Document:

Exhibit 4.1

 

Execution Copy

 

SHAREHOLDERS AGREEMENT

 

BY AND AMONG

 

POLYMER GROUP, INC.,

 

TESALCA-99, S.A.,

 

TEXNOVO, S.A.

 

AND

 

MATLINPATTERSON GLOBAL OPPORTUNITIES PARTNERS, L.P.

 

Dated as of November 30, 2009

 

 

TABLE OF CONTENTS

 

	
  ARTICLE 1 GENERAL PROVISIONS

  	
  1

  
	
  1.1

  	
  Shares Subject to this Agreement

  	
  1

  
	
  1.2

  	
  Sellers Put Option

  	
  1

  
	
  1.3

  	
  Certain Definitions

  	
  2

  
	
   

  	
   

  	
   

  
	
  ARTICLE 2 RESTRICTIONS ON TRANSFER OF SHARES

  	
  3

  
	
  2.1

  	
  Transfers Restrictions

  	
  3

  
	
  2.2

  	
  Permitted Transfers

  	
  4

  
	
  2.3

  	
  Notice of Proposed Transfer

  	
  4

  
	
  2.4

  	
  Rule 144 Reporting

  	
  4

  
	
  2.5

  	
  Legends

  	
  4

  
	
   

  	
   

  	
   

  
	
  ARTICLE 3 TAG-ALONG RIGHTS

  	
  5

  
	
  3.1

  	
  Tag-Along Rights

  	
  5

  
	
  3.2

  	
  Procedures

  	
  5

  
	
  3.3

  	
  Non-Material Variation of Procedures

  	
  7

  
	
  3.4

  	
  Waiver

  	
  7

  
	
   

  	
   

  	
   

  
	
  ARTICLE 4 DRAG-ALONG RIGHTS

  	
  7

  
	
  4.1

  	
  Approved Sale

  	
  7

  
	
  4.2

  	
  Applicability

  	
  8

  
	
   

  	
   

  	
   

  
	
  ARTICLE 5 BOARD OF DIRECTORS

  	
  8

  
	
  5.1

  	
  The Seller Director

  	
  8

  
	
  5.2

  	
  Company Action

  	
  9

  
	
  5.3

  	
  Vacancies

  	
  9

  
	
  5.4

  	
  Resignation

  	
  9

  
	
  5.5

  	
  Shareholder Action

  	
  9

  
	
   

  	
   

  	
   

  
	
  ARTICLE 6 PREEMPTIVE RIGHTS

  	
  10

  
	
  6.1

  	
  Preemptive Rights

  	
  10

  
	
  6.2

  	
  Procedures

  	
  10

  
	
  6.3

  	
  Non-Material Violation of Procedures

  	
  11

  
	
  6.4

  	
  Waiver

  	
  11

  
	
   

  	
   

  	
   

  
	
  ARTICLE 7 MISCELLANEOUS

  	
  11

  
	
  7.1

  	
  Rights Not Transferable; Aggregation

  	
  11

  
	
  7.2

  	
  No Conflict

  	
  11

  
	
  7.3

  	
  Termination

  	
  11

  
	
  7.4

  	
  Notices

  	
  12

  
	
  7.5

  	
  Entire Agreement

  	
  13

  
	
  7.6

  	
  Amendments and Waivers

  	
  13

  
	
  7.7

  	
  Successors and Assigns

  	
  13

  
	
  7.8

  	
  Governing Law; Jurisdiction

  	
  13

  
	
  7.9

  	
  Severability

  	
  14

  

 

i

 

	
  7.10

  	
  Interpretation

  	
  14

  
	
  7.11

  	
  Headings and Captions

  	
  14

  
	
  7.12

  	
  Enforcement

  	
  14

  
	
  7.13

  	
  Counterparts

  	
  14

  

 

ii

 

SHAREHOLDERS
AGREEMENT

 

THIS SHAREHOLDERS
AGREEMENT (this “Agreement”) is made as of November 30, 2009 by and
among Polymer Group, Inc., a Delaware corporation (the “Company”), Tesalca-99,
S.A., a company duly incorporated and validly existing under the laws of Spain
(“Tesalca”), Texnovo, S.A., a company duly incorporated and validly
existing under the laws of Spain (“Texnovo” and, together with Tesalca,
the “Sellers”), and MatlinPatterson Global Opportunities Partners L.P.,
a Delaware limited liability partnership (together with MatlinPatterson Global Opportunities
Partners (Bermuda) L.P., MatlinPatterson Global Opportunities Partners B, L.P.,
MatlinPatterson Global Advisers LLC, MatlinPatterson Global Partners LLC,
MatlinPatterson Asset Management LLC and MatlinPatterson LLC, “MatlinPatterson”).

 

WHEREAS, the Company,
the Sellers and Grupo Corinpa, S.L., a company duly incorporated and validly
existing under the laws of Spain, have entered into certain Asset Transfer
Agreement, dated as of October 30, 2009, with respect to the sale of
certain assets of the Sellers to the Company or its designated subsidiary (the “Asset Transfer Agreement”),
the Sellers receiving as consideration 1,048,864 shares of Class A Common
Stock of the Company.

 

WHEREAS, pursuant to the
provisions of the Asset Transfer Agreement, the parties wish to enter into this
Agreement to regulate the relationship among them.

 

Capitalized terms used
but not defined herein shall have the same meanings set forth in the Asset
Transfer Agreement

 

NOW, THEREFORE, in consideration
of the covenants and agreements set forth herein and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto covenant and agree as follows:

 

ARTICLE 1

GENERAL PROVISIONS

 

1.1                                 Shares Subject to this Agreement. 
The Sellers and MatlinPatterson agree that the terms and restrictions of
this Agreement shall apply to all shares of the Class A common stock, par
value $.01, of the Company (the “Class A Common Stock”) which any
of them now Owns (as defined below) or hereafter acquires by any means,
including without limitation, by purchase, assignment, conversion of
convertible securities or operation of law, or as a result of any stock
dividend, stock split, reorganization, reclassification, whether voluntary or
involuntary, or other similar transaction, and to any shares of capital stock
of any successor to the Company, whether by sale, merger, consolidation or
other similar transaction (the “Shares”).  As of the date of this Agreement,
MatlinPatterson owns only Class A Common Stock of the Company.

 

1.2                                 Sellers Put Option. 
If the Sellers exercise the Sellers Put Option pursuant to
Section 3.1 of the Asset Transfer Agreement and all of the Phase II
Conditions set forth in Section 3.2 of the Asset Transfer Agreement have
been satisfied other than the condition set forth in
Section 3.2(iii) thereof, then, for purposes of this Agreement, the
Sellers shall be treated as if they had acquired the Consideration for Phase II
as of the date that the Sellers Put Option was exercised (the “Put Exercise
Date”).  By way of example only, if
the aforementioned conditions are met, the Sellers would be treated as if they
owned the Consideration for Phase II

 

1

 

as of the Put Exercise
Date when determining the Drop Off Date and when calculating the consideration
to be received for the Sellers’ Tag-Along Shares in a sale pursuant to
Article 3 hereof.

 

1.3                                 Certain Definitions. 
As used in this Agreement, the following terms shall have the following
respective meanings:

 

“Affiliate” means,
with respect to any specified Person, any other Person that, directly or
indirectly through one or more intermediaries, controls, is controlled by or is
under common control with, such specified Person.  For purposes hereof, the term “control,” or a
variation thereof, means the possession, directly or indirectly, of the power
to direct or cause the direction of the management and policies of a Person,
whether through the Ownership of voting securities, by contract or otherwise.

 

“Board” means the
Board of Directors of the Company.

 

“Business Day”
shall mean any day that is not Saturday, Sunday or other day on which banking
institutions in New York (NY) are authorized or required by law or executive
order to close.

 

“Commission” means
the Securities and Exchange Commission and any successor agency of the federal
government administering the Securities Act and the Exchange Act.

 

“Drop Off Date”
shall mean, (i) for the period from the Closing Date of Phase I until the
Closing Date of Phase II, the first date that any Shares are Transferred (as
defined below) by either Seller (or any Permitted Transferee) to any transferee
that is not a Permitted Transferee, and (ii) for the period from and after
the Closing Date of Phase II, the date upon which the Sellers’ Ownership of the
Shares is less than 5% of the Company’s total outstanding Class A Common
Stock calculated on a fully diluted basis.

 

“Exchange Act” means the Securities Exchange Act of
1934, as amended, and any similar or successor federal statute, and the
rules and regulations of the Commission thereunder, all as the same shall
be in effect from time to time.

 

“Exempt Securities”
shall mean (a) equity securities of the Company issued in connection with
(i) any acquisition of another Person by the Company or any subsidiary of
the Company by merger, stock purchase, purchase of all or substantially all of
the assets, or other reorganization, or (ii) the purchase of all or substantially
all of the assets of another Person, in each case that is approved by a
majority of the Board; (b) common stock or other equity securities issued
to employees, officers, directors, consultants, other persons performing
services for the Company (including distributors and sales representatives) and
their respective Affiliates, in each case, pursuant to any stock option plan,
or similar equity-based compensatory arrangement approved by a majority of the
Board, (c) shares of common stock issued in connection with any stock
split, stock dividend, recapitalization or similar transaction by the Company;
(d) shares of common stock issued pursuant to a firm commitment
underwritten public offering of the Company’s common stock;
(e) non-convertible debt securities or debt instruments; (f) shares
of capital stock issued pursuant to a rights offering made to all holders of
common stock in accordance with applicable U.S. securities laws;
(g) shares of common stock issuable upon exercise of the 

 

2

 

Company’s Series A
Warrants and the Series B Warrants; and (h) shares of capital stock
issued pursuant to an anti-takeover plan, takeover defense plan or “poison
pill” in the form of a shareholder rights plan or similar plan adopted by the
Company.

 

“Ownership” or “Own”
means record ownership and beneficial ownership, as determined pursuant to
Rule 13d-3 under the Exchange Act.

 

“Person” means an
individual, corporation, partnership, limited liability company, joint venture,
trust or unincorporated organization, or a government or any agency or
political subdivision thereof.

 

“Sale of the Company”
means the direct or indirect sale of the Company to a third party pursuant to
which such party or parties acquire (i) capital stock of the Company
possessing the voting power to elect a majority of the Board (whether by
merger, consolidation or sale, exchange or transfer of the Company’s capital
stock), or (ii) all or substantially all of the Company’s assets
determined on a consolidated basis.

 

“Securities Act”
means the Securities Act of 1933, as amended, and any similar or successor
federal statute, and the rules and regulations of the Commission
thereunder, all as the same shall be in effect from time to time.

 

ARTICLE 2

RESTRICTIONS ON TRANSFER OF SHARES

 

2.1                                 Transfers Restrictions.

 

(a)                                  Except as otherwise
provided in Section 2.2, with respect to the Shares issued to the Sellers
on each of the Closing Date of Phase I and the Closing Date of Phase II,
respectively, each Seller agrees not to sell, assign, transfer, gift, pledge,
encumber, hedge or otherwise alienate or dispose of, whether voluntarily or
involuntarily, by operation of law or otherwise (“Transfer”), or agree
to so Transfer, any of such Shares Owned by it or any right or interest therein
for a period of one year after issuance.

 

(b)                                 Each Seller further agrees
not to Transfer at any time any Shares Owned by it, or any right or interest
therein, to any Person that, in the reasonable determination of the Board,
directly competes with the Company or is a customer, supplier or distributor of
the Company; provided, that such restriction shall not apply to
Transfers by either of the Sellers pursuant
to (1) “tag-along” sales in accordance with Article 3 hereof, or
(2) “drag-along” sales in accordance with Article 4 hereof.

 

(c)                                  Each
Seller acknowledges that the Shares have not been registered under the
Securities Act or any state or foreign securities laws and such Seller agrees
not to offer for sale, sell or otherwise Transfer any Shares in the absence of
an effective registration statement covering such Shares under the Securities
Act and any applicable state or foreign securities laws, or an exemption from
the registration requirements thereof.

 

3

 

(d)                                 Any
purported Transfer in violation of any provision of this Agreement and all
actions by the purported transferor and transferee in connection therewith
shall be of no force or effect.  The
Company shall not be required to recognize such purported Transfer for any
purpose, including, without limitation, for purposes of dividend and voting
rights.

 

2.2                                 Permitted Transfers. 
The restrictions on Transfer contained in Section 2.1(a) shall
not apply to Transfers by either of the Sellers (i) to any of its
Affiliates or any successor by merger, reorganization or similar fundamental
corporate transaction, (ii) to any lender to secure financings of such
Seller either existing as of the date of this Agreement or taken to refinance
the existing financings, or (iii) pursuant to (1) “tag-along” sales
in accordance with Article 3 hereof, or (2) “drag-along” sales in
accordance with Article 4 hereof, except to the extent that such sales are
not permissible under applicable U.S. securities laws (collectively, “Permitted
Transferees”); provided, however, that in any such event the
Shares so Transferred in the hands of each such Permitted Transferee shall
remain subject to the provisions of this Agreement, and each such Permitted
Transferee shall so acknowledge in writing, assuming, in the case of its
Affiliates, successor by merger, reorganization or similar fundamental
corporate transaction all the rights, obligations, terms and conditions arising
from this Agreement by signing a declaration of adherence to this Agreement as
a condition precedent to the effectiveness of such Transfer.

 

2.3                                 Notice of Proposed Transfer. 
Prior to any proposed Transfer of any Shares by any Seller, such Seller
shall give written notice to the Company of its intention to effect such
Transfer.  Each such notice shall
describe the manner of the proposed Transfer and, if requested by the Company,
shall be accompanied by an opinion of counsel reasonably satisfactory to the
Company to the effect that the proposed Transfer may be effected without
registration under the Securities Act, whereupon such Seller shall be entitled
to Transfer such securities in accordance with the terms of its notice.

 

2.4                                 Rule 144 Reporting. 
With a view to making available the benefits of Rule 144, which may
at certain times permit the sale of Shares to the public without registration,
at all times after the first anniversary of the Closing Date of Phase I until
such time as all of the Shares are saleable pursuant to Rule 144 without
restrictions, the Company agrees to use its commercially reasonable best
efforts to comply with all of the information reporting requirements of
Rule 144 (as amended from time to time, or any successor
rule thereto).  In this respect, the
Company represents that it has never been a “shell company” under Rule 405
of the Securities Act.

 

2.5                                 Legends.  Each
certificate representing Shares Owned by the Sellers shall bear legends in
substantially the following form:

 

“THE SALE, TRANSFER OR
ASSIGNMENT OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO THE
TERMS AND CONDITIONS OF A SHAREHOLDERS AGREEMENT AMONG THE COMPANY AND CERTAIN
HOLDERS OF ITS OUTSTANDING CLASS A COMMON STOCK.  COPIES OF SUCH AGREEMENT MAY BE OBTAINED
AT NO COST BY WRITTEN REQUEST BY THE HOLDER OF RECORD OF THE CERTIFICATE TO THE
SECRETARY OF THE COMPANY.”

 

4

 

“THE SECURITIES
REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE “ACT”), OR ANY STATE SECURITIES LAWS.  SUCH SECURITIES MAY NOT BE OFFERED FOR
SALE, SOLD, DELIVERED AFTER SALE, TRANSFERRED, PLEDGED, HEDGED OR HYPOTHECATED
IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT COVERING SUCH SECURITIES
UNDER THE ACT AND ANY APPLICABLE STATE SECURITIES LAWS, OR AN EXEMPTION FROM
THE REGISTRATION REQUIREMENTS THEREOF.”

 

At the request of the
Sellers, and as soon as it is no longer legally required, the Company
undertakes to exchange the above mentioned certificates for new ones which do
not include such legends.

 

ARTICLE 3

TAG-ALONG RIGHTS

 

3.1                                 Tag-Along Rights. 
MatlinPatterson will not sell or Transfer any Shares to any Person,
other than an Affiliate or any limited partner of MatlinPatterson (a “Third
Party”), without compliance with the terms of this Article 3; provided,
however, that the terms and provisions of this Article 3 shall not
be applicable to any sale by MatlinPatterson if (a) prior to and after
giving effect to such sale, MatlinPatterson shall Own at least an aggregate of
54.9% of the Class A Common Stock, calculated on a fully diluted basis, or
(b) MatlinPatterson’s sale to a Third Party is in connection with a tender
offer or other offer by such Third Party open to the Sellers upon the same
terms and conditions offered to MatlinPatterson, or (c) MatlinPatterson’s
sale is made in the market pursuant to Rule 144 and the applicable volume
restrictions or a registration statement. 
All Shares proposed to be sold by MatlinPatterson and not excluded from
the terms and provisions of this Article 3 pursuant to the proviso of the
immediately preceding sentence are referred to herein as “Subject Shares.”  The Sellers shall have the right to
participate in any “tag-along” sales in accordance with this Article 3
during the term of this Agreement, including during the one-year period
described in Section 2.1(a), except to the extent that such sales are not
permissible under applicable U.S. securities laws.  Any Subject Shares Transferred to an
Affiliate of MatlinPatterson shall remain subject to the provisions of this
Article 3, and each such Affiliate shall so acknowledge in writing as a
condition precedent to the effectiveness of such Transfer.

 

3.2                                 Procedures.

 

(a)                                  Prior
to the sale of any Subject Shares to a Third Party, MatlinPatterson shall
deliver to the Company a written notice of the proposed or intended sale of
Subject Shares (the “MatlinPatterson Tag-Along Notice”), which
MatlinPatterson Tag-Along Notice shall (i) identify the Subject Shares
proposed or intended to be sold, and (ii) disclose the number, price,
names of purchasers and other terms upon which they are to be sold.  Within 5 Business Days of the receipt of the
MatlinPatterson Tag-Along Notice, the Company (directly or through its agent)
shall take all steps necessary and/or advisable (including preparing necessary
and/or advisable documentation and making all necessary and/or advisable
filings with the Commission and any other governmental authority) to deliver to
each Seller a written notice of the proposed or 

 

5

 

intended sale of Subject
Shares (the “Company Tag-Along Notice”). 
The Company Tag-Along Notice shall be satisfactory in all respects to
MatlinPatterson and in compliance with this Agreement and shall
(1) identify the Subject Shares proposed or intended to be sold,
(2) disclose the number, price, names of purchasers and other terms upon
which they are to be sold, (3) inform each Seller of the right to sell
such Seller’s pro rata portion (determined in accordance with the penultimate
sentence of this Section 3.2(a)) of Shares along with MatlinPatterson to
the Third Party, (4) include all other information, disclosures,
statements and documents as may be required by applicable law (which
information, disclosures, statements and documents shall be reasonably
satisfactory to MatlinPatterson), and (5) include a deadline for the
Sellers to deliver a “Shareholder Tag-Along Acceptance Notice,” along
with the Shares to be sold, to MatlinPatterson in accordance with the terms of
the Shareholder Tag-Along Acceptance Notice, which deadline shall in no event
be later than 30 calendar days or earlier than 10 Business Days after receipt
by the Sellers of the Company Tag-Along Notice; provided, that such
deadline may be later than 30 calendar days after the date of receipt of the
Company Tag-Along Notice if (i) MatlinPatterson consents thereto in
writing, or (ii) outside legal counsel to the Company provides a written
opinion addressed to the Company to the effect that a later deadline is
required for the Company to comply with a Law applicable to the Company.  The Company shall enclose a sufficient number
of Shareholder Tag-Along Acceptance Notices with each Company Tag-Along Notice.  The aggregate number of shares of
Class A Common Stock that the Sellers will be entitled to sell pursuant to
this Article 3 prior to the fifth anniversary of the Closing Date of Phase
I shall not exceed the aggregate of the Consideration for Phase I, the
Consideration for Phase II and, if applicable, the number of Shares acquired
pursuant to Article 6 hereof.

 

With regards to
Article 3.2(a)(4) above, MatlinPatterson undertakes to collaborate
with the Company and promptly deliver to it all relevant information necessary
to prepare any disclosures, statements and documents as may be required by
applicable law.

 

For purposes of this
Section 3.2, a Seller’s pro rata portion shall be determined by
multiplying (x) the number of Subject Shares proposed to be sold to a
Third Party by (y) a fraction, the numerator of which is the aggregate
number of issued and outstanding Shares then Owned by such Seller, and the
denominator of which is the aggregate number of shares of Class A Common
Stock then issued and outstanding.

 

(b)                                 To
sell its pro rata portion of Shares along with MatlinPatterson to the Third
Party, each Seller must (i) deliver a Shareholder Tag-Along Acceptance
Notice, along with the Shares to be sold, to MatlinPatterson in accordance with
the instructions set forth on the Shareholder Tag-Along Acceptance Notice; and
(ii) comply with any other applicable terms of the proposed sale
(including executing definitive documentation and any related documents), such
terms being substantially identical for both MatlinPatterson and the Sellers,
in each case, prior to the deadline set forth in the Company Tag-Along Notice
(a Seller satisfying such requirements shall be referred to herein as a “Participating
Seller”).  Upon compliance with the
foregoing procedures, MatlinPatterson may sell the Subject Shares; provided,
that such sale provides for the purchase of each Participating Seller’s pro
rata portion of Shares (the “Tag-Along Shares”) for a period of up to
180 calendar days after the deadline set forth in the Company Tag-Along Notice,
upon terms and conditions (including the per share price) which are not less
favorable to MatlinPatterson and the Sellers than those set forth in the
MatlinPatterson Tag-Along Notice.  Any
Subject Shares not sold by MatlinPatterson prior to the date that is 180 

 

6

 

calendar days after the
deadline set forth in the Company Party Tag-Along Notice may not be sold
without compliance with this Section 3.2.

 

(c)                                  Promptly
(but in no event later than 3 Business Days) after the consummation of the sale
of the Subject Shares and the Tag-Along Shares by MatlinPatterson and the
Sellers, respectively, to a Third Party, MatlinPatterson shall (i) notify
the Company and the Participating Sellers of such sale, and (ii) cause to
be remitted to the Company the total sales proceeds attributable to the sale of
Tag-Along Shares.  Thereafter, the
Company shall promptly distribute such sales proceeds to the applicable
Sellers.

 

3.3                                 Non-Material Variation of Procedures. The Company, with the approval of the
Board and the written consent of MatlinPatterson, may alter the procedures set
forth in Section 3.2 to the extent required to comply with any applicable
law or as is otherwise advisable; provided, however, that no
alteration to the procedures set forth in Section 3.2 may be made in the
manner set forth in this Section 3.3 if such alteration would result in an
adverse effect on the tag-along rights provided in this Article 3.

 

3.4                                 Waiver. MatlinPatterson may sell Subject Shares without
compliance with the terms and provisions of Section 3.2 with the prior
written consent of the Sellers in each instance.

 

ARTICLE 4

DRAG-ALONG RIGHTS

 

4.1                                 Approved Sale.

 

(a)                                  In the
event that MatlinPatterson (the “Proposing Shareholder”) approves the
Sale of the Company (an “Approved Sale”) and delivers written notice
thereof to the Company and the Sellers not less than 30 calendar days before
the consummation of the Approved Sale, each Seller will vote for, consent to,
cooperate with and will not object or otherwise impede consummation of the
Approved Sale; provided, that Sellers will retain the right to convey
their objections to, and discuss with MatlinPatterson, the consideration to be
received in such Approved Sale.

 

(b)                                 If the
Approved Sale is structured as (i) a merger or consolidation, each Seller
shall vote (to the extent having the right to vote) its Shares to approve such
merger or consolidation and all matters ancillary thereto, whether by written
consent or at a shareholders meeting, (ii) a sale of equity, each Seller
shall agree to sell, and shall sell, all of its Shares on the terms and
conditions so approved, or (iii) a sale of assets, each Seller shall vote
its Shares to approve such sale and any subsequent liquidation of the Company
or other distribution of the proceeds therefrom, whether by written consent or
at a shareholders meeting.  In
furtherance of the foregoing, each Seller shall cooperate with and take, with
respect to such Seller’s Shares, all necessary or desirable actions reasonably
requested by MatlinPatterson in connection with the consummation of the
Approved Sale, including executing the applicable agreements (which agreements
may, subject to the provisions of this Section 4.1, require a Seller to
sell a pro rata portion or all of its Shares and customary representations, indemnities,
holdbacks and escrows); provided, however, in any Approved Sale,
the terms and conditions of such agreements, including, but not limited to, the
form or forms of consideration (in the same relative proportions 

 

7

 

if more than one form is
received) and the indemnification obligations (which in no event shall expose
any such other Seller to liability greater than the consideration to be
received), shall be on terms substantially identical for the Sellers and
MatlinPatterson.

 

(c)                                  The
provisions of this Section 4.1 shall apply regardless of the form of
consideration received in the Approved Sale; provided, however,
if the consideration received in such Approved Sale is in a form other than
cash or freely transferable public securities (“Other Consideration”),
then each Seller shall have the right to elect to not be bound by this
Section 4.1 unless the Company will, at the written request of such
Seller, which shall be made not later than 15 calendar days after notice of the
nature of the consideration was provided to the Seller, concurrently with the
closing of the Approved Sale, pay to such Seller, in cash, the fair market
value of such Other Consideration in lieu of such Other Consideration.  The Board’s determination of the fair market
value of any Other Consideration shall be conclusive.

 

(d)                                 In
furtherance of the provisions of this Section 4.1, for so long as this
Section 4.1 is in effect, each Seller (and its successors, heirs, legal
representatives, and permitted assigns and transferees) hereby
(i) irrevocably appoints each of the directors of the Company as his or
its agent and attorney-in-fact (the “Drag-Along Agents”) (with full
power of substitution) to execute all agreements, instruments and certificates
and take all actions necessary or desirable to effectuate any Approved Sale as
contemplated under this Section 4.1, and (ii) grants to each
Drag-Along Agent a proxy (which shall be deemed to be coupled with an interest
and to be irrevocable) to vote the Shares having voting power held by such
Seller and exercise any consent rights applicable thereto in favor of any such
Approved Sale as provided in this Section 4.1; provided, however,
that the Drag-Along Agents shall not exercise such powers-of-attorney or
proxies with respect to any such Seller unless such Seller refuses or fails to
comply with its obligations under this Section 4.1.  THE AGREEMENTS CONTAINED IN THIS
SECTION 4.1 ARE COUPLED WITH AN INTEREST AND EXCEPT AS PROVIDED IN THIS
AGREEMENT MAY NOT BE REVOKED OR TERMINATED DURING THE TERM OF THIS
AGREEMENT.

 

4.2                                 Applicability. 
The terms and provisions of this Article 4 shall not be applicable
to any Approved Sale by MatlinPatterson if prior to such Approved Sale
MatlinPatterson Ownership percentage of Class A Common Stock is lower than
the Sellers Ownership percentage of Class A Common Stock.

 

ARTICLE 5

BOARD OF DIRECTORS

 

5.1                                 The Seller Director. 
Effective as of the Closing Date of Phase I until the Drop Off Date,
Sellers shall have the right to jointly nominate one member of the Board (the “Seller
Director”), who shall be remunerated and have the same rights and
obligations as the other members.  A
Seller Director must meet all of the relevant qualifications and standards set
forth in the Company’s corporate governance documents and the rules and
regulations of the Commission and the listing standards of a stock exchange
designated by the Board (the “Listing Standards”).

 

8

 

Compliance with the
paragraph above will be determined by the Board and Sellers agree that if it is
determined that the Seller Director at any time fails to meet the standards and
qualifications set forth in the paragraph above, the Sellers will cause the
Seller Director to resign from the Board and be replaced in accordance with the
provisions of this Agreement.

 

The first Seller Director
to be appointed shall be Mr. Carlos Cavallé Pinós, as to whose appointment
the Company and MatlinPatterson consent.

 

Without prejudice of the
foregoing and for so long as Sellers have the right to the Seller Director,
Mr. José Durany Pich will be entitled:

 

(a)                                  During the first two years after the
Closing Date of Phase I, at the discretion of the Board, to be invited to and
participate in Board meetings of the Company where the Board determines that
his assistance and/or consultation is advisable with respect to matters
directly or indirectly related to Tesalca-99, S.A. or Texnovo, S.A.  In such instances, the Board shall notify
Mr. José Durany Pich, at the same time and in the same manner that
notifies its members, of such Board meetings.

 

(b)                                 Upon the earlier of the Closing Date of
Phase II and two years after the Closing Date of Phase I, to be appointed as a
Seller Director in place of Mr. Carlos Cavallé Pinós.

 

5.2                                 Company Action. 
Subject to Section 5.1 above, the Company will (i) present the
Seller Director to the Board for consideration and appointment to the Board
effective as of the Closing Date of Phase I, and (ii) following the
Closing Date of Phase I until the Drop Off Date, (A) use commercially
reasonable efforts to cause the Seller Director to be included in the slate of
nominees recommended by the Board to the Company’s shareholders for election as
a director at each annual meeting of the shareholders of the Company, and
(B) use commercially reasonable efforts to cause the election of the
Seller Director, including soliciting proxies in favor of the election of the
Seller Director.

 

5.3                                 Vacancies.  In the event that
a vacancy is created at any time by the death, disability, retirement,
resignation or removal (with or without cause) of the Seller Director, the
Sellers, subject to Section 5.1 above, shall have the right to designate a
replacement Seller Director to fill such vacancy, and the Company shall use
their best efforts to cause such vacancy to be filled with the replacement
Seller Director so designated.

 

5.4                                 Resignation 
Following the Drop Off Date, upon the written request of the Company,
the Sellers shall cause the Seller Director then serving on the Board to
promptly resign from the Board.  The
Sellers hereby agree that if the Seller Director does not so promptly resign,
the Seller Director may be removed from the Board in accordance with the
Company’s Amended and Restated By-laws, as they may be amended from time to
time.

 

5.5                                 Shareholder Action. 
Each of the Sellers and MatlinPatterson shall take, or cause to be
taken, such actions as may be required from time to time to maintain the number
of persons comprising the Board of the Company at nine, and to elect as
directors all of the directors nominated by the Company for election as
directors, including the Seller Director. 
Without limiting the generality of the foregoing, at each annual meeting
of the shareholders, and at each special meeting of the shareholders called for
the purpose of electing directors of the Company, 

 

9

 

and at any time at which
the shareholders have the right to, or shall, elect directors of the Company,
then, and in each event, each of the Sellers and MatlinPatterson shall vote all
Shares Owned by them (or shall consent in writing in lieu of a meeting of
shareholders, as the case may be) to set the number of, and to elect persons as,
directors of the Company in accordance with this Section 5.5.

 

ARTICLE 6

PREEMPTIVE RIGHTS

 

6.1                                 Preemptive Rights. 
Except for issuances of Exempt Securities, the Company will not issue
any shares of capital stock of the Company and will not issue or grant any
options, warrants, conversion rights or other rights to purchase or acquire any
shares of capital stock of the Company (collectively, “Preemptive Securities”)
without compliance with this Article 6.

 

6.2                                 Procedures

 

(a)                                  Prior to any issuance of any Preemptive
Securities, the Company (directly or through its agent) shall deliver to the
Sellers a written notice of any proposed or intended issuance of Preemptive
Securities (the “Preemptive Notice”), which Preemptive Notice shall
(a) identify and describe the Preemptive Securities proposed or intended
to be issued, (b) disclose the number, price names of purchasers and other
terms upon which they are to be issued, (c) indicate the procedure for the
Sellers to offer to purchase the Sellers’ pro rata portion (determined in
accordance with this Section 6.2(a)) of such Preemptive Securities, and
(d) include a deadline for the Sellers to deliver a Notice of Acceptance
and payment of the purchase price for the Sellers’ pro rata portion of Preemptive
Securities to be purchased thereby to the Company, which deadline shall in no
event be later than 30 calendar days or earlier than 10 Business Days after
receipt by the Sellers of the Preemptive Notice; provided, that such
deadline may be later than 30 calendar days after the date of the Preemptive
Notice if (i) MatlinPatterson consents thereto in writing, or
(ii) outside legal counsel to the Company provides a written opinion
addressed to the Company to the effect that a later deadline is required for the
Company to comply with applicable law. 
For purposes of this Section 6.2, the Sellers’ pro rata portion of
Preemptive Securities shall be determined by multiplying (x) the number of
Preemptive Securities (determined on an as exercised or as converted basis)
proposed to be issued by (y) a fraction, the numerator of which is the
aggregate number of issued and outstanding shares of Class A common stock
then beneficially owned by the Sellers, and the denominator of which is the
aggregate number of issued and outstanding shares of Class A common stock.

 

(b)                                 To purchase their pro rata portion of any
Preemptive Securities to be issued by the Company, the Sellers must deliver a
Notice of Acceptance, along with a wire transfer of immediately available funds
for the purchase price for such Preemptive Securities to the Company (or its
agent) in accordance with the instructions set forth on the Preemptive Notice
prior to the deadline set forth in the Preemptive Notice.  The Company shall issue to the Sellers that
have timely returned a properly completed Notice of Acceptance along with a
wire transfer of immediately available funds for the purchase price, the
applicable number of Preemptive Securities in accordance with the terms set
forth in the Preemptive Notice.

 

10

 

(c)                                  In the event that the Company complies
with the procedures set forth in this Section 6.2 and the Sellers do not
purchase all of their pro rata portion of the Preemptive Securities, the
Company shall have 180 calendar days from the date of the deadline set forth in
the applicable Preemptive Notice to issue or sell all or any part of the
Preemptive Securities as to which a Notice of Acceptance has not timely been
given by the Sellers to any other purchaser or purchasers (including
MatlinPatterson or its Affiliates) upon the terms and conditions (including the
per share price) which are not more favorable to the purchaser than those set
forth in the Preemptive Notice.  Any
Preemptive Securities not acquired by the Sellers or any other purchaser or
purchasers prior to the date that is 180 calendar days after the deadline set
forth in the applicable Preemptive Notice may not be issued until they are
again offered to the Sellers under the procedures specified in this Article 6.

 

6.3                                 Non-Material Violation of Procedures. 
The Company, with the approval of the Board and the written consent of
MatlinPatterson, may alter the procedures set forth in this Article 6 to
the extent required to comply with any applicable law or as is otherwise
advisable; provided, however, that no alteration to the
procedures set forth in this Article 6 may be made in the manner set forth
in this Section 6.3 if such alteration would result in an adverse effect
on the preemptive rights provided in this Article 6.

 

6.4                                 Waiver.  The Company
may issue Preemptive Securities without compliance with the terms and
provisions of this Article 6 with the prior written consent of the Sellers
in each instance.

 

ARTICLE 7

MISCELLANEOUS

 

7.1                                 Rights Not Transferable; Aggregation. 
The rights and obligations set forth in this Agreement shall terminate
with respect to any Shares Transferred by the Sellers, except for Shares
Transferred to Permitted Transferees pursuant to Section 2.2 above.  All Shares held by any Seller and its
Permitted Transferees shall be aggregated for determining the availability of
any rights under this Agreement.

 

7.2                                 No Conflict. 
The parties represent that the execution of this Agreement and
performance of all the obligations under this Agreement:

 

(a)                              do not breach any law, regulation, order,
rule, ruling, award or resolution of any other nature applicable to the
parties;

 

(b)                             do not breach the provisions of the
Company’s By-laws or Certificate of incorporation; and

 

(c)                             do not contravene any agreement, covenant
or instrument that is binding on the parties and will not give rise to breach
or termination of any such agreement, covenant or instrument.

 

7.3                                 Termination. 
Except for the provisions set forth in Articles 3, 4, 6 and 7, which
shall survive until the later of the Drop Off Date and December 31, 2011,
or as may otherwise be 

 

11

 

provided in any section
of this Agreement, all rights and obligations of the parties under this
Agreement will terminate on the Drop Off Date.

 

7.4                                 Notices.  All notices,
requests, consents and other communications hereunder shall be in writing,
shall be addressed to the receiving party’s address set forth below or to such
other address as a party may designate by notice hereunder, and shall be either
(a) delivered by hand, (b) made by facsimile transmission,
(c) sent by overnight courier, or (d) sent by registered or certified
mail, return receipt requested, postage prepaid.

 

If to the Company:

 

Polymer
Group, Inc.

9335 Harris
Corners Parkway

Suite 300

Charlotte, NC
28269

Phone: (704) 697-5179

Fax: (704) 697-5120

Attention: Daniel L. Rikard

 

With a copy to (which
shall not constitute notice):

 

Parker Poe
Adams & Bernstein LLP

401 South Tryon
Street

Suite 3000

Charlotte, NC 28202

Phone: (704) 372-9020

Fax: (704) 335-4485

Attention: R. Douglas Harmon

 

If to MatlinPatterson:

 

MatlinPatterson Global
Opportunities Partners L.P.

c/o MatlinPatterson
Global Advisers LLC

520 Madison Avenue

New York, NY 10022-4203

Fax:  (212) 651-4011

Attention:  Robert H. Weiss

 

With a copy to (which
shall not constitute notice):

 

Whalen LLP

19000 MacArthur Boulevard

Suite 600

Irvine, CA 92612

Phone:  (949) 833-1703

Fax:  (949) 833-1710

Attention:  Michael P. Whalen

 

12

 

If to either Seller:

 

31-3a Anglí, 08017
(Barcelona)

Attention:  Messrs. José Durany Pich
and Juan Pich-Aguilera Roca

Phone: 34 93 3013439

Facsimile: 34 93
3041326

E-mail: jdurany@grupocorinpa.es
and juanpich@grupocorinpa.es

 

All notices, requests,
consents and other communications hereunder shall be deemed to have been given
(w) if by hand, at the time of the delivery thereof to the receiving party
at the address of such party set forth above, (x) if made by facsimile
transmission, at the time that receipt thereof has been acknowledged by
electronic confirmation or otherwise, (y) if sent by overnight courier, on
the next business day (or if sent overseas, on the second business day)
following the day such notice is delivered to the courier service, or
(z) if sent by registered or certified mail, on the 5th business day
(or if sent overseas, on the 10th business day) following the day such mailing
is made.

 

7.5                                 Entire Agreement. 
This Agreement, together with the Asset Transfer Agreement, embody the
entire agreement and understanding between the parties hereto with respect to
the subject matter hereof and supersedes all prior oral or written agreements
and understandings relating to the subject matter hereof.  No statement, representation, warranty,
covenant or agreement of any kind not expressly set forth in this Agreement
shall affect, or be used to interpret, change or restrict, the express terms
and provisions of this Agreement.

 

7.6                                 Amendments and Waivers. 
Any term of this Agreement may be amended and the observance of any term
of this Agreement may be waived (either generally or in any particular
instance) only with the prior written consent of the parties hereto.  No failure or delay by a party hereto in
exercising any right, power or remedy under this Agreement, and no course of
dealing among the parties hereto, shall operate as a waiver of any such right,
power or remedy of the party.  No single
or partial exercise of any right, power or remedy under this Agreement by a
party hereto, nor any abandonment or discontinuance of steps to enforce any
such right, power or remedy, shall preclude such party from any other or
further exercise thereof or the exercise of any other right, power or remedy
hereunder.  The election of any remedy by
a party hereto shall not constitute a waiver of the right of such party to
pursue other available remedies.  No
notice to or demand on a party not expressly required under this Agreement
shall entitle the party receiving such notice or demand to any other or further
notice or demand in similar or other circumstances or constitute a waiver of
the rights of the party giving such notice or demand to any other or further
action in any circumstances without such notice or demand.

 

7.7                                 Successors and Assigns. 
This Agreement shall be binding on the parties hereto and shall inure to
the benefit of the respective successors and assigns of each party hereto.  Nothing in this Agreement shall be construed
to create any rights or obligations except among the parties hereto, and no
person or entity shall be regarded as a third-party beneficiary of this
Agreement.

 

7.8                                 Governing Law; Jurisdiction. 
This Agreement shall be construed and enforced in accordance with and
governed by the laws of the State of New York, without giving effect to the
conflicts of law principles thereof. 
Each of the parties hereby irrevocably submits to the 

 

13

 

jurisdiction of any state
or federal court sitting in the State of New York over any suit, action or
other proceeding brought by any party arising out of or relating to this
Agreement, and each of the parties hereby irrevocably agrees that all claims
with respect to any such suit, action or other proceeding shall be heard and
determined in such courts.

 

7.9                                 Severability. 
In the event that any court of competent jurisdiction shall determine
that any provision, or any portion thereof, contained in this Agreement shall
be unenforceable in any respect, then such provision shall be deemed limited to
the extent that such court deems it enforceable, and as so limited shall remain
in full force and effect.  In the event
that such court shall deem any such provision, or portion thereof, wholly
unenforceable, the remaining provisions of this Agreement shall nevertheless
remain in full force and effect.

 

7.10                           Interpretation. 
The parties hereto acknowledge and agree that: (a) each party and
its counsel reviewed and negotiated the terms and provisions of this Agreement;
(b) the rule of construction to the effect that any ambiguities are
resolved against the drafting party shall not be employed in the interpretation
of this Agreement; and (c) the terms and provisions of this Agreement
shall be construed fairly as to all parties hereto and not in favor of or against
any party, regardless of which party was generally responsible for the
preparation of this Agreement.

 

7.11                           Headings and Captions. 
The headings and captions of the various subdivisions of this Agreement
are for convenience of reference only and shall in no way modify or affect the
meaning or construction of any of the terms or provisions hereof.

 

7.12                           Enforcement. 
Each of the parties hereto acknowledges and agrees that the rights
acquired by each party hereunder are unique and that irreparable damage would
occur in the event that any of the provisions of this Agreement to be performed
by the other parties were not performed in accordance with their specific terms
or were otherwise breached.  Accordingly,
in addition to any other remedy to which the parties hereto are entitled at law
or in equity, each party hereto shall be entitled to an injunction or
injunctions to prevent breaches of this Agreement by any other party and to
enforce specifically the terms and provisions hereof in any federal or state
court to which the parties have agreed hereunder to submit to jurisdiction.

 

7.13                           Counterparts. 
This Agreement may be executed in one or more counterparts, each of
which shall be deemed an original, but all of which together shall constitute
one and the same instrument.  This
Agreement shall become effective only upon execution by the Company.

 

IN WITNESS WHEREOF, the
undersigned have executed or caused to be executed by theft duly authorized
representative this Shareholders Agreement as of the date first written above.

 

	
   

  	
  POLYMER
  GROUP, INC.

  
	
   

  	
   

  
	
   

  	
  Effective as of
  December 2, 2009

  
	
   

  	
   

  
	
   

  	
  /s/

  
	
   

  	
  By:

  
	
   

  	
  Name: 

  	
  Dennis E. Norman

  
	
   

  	
  Title:

  	
  Vice President –
  Strategy and Corporate Development

  

 

14

 

	
   

  	
  TESALCA-99,
  S.A.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  /s/ 

  	
  /s/

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Name:

  	
  Jose Durany

  	
  Juan Pich-Aguilera Roca

  
	
   

  	
  Title:

  	
  Administrator

  	
  Administrator

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  TEXNOVO,
  S.A.

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  /s/ 

  	
  /s/

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Name: 

  	
  Jose Durany

  	
  Juan Pich-Aguilera Roca

  
	
   

  	
  Title:

  	
  Administrator

  	
  Administrator

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  MATLINPATTERSON
  GLOBAL OPPORTUNITIES PARTNERS, L.P., MATLINPATTERSON GLOBAL OPPORTUNITIES
  PARTNERS (BERMUDA) L.P., MATLINPATTERSON GLOBAL OPPORTUNITIES PARTNERS B,
  L.P.

  
	
   

  	
   

  	
   

  
	
   

  	
  By: MatlinPatterson
  Global Advisers LLC, its Investment Advisor

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  /s/

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Name: 

  	
  Robert H. Weiss

  
	
   

  	
  Title:

  	
  General Counsel

  

 

15EXHIBIT 10.38

 

CONTRACT FOR PURCHASE AND
SALE

 

Cyan/PDX,

Portland, Oregon

 

This
CONTRACT FOR PURCHASE AND SALE (this “Contract”)
is made and entered as of the Effective Date (defined below) by and between 4TH & HARRISON
INVESTORS, LLC, an Oregon limited liability
company (“Seller”), and BEHRINGER HARVARD
MULTIFAMILY OP I LP, a Delaware limited partnership (“Buyer”).

 

For
and in consideration of the mutual covenants and agreements contained in this
Contract and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, Buyer and Seller agree as
follows.

 

1.             PURCHASE AND
SALE.  Seller agrees to sell and
convey to Buyer, and Buyer agrees to buy from Seller, the Property (defined
below) for the consideration and upon and subject to the terms and conditions
hereinafter set forth.  The “Property”
means:

 

(a)           The land
situated in Portland, Multnomah County, Oregon, more particularly described in Exhibit A
to this Contract (the “Land”), together with (i) the improvements situated
on the Land commonly known as Cyan/PDX and all other structures, fixtures,
buildings and improvements situated on the Land (such buildings, structures,
fixtures and improvements being herein called the “Improvements”), (ii) any
and all rights, titles, powers, privileges, easements, licenses, rights-of-way
and interests appurtenant to the Land and the Improvements, (iii) all
rights, titles, powers, privileges, licenses, easements, rights-of-way and
interests, if any, of Seller, either at law or in equity, in possession or in
expectancy, in and to any real estate lying in the streets, highways, roads,
alleys, rights-of-way or sidewalks, open or proposed; in front of, above, over,
under, through or adjoining the Land and in and to any strips or gores of real
estate adjoining the Land, and (iv) all rights, titles, powers,
privileges, interests, licenses, easements and rights-of-way appurtenant or
incident to any of the foregoing;

 

(b)           All equipment,
fixtures, appliances, inventory, computers, computer hardware, computer
software, and other personal property of whatever kind or character owned by
Seller and attached to or installed or located on or in the Land or the
Improvements, including 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 (collectively, the “Personal Property”);

 

(c)           All of Seller’s
right, title and interest in and to all agreements, leases and other agreements
which relate to or affect the Land, the Improvements, the Personal Property or
the operation thereof, including tenant leases (collectively, the “Tenant
Leases”) and all deposits (security, pet or otherwise) actually paid to or
received by Seller in connection therewith (and not as of the Closing Date returned
to or forfeited by tenants under Tenant Leases), service and maintenance
contracts (collectively, the “Service Contracts”) and equipment leases
(collectively, “Equipment Leases”); and

 

 

(d)           All of Seller’s
right, title, and interest in and to (i) all assignable bonds, permits,
licenses (including software licenses), approvals, utility rights, development
rights and similar rights related to the Property, or any portion thereof,
whether granted by governmental authorities or private persons, (ii) the
trade name “Cyan/PDX”, the Internet domain name www.cyanpdx.com, a
non-exclusive license in the “virtual concierge” as installed on such website
and a non-exclusive license in the “virtual wallpaper” as installed on such
website (the “Website”), (iii) all telephone numbers and exchanges
serving the Property, or any portion thereof, (iv) all business and
goodwill of Seller related to the Property, or any portion thereof, (v) all
site plans, surveys, soil and substrata studies, (vi) the non-exclusive
license to all architectural drawings, plans and specifications, engineering
plans and studies and floor plans for all Improvements, landscape plans and
other plans or studies of any kind that relate to the Property, or any portion
thereof, (vii) all leasing materials and brochures, ledger cards, leasing
records, leasing applications, tenant credit reports and maintenance and
operating records related to the operation of Property, or any portion thereof,
and (viii) all assignable 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 Seller and attached to and located in or used in connection
with the Property or (b) the construction of any of the improvements
located on the Property, or any portion thereof (collectively, the “Intangibles”).

 

(e)           Exclusions.  The Property shall not include any of the
items listed on Schedule 1(e), each of which shall be retained by Seller.

 

2.             PURCHASE PRICE.  The total purchase price for the Property
(the “Purchase Price”) shall be $65,000,000 payable in cash at Closing
(defined below).  Payment in cash shall
mean by cashier’s check or certified check drawn on a national banking
association acceptable to Seller or by wire transfer of immediately available
federal funds (the foregoing types of funds are hereinafter referred to as “Immediately
Available Funds”).

 

3.             EARNEST MONEY.  Not later than two business days after the Effective
Date, Buyer shall deliver to Partners Title Company, 712 Main St., Suite 2000E,
Houston, Texas 77002-3223, Attention: Jimmy Erwin, 713-238-9191 telephone,
713-238-9190 fax (jerwin@partnerstitle.com) (the “Title Company”), as
escrow agent, $1,500,000 (by Immediately Available Funds) as earnest money (the
“Earnest Money”), which funds shall be deposited and held by the Title
Company in an interest bearing account. 
If Buyer does not timely deliver the Earnest Money as provided in this Section 3,
or if the Title Company is unable to immediately cash the check representing
the Earnest Money and obtain the proceeds thereof, this Contract shall be null
and void, and neither party shall have any right or obligation hereunder.  The Earnest Money shall be invested in an
interest-bearing account at one or more federally insured national banking
institutions, provided Buyer satisfies the Title Company’s requirements with
respect thereto.  The term “Earnest
Money” as used herein shall include the amount required to be initially
deposited with the Title Company and any interest earned thereon.  In the event the transaction contemplated by
this Contract is closed, at Buyer’s option, the Earnest Money will be either
applied in payment of the Purchase Price to be paid at Closing or refunded to
Buyer.  In the event the transaction is
not closed, the Earnest Money shall be disbursed in accordance with the
provisions of this Contract.  Notwithstanding
any other provision of this Contract to the contrary, the Earnest Money shall
be refundable to Buyer in all events until expiration of the Feasibility
Period.  The provisions of this Contract
regarding disposition of the Earnest Money following a termination of this
Contract shall survive termination of this Contract.

 

2

 

4.             CLOSING.

 

(a)           Closing Date.  The closing of the sale of the Property to
Buyer (the “Closing”) shall take place at the Title Company on December 15,
2009 (the “Closing Date”); provided, however, Buyer may elect to proceed
with the Closing on an earlier Closing Date by delivering notice thereof to
Seller not less than five business days before such earlier Closing Date.  The parties may attend the Closing by making
their Closing deliveries into escrow with the Title Company pursuant to escrow
instructions that do not conflict with the terms of this Contract.

 

(b)           Seller’s
Closing Deliveries.  At the
Closing, Seller shall deliver to Buyer the following:

 

(i)            a statutory
special warranty deed duly executed and acknowledged by Seller, in the form
attached as Exhibit B, subject only to the Permitted Exceptions
(defined below) and any others approved by Buyer in writing;

 

(ii)           a Bill of Sale
duly executed by Seller, in the form attached as Exhibit C;

 

(iii)          an Assignment
and Assumption Agreement (the “Assignment and Assumption Agreement”)
duly executed by Seller, in the form attached as Exhibit D;

 

(iv)          an Assignment
of Tenant Leases and Assumption (the “Assignment of Leases”) duly
executed by Seller, in the form attached as Exhibit E;

 

(v)                                 a form of
notice to all tenants of the Property (“Tenant Notice Letter”) duly
executed by Seller, in the form attached as Exhibit F;

 

(vi)          Tenant estoppel
certificates executed by each tenant leasing a portion of the Property for retail
uses (each, a “Retail Tenant”) in the applicable form attached hereto as
Exhibit H;

 

(vii)         an Owner Policy
of Title Insurance on ALTA Form B-1970 (with such endorsements as Buyer
may request, the “Owner’s Title Policy”), to be issued by the Title Company
and Chicago Title Insurance Company (the “Underwriter”) in accordance
with a marked-up and executed version of the Commitment (or an executed Pro
Forma), in the full amount of the Purchase Price, insuring Buyer’s fee simple
title to the Land and Improvements to be good and marketable subject only to
Permitted Exceptions and others approved by Buyer in writing; provided,
however:

 

(1)           the standard
exceptions shall, to the extent permitted under applicable insurance
regulations, be deleted;

 

(2)           the rights of
parties in possession shall be limited only to the rights of tenants as tenants
under written leases or in possession pursuant to the occupancy agreement
listed on Schedule 4(b)(vii)(2) (“Additional
Occupancy Agreements”), each as listed on the Closing Rent Roll (defined
below); and

 

(3)           the Owner’s
Title Policy shall not contain any Monetary Encumbrances (defined below).

 

(viii)        an Escrow
Agreement (the “Escrow Agreement”) duly executed by Seller, in the form
attached as Exhibit J;

 

3

 

(ix)          exclusive
possession of the Property, subject only to the rights of parties claiming
under the Tenant Leases, the Additional Occupancy Agreements and the Permitted
Exceptions;

 

(x)                                 a non-foreign
affidavit as permitted by Section 1445 of the Internal Revenue Code of
1986, as amended, and the regulations promulgated thereunder;

 

(xi)          evidence of its
capacity and authority for the closing of this transaction;

 

(xii)         evidence
reasonably satisfactory to Buyer that all units vacant seven or more days
before the Closing Date are in rent-ready condition on the Closing Date, except
for the Finish Work (defined below);

 

(xiii)        for any
employee of Seller or Seller’s affiliates who is a tenant at the Property and
who is not being retained by Buyer and who has not completely vacated his or
her unit prior to the Closing Date, evidence reasonably satisfactory to Buyer
that such employee has, on or before the Closing Date, executed a new lease for
a term of not more than 60 days following the Closing Date at the rental rate
existing under the current rent schedule for that type of unit;

 

(xiv)        a current
update of the Initial Rent Roll (“Closing Rent Roll”), certified by
Seller using the same certification as that made with respect to the Initial
Rent Roll;

 

(xv)         affidavits,
bonds, gap indemnities and other documentation duly executed and acknowledged
by Seller in form and substance satisfactory and acceptable to Buyer, Seller
and the Title Company and sufficient to permit the Title Company to issue the
Owner’s Title Policy; and

 

(xvi)        such other
documents as may be reasonably required to close this transaction, duly
executed.

 

(c)           Buyer’s Closing
Deliveries.  At the
Closing, Buyer shall perform and deliver the following:

 

(i)            the Purchase Price
in Immediately Available Funds (reduced by the amount, if any, of the Earnest
Money applied for that purpose and by any other amounts to be credited to Buyer
at the Closing pursuant to the provisions of this Contract);

 

(ii)           the Assignment
and Assumption Agreement duly executed by Buyer;

 

(iii)          the Assignment
of Leases duly executed by Buyer;

 

(iv)          the Tenant
Notice Letter duly executed by Buyer;

 

(v)           the Escrow
Agreement duly executed by Buyer;

 

(vi)          evidence of its
capacity and authority for the closing of the transaction contemplated herein;
and

 

(vii)         such other
documents as may be reasonably required to close this transaction.

 

4

 

(d)           Closing Costs.  Seller shall pay: (i) the premium for
the standard Owner’s Title Policy; (ii) any transfer, excise, document
stamps, sales and similar taxes applicable to the transactions contemplated
hereby; (iii) one-half (1/2) of any escrow fee; (iv) Seller’s
attorneys’ fees; and (v) other expenses stipulated to be paid by Seller
under other provisions of this Contract. 
Buyer shall pay: (A) the premium for Owner’s extended coverage and
any endorsements to the Owner’s Title Policy; (B) one-half (1/2) of any
escrow fee; (C) Buyer’s attorneys’ fees; (D) recording fees (other
than fees described in the preceding clause (ii)); (E) costs and
expenses for the UCC searches; (F) costs and expenses for the updates to
the Survey; and (G) other expenses stipulated to be paid by Buyer under
other provisions of this Contract.

 

(e)           Additional
Seller Deliveries.  Upon
completion of the Closing, Seller shall deliver to Buyer all keys to the
Improvements.  Seller shall also deliver
the originals (or copies if Seller does not have originals) of all Tenant
Leases and other tenant records in Seller’s possession or control such as
applications, credit reports and correspondence.  Seller shall also deliver one set of any
plans and specifications, surveys, engineering reports, environmental
inspection/testing reports, soils testing reports, foundation reports, termite
reports and other property (real, personal or mixed) in Seller’s possession or
control relating to the design, construction, ownership, use, leasing
maintenance, service or operation of the Property.  Delivery of the materials in this Section 4(e) may
be accomplished by leaving such items in the business office at the Property.

 

(f)            Proration of
Rents, Deposits, Assessments, and Taxes.  Assessments, current taxes, rents and
maintenance fees will be prorated as of the Closing Date; provided, however, no
prorations will be made for delinquent rents existing as of the Closing.  If ad valorem taxes for the year in which the
sale is closed are not available on the Closing Date, proration of taxes will
be made on the basis of taxes assessed in the previous year, with a subsequent
cash adjustment of such proration to be made between Seller and Buyer, if
necessary, when actual tax figures are available.  If any such charges, expenses, income, or
other required prorations are unavailable at the precise Closing Date, then a
readjustment of these items shall be made within 30 days after the
Closing.  With respect to any delinquent
rentals, Buyer will make a reasonable attempt (but shall not be obligated) to
collect the same for Seller’s benefit after the Closing in the usual course of
the operation of the Property and such collection, if any, will be remitted to
Seller promptly upon receipt by Buyer. 
Nothing contained herein shall operate to require Buyer to institute any
lawsuit or other collection procedure to collect such delinquent rentals.  Seller agrees that it will not initiate any
suit or proceeding to collect delinquent rents from a tenant so long as they
remain a tenant of the Property.  Any
sums received by Buyer from any tenants owing delinquent rentals will first be
applied to the then-current portion of such tenant’s rent,  and then to costs incurred by Buyer in
collecting the delinquent rents, and then (and only then) to delinquent rentals
owed with respect to the period before Closing. 
Seller shall pay all locator fees, commissions, and the like related to
any Tenant in possession prior to Closing under the Tenant Leases executed
prior to Closing.  Buyer shall further be
entitled to a credit at Closing for all brokerage or leasing commissions or
fees or other compensation due or payable subsequent to Closing, to any person,
firm, corporation, or other entity with respect to any retail lease entered
into prior to the Closing Date.  At the Closing, Seller will pay to Buyer in cash the amount
of any security deposits, pet deposits, pet fees, and any other non-refundable
fees and charges collected for the purpose of offsetting any expenses incurred
by Seller in connection with such tenant’s occupancy, and any prepaid
rentals actually paid to or received by Seller for periods subsequent to the
Closing. 
All charges, assessments, and taxes affecting the Property levied or
assessed prior to the Closing Date shall be paid in full 

 

5

 

and prorated between the
parties at Closing, even though the same may not yet be due and payable or may
be payable in installments.  In making
the prorations required by this Section 4 the economic burdens and
benefits of ownership of the Property for the Closing Date shall be allocated
to Buyer.  The provisions of this Section 4(f) shall
survive the Closing.

 

(g)           Proration of
Utilities.  Utilities
and other customarily prorated expenses, including without limitation water,
sewer, gas, electricity, trash removal and fire protection service, and any
Service Contracts to be transferred to and assumed by Buyer, to the extent paid
for by Seller or required to be paid for by Seller for a period after Closing,
will be prorated as of the Closing Date. 
Other expenses relating to the Property up to the Closing Date and all
periods prior thereto including those required by any Service Contracts and
those incurred or ordered by Seller or Seller’s agents which are not to be
transferred and assumed by Buyer, including without limitation insurance and
administrative expenses, will be paid for by Seller and Buyer shall not be
liable therefor.  Seller will not assign
to Buyer, and Buyer will not be entitled to, any deposits held by any utility
company or other company servicing the Property; but rather such deposits will
be returned to Seller and Buyer will arrange and bear all responsibility to
arrange with all utility companies to have accounts styled in Buyer’s name
beginning on the Closing Date.  The
provisions of this Section 4(g) shall survive the Closing.

 

(h)           Costs in Retail
Leases.  Seller shall be obligated to pay all leasing commissions,
tenant improvement costs, tenant allowances, lease buyout costs, moving costs
and other expenditures (“Existing Tenant Costs”) that are payable in
connection with a Retail Lease or an amendment to a Retail Lease entered into
before the Closing Date.  Notwithstanding
any provision of this Section 4(h) to the contrary, Buyer
shall be solely responsible for any Existing Tenant Costs or other expenditures
due with respect to any unexercised renewal or expansion of any Retail Tenant
pursuant to Retail Leases existing as of the Effective Date, but only to the
extent such Existing Tenant Costs are disclosed in the Retail Leases identified
in the Initial Rent Roll and furnished to Buyer.  The provisions of this Section 4(h) shall
survive the Closing.

 

(i)            Pre-Closing
Operations.  For a period of at least 72 hours
before the Closing, Seller shall discontinue data entry operations in the
on-site computer system for the Property, including making deposits of rental
income.  Seller acknowledges that such
discontinuance is intended to afford Seller and Buyer an opportunity to
coordinate the transition of the Property in anticipation of Closing and to
complete work on prorations as set forth in this Contract.  Seller shall, as soon as practicable after
discontinuing such data entry (with Seller endeavoring to do the same within
two hours of such discontinuance), forward to Buyer or its designee final
reports to facilitate transition planning and compilation of prorations.

 

5.             FEASIBILITY
STUDY, INSPECTION, AND SERVICE CONTRACTS.

 

(a)           Feasibility
Study.  Buyer is granted the right to
conduct engineering and/or market and economic feasibility studies of the
Property and a physical inspection of the Property, including studies or
inspections to determine the existence of any environmental hazards or
conditions (collectively, the “Feasibility Study”) during the period
(the “Feasibility Period”) commencing on the Effective Date and ending
at 5:00 p.m., prevailing Pacific Time, on November 24, 2009.  With Seller’s permission, after Seller has
received advance notice sufficient to permit it to schedule in an orderly
manner Buyer’s examination of the Property and to provide at least 24-hours’
advance written notice to any affected tenants, Buyer or its designated agents
may enter upon the Property during normal business hours for purposes of

 

6

 

analysis or other tests and
inspections which may be deemed necessary by Buyer for the Feasibility
Study.  Buyer must be accompanied by
Seller’s manager for the Property or another designated representative of
Seller or have received Seller’s written permission prior to entering upon the
Property in connection with Buyer’s Feasibility Study; provided, however, Buyer
may not enter into any space leased by any tenant without being accompanied by
Seller’s manager for the Property or another designated representative of
Seller.  Seller agrees to make its
manager or other representative reasonably available during normal business
hours.  Buyer will not alter the physical
condition of the Property without notifying Seller of its requested tests, and
obtaining the written consent of Seller to any physical alteration of the
Property.  Buyer will utilize
commercially reasonable diligence to conduct or cause to be conducted all
inspections and tests in a manner and at times which will not unreasonably
interfere with any tenant’s use and occupancy of the Property.  If Buyer determines, in its sole judgment,
that the Property is not suitable for any reason for Buyer’s intended use or
purpose, or is not in satisfactory condition, then Buyer may terminate this
Contract by written notice to Seller prior to expiration of the Feasibility
Period, in which case the Earnest Money (less any cancellation fee payable to
the Title Company or Underwriter) will be returned to Buyer, and neither party
shall have any further right or obligation hereunder other than as set forth
herein with respect to rights or obligations which survive termination.  If this Contract is not terminated pursuant
to this Section 5(a), then Buyer or its designated agents may enter
upon the Property after expiration of the Feasibility Period from time to time
during normal business hours and upon advance notice to Seller (which notice
may be oral) for the purpose of inspecting the common areas; provided, however,
Buyer may not enter into any space leased by any tenant without Seller’s
consent and without being accompanied by Seller’s manager for the Property or
another designated representative of Seller. 
If this Contract is not terminated pursuant to this Section 5(a),
Buyer’s right to terminate this Contract pursuant to this Section 5(a) and
any and all objections with respect to the Feasibility Study will be deemed to
have been waived by Buyer for all purposes.

 

(b)           Restoration of
Property.  Buyer will
promptly restore the Property to its original condition if damaged or changed
due to the tests and inspections performed by Buyer, free of any mechanic’s or
materialman’s liens or other encumbrances arising out of any of the inspections
or tests.

 

(c)           Indemnity and
Insurance.  Buyer shall indemnify and hold Seller harmless from all claims, liabilities,
damages, losses, costs, and expenses (including reasonable attorneys’ fees)
caused by Buyer or Buyer’s Feasibility Representatives (defined below) during
the Feasibility Study; provided, however, neither Buyer nor any of Buyer’s
Feasibility Representatives shall be liable for, and Buyer shall not indemnify
Seller with respect to, any pre-existing condition, fact, matter, item, or
substance discovered, uncovered, located, identified, or disturbed as a result
of Buyer’s or Buyer’s Feasibility Representatives’ entry to the extent such
condition, fact, matter, item, or substance is not exacerbated by Buyer or Buyer’s Feasibility Representatives.  Buyer shall procure and continue in force
from and after the date Buyer and Buyer’s
Feasibility Representatives first enter the Property, and continuing
throughout the term of this Contract, liability insurance of not less than
$1,000,000.  Buyer anticipates causing
its independent contractors, agents,
consultants and other representatives conducting the Feasibility Study
(collectively, “Buyer’s Feasibility Representatives”) to procure and
maintain during the term of this Contract liability insurance of not
less than $1,000,000 and to cause Buyer’s Feasibility Representatives to
indemnify and hold Buyer harmless from claims,
liabilities, damages, losses, costs, and expenses (including reasonable
attorneys’ fees) for and from which Buyer is obligated to indemnify and hold
Seller harmless in this Section 5(c).  If

 

7

 

(i) Buyer
is obligated to indemnify and hold Seller harmless in this Section 5(c) and
(ii) Seller receives the benefit of any indemnification and hold harmless
from Buyer’s Feasibility Representatives (by way of an assignment from Buyer to
Seller or otherwise), Buyer shall not be obligated to indemnify and hold Seller
harmless in this Section 5(c) to the extent of such benefit
received by Seller.

 

(d)           Confidential
Information.  Buyer shall
treat as confidential all information and materials furnished or made available
by Seller to Buyer in accordance with this Contract or obtained by Buyer in the
course of its investigation and Feasibility Study (collectively, “Confidential
Information”).  Buyer will not
divulge and will use its commercially reasonable diligence to prevent Buyer’s
Representatives (defined below) from divulging such information except as
required by law or as reasonably necessary to third parties engaged by Buyer
for the limited purpose of analyzing and investigating such information for the
purpose of consummating the transaction, including Buyer’s agents, attorneys,
representatives, consultants, prospective lenders, current and prospective
investors and their advisors, current and prospective financial partners, and
engineers in this transaction (collectively “Buyer’s Representatives”).  If Buyer elects to purchase the Property,
then Buyer and Buyer’s Representatives may disclose such confidential
information after the Closing. 
Notwithstanding anything to the contrary in this Section 5(d) or
in any other agreement to which a party hereto is bound, the Confidential
Information shall exclude, and Buyer may disclose, any information or
documentation that (i) is readily ascertainable by the general public, (ii) was
known to Buyer prior to the execution of this Contract other than information
provided by or on behalf of Seller, (iii) is deemed advisable by Buyer to
disclose to its officers, directors, members, managers, employees, agents,
consultants, members of professional firms serving it or potential lenders,
investors, consultants and brokers and others who need to know such information
or review such documentation for the purpose of assisting Buyer in connection
with the transaction contemplated by this Contract so long as such persons are
informed by Buyer of the confidential nature of such information and are
directed by Buyer to treat such information confidentially, (iv) is
required to be disclosed by applicable law, or (v) is deemed advisable by
Buyer or its counsel to be disclosed in connection with financial reporting,
securities disclosures or other legal, tax or financial requirements or
guidelines applicable to Buyer or any affiliate thereof, including any
disclosures to the Securities and Exchange Commission.  The provisions of this Section 5(d) shall
survive Closing or termination of this Contract.

 

(e)           Service
Contracts.  During the
Feasibility Period, Buyer shall have the right to review all Service Contracts
and Additional Occupancy Agreements. 
Buyer may notify Seller prior to the expiration of the Feasibility
Period of any Service Contracts or Additional Occupancy Agreements that Buyer,
in its discretion, approves.  All Service
Contracts and Additional Occupancy Agreements (other than the Non-Terminable
Contracts) that Buyer does not so approve shall be deemed disapproved, and
Seller shall, at Seller’s expense, terminate such disapproved Service Contracts
effective not later than the Closing Date. 
In all events, the property management agreement in effect with respect
to the Property, along with any Service Contract that is not delivered to
Buyer, shall be deemed to be disapproved by Buyer, and Seller shall, at Seller’s
expense, terminate such property management agreement and undelivered Service
Contracts effective not later than the Closing Date.  Notwithstanding the foregoing, Buyer shall be
deemed to have approved and shall have no right to reject those Service
Contracts and Additional Occupancy Agreements (“Non-Terminable Contracts”)
that, by their terms, cannot be terminated by Seller without the payment of a
penalty, termination fee, or other charge that
is greater than one month’s payment for services under such Service Contract.  The Non-Terminable Contracts are listed on Schedule
5(e).

 

8

 

6.             TITLE REVIEW
AND APPROVAL.

 

(a)                                 Seller shall
request that the Title Company and Underwriter, as applicable, deliver to Buyer
within five days after the Effective Date (i) a Commitment for Title
Insurance with copies of all recorded instruments affecting the Property and
recited as exceptions in such Commitment for Title Insurance (collectively, the
“Commitment”), (ii) reports of searches made of the Uniform
Commercial Code records of the county in which the Property is located, the
Secretary of State of the state in which the Property is located, and the
Secretary of State of the state in which Seller is organized (collectively, “UCC
Reports”) setting forth the state of title to the Personal Property, and (iii) a
current survey (or an update of an existing survey) (the “Survey”) of
the Property made on the ground by a registered professional land surveyor that
conforms to the current requirements of an ALTA/ACSM Land Title Surveys as
adopted by the American Land Title Association and American Congress on
Surveying and Mapping.  The Survey shall be certified to Buyer using
the form of certificate attached as Exhibit G.

 

(b)                                If Buyer has an
objection to items disclosed in the Commitment, UCC Reports, or Survey, Buyer
will have ten days after receipt of the Commitment, UCC Reports, and
Survey (whichever is last received) (the “Title Review Period”) to give
Seller written notice of its objections. 
If Buyer gives timely written notice of its objections, Seller shall
have the opportunity, but not an obligation, for five days (the “Cure Period”)
following delivery of Buyer’s notice, if any, to cure the same.  During the Cure Period, Seller shall respond
in writing to Buyer’s objections and shall utilize reasonable diligence to cure
any errors in the Commitment, but Seller shall have no obligation to expend any
money, to incur any contractual or other obligations, or to institute any
litigation in pursuing such efforts.  If
any objection is not satisfied within such time period, Buyer will elect within
five days of the expiration of the Cure Period, as its sole and exclusive
remedy, to either (i) terminate this Contract, in which case the Earnest
Money will be refunded to Buyer, and neither party shall have any further
rights or obligations pursuant to this Contract, other than as set forth herein
with respect to rights or obligations which survive termination, or (ii) waive
the unsatisfied objection (which will thereupon become a Permitted
Exception).  Any exception to title not
objected to by Buyer in the manner and within the time period specified in this
Section 6 will be deemed accepted by Buyer.  The phrase “Permitted Exceptions”
shall mean those exceptions to title set forth in the Commitment or Survey and
which have been accepted or deemed accepted by Buyer.  Notwithstanding the foregoing, in all events
and regardless of whether Buyer objects to such exceptions, on or before the
Closing, Seller shall: (A) discharge any voluntary lien created by Seller
that is secured by any portion of the Property; (B) discharge any lien for
delinquent ad valorem taxes; (C) discharge any mortgage or deed of trust
encumbering the Property; (D) discharge or bond around any mechanics’
liens; and (E) discharge all security interests reflected in the UCC
Reports (collectively, “Monetary Encumbrances”).

 

(c)                                 After the
Effective Date, Seller will not intentionally or deliberately place on the
Property any lien, encumbrance or other exception other than the Permitted
Exceptions.

 

7.             SUBMISSION
MATTERS AND ADDITIONAL MATTERS.

 

(a)                                 Submission
Matters.  Seller shall deliver to Buyer
within five days after the Effective Date, copies of the following (the “Submission
Matters”):

 

9

 

(i)                                  a standard form
of Tenant Lease used with respect to the Property;

 

(ii)                               all Tenant
Leases with Retail Tenants (“Retail Leases”);

 

(iii)                            all Service
Contracts relating to the ownership and operation of the Property;

 

(iv)          a list of the
Personal Property;

 

(v)           all licenses
and permits with respect to the ownership and operation of the Property,
including building permits and certificates of occupancy;

 

(vi)          the most
current real estate and personal property tax statements with respect to the
Property;

 

(vii)         to the extent
(and only to the extent) that such items are available and in Seller’s actual
possession or in the actual possession of Seller’s management company, all
warranties and guaranties relating to the Property, or any part thereof, or to
the Personal Property;

 

(viii)        a rent roll as
of a date not more than 30 days prior to the Effective Date (“Initial Rent
Roll”) prepared by the management company managing the Property showing, at
a minimum, the following information: (a) unit
number, (b) tenant name, (c) rental rate, (d) expiration date of
the Tenant Lease, (e) amount of deposits, and (f) move-in date;

 

(ix)          operating
reports since completion of construction and occupancy of the Property prepared
by the management company managing the Property, showing all items of income
and expense and all deposits;

 

(x)           to the extent
(and only to the extent) that such items are available and in Seller’s actual
possession or in the actual possession of Seller’s management company, all
environmental, engineering, and soils reports;

 

(xi)          to the extent
(and only to the extent) that such items are available and in Seller’s actual
possession or in the actual possession of Seller’s management company,
non-privileged correspondence and pleadings in pending lawsuits affecting the
Property, if any;

 

(xii)         a list of
repairs done to the Property after final completion of construction within the
last 12 months having a cost of more than $5,000;

 

(xiii)        to the extent
(and only to the extent) that such items are available and in Seller’s actual
possession or in the actual possession of Seller’s management company, all
documentation regarding any roof, foundation, or pest control (including
termite) work performed on the Property and the bonds and/or warranties of such
work;

 

(xiv)        a schedule of
all insurance claims after final completion of construction that relate to the
Property, including crime and casualty claims;

 

10

 

 

(xv)                           all orders of
any governmental agencies received after final completion of construction
affecting the Property;

 

(xvi)                        a description
of all pending and threatened litigation, if any, affecting the Property;

 

(xvii)                     any written
notices received by Seller after final completion of construction either (i) claiming
violation of any applicable law or restrictive covenant affecting any portion
of the Land, Improvements or Personal Property, or (ii) requiring or
calling attention to the need for any work, repairs, construction, alterations
or installation in connection with the Land and Improvements which is required
in order to comply with any law or restrictive covenant; and

 

(xviii)      to the extent
(and only to the extent) that such items are available and in Seller’s actual
possession or in the actual possession of Seller’s management company, copies
of any zoning information relating to the Property.

 

(b)                                 Additional
Submission Matters.  In
addition, Seller will cause to be made available to Buyer for inspection at the
Property or at Seller’s principal place of business the following (the “Additional
Submission Matters”), to the extent (and only to the extent) that such
items are available and in Seller’s actual possession or in the actual
possession of Seller’s management company:

 

(i)                                    copies of all
construction change orders and copies of all 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 Property in the
possession of or under the control of Seller;

 

(ii)                                a copy of the
current casualty insurance and business interruption or loss of rent insurance
policies, showing conditions, coverage and deductible amounts;

 

(iii)                             12 most recent
utility bills relating to the Property;

 

(iv)                              all Tenant
Leases; and

 

(v)                                 delinquency
logs, tenant complaint logs, repair/maintenance logs and records.

 

8.                                       BROKERS’ FEE.  Buyer and Seller represent and warrant to
each other that no real estate commissions, finders’ fees, or brokers’ fees
have been or will be incurred in connection with the sale of the Property by
Seller to Buyer other than (i) a commission payable by Buyer to Real
Estate Investment Group (George Diamond) (“Buyer’s Broker”) pursuant to
a separate written agreement between Buyer and Buyer’s Broker (provided,
however, Seller shall pay $50,000 of the commission payable to Buyer’s Broker),
and (ii) any commission payable by Seller to NAI Norris, Beggs &
Simpson  (“Seller’s Broker”)
pursuant to a separate written agreement between Seller and Seller’s
Broker.  Buyer and Seller will indemnify,
defend and hold each other harmless from any claim, liability, obligation, cost
or expense (including attorneys’ fees and expenses) for fees or commissions
relating to Buyer’s purchase of the Property asserted against either party by
any broker or other person (other than the Broker) claiming by, through or
under the indemnifying party or whose claim is based on the indemnifying party’s
acts.  The provisions of this Section 8
shall survive the Closing or any termination of this Contract.

 

11

 

9.                                       LIMITATION OF
SELLER’S REPRESENTATIONS AND WARRANTIES.  EXCEPT AS OTHERWISE SPECIFICALLY STATED IN SECTION 11OF
THIS CONTRACT OR IN ANY DOCUMENTS DELIVERED AT CLOSING, SELLER HEREBY
SPECIFICALLY DISCLAIMS ANY WARRANTY, GUARANTY OR REPRESENTATION, ORAL OR
WRITTEN, PAST, PRESENT OR FUTURE, OF, AS TO, OR CONCERNING (i) THE NATURE
AND CONDITION OF THE PROPERTY, INCLUDING THE WATER, SOIL AND GEOLOGY, AND THE
SUITABILITY THEREOF AND OF THE PROPERTY FOR ANY AND ALL ACTIVITIES AND USES
WHICH BUYER MAY ELECT TO CONDUCT THEREON, AND THE EXISTENCE OF ANY
ENVIRONMENTAL HAZARDS OR CONDITIONS THEREON (INCLUDING THE PRESENCE OF
ASBESTOS) OR COMPLIANCE WITH ANY OR ALL APPLICABLE LAWS.  BUYER ACKNOWLEDGES THAT IT WILL INSPECT THE
PROPERTY AND BUYER WILL RELY SOLELY ON ITS OWN INVESTIGATION OF THE PROPERTY
AND NOT ON ANY INFORMATION PROVIDED OR TO BE PROVIDED BY SELLER, EXCEPT AS SET
FORTH IN SECTION 11 OF THIS CONTRACT OR IN ANY DOCUMENTS DELIVERED
AT CLOSING.  THE SALE OF THE PROPERTY AS
PROVIDED FOR HEREIN IS MADE ON AN “AS  IS,” “WHERE  IS”
BASIS AND “WITH  ALL  FAULTS,” AND BUYER EXPRESSLY
ACKNOWLEDGES THAT, IN CONSIDERATION OF THE AGREEMENTS OF SELLER HEREIN, EXCEPT
AS OTHERWISE SPECIFIED IN SECTION 11 OF THIS CONTRACT OR IN ANY
DOCUMENTS EXECUTED AND DELIVERED BY SELLER AT CLOSING, SELLER MAKES NO WARRANTY
OR REPRESENTATION, EXPRESS OR IMPLIED, OR ARISING BY OPERATION OF LAW,
INCLUDING, BUT NOT LIMITED TO, ANY WARRANTY OF CONDITION, HABITABILITY,
MERCHANTABILITY, TENANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE, IN RESPECT
OF THE PROPERTY.

 

10.                                 DEFAULT.

 

(a)                                  Default by
Buyer. Unless otherwise provided for herein, if the transaction contemplated
hereby is not consummated by reason of Buyer’s breach or other failure to
timely perform all obligations and conditions to be performed by Buyer, then
Seller may, as its sole and exclusive remedy (whether at law or in equity),
terminate this Contract and receive the Earnest Money as liquidated damages;
Buyer and Seller hereby agree that actual damages would be difficult or
impossible to ascertain and such amount is a reasonable estimate of the damages
for such breach or failure.  Upon such
payment of the Earnest Money, this Contract shall terminate and neither party
shall have any further rights or obligations pursuant to this Contract, other
than as set forth herein with respect to rights or obligations which survive
termination.  All other remedies are
expressly waived by Seller.

 

(b)                                 Default by
Seller.  If the transaction
contemplated hereby is not consummated by reason of Seller’s breach or other
failure to timely perform all obligations and conditions to be performed by
Seller, then Buyer may, as its sole and exclusive remedy (whether at law or in
equity), either (i) terminate this Contract and receive the Earnest Money,
whereupon Seller shall reimburse to Buyer for all out-of-pocket expenses
(including attorney’s fees, engineering fees, consultant’s fees, environmental
fees, and other costs incurred in connection with the potential acquisition of
the Property, the inspection and review of the Property and the negotiation of
this Contract) up to a maximum of $100,000 (provided Buyer provides evidence of
such costs to Seller), and neither party shall have any further rights or
obligations pursuant to this Contract, other than as set forth herein with
respect to rights or obligations which survive termination, or (ii) enforce
specific performance of Seller’s obligations hereunder; provided, however, if
specific performance is not an available remedy, then Buyer may exercise its
remedy in the preceding clause (i), whereupon Seller shall reimburse Buyer’s 

 

12

 

out-of-pocket expenses and
other costs as provided in, and subject to the cap in, such clause.  All other remedies are expressly waived by
Buyer.

 

(c)                                  Cure Period for
Other Defaults.  Subject to Sections
10(a) and 10(b), if either party is in default under this Contract,
then the non-defaulting party may not take any remedy expressly granted to it
under this Contract unless and until (i) such non-defaulting party
delivers notice of the alleged default, in reasonable detail, to the defaulting
party, and (ii) the alleged default remains uncured at 5:00 p.m.,
prevailing Pacific Time, on the third business day following delivery of the
default notice.  If this Contract does
not expressly provide for a remedy with respect to a particular default under
this Contract, then the non-defaulting party’s sole and exclusive remedy shall
be as follows: (i) in the case of a default by Buyer after the expiration
of the Feasibility Period, Seller may terminate this Contract and receive the
Earnest Money as liquidated damages; and (ii) in the case of a default by
Seller, Buyer may terminate this Contract and receive the Earnest Money,
whereupon Seller shall reimburse to Buyer for all out-of-pocket expenses
(including attorney’s fees, engineering fees, consultant’s fees, environmental
fees, and other costs incurred in connection with the potential acquisition of
the Property, the inspection and review of the Property and the negotiation of
this Contract) up to a maximum of $100,000 (provided Buyer provides evidence of
such costs to Seller); after which, in either such case, neither party shall
have any further rights or obligations pursuant to this Contract, other than as
set forth herein with respect to rights or obligations which survive
termination.  The notice and cure
provisions of this Section 10(c) do not apply to a failure by
Buyer to deliver the Earnest Money or the Purchase Price within the times
required by this Contract.

 

11.                                 REPRESENTATIONS
AND WARRANTIES OF SELLER.

 

(a)                                  Seller hereby
represents and warrants to Buyer, which representations and warranties will be
deemed made by Seller to Buyer as of the Effective Date and also as of the
Closing Date, that the facts recited below are true and correct.  No examination or investigation of the
Property (or any portion thereof), the Submission Matters, or the Additional
Submission Matters by or on behalf of Buyer shall in any way modify, affect, or
diminish the representations and warranties of Seller contained herein.  The representations and warranties contained
in this Contract shall survive the Closing for a period of 12 months.

 

(i)                                    There are no
parties in possession of any portion of the Property except Seller and tenants
under Tenant Leases, except for parties in possession pursuant to
Additional  Occupancy Agreements.

 

(ii)                                Seller has the
requisite power and authority to sell and convey the Property as provided in
this Contract and to carry out Seller’s obligations hereunder, and that all
requisite action necessary to authorize Seller to enter into this Contract and
to carry out Seller’s obligations hereunder has been, or on the Closing Date
will have been, taken.

 

(iii)                              Since
completion of construction of the Improvements, except as disclosed in the
Submission Matters and Additional Submission Matters, Seller has received no
written notice either (i) claiming violation of any applicable law or
restrictive covenant affecting any portion of the Land, Improvements or
Personal Property, or (ii) requiring or calling attention to the need for
any work, repairs, construction, alterations or installation in connection with
the Land and Improvements which is 

 

13

 

required in order to comply
with any law or restrictive covenant. 
Seller’s marketing signage at the Property does not comply with
applicable sign ordinances.  Seller will
provide to Buyer copies of any notices of such violations it may receive
following the Effective Date of this Contract.

 

(iv)                             There is no
action, suit, proceeding or claim affecting Seller or the Land, Improvements or
Personal Property or any portion thereof relating to or arising out of the
ownership, operation, use or occupancy of the Property threatened, pending, or
being prosecuted in any court or by or before any federal, state, county or
municipal department, commission, board, bureau or agency or other governmental
instrumentality.

 

(v)                                Seller has not
claimed the benefit of laws permitting a special use valuation for the purposes
of payment of ad valorem taxes on the Property, other than an exemption during
construction under ORS 307.330 through the 2009/2010 tax year.

 

(vi)                             To Seller’s
Knowledge, except as disclosed in the Existing Environmental Reports (defined
below), no portion of the Property has ever been used as a landfill or as a
dump to receive garbage, refuse, waste, or fill material whether or not
hazardous, and there are and have been no Hazardous Substances (defined below)
located upon, stored, handled, installed or disposed in, on or about the
Property or any other location within the vicinity of the Property in amounts
or quantities which would constitute a violation of the Applicable
Environmental Laws (defined below).  As
used in this Contract, the term “Hazardous Substances” means any
materials, waste, contaminates, pollutants, or other substances which are
toxic, dangerous, radioactive, disease causing, carcinogenic, infectious,
caustic, or contain petroleum products or by-products, asbestos, heavy metals,
or which are defined as toxic, dangerous to health or otherwise hazardous by
reference to the following sources as amended from time to time: (i) the
Resource Conservation and Recovery Act of 1976, 42 USC §1801, et. seq.; (ii) the
Comprehensive Environmental Response Compensation and Liability Act of 1980, 42
USC §9601 et. seq.; (iii) any applicable laws issued or promulgated under
or pursuant to any of those laws or otherwise by any department, agency or
other administrative, regulatory or judicial body; or (iv) any applicable
laws related to environmental matters (items (i) through (iv) being referred
to herein as the “Applicable Environmental Laws”).  Seller agrees to indemnify and hold Buyer
harmless from and against any and all costs, liabilities, expenses and damages,
including attorneys’ fees, fines, costs of clean-up or remediation and penalties,
whether arising from statutory, strict liability, negligence or equity claims,
but not to the extent resulting from the negligence or willful misconduct of
Buyer or its agents or employees, resulting from a breach of this warranty
which shall last indefinitely to the extent, and only to the extent, that such
breach was in existence at or prior to Closing. 
As used in this Contract, the term “Existing Environmental Reports”
means the following:

 

·      Asbestos
Abatement Air Clearance Results dated October 8, 2007;

·      Asbestos
Memorandum for ACM Sampling dated May 24, 2007;

·      Asbestos
Memorandum for Remaining Asbestos Materials dated August 21, 2007;

·      Asbestos
Memorandum for Additional Asbestos Materials August 28, 2007;

·      DEQ, Air
Clearance & Waste Report dated January 2, 2008;

 

14

 

·      Geotechnical
Engineering Report dated July 21, 2006;

·      Geotechnical
Addendum #1 (Correcting Figures 6 & 7) dated August 4, 2006;

·      Geotechnical
Addendum #2 (Tieback Shoring) dated April 26, 2007;

·      Geotechnical
Addendum #3 (Revised Lateral Shoring) dated May 17, 2007;

·      Geotechnical
Addendum #4 (Mat Foundation) dated July 17, 2007;

·      Geotechnical
Memorandum (Mat Foundation & Stone Columns) dated May 23, 2007;

·      Geotechnical
Memorandum (Basement & Groundwater Control) dated September 27,
2007;

·      Geotechnical
Memorandum (Additional Stone Columns) dated November 9, 2007;

·      Geotechnical
Memorandum (Infiltration Testing) dated August 21, 2006;

·      Phase I
Environmental, Limited Asbestos & Lead Based Paint Survey dated May 2,
2006; and,

·      Phase II
Environmental Site Assessment May 23, 2006.

 

(vii)                          All information
set forth in the Initial Rent Roll is true, correct, and complete in all material
respects and, as of the Closing Date all information set forth in the Closing
Rent Roll will be true, correct, and complete in all material respects as of
the date of such Closing Rent Roll.  All
Tenant Leases referenced in the Initial Rent Roll are, as of the date of this
Contract, the only leases entered into by Seller currently affecting the
Property (other than the Additional Occupancy Agreements) and, except as
otherwise provided to the contrary in the Initial Rent Roll, all such Tenant
Leases are in full force and effect and any tenant allowances required to be
paid by Seller prior to Closing under the provisions of the Tenant Leases have
been paid in full.  At the Closing, all
Tenant Leases referenced in the Closing Rent Roll shall be the only leases
(other than the Additional Occupancy Agreements) entered into by Seller then
currently affecting the Property and, except as otherwise provided in the
Closing Rent Roll, all such Tenant Leases shall be in full force and effect as
of Closing.

 

(viii)                       To Seller’s
Knowledge, the Submission Matters and Additional Submission Matters prepared by
Seller are true and correct in all material respects and fairly and accurately
describe the matters to which they relate. 
Notwithstanding the foregoing, all items provided to Buyer by third
parties or prepared by parties other than Seller are not represented or
warranted as to their accuracy by Seller.

 

(ix)                               The Initial
Rent Roll and the operating reports delivered with the Submission Matters are
those which Seller customarily relies upon in the ordinary course of its
business.

 

(b)                                 As used in this
Contract, “Seller’s Knowledge” means the current actual knowledge of,
the Kelly T. Saito, a principal of Seller, and Damin Tarlow, Manager of the
property manager for the Property (each, a “Seller Representative”)
without regard to the knowledge of any former or other employees, agents or
contractors of Seller. The Seller Representatives shall not have any personal
liability whatsoever for the representations made herein or for any other
matters relating to this Contract.

 

12.                                 CONDITIONS TO
BUYER’S OBLIGATIONS.  If any of
the following conditions precedent to Buyer’s obligations under this Contract
is not satisfied, then Buyer may, at its option, waive such

 

15

 

condition, or, as Buyer’s
sole and exclusive remedy, terminate this Contract by notice in writing to
Seller and receive back the Earnest Money. 
The following shall be conditions precedent to Buyer’s obligations hereunder:

 

(a)                                  Seller shall
have complied with all covenants of Seller set forth herein;

 

(b)                                 All
representations and warranties of Seller shall be true and correct, in all
material respects, as of the Closing Date;

 

(c)                                  On or before
the expiration of the Feasibility Period, Seller shall have delivered to Buyer
the Tenant Estoppels for all Retail Leases.

 

(d)                                 On the Closing
Date, there shall be no third party litigation pending or threatened,
seeking  to enjoin the consummation of
the sale and purchase hereunder,  to
recover title to the Property, or any part thereof or any interest therein, to
increase substantially ad valorem taxes theretofore or thereafter assessed
against the Land and Improvements or  to
enjoin the violation of any law, rule, regulation, restrictive covenant or
zoning ordinance that may be applicable to the Land, Improvements, or Personal
Property; and

 

(e)                                  (i) There
must not have been any material adverse change in the environmental condition
of the Property after expiration of the Feasibility Period, (ii) there
must not have been any material adverse change in the matters reflected in the
Commitment, the UCC Reports, or the Survey after the expiration of the Title
Review Period, and (iii) there must not be any encumbrance or title defect
affecting the Property, or any portion thereof, other than those described in
the Commitment, the UCC Reports or the Survey, or previously approved by Buyer.

 

13.                                 COVENANTS OF
SELLER.

 

(a)                                  Continued
Operations.  Except as
otherwise provided in Section 4(i), from the Effective Date until
Closing, Seller will (i) maintain and operate the Property in its current
state and condition in accordance with Seller’s customary manner, reasonable
wear and tear and damage from casualty excepted, (ii) continue all
insurance policies relative to the Property in full force and effect, (iii) 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 all development,
building and use permits and certificates of occupancy, (v) perform, when
due, all material obligations under any and all agreements relating to the
Property and otherwise in accordance with applicable laws, ordinances, rules,
and regulations, (vi) promptly notify Buyer of any fact of which Seller
becomes aware which would cause any representations or warranties contained in
this Contract to become false, and (vii) promptly forward to Buyer any
notices of code violations Seller receives.

 

(b)                                 Rent Ready
Condition.  If any
apartment unit is vacated seven days or more prior to Closing, then, prior to
Closing, Seller shall use commercially reasonable diligence to return such unit
to rentable condition in accordance with Seller’s customary cleaning, painting,
and repair standards for vacant units (the condition of such an apartment unit
after cleaning is referred to herein as a “Rent Ready Condition”).  To the extent any such units are not in a
Rent Ready Condition, the Purchase Price shall be credited in an amount equal
to $500 for each unit that

 

16

 

is not in a Rent Ready
Condition.  Notwithstanding the
foregoing, no adjustment shall be due for any unit because of the incomplete
Finish Work.

 

(c)                                  Lease
Guidelines.  From the
Effective Date through Closing, Seller shall conduct its leasing activities in
the normal course of business; provided, however, that after the Effective Date
(i) Seller shall not enter into any new leases with corporate apartment
providers without Buyer’s prior written approval, and (ii) Seller shall
not enter into any new leases for retail uses without Buyer’s prior written
approval.  All new Tenant Leases shall be
on the form of lease currently used by Seller or such other form as may be
approved by Buyer in its reasonable discretion. 
All new leases shall be entered into in conformity with the lease
guidelines (“Lease Guidelines”) attached hereto as Exhibit I,
including lease term, rental rates and leasing concessions, or as otherwise
approved by Buyer in its reasonable discretion.  Seller will not
grant any move-in incentive to tenants greater those provided in the Lease
Guidelines.

 

(d)                                 Website.  Seller
shall maintain the Website and related material though the Closing, except that
upon Closing, Seller may remove all references to Seller as owner and to the
property management company, as well as any internet lease concessions and
Seller’s intellectual property described in Schedule
1(e).  Seller shall
maintain the hosting of the Website at its current web-hosting location for 30
days after Closing, after which Buyer shall be responsible for arranging for
its own hosting of the Website.  The
provisions of this Section 13(d) shall survive the Closing.

 

(e)                                  Completion of
Finish Work.  As of the
Effective Date, the following finish work remains to be completed in the
Property (collectively, the “Finish Work”):  (i) appliance punch list items
consisting of replacement of knobs, accessories, and final adjustments in approximately
14 units; and (ii) installation of window shades in approximately 84
units; and (iii) installation of sliding room dividers in approximately 50
units; and (iv) completion of Tenant Improvements for retail tenant “Natural
Mart.”  Seller shall complete all of the
Finish Work, at Seller’s sole cost and expense, on or before January 15,
2010.  Seller anticipates that the cost
to complete the Finish Work is $242,000 (the “Finish Work Amount”).  At Closing, 110% of the Finish Work Amount
shall be withheld from the Purchase Price paid by Buyer and shall be held in
escrow by the Title Company pursuant to the provisions of the Escrow
Agreement.  Upon completion of the Finish
Work, as reasonably determined by Seller and Buyer, on a lien-free basis, Buyer
shall instruct the Title Company to release the escrowed funds to Seller.  If Seller does not complete the Finish Work
by January 15, 2010, then Buyer may elect to complete the Finish Work, in
which event Seller shall instruct the Title Company to release to Buyer the
portion of escrowed funds required to reimburse Buyer’s actual costs and
expenses in completing the Finish Work, and the balance of the escrowed funds
shall be released to Seller.  Seller
shall be responsible of any costs and expenses of Buyer actually incurred in
completing the Finish Work that are in excess of the amount of the escrowed
funds released to Buyer.  The provisions
of this Section 13(e) shall survive the Closing.

 

14.                                 CONDEMNATION.  Immediately upon obtaining knowledge of the
institution of any proceedings for the condemnation of the Property, or any
portion thereof, or any other proceedings arising out of injury or damage to
the Property, or any portion thereof, Seller will notify Buyer of the pendency
of such proceedings.  If any condemnation
proceedings affecting the Property, or any portion thereof, are commenced or
threatened prior to Closing, then Buyer may, at its option, (i) terminate
this Contract whereupon the Earnest Money shall be refunded to Buyer, and
neither party shall have any further rights or obligations pursuant to this
Contract, other than as set forth herein with respect to rights or obligations
that survive termination; or (ii) waive its objections.

 

17

 

15.                                 DAMAGE TO
PROPERTY.  Seller
agrees to give Buyer prompt notice of any fire or other casualty affecting the
Land, the Improvements or the Personal Property between the Effective Date and
the Closing.  Buyer or its designated
agents may enter upon the Property from time to time during normal business
hours and upon advance notice to Seller in accordance with this Contract for
the purpose of inspecting any such casualty.

 

(a)                                  If, prior to
the Closing, the Property is damaged by a fire or other casualty that would cost
$200,000 or more to repair, then in such event, Buyer may, at its option, elect
to terminate this Contract by written notice to Seller within 20 days after the
date of Sellers’ notice to Buyer of the casualty or at the Closing, whichever
is earlier, in which case the Earnest Money will be refunded to Buyer, and
neither party will have any further rights or obligations hereunder, other than
as set forth herein with respect to rights and obligations which survive
termination.  If neither Buyer nor Seller
timely makes its election to terminate this Contract, then the Closing will
take place as provided herein without reduction of the Purchase Price, and
there will be assigned to Buyer at the Closing all interest of Seller in and to
any casualty insurance proceeds received or to be received by reason of such
damage or destruction and shall tender at Closing the deductible amounts under
Seller’s insurance policies (including business interruption and rental loss
insurance of Seller that would be applicable to the period after the Closing).

 

(b)                                 If, prior to
the Closing, the Property is damaged by a fire or other casualty that would
cost less than $200,000 to repair, and if: (i) the insurance carrier
affirms and acknowledges its liability for such damage, (ii) the insurance
proceeds are sufficient (when added to the deductible amount under such policy)
to pay the full cost of repairing such damage or destruction, and (iii) Seller
tenders at Closing the full amount of the deductible portion of such insurance
loss (including business interruption and rental loss insurance of Seller that
would be applicable to the period after the Closing), then in such event this
Contract shall not terminate, and, at Closing, Seller shall assign and transfer
to Buyer all of its right, title, and interest in and to such insurance
proceeds and deductible amounts.  If the
insurance proceeds are insufficient (when added to the deductible amount under
such policies) to pay the full cost of repairing such damage or destruction,
and if Seller tenders the difference at Closing, then this Contract shall not
terminate, and, at Closing, Seller shall assign and transfer to Buyer all such
insurance proceeds and the deductible amount. 
If Seller does not tender the difference at Closing, then Buyer may, at
its option, elect to terminate this Contract by written notice to Seller, in
which case the Earnest Money will be refunded to Buyer, and neither party will
have any further rights or obligations hereunder, other than as set forth
herein with respect to rights and obligations which survive termination.

 

(c)                                  If and to the
extent that Seller is required in this Section 15 to assign and
transfer to Buyer all of Seller’s right, title, and interest in and to
insurance proceeds and deductible amounts, (i) Seller shall use
commercially reasonable efforts to cause its insurance carriers pay any unpaid
insurance proceeds (including business interruption and rental loss insurance
of Seller that would be applicable to the period after the Closing) to Buyer
and for Buyer’s benefit, and (ii) if Seller’s insurance carriers do not
permit assignment of such insurance proceeds to Buyer, then Seller shall obtain
from its insurance carriers a policy endorsement to each applicable policy
pursuant to which Buyer is added as a loss payee as of the Closing Date under
each applicable policy.  The provisions
of this Section 15(c) shall survive the Closing.

 

18

 

16.                                 REPRESENTATIONS
AND WARRANTIES OF BUYER.  Buyer represents and warrants to
Seller, which representations and warranties shall be deemed made by Buyer to
Seller as of the Effective Date and also as of the Closing Date:

 

(a)                                  Buyer has the
requisite power and authority to purchase the Property as provided in this
Contract and to carry out Buyer’s obligations hereunder, and that all requisite
action necessary to authorize Buyer to enter into this Contract and to carry
out Buyer’s obligations hereunder has been, or on the Closing Date will have
been, taken.

 

(b)                                 No petition has
been filed by or against Buyer under the Federal Bankruptcy Code or any similar
laws.

 

17.                                 ASSIGNMENT.  Except as otherwise provided herein, Buyer
may not assign this Contract without Seller’s prior written consent, such
consent to be given or denied in Seller’s reasonable discretion.  Notwithstanding the foregoing, Buyer may
assign its rights under this Contract, in whole or in part, to (i) any
affiliate or direct or indirect subsidiary of Buyer or (ii) any entity in
which Buyer, or the principals thereof, have control as defined herein.  Upon any such assignment, the assignor shall
be released from its liabilities hereunder provided such assignee assumes the
same provided such assignee provides adequate proof of insurance in the
amount of not less than $1,000,000 covering the negligence of such assignee and
contractual indemnity obligations of such assignee under Section 5(c).  For purposes of this Contract, “affiliate”
means, in respect of Buyer: (a) any entity that controls, is controlled
by, or is under common control, with the entity in question, or (b) any
entity or affiliate thereof that participates in any investment program
sponsored by Behringer Harvard Holdings, LLC, or any of its direct or indirect
affiliates or subsidiaries.  For purposes
of this Contract, the term “control” means the possession, directly or
indirectly, of the power to direct or cause the direction of the management and
policies of an entity, whether through the ownership of voting securities or
otherwise.

 

18.                                 EFFECTIVE DATE.  The
“Effective Date” is the date when an original of this Contract is
executed by Seller and by Buyer and such executed original is delivered to the
Title Company.

 

19.                                 EXCHANGE.  Buyer may consummate the acquisition of the
Property as part of a like kind exchange (the “Exchange”) pursuant to Section 1031
of the Internal Revenue Code of 1986, as amended (the “Code”), and, in
connection therewith may assign its rights under this Contract to a qualified
intermediary.  Seller will reasonably
cooperate with Buyer in the Exchange provided that Buyer pays any additional
costs that would not otherwise have been incurred by Seller or Buyer had Buyer
not consummated its purchase through the Exchange.  The Closing shall not, as a result of the
Exchange, be delayed.

 

20.                                 AUDIT BY BUYER.  Seller
acknowledges that Buyer may cause to be prepared audited financial statements
with respect to the Property in compliance with the policies of Buyer and
certain laws, including applicable regulations promulgated by the Securities and
Exchange Commission.  Seller shall use
commercially reasonable efforts to cooperate with Buyer’s auditors in the
preparation of such audited financial statements (including making available
for interview by Buyer and Buyer’s auditors the management personnel of Seller’s
property manager who are responsible for the day-to-day operation of the
Property and the keeping of the books and records in respect of the operation
of the Property).  Seller acknowledges
that any such audit may require review of records existing for up to three
years prior to the date of Closing.  The
provisions of this Section 20 shall survive the Closing for a
period of 12 months.

 

19

 

21.                                 PUBLICITY.  Seller
and Buyer each agrees that (i) prior to the Closing, neither Seller nor
Buyer shall issue any press release with respect to the transaction
contemplated by this Contract without the prior consent of the other, except to
the extent required by applicable law or as may otherwise be permitted pursuant
to Section 5(d), and (b) after the Closing, either Seller or
Buyer shall have the right to issue a press release or private communication
announcing the purchase and sale of the Property and the resulting ownership
and control of the Property so long as the release does not, except to the
extent required by applicable law or as may otherwise by permitted pursuant to Section 5(d),
disclose the economic terms thereof (a “Permitted Release”).  Notwithstanding the foregoing, any press
release other than a Permitted Release issued by either Seller or Buyer shall
be subject to the review and approval of the other party hereto (which approval
shall not be unreasonably withheld, conditioned or delayed), except to the
extent required by applicable law or as may otherwise by permitted pursuant to Section 5(d),
in which event the review and approval of the other party hereto shall not be
required.

 

22.                                 ENERGY TAX
CREDITS AND INCENTIVES.  All tax credits and incentives
available as a result of sustainable development or LEED certification of the
Property shall be retained by Seller, including the BETC credits from the State
of Oregon and cash incentives from Energy Trust.  Buyer agrees (at no cost
or expense to Buyer) to reasonably cooperate with Seller’s efforts to obtain
the tax credits and incentives, which may include execution of consents or
waivers as successor owner of the Property.  The provisions of this Section 22
shall survive the Closing.

 

23.                                 MISCELLANEOUS.

 

(a)                                  Any notice
required or permitted to be delivered hereunder shall be in writing and shall
be deemed received: (i) upon receipt when personally delivered; (ii) upon
deposit when sent by nationally-recognized overnight courier service, charges
prepaid, and properly addressed;  (iii) upon
confirmation of successful transmission to each recipient’s facsimile machine
when sent by facsimile; or (iv) upon transmission by electronic mail
(provided that receipt is confirmed by telephone or in a return electronic mail
message sent by the recipient or an assistant thereof); provided, however,
notices sent pursuant to Section 10(c) shall not be
transmitted by electronic mail.  For
purposes of this Section 23(a), the addresses of each party will be
that set forth below the signature of such party hereto with a copy to the
other addressees set forth below the signature of such party.  Either party may change its address for
notice from time to time by delivery of at least ten days prior written notice
of such change to the other party hereto in the manner prescribed herein.

 

(b)                                 The Article and
Section headings in this Contract are for convenience of reference only
and shall not be deemed to alter or affect the meaning or interpretation of any
provision hereof.  Unless the context
otherwise requires, (i) all references to Sections, Schedules or Exhibits
contained in this Contract are references to sections, schedules and exhibits
of or to this Contract, (ii) words in the singular include the plural and vice versa, and (iii) words of any gender include each
other gender.  Whenever in this Contract,
any party is permitted or required to make a decision in its discretion, give
its approval, or elect an option, such party shall be entitled to act in its
sole and absolute discretion in making such decision, giving such approval, or
exercise such option, unless a different standard is expressly provided in the
applicable provision hereof.  No
provision of this Contract will be interpreted in favor of, or against, any
party hereto by reason of the extent to which any such party hereto or its
counsel participated in the drafting hereof or by reason of the extent to which
any such provision is inconsistent with any prior draft hereof or thereof.

 

20

 

 

(c)                                  As used in this
Contract the following words or phrases have the following meanings:  (i) “hereby,” “herein,” “hereof,”
“hereto,” “hereunder” and words of similar import refer to this
Contract as a whole and not to any particular provision hereof; (ii) “include,”
“including” or derivatives thereof means “including without limitation”;
and (iii) “law” means any statute, regulation, rule, judicial order
and any other legal pronouncement having the effect of law.

 

(d)                                 Seller shall
remove the Property from the market upon execution of this Contract and deal
exclusively with Buyer until the expiration of the Feasibility Period and
thereafter during the term of this Contract. 
If Buyer elects to terminate this Contract during the Feasibility
Period, or if this Contract otherwise terminates, then the requirement to deal
exclusively with Buyer shall no longer apply.

 

(e)                                  This Contract
will be construed under and in accordance with the laws of the State of Oregon,
and all obligations of the parties created hereunder are performable in
Multnomah County, Oregon.

 

(f)                                    Any party to
this Contract who is the prevailing party in any legal proceeding against the
other party brought under or with respect to this Contract or transaction will
be additionally entitled to recover court costs and reasonable attorneys’ fees
from the non-prevailing party.

 

(g)                                This Contract
will be binding upon and inure to the benefit of the parties hereto, their
respective heirs, executors, administrators, legal representatives, successors,
and permitted assigns.  A document or
signature page transmitted by facsimile or circulated by electronic mail
shall be binding on any party whose signature appears thereon.

 

(h)                                 In case any one
or more of the provisions contained in this Contract shall for any reason be
held to be invalid, illegal, or unenforceable in any respect, such invalidity,
illegality, or unenforceability will not affect any other provision hereof, and
this Contract will be construed as if such invalid, illegal, or unenforceable
provision had never been contained herein.

 

(i)                                    Except for the
Inspection Agreement dated November 6, 2009, between Buyer and Seller,
this Contract constitutes the sole and only agreement of the parties hereto
with respect to the subject matter hereof and supersedes any prior
understandings or written or oral agreements between the parties respecting the
subject matter hereof and cannot be changed except by their written consent.

 

(j)                                     Time is of the
essence in the performance of this Contract.

 

(k)                                 The parties may
execute this Contract in one or more identical counterparts, all of which when
taken together will constitute one and the same instrument.

 

(l)                                    Whenever any
determination is to be made or action to be taken on a date specified in this
Contract, if such date shall fall upon a Saturday, Sunday or holiday observed
by federal savings banks in the State of Oregon, the date for such
determination or action will be extended to the first business day immediately
thereafter.

 

(m)                               THE REAL
PROPERTY DESCRIBED IN THIS INSTRUMENT MAY NOT BE WITHIN A FIRE PROTECTION
DISTRICT PROTECTING STRUCTURES.  THE REAL
PROPERTY IS SUBJECT TO LAND USE LAWS AND REGULATIONS THAT, IN FARM OR FOREST
ZONES, MAY NOT AUTHORIZE CONSTRUCTION OR SITING OF A RESIDENCE AND 

 

21

 

THAT LIMIT LAWSUITS AGAINST
FARMING OR FOREST PRACTICES, AS DEFINED IN ORS 30.930, IN ALL ZONES.  BEFORE SIGNING OR ACCEPTING THIS INSTRUMENT,
THE PERSON TRANSFERRING FEE TITLE SHOULD INQUIRE ABOUT THE PERSON’S RIGHTS, IF
ANY, UNDER ORS 195.300, 195.301 AND 195.305 TO 195.336 AND SECTIONS 5 TO 11,
CHAPTER 424, OREGON LAWS 2007.  BEFORE
SIGNING OR ACCEPTING THIS INSTRUMENT, THE PERSON ACQUIRING FEE TITLE TO THE
REAL PROPERTY SHOULD CHECK WITH THE APPROPRIATE CITY OR COUNTY PLANNING
DEPARTMENT TO VERIFY THAT THE UNIT OF LAND BEING TRANSFERRED IS A LAWFULLY
ESTABLISHED LOT OR PARCEL, AS DEFINED IN ORS 92.010 OR 215.010, TO VERIFY THE
APPROVED USES OF THE LOT OR PARCEL, TO VERIFY THE EXISTENCE OF FIRE PROTECTION
FOR STRUCTURES AND TO INQUIRE ABOUT THE RIGHTS OF NEIGHBORING PROPERTY OWNERS,
IF ANY, UNDER ORS 195.300, 195.301 AND 195.305 TO 195.336 AND SECTIONS 5 TO 11,
CHAPTER 424, OREGON LAWS 2007.

 

 

REMAINDER OF PAGE
INTENTIONALLY BLANK.

SIGNATURE PAGE(S) FOLLOWS.

 

22

 

EXECUTED
on the dates set forth below to be effective as of the Effective Date.

 

	
   

  	
  SELLER:

  
	
   

  	
   

  
	
   

  	
  4TH &
  HARRISON INVESTORS, LLC,

  
	
   

  	
  an Oregon limited liability company

  
	
   

  	
   

  
	
   

  	
  By:

  	
  4th & Harrison
  Development, LLC,

  
	
   

  	
   

  	
  an
  Oregon limited liability company,

  
	
   

  	
   

  	
  its
  manager

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/
  Kelly Saito

  
	
   

  	
   

  	
  Name:

  	
  Kelly
  Saito

  
	
   

  	
   

  	
  Title:

  	
  Manager

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Date
  signed: 

  	
  November 17,
  2009

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Address:

  
	
   

  	
   

  
	
   

  	
   

  	
  4th & Harrison
  Investors, LLC

  
	
   

  	
   

  	
  c/o
  Gerding Edlen Development

  
	
   

  	
   

  	
  1120
  NW Couch Street, Suite 600

  
	
   

  	
   

  	
  Portland,
  Oregon 97209

  
	
   

  	
   

  	
  Attention:
  Mark Edlen

  
	
   

  	
   

  	
  Telephone:
  593-299-6000

  
	
   

  	
   

  	
  Facsimile:
  503-299-6703

  
	
   

  	
   

  	
  Email:
  mark.edlen@gerdingedlen.com

  
	
   

  	
   

  	
   

  
	
   

  	
  with
  a copy to:

  
	
   

  	
   

  
	
   

  	
   

  	
  Dunn
  Carney Allen Higgins & Tongue LLP

  
	
   

  	
   

  	
  851
  SW Sixth Avenue, Suite 1500

  
	
   

  	
   

  	
  Pacific
  First Center

  
	
   

  	
   

  	
  Portland,
  Oregon 97204

  
	
   

  	
   

  	
  Attention:
  Gilbert E. Parker

  
	
   

  	
   

  	
  Telephone:
  503-306-5315

  
	
   

  	
   

  	
  Facsimile:
  503-224-7324

  
	
   

  	
   

  	
  Email:
  gparkner@dunncarney.com

  
	
   

  	
   

  	
   

  
							

 

 

	
   

  	
  BUYER:

  
	
   

  	
   

  
	
   

  	
  BEHRINGER
  HARVARD MULTIFAMILY OP I LP,

  
	
   

  	
  a
  Delaware limited partnership

  
	
   

  	
   

  
	
   

  	
  By:

  	
  BHMF, Inc.,

  
	
   

  	
   

  	
  a
  Delaware corporation,

  
	
   

  	
   

  	
  its
  general partner

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/
  Robert T. Poynter

  
	
   

  	
   

  	
  Name:

  	
  Robert
  T. Poynter

  
	
   

  	
   

  	
  Title:

  	
  Vice
  President

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Date
  signed:  

  	
  November 16,
  2009

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Address:

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  Behringer
  Harvard Multifamily OP I LP

  
	
   

  	
   

  	
   

  	
  15601
  Dallas Parkway, Suite 600

  
	
   

  	
   

  	
   

  	
  Addison,
  Texas 75001

  
	
   

  	
   

  	
   

  	
  Attention:
  Mark T. Alfieri

  
	
   

  	
   

  	
   

  	
  Telephone:
  214-655-1600

  
	
   

  	
   

  	
   

  	
  Facsimile:
  214-655-1610

  
	
   

  	
   

  	
   

  	
  Email:
  malfieri@behringerharvard.com

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  with
  a copy to:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  Miller, Egan,
  Molter & Nelson LLP

  
	
   

  	
   

  	
   

  	
  4514 Cole Avenue,
  Suite 1250

  
	
   

  	
   

  	
   

  	
  Dallas, Texas 75205

  
	
   

  	
   

  	
   

  	
  Attention: Walter D.
  Miller

  
	
   

  	
   

  	
   

  	
  Telephone: 214-628-9502

  
	
   

  	
   

  	
   

  	
  Facsimile: 214-628-9505

  
	
   

  	
   

  	
   

  	
  Email:
  walt.miller@MillerEgan.com

  
						

 

 

	
   

  	
  TITLE
  COMPANY:

  
	
   

  	
   

  
	
   

  	
  Receipt
  of $1,500,000 Earnest Money is acknowledged in the form of wire transfer of
  Immediately Available Funds. The undersigned agrees to execute the Escrow
  Agreement at Closing.

  
	
   

  	
   

  
	
   

  	
  PARTNERS
  TITLE COMPANY

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  Carol Gonzales

  
	
   

  	
  Name:

  	
  Carol
  Gonzales

  
	
   

  	
  Title:

  	
  Escrow
  Officer

  
	
   

  	
   

  
	
   

  	
  Date
  signed: November 20, 2009

  

 

EXHIBITS:

A
– Description of the Land

B
– Statutory Special Warranty Deed

C
– Bill of Sale

D
– Assignment and Assumption Agreement

E
– Assignment of Tenant Leases and Assumption

F
– Tenant Notice Letter

G
– Survey Certification

H
– Tenant Estoppel

I
– Lease Guidelines

J
– Escrow Agreement

 

SCHEDULES:

1(e) –
Excluded Property

5(e) –
Non-Terminable Contracts

4(b)(vii)(2) –
Additional Occupancy Agreements

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00166-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00166-of-00352.parquet"}]]