petition in
bankruptcy; (ii) been adjudicated a bankrupt or insolvent or filed a petition
or action seeking any reorganization, arrangement, recapitalization,
readjustment, liquidation, dissolution or similar relief under any federal
bankruptcy act or any other laws; (iii) sought or acquiesced in the appointment
of any trustee, receiver or liquidator of all or any substantial part of its
properties; or (iv) made an assignment for the benefit of creditors or admitted
in writing its or his inability to pay its or his debts generally as the same
become due.

3.6          Terrorism.

To BH Investor’s knowledge, neither BH Investor, or
any of its respective partners, members, shareholders or other equity owners,
and none of their respective employees, officers, directors, representatives or
agents, (i) is a person or entity with whom U.S. persons or entities are
restricted from doing business under regulations of the Office of Foreign Asset
Control (“OFAC”) of the Department
of the Treasury (including those named on OFAC’s Specially Designated and
Blocked Persons List) or under any statute, executive order (including the
September 24, 2001, Executive Order Blocking Property and Prohibiting
Transactions with Persons Who Commit, Threaten to Commit, or Support
Terrorism), or other governmental action relating to terrorist activities or
money laundering and (ii) is engaged in any dealings or transactions or be
otherwise associated with such persons or entities.

3.7          Full
Disclosure

The representations and warranties of the Transferors
contained in this Agreement and the instruments, documents, certificates and
schedules delivered herewith contain no untrue statement of a material fact
and, when taken together as a whole, do not omit to state a material fact
necessary in order to make the statements contained herein or therein not
misleading.

 19
 

ARTICLE IV.

CLOSING AND POST-CLOSING AGREEMENTS

4.1          Further
Action.

From and after the Closing, each party hereto shall
perform such further acts and execute such documents, and otherwise cooperate
with the other parties hereto, as may be reasonably required to effectuate the
creation of the joint venture and the other transactions contemplated hereby.

4.2          Prorations
and Closing Costs.

The following provisions shall govern the
apportionment of income and expenses with respect to the Project between
Transferors and Transferee:

(a)           Real estate taxes and assessments and
personal property taxes shall be prorated at Closing.

(b)           Expenses under the Operating
Agreements shall be prorated between Transferors and Transferee at Closing.

(c)           Transferors shall arrange for final
meter readings on all utilities at the Project to be taken on the day preceding
Closing.  Transferors shall be
responsible for the payment of utilities used through the day preceding the
Closing Date and Transferee shall be responsible for the payment of utilities used
on or after the Closing Date.  With
respect to any utility for which there is no meter, the expenses for such
utility shall be prorated between Transferors and Transferee at Closing based
upon the most current bill for such utility. 
Any deposits for utilities shall inure to the benefit of and be deemed
assigned to Transferee.  Transferors and
BH Investor shall cooperate to cause the transfer of utility company accounts
from Transferors to Transferee.

(d)           Basic rents (“Basic Rent”)
and additional rent relating to escalation and pass-throughs of operating
and other similar expenses (“Additional Rent”)
shall be prorated between Transferors and Transferee based upon Basic Rent and
Additional Rent actually collected.  All
prepaid Basic Rent, Additional Rent and other income from the Property shall be
credited to Transferee at Closing, to the extent same is attributable to a
period of time after Closing.  With
respect to Additional Rent which is paid based upon an estimate, with an
end-of-year accounting and adjustment, after Closing Transferors and Transferee
shall make any adjustments to the proration of such items made at Closing at
such time as the final tax and operating expenses numbers become available and
such end-of-year accountings are completed. 
Any Additional Rent which may be due Transferors as a result of such
re-prorations shall be paid by Transferee to Transferor if and when such
Additional Rent is collected by Transferee.

(e)           Basic Rent and Additional Rent which
is delinquent and remains uncollected at Closing shall not be prorated between
Transferors and Transferee at Closing. 
At Closing, Transferors shall furnish to Transferees a schedule of
delinquent Basic Rent and Additional Rent due under the Leases.  Transferee shall pay Transferors’ prorata
share of any delinquent Basic Rent and Additional Rent if and when collected by
Transferee; provided, however, that 

 20
 

Transferee shall have no
obligation to collect or pursue the collection of same.  It is understood and agreed that any Basic
Rent or Additional Rent collected by Transferee after Closing shall be applied
first to currently due Basic Rent and Additional Rent.  Transferee shall hold all landlord’s liens in
the entireties thereof to enforce the payment of rentals to which Transferee is
entitled, and Transferors shall be deemed to have transferred to Transferee all
of such landlord’s liens.

(f)            All security
deposits and other deposits payable to tenants under the Leases shall be
credited to Transferee at Closing.

(g)           The prorations described in this Section
4.2 shall be made as of 12:01 a.m. on the Closing Date, as if Transferee
were vested with title to the Property during the entire day upon which Closing
occurs.  All prorations described in this
Section 4.2 shall be effected by increasing or decreasing, as the case
may be, the amount of cash to be paid by Transferee to Transferor at
Closing.  Transferors and Transferee
agree to adjust between themselves after Closing any errors or omissions in the
prorations made at Closing; provided, however, that such prorations shall be
deemed final and not subject to further post Closing adjustments if no such
adjustments have been requested within one (1) year after the Closing Date.

(h)           Transferors
shall pay (a) the fees of any counsel representing it in connection with
this transaction; (b) the basic premium for the Title Policy; (c) the cost of
the Survey; and (d) one-half (1/2) of any escrow fee which may be
charged by the Title Company.  BH
Investor shall pay (x) the cost of any endorsement to the Title Policy desired
by BH Investor (y) the fees of any counsel representing BH Investor in
connection with this transaction; and (z) one-half (1/2) of any escrow
fees charged by the Title Company.  All
other costs and expenses incident to this transaction and the closing thereof
shall be paid by the party incurring same

4.3          Audit.

BH Investor has advised Transferors that Transferee
must cause to be prepared up to three (3) years of audited financial statements
beginning in 2007 in respect of the Project in compliance with the policies of
Transferee and certain laws and regulations, including, without limitation,
Securities and Exchange Commission Regulation S-X. Transferors agree to use
reasonable efforts to cooperate with Transferee’s auditors in the preparation
of such audited financial statements (it being understood and agreed that the
foregoing covenant shall survive the Closing). Without limiting the generality
of the preceding sentence (i) Transferors shall, during normal business
hours, allow Transferee’s auditors reasonable access to such books and records
maintained by Transferors (and Transferors’ manager of the Project) in respect
of the Project as necessary to prepare such audited financial statements; (ii)
Transferors shall use reasonable efforts to provide to Transferee such financial
information and supporting documentation in the possession of Transferors or as
are necessary for Transferee’s auditors to prepare audited financial
statements; (iii) if Transferee or its auditors require any information that is
in the possession of the party from which Transferors purchased the Project,
Transferors shall contact such prior owner of the Project and use commercially
reasonable efforts to obtain from such party the information requested by
Transferee; (iv) Transferors will make available for interview by Transferee
and Transferee’s auditors the agents or representatives of Transferors
responsible for the day-to-day operation of the Project and the keeping of the
books and records in 

 21
 

respect of the operation of the Project; and (v) if
Transferors have audited financial statements with respect to the Project,
shall promptly provide Transferee’s auditors with a copy of such audited
financial statements. If after the Closing Date Transferors obtain an audited
financial statement in respect of the Project for a fiscal period prior to the
Closing Date that was not completed as of the Closing Date, then Transferors
shall promptly provide Transferee with a copy of such audited financial
statement, and the foregoing covenant shall survive Closing.  It shall be a condition precedent to the
obligations of BH Investor under this Agreement that Transferors shall have
materially complied with the covenants set forth in this Section 4.3
as of the Closing Date.  BH Investor
shall be liable for all reasonable costs incurred in connection with this Section
4.3.

ARTICLE V.

REMEDIES

5.1          BH Investor’s Remedies.

(a)           Survival of Representations and Warranties.  All representations and warranties
of Transferors (i) under Article II of this Agreement and (ii) set forth
in the Transferors Closing Certificate shall survive the Closing for nine (9)
months following the Closing. 
Notwithstanding the preceding sentence, any representation or warranty
in respect of which indemnity may be sought under this Section 5.1 shall
survive the time at which it would otherwise terminate pursuant to the
foregoing provisions of this Section 5.1, if notice of the inaccuracy or
breach thereof giving rise to such right to indemnity shall have been given to
the Transferors by BH Investor
prior to such time.  Any liability as a
result of a breach of a representation or warranty shall not exceed One Million
Dollars ($1,000,000.00).  The
consummation of the Closing shall not affect the other covenants and
obligations of the parties hereto.

(b)           Indemnification of BH Investor.  Transferors shall
indemnify, defend and hold harmless BH
Investor from and against and in respect of, and promptly reimburse such
entities for the amount of, any and all losses, costs, fines, liabilities,
deficiencies, obligations, claims, penalties, damages, settlements, awards and
expenses (including without limitation reasonable expenses of investigation and
defense, and reasonable legal fees and expenses) (collectively “Losses”)
resulting from, in connection with or arising out of, directly or indirectly:

(1)           subject to Section 5.1(a),
any breach of any representation or warranty of Transferors in this Agreement,
including any certificate or document delivered by Transferors in connection
with the transactions contemplated hereby;

(2)           any breach of any covenant or
obligation made by Transferors in this Agreement, including any certificate or
document delivered by Transferors in connection with the transactions
contemplated hereby;

(3)           subject to Section 5.3,
if the Closing occurs, (i) any activity or event involving the Project and
occurring before Closing, other than as a consequence of acts, or when under a
duty to act, omissions of BH
Investor or any of its affiliates or any of their respective
representatives, consultants or contractors, (ii) failure of the 

 22
 

Project Owner
to perform any obligation under any Contract prior to Closing, (iii)
misapplication of deposits prior to Closing, or (iv) any liability or
obligation of the Project Owner existing as of Closing other than Permitted
Obligations;

(4)           any liability or loss of any
type arising out of work performed on the Project by Project Owner or by
Project Owner’s agents and contractors including all construction and developer
related liability; and

(5)           any action, suit or proceeding
relating to any of the foregoing.

The obligations
of Transferors under Section 5.1(b) shall survive the Closing for nine
(9) months following the Closing. 
Notwithstanding the preceding sentence, any indemnity which may be
sought under this Section 5.1(b) shall survive the time at which it
would otherwise terminate pursuant to the foregoing provisions of this Section
5.1(b), if notice of the inaccuracy or breach thereof giving rise to such
right to indemnity shall have been given to the Transferors by BH Investor prior to such time.  Any liability as a result of an obligation to
indemnify pursuant to Section 5.1(b)(2), (3) (4) or (5), respectively,
shall not exceed One Million Dollars ($1,000,000.00).

(c)           Specific Performance.  It
is understood that Transferors’ breach of this Agreement may materially and
irreparably harm BH Investor,
and that money damages may accordingly not be an adequate remedy for any breach
of this Agreement, and that BH Investor,
in its sole discretion and in addition to any other remedies it may have at law
or in equity may apply to any court of law or equity of competent jurisdiction
(without posting any bond or deposit) for specific performance or other
injunctive relief in order to enforce or prevent any violations of this
Agreement.

5.2          Transferors’ Remedies.

Transferors’ sole and exclusive remedy for any BH
Investor breach of, misrepresentation under, or nonperformance of this
Agreement, or any other act or omission of BH Investor or its affiliates
related to this Agreement or the transactions contemplated hereby including,
without limitation, the failure of BH Investor to consummate the transactions
contemplated hereby, shall be to terminate this Agreement, and Transferors
shall have no other remedy at law or equity pursuant to this Agreement or
otherwise against any person or entity, any such other remedy being expressly
waived. BH Investor’s breach of, misrepresentation under, or nonperformance of
this Agreement, or any other act or omission of Transferee or its affiliates
related to this Agreement or the transactions contemplated hereby, shall not
affect the rights and obligations under the Mezzanine Loan.  Notwithstanding the foregoing, in the event
that this Agreement has not been terminated pursuant to Section 1.9
(other than termination pursuant to Section 1.9(a)(3) or pursuant to Section
1.9(a)(4) only in the event that the failure to close is not due to a
default by Transferors) and Transferors are not in default and have materially
complied with all obligations under this Agreement, in the event that BH
Investor does not contribute the consideration set forth in Section 1.2(b)
hereto, Transferors shall receive a credit in connection with the repayment of
the Mezzanine Loan in the amount of One Million Five Hundred Thousand Dollars
($1,500,000.00).

 23
 

5.3          Arbitration.

Except with respect to any action by BH Investor
for specific performance of this Agreement or any other action for injunctive
relief, which actions shall be commenced and resolved in a court of competent
jurisdiction, and except as otherwise expressly provided herein, any
controversy or claim arising out of or relating to this Agreement, or the
breach thereof, shall be settled by binding arbitration in Dallas, Texas,
by a single arbitrator reasonably satisfactory to BH Investor and
Transferors (provided, however, that if BH Investor and Transferors are unable
to agree upon a mutually satisfactory arbitrator, then the arbitrator shall be
selected in accordance with the applicable rules of the American Arbitration
Association), in accordance with the rules of the American Arbitration
Association governing large, complex commercial disputes then in effect.  BH Investor and Transferors will share
equally the total expense charged by the American Arbitration Association and
the arbitrator related to such arbitration as those expenses become due; but
each party shall bear its own legal, accounting and all of its other fees and
expenses related to the arbitration. 
Such arbitration and determination shall be final and binding on BH
Investor and Transferors, judgment may be entered upon such determination and
award in any court having jurisdiction thereof, and BH Investor and Transferors
agree that no appeals shall be taken therefrom except as set forth in 9 U.S.C.
§10.  Notice of a demand for arbitration
of any dispute subject to arbitration by one party shall be made in writing and
simultaneously served on the other parties and filed with the American
Arbitration Association.  The parties
agree that after any such notice has been filed, they shall, before the hearing
thereof, make discovery and disclosure of all matters relevant to such dispute,
to the extent and in the manner provided by the applicable rules of the
American Arbitration Association.  The
arbitrator’s determination with respect to discovery shall be final and
conclusive.  Discovery and disclosure
shall be completed no later than ninety (90) days after filing of such notice
of arbitration unless extended by the arbitrator upon a showing of good cause
by a party to the arbitration.  The
arbitrator may consider any evidence which is relevant to the subject matter of
such dispute even if such evidence might also be relevant to an issue or issues
not subject to arbitration hereunder.

ARTICLE VI.

GENERAL

6.1          Entirety and Modification.

This Agreement constitutes the entire agreement
between the parties hereto with respect to the subject matter hereof and
supersedes any and all prior agreements and understandings, whether oral or
written, between the parties hereto relating to such subject matter.  No modification, alteration, amendment,
waiver or supplement to this Agreement shall be valid or effective unless the
same is in writing and signed by all parties hereto.

6.2          Assignment; Successors and Assigns.

Except as specifically provided otherwise in this
Agreement, neither this Agreement nor any interest herein shall be assignable
(voluntarily, involuntarily, by judicial process, operation of law or
otherwise), in whole or in part, by any party without the prior written consent
of the other parties hereto, and any such attempted assignment shall be null
and void.  Notwithstanding the foregoing,
BH Investor may, without the consent of any other party assign its rights and obligations
under this 

 24
 

Agreement to an Affiliate of BH Investor; provided,
however, no such assignment shall affect the rights and obligations of BH
Investor to Transferors under this Agreement. 
This Agreement shall be binding upon and inure to the benefit of the
respective parties hereto and their successors and permitted assigns.

6.3          Expenses.

Except as otherwise provided herein BH Investor and
Transferors shall each pay their own respective fees and expenses incurred in
connection with the negotiation, execution, delivery and performance of this
Agreement.

6.4          Notices.

Any and all notices and
other communications hereunder shall be in writing addressed to the parties at
the addresses specified below or such other addresses as a party may direct by
notice given in accordance with this Section, and shall be delivered in one of
the following manners (a) by personal delivery, in which case notice shall be
deemed to have been duly given when delivered; or (b) by reputable delivery
service (including, by way of example and not limitation, Federal Express, UPS
and DHL) which makes a record of the date and time of delivery, in which case
notice shall be deemed to have been duly given on the date indicated on the
delivery service’s record of delivery:

If to Transferors, to:

BREOF Holdings, LLC

181 Bay Street, Suite 300

Toronto, Ontario M5J 2T3

Canada
Attn: David Arthur

with a
copy to:

Phoenix Property Company

2626 Howell Street, Suite 800

Dallas, Texas 75204

Attn: Jason P. Runnels

With an additional copy to:

Stutzman, Bromberg, Esserman & Plifka

2323 Bryan Street, Suite 2200

Dallas, Texas 75201

Attn: John J. Reoch, Jr.

 25
 

If to BH Investor, to:

BEHRINGER HARVARD UVA, LLC

c/o Behringer Harvard
Funds

15601 Dallas Parkway, Suite 600

Addison, Texas 72001

Attn: Mark T. Alfieri

with a copy to:

Behringer Harvard Funds

15601 Dallas Parkway, Suite 600

Addison, Texas 72001

Attn: Chief Legal Officer

with an
additional copy to:

Powell & Coleman, L.L.P.

8080 North Central Expressway, Suite 1380

Dallas, Texas 75026

Attn: Carol D. Satterfield

6.5          Severability; Reformation.

In case any provision of this Agreement shall be
invalid, illegal or unenforceable, such provision shall be reformed to best
effectuate the intent of the parties and permit enforcement thereof, and the
validity, legality and enforceability of the remaining provisions shall not in
any way be affected or impaired thereby. 
If such provision is not capable of reformation, it shall be severed
from this Agreement and enforceability of the remaining provisions shall not in
any way be affected or impaired thereby.

6.6          No Waiver.

A party’s failure to enforce any provision or
provisions of this Agreement shall not in any way be construed as a waiver of
any such provision or provisions, nor prevent that party thereafter from
enforcing each and every other provision of this Agreement.  The rights granted all parties herein are
cumulative and shall not constitute a waiver of a party’s right to assert all
other legal remedies available to it under the circumstances.

6.7          Headings.

The headings of this Agreement are inserted for
convenience and identification only, and are in no way intended to describe,
interpret, define or limit the scope, extent or intent hereof.

 26
 

6.8          Counterparts; Facsimiles.

This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.  This Agreement and any other document or
agreement executed in connection herewith (other than any document for which an
originally-executed signature page is required by law) may be executed by
delivery of a facsimile copy of an executed signature page with the same force
and effect as the delivery of an originally-executed signature page.

6.9          Governing Law.

This Agreement shall be governed in all respects by,
construed, interpreted and applied in accordance with the internal laws of the
Commonwealth of Virginia, without regard to principles of conflicts of laws
that would refer the matter to the laws of another jurisdiction.

6.10        Joint and Several Liability.

If more than one person has executed this agreement as
a “Transferor”, the representations, covenant, warranties and obligations of
all such persons hereunder shall be joint and several.

[Signatures Follow on
Next Page]

 27

 

WITNESS the following signatures and seals with the
intent that this shall be deemed an instrument under seal.

	
  

  	
  TRANSFERORS:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  BREOF UVA GP LLC,

  	
   

  
	
   

  	
  a Delaware limited liability company

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Steven Ganeless

  	
  (SEAL)

  	
   

  
	
   

  	
  Name:

  	
  Steven Ganeless

  	
   

  
	
   

  	
  Title:

  	
  Authorized Signing Officer

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  BREOF UVA LLC,

  	
   

  
	
   

  	
  a Delaware limited liability company

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Steven Ganeless

  	
  (SEAL)

  	
   

  
	
   

  	
  Name:

  	
  Steven Ganeless

  	
   

  
	
   

  	
  Title:

  	
  Authorized Signing Officer

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  PPC-UVA 15TH STREET LIMITED PARTNERSHIP,

  
	
   

  	
  a Texas limited partnership

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  PPC Charlottesville GP, Inc.,

  	
   

  
	
   

  	
   

  	
  a Texas corporation

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/ Jason P. Runnels

  	
  (SEAL)

  	
   

  
	
   

  	
   

  	
  Name:

  	
  Jason P. Runnels

  	
   

  
	
   

  	
   

  	
  Title:

  	
  Vice President

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  PPC CHARLOTTESVILLE GP, INC.,

  	
   

  
	
   

  	
  a Texas corporation

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Jason P. Runnels

  	
  (SEAL)

  	
   

  
	
   

  	
  Name:

  	
  Jason P. Runnels

  	
   

  
	
   

  	
  Title:

  	
  Vice President

  	
   

  
																	

 

 

	
  

  	
  BH INVESTOR:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  BEHRINGER HARVARD UVA, LLC,

  	
   

  
	
   

  	
  a Delaware limited liability company

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Gerald J. Reihsen, III

  	
  (SEAL)

  	
   

  
	
   

  	
   

  	
  Gerald J. Reihsen, III

  	
   

  	
   

  
	
   

  	
   

  	
  Secretary

  	
   

  	
   

  

 

 

EXHIBIT A

DEFINITIONS

For purposes of the
Agreement to which this is an exhibit, the terms underlined in the paragraphs
of this exhibit shall have the meaning set forth next to the underlined term.

Affiliate.  As to any person or entity, any corporation, limited
liability company or other business organization or person who or which
directly or indirectly through one or more intermediaries (a) is owned or
controlled by such person or entity, (b) owns or controls such person or entity
or (c) is under substantially common control with such person or entity.

Agreement.  This Contribution Agreement, its Exhibits and
any written amendments to this Contribution Agreement (including an amendment
changing Exhibits) that may be executed from time to time by Transferors and BH
Investor.

Architect.  HKS, Inc.

BH Contribution.  Defined in Section 1.1(e).

BH Investor.  Defined in the preamble of this Agreement.

BH Investor Closing
Certificate.  Defined
in Section 1.4(b).

Business Day.  Monday through Friday of each calendar week,
exclusive of federal holidays.

Changes.  Defined in Section 1.8(b).

Closing.  Defined in Section 1.3(a).

Closing Date.  The date of the Closing.

Code.  The Internal Revenue Code of 1986, as
amended.

Completion Date.  The date of satisfaction of the following:
(a) the issuance of the final certificate of occupancy for the Project, (b) the
issuance of a certificate of substantial completion from the Architect for the
Project, (c) receipt of a contractor’s release and the receipt of lien waivers
or similar evidence of payment from the General Contractor and all major
subcontractors (i.e., subcontractors whose contract amount exceeds Two Hundred
Fifty Thousand Dollars ($250,000.00)) for the Project to BH Investor’s
reasonable satisfaction.  If Senior Lender
shall deem the Project substantially complete, then the date of such
determination by the Senior Lender shall be the Completion Date.

Completion Notice.  Defined in Section 1.3(b).

Construction Loan.  Defined in the Recitals.

Contracts.  Defined in Section 2.9(f).

 A-1
 

Contributed Property.  Defined in Section 1.1(b).

Environmental Laws.  Defined in Section 2.13(c).

Environmental Liabilities.  Defined in Section 2.13(c)(2).

Exception Instruments.  Defined in Section 1.7(a).

General Contractor.  C.D. Henderson Construction Services, Ltd.

Governmental Authorities.  Any and all federal, state, county, city,
town, other municipal corporation, governmental or quasi-governmental board,
agency, authority, department or body having jurisdiction over the Land or the
Project.

Governmental
Authorizations.  The
permits, variances, approvals and other actions which under Governmental
Requirements applicable to the Project have been or must be issued, granted, or
taken by Governmental Authorities in connection with the Project.

Governmental
Requirement(s). 
Building, zoning, subdivision, traffic, parking, land use, Environmental
Laws, occupancy, health, accessibility for disabled and other applicable laws,
statutes, codes, ordinances, rules, regulations, requirements, and decrees, of
any Governmental Authorizations pertaining (a) to the Improvements,
Project or Land or (b) to the use and operation of the Project for its
intended purpose.  This term shall
include the conditions or requirements of Governmental Authorizations.

Ground Lease.  Defined in the Recitals.

Hazardous Materials.  At any time, (i) asbestos and any asbestos
containing material, (ii) any substance that is then defined or listed in, or
otherwise classified pursuant to, any Environmental Laws or any applicable laws
or regulations as a “hazardous substance”, “hazardous material”, “hazardous
waste”, “infectious waste”, “toxic substance”, “toxic pollutant” or any other
formulation intended to define, list, or classify substances by reason of
deleterious properties such as ignitability, corrosivity, reactivity,
carcinogenicity, toxicity, reproductive toxicity, or “EP toxicity”, or (iii)
any petroleum and drilling fluids, produced waters, and other wastes associated
with the exploration, development or production of crude oil, natural gas, or
geothermal resources or (iv) petroleum products, polychlorinated biphenyls,
urea formaldehyde, radon gas, radioactive matter and medical waste.

Hazardous Materials
Activity.  Any actual
use, packaging, labeling, treatment, leaching, spill, cleanup, storage,
holding, existence, release, threatened release, emission, discharge,
generation, processing, treatment, abatement, removal, disposition, handling or
transportation of any Hazardous Materials from, under, into or on the Project.

Improvements.  Defined in Section 1.1(a)(2).

Land.  Defined in Section 1.1(a)(1).

Leases.  Defined in Section 1.1(a)(4).

 A-2
 

Legal Requirements.  Defined in Section 2.12.

Liens.  Any claims, liens, mortgages, pledges,
security interests, charges, covenants, options, claims, voting arrangements,
restrictions on transfer, or other restrictions or encumbrances of any nature
whatsoever.

Losses.  Defined in Section 5.1(b).

LP
Agreement.  Defined in Section 1.2(a).

Mezzanine Loan.  That certain Mezzanine Loan between BH
Investor as Lender and Transferors, in the amount of Six Million Forty Thousand
Dollars ($6,040,000.00).

Money Liens.  Mortgages, statutory liens and any and all
other liens or charges on the Project.

Notifying Party.  Defined in Section 1.9(b).

Operating Agreements.  Defined in Section 1.1(a)(5).

Organizational Documents.  Defined in Section 2.3(b).

Permitted Dispositions:  Any of the following: (i) a Tenant Lease of
an individual dwelling unit for a term of two years or less not containing an
option to purchase; (ii) the sale of obsolete, worn out or damaged property or
fixtures that is contemporaneously replaced by items of equal or better
function and quality, which are free of liens, encumbrances and security
interests other than Permitted Exceptions; (iii) the sale (including through
consumption) of personal property in the ordinary course of business that is
contemporaneously replaced by items of equal or better function and quality;
(iv) the grant of an easement if, before the grant, BH Investor determines
(which determination must be made reasonably) that the easement will not
materially affect the operation or value of the Project; and (v) the creation
of (1) a lien for taxes, assessments or other governmental charges or levies
that are not then due and payable or that are being contested in good faith and
in accordance with applicable statutory procedures or (2) a mechanic’s, lien
against the Project which is bonded off, released of record or otherwise
remedied to BH Investor’s reasonable satisfaction within 30 days of the date of
creation.

Permitted Exceptions.  All of (a) those matters of title and survey
which affect the Project and are described on the existing title policy issued
in connection with the Project, (b) liens for taxes, assessments or other
governmental charges, impositions or levies that are not then due and payable,
(c) liens for taxes, assessments or other governmental impositions or levies
that are being contested in good faith and, at Closing, Transferors have
provided security reasonably acceptable to Transferee necessary to discharge
such liens, (d) mechanics’, materialmen’s, or judgment liens against the
Project which are being contested in good faith and, at Closing, Transferors
have provided security reasonably acceptable to Transferee necessary to
discharge such liens, (e) Leases entered into on the terms allowed by this
Agreement, (f) other matters approved by BH Investor, and (g) matters created
by BH Investor, Transferee or any of their respective affiliates or any of
their respective representatives, consultants or contractors.

 A-3
 

Permitted Obligations.  Liabilities or obligations of the Project
Owner in connection with (a) Service Contracts, (b) Permitted Exceptions, (c)
Tenant Leases, (d) liabilities allocable to Transferee based on proration
credit to Transferee, and (e) Governmental Authorizations; provided, however,
liabilities or obligations arising from any breach of, or default under, the
foregoing prior to the Closing shall not be Permitted Obligations.

Personal Property.  All of Project Owner’s right, title and
interest in and to (a) Plans; (b) Governmental Authorizations issued,
granted or pending with respect to the Project; (c) studies, reports, surveys
and other informational materials relating to the Land or the Project,
including any “as-built” plans and CAD drawings; (d) all equipment, fixtures,
appliances, inventory, computers, computer hardware, computer software, and
other personal property of whatever kind or character owned by Project Owner
and attached to or installed or located on or in the Land or the Improvements,
including, without limitation, furniture, furnishings, drapes and floor
coverings, office equipment and supplies, heating, lighting, refrigeration,
plumbing, ventilating, incinerating, cooking, laundry, communication,
electrical, dishwashing, and air conditioning equipment, disposals, window
screens, storm windows, recreational equipment, pool equipment, patio
furniture, sprinklers, hoses, tools and lawn equipment; and (e) all of Project
Owner’s right, title, and interest in and to (i) all permits, licenses
(excluding software licenses), approvals, utility rights, development rights
and similar rights related to the Project, or any portion thereof, whether
granted by Governmental Entities or private persons, (ii) all telephone numbers
and exchanges serving the Project, or any portion thereof, (iii) all business
and goodwill of Transferors related to the Project, or any portion thereof,
(iv) all site plans, surveys, soil and substrata studies, architectural
drawings, plans and specifications, engineering plans and studies, floor plans,
landscape plans and other plans or studies of any kind that relate to the
Project, or any portion thereof, (v) all leasing materials and brochures,
ledger cards, leasing records, leasing applications, tenant credit reports and
maintenance and operating records related to the operation of Project, or any
portion thereof, (vi) all warranties and guaranties (express or implied) issued
in connection with, or arising out of (A) the purchase and repair of all
furniture, fixtures, equipment, inventory, and other tangible personal property
owned by Project Owner and attached to and located in or used in connection
with the Project; or (B) the construction of any of the improvements located on
the Project, or any portion thereof, and expressly including any warranty or
guaranty from the General Contractor.

Plans.  The plans and specifications described in Exhibit
K.

Project.  A collective reference to (a) the
Improvements and (b) the Land.

Project
Owner.  Defined in the
Recitals.

Project
Owner Membership Interest. 
Defined in the Recitals.

Receiving Party.  Defined in Section 1.9(b).

Release.  Defined in Section 2.13(c).

Residential Tenants.

Restrictions.  Any and all restrictions, easements,
conditions, covenants and other agreements recorded against the Land or
Improvements.

 A-4
 

Retail Tenants.

Senior Lender.  Defined in the Recitals.

Service Contracts.  All service and maintenance contracts which
relate to or affect the Project or the operation thereof.  A list of the existing Service Contracts is
attached as Exhibit L.

Survey.  Defined in Section 1.7(b).

Tenant Leases.  All tenant leases which relate to or affect
the Project or the operation thereof.

Title Company.  Defined in Section 1.7(a).

Title Policy.  The owner title policy issued by the Title
Company with regard to the Project.

Transfer.  Defined in the Recitals.

Transferee.  Defined in the preamble of this Agreement.

Transferor(s).  Defined in the preamble of this Agreement.

Transferors Closing
Certificate.  Defined
in Section 1.4(b).

 A-5Exhibit 10.1

DISSOLUTION AGREEMENT

This Dissolution
Agreement (the “Agreement”) is entered into this 1st day of February 2007 by and between Joe’s
Jeans, Inc. (“JJI”) and Beyond Blue, Inc. (“BBI”).  Capitalized terms not defined herein shall
have the meanings assigned to them in the Master Distribution Agreement
(defined below).

WHEREAS,
JJI and BBI entered into a Master Distribution Agreement, dated as of  January 1, 2004, as amended by that certain
First Amendment to Master Distribution Agreement, dated as of February 14 ,
2005 (the “First Amendment”) (collectively, the “MDA”) pursuant to which, among
other things, JJI granted BBI an exclusive right to distribute and sell apparel
featuring the “Joe’s Jeans®” family of trademarks (the “Brand”) in the Territory
in exchange for certain mutual obligations pursuant to the MDA;

WHEREAS,
JJI, in connection with its grant of certain rights to BBI under the MDA,
entered into an Agent Agreement with BBI dated July 1, 2003 giving BBI certain
rights to market and exploit the Brand in Japan (“Agent Agreement”);

WHEREAS,
JJI, in connection with its grant of certain rights to BBI under the MDA,
further assigned on January 1, 2004 certain rights and obligations of JJI under
a Master Distribution and License Agreement dated July 1, 2003 by and between
JJI and Itochu Corporation (“Japan MDA”) whereby BBI accepted certain
assignment rights and obligations of JJI (“Japan Assignment”);

WHEREAS,
the parties mutually desire to terminate the MDA, Japan Assignment and Agent
Agreement on the terms and conditions set forth herein;

NOW,
THEREFORE, in consideration of the following covenants and
agreements and for other good and valuable consideration, the receipt of which
is hereby acknowledged, the parties have agreed as follows:

1.             Effective immediately, the Agent
Agreement shall be deemed terminated and each party shall have no further
obligation to the other party and the Agent Agreement shall be null and void
and of no force or effect as of the date hereof.

2.             Effective immediately, the Japan
Assignment shall be deemed terminated, all rights and obligations which BBI
assumed pursuant to the said Japan Assignment shall revert back to JJI, and the
Japan  Assignment shall be null and void
and of no force or effect as of the date hereof.

3.             Effective immediately, the MDA
shall be deemed terminated without prejudice to or release of any and all past,
present and future claims, counterclaims, losses, obligations, liabilities,
rights, demands, actions or causes of action, orders, expenses, debts, costs,
attorneys’ fees, judgments, liabilities and damages of every kind and nature
whatsoever, in law, equity or otherwise, whether now known or unknown,
suspected or unsuspected, anticipated or unanticipated, direct or indirect,
fixed or contingent, now existing or which may in the future arise that the
parties may have against the other party relating to or arising from the MDA
and it shall be understood and agreed that this Dissolution Agreement
supersedes the MDA once this Dissolution Agreement is executed by the
parties.  Notwithstanding anything to the
contrary herein or in the MDA, Sections 4.7, 6.2, 8, 9.2, 10, 11 and 14 (with
the exception of 14.6, 14.9, 14.10 and 14.12(g)) shall survive termination of the
MDA.

4.             Any claims made by one party
against the other party set forth in paragraph 3 hereinabove shall be made in
accordance with the arbitration provisions set forth in Section 14.12(a)
through (f) of the MDA.

 2
 

5.             Notwithstanding anything herein to
the contrary, subsequent to the effective date of this Dissolution Agreement,
BBI shall agree to cooperate with JJI in timely delivering to JJI all customer
orders, agreements with sub-distributors as set forth in Section 2 of the MDA,
and shall agree to ensure an orderly and smooth transition of any existing
rights and obligations under the Japan Assignment and Japan MDA.

6.             Should either party assert claims
against the other party in accordance with Paragraph 3 hereinabove, each party
shall cooperate with the other party in providing any and all related documents
which may be deemed reasonably necessary by each party for the purpose of
preparing for arbitration pursuant to Paragraph 4 hereinabove.

7.             In the
event of a claimed breach of any of the provisions, representation, warranties
or covenants contained in this Dissolution Agreement, the party claiming breach
shall notify the alleged breaching party in writing in accordance with the
notice provisions set forth in Paragraph 9 hereinbelow of the claimed breach
and the alleged breaching party shall have five (5) business days to cure said
breach, if curable.

8.             All
notices, waivers and other communications hereunder shall be in writing and
shall be give by hand delivery to the other party, by reputable overnight
courier, or by certified mail, return receipt requested.  All notices, waivers, or other communications
shall be deemed delivered when actually received if delivered by hand, one day
after mailing if sent by overnight courier and three days after mailing if sent
by certified mail and shall be addressed as follows:

If to JJI:

Joe’s
Jeans, Inc.

5901 S.
Eastern Avenue

Commerce,
CA  90040

Attention:  Marc
Crossman or Chief Executive Officer

 3
 

If to BBI:

Beyond Blue, Inc.

9169 Sunset Blvd.

Los Angeles, CA  90069

Attention: Harry Haralambus or President

9.             This
Dissolution Agreement may be signed in counterparts and when executed by all
parties shall constitute one integrated agreement. A party’s signature
delivered by facsimile transmission shall be deemed an original and is binding
on such party.

10.           Each of
the signatories hereto represents and warrants to be duly authorized to fully
and completely resolve the disputes described in this Dissolution Agreement and
to bind the party on whose behalf the signatory has agreed to act to the terms
and conditions contained in this Dissolution Agreement.

11.           The
parties hereto represent and warrant that they have not assigned, transferred,
conveyed or released and discharged, voluntarily or involuntarily, or by
operation of law, to any other entity an interest in the disputes which are the
subject of this Dissolution Agreement.

12.           This
Dissolution Agreement represents the entire agreement concerning the matters
herein, superseded any and all prior agreements concerning same, may not be
amended except in a writing referring specifically to this Dissolution
Agreement, and shall be binding on the parties’ successors and assigns.  Neither party shall assign this Dissolution
Agreement in any manner without the prior written consent of the other party.

13.           The parties
each acknowledge that they have not executed this Dissolution Agreement in
reliance on any representation, inducement, promise, agreement or warranty
which is not contained in this Dissolution Agreement and that they have
received independent legal

 4
 

advice from their respective
attorneys with respect to their rights as well as the consequences of signing
this Dissolution Agreement.

14.           This Dissolution Agreement shall be
construed and interpreted in accordance with the laws of the State of
California without regard to any conflicts of law.

15.           JJI agrees
not to disparage, criticize, or make any negative public or private comments
about the BBI to any person or entity; provided, however, that this
undertaking shall not be applicable to any statement made in any legal
proceeding or government investigation. 
BBI agrees not to disparage, criticize, or make any negative public or
private comments about the JJI to any person or entity; provided,
however, that this undertaking shall not be applicable to any statement made in
any legal proceeding or government investigation.  For purposes of this section 15, the term “JJI”
shall also include its affiliates and their officers, directors, employees,
legal representatives or other agent acting on behalf of JJI, and the term “BBI”
shall also include its affiliates, and their officers, directors, employees,
legal representatives or other agent acting on behalf of JJI.

16.           The
parties hereto acknowledge and agree that JJI’s parent company, Innovo Group
Inc., may issue a press release related to the transactions contemplated
hereunder, which shall contain and be limited to using the language attached on
Exhibit A attached hereto and incorporated herein by reference.

[remainder of page intentionally left
blank, signature page to follow]

 5
 

IN WITNESS WHEREOF, the parties hereto have executed this
agreement as of the date first above written.

	
  

  	
  JOE’S JEANS, INC.

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Marc
  Crossman

  
	
   

  	
   

  	
  Name:

  	
  Marc Crossman

  
	
   

  	
   

  	
  Title:

  	
  C.E.O.

  
	
   

  	
   

  	
   

  
	
   

  	
  BEYOND BLUE INC.

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Harry
  Haralambus

  
	
   

  	
   

  	
  Name:

  	
  Harry Haralambus

  
	
   

  	
   

  	
  Title:

  	
  President

  

 

 6
 

EXHIBIT A

Language
of Innovo Group Inc. press release shall be limited to using the following
language:

Innovo Group Inc. today announced that its Joe’s
Jeans, Inc. subsidiary has entered into a mutual dissolution agreement with
Beyond Blue, Inc. to end the Master Distribution Agreement (“MDA”) for the
international distribution of the Company’s Joe’s® and Joe’s Jeans® branded
products.  The parties have each reserved
certain rights under the MDA in an effort to resolve outstanding issues related
to certain obligations under the MDA.

Marc Crossman, Chief Executive Officer of Innovo Group, stated “We
believe the decision to enter into this dissolution with Beyond Blue is in the best
interests of the parties.  We are working
to establish new distributor relationships and realign certain existing
relationships in an effort to grow our international business.”

 7

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