Exhibit 10.195

 

 

 

LIMITED LIABILITY COMPANY AGREEMENT

 

OF

 

BR BERRY HILL MANAGING MEMBER II, LLC

 

A DELAWARE LIMITED LIABILITY COMPANY

 

DATED AS OF DECEMBER 9, 2014

 

 

 

 

 

 

TABLE OF CONTENTS

 

  Page     Section 1.        Definitions 1     Section 2.        Organization of
the Company 8       2.1 Name 8       2.2 Place of Registered Office; Registered
Agent 9       2.3 Principal Office 9       2.4 Filings 9       2.5 Term 9      
2.6 Expenses of the Company 9       Section 3.        Purpose 9 Section 4
        Reserved 9 Section 5.        Capital Contributions, Loans, Percentage
Interests and Capital Accounts 10       5.1 Capital Contributions 10       5.2
Additional Capital Contributions 10       5.3 Percentage Ownership Interest 12  
    5.4 Return of Capital Contribution 12       5.5 No Interest on Capital 12  
    5.6 Capital Accounts 12       5.7 New Members 13       Section
6.        Distributions 13     6.1 Distribution of Distributable Funds 13

 

 

 

 

Section 7.         Allocations 14     7.1 Allocation of Net Income and Net
Losses Other than in Liquidation 14       7.2 Allocation of Net Income and Net
Losses in Liquidation 14       7.3 U.S. Tax Allocations 14       Section
8.         Books, Records, Tax Matters and Bank Accounts 15     8.1 Books and
Records 15       8.2 Reports and Financial Statements 15       8.3 Tax Matters
Member 16       8.4 Bank Accounts 16       8.5 Tax Returns 16       8.6 Expenses
16       Section 9.         Management 17     9.1 Management. 17       9.2
Affiliate Transactions 17       9.3 Other Activities 17       9.4 Operation in
Accordance with REOC/REIT Requirements 18       9.10 FCPA 20       Section
10.        Confidentiality 21 Section 11.        Representations and Warranties
22     11.1 In General 22

 

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11.2 Representations and Warranties 22       Section 12.        Sale,
Assignment, Transfer or other Disposition 25     12.1 Prohibited Transfers 25  
    12.2 Affiliate Transfers 25       12.3 Admission of Transferee; Partial
Transfers 26       12.4 Withdrawals 27       Section 13.        Dissolution 27  
  13.1 Limitations 27       13.2 Exclusive Events Requiring Dissolution 27      
13.3 Liquidation 28       13.4 Continuation of the Company 28       Section
14.        Indemnification 29     14.1 Exculpation of Members 29       14.2
Indemnification by Company 29       14.3 General Indemnification by the Members
29       Section 15.        Sale Rights 30     15.1 Push /Pull Rights 30      
15.2 Forced Sale Rights 32       Section 16        Mediation and Arbitration of
Disputes. 33     16.1 Events Giving Rise to Mediation or Arbitration 33

 

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16.2 Selection of Arbitrators 33       16.3 Arbitration Hearing 33       16.4
Decision of the Arbitrators/Binding Effect 34       Section
17        Miscellaneous. 34     17.1 Notices 34       17.2 Governing Law 35    
  17.3 Successors 35       17.4 Pronouns 35       17.5 Table of Contents and
Captions Not Part of Agreement 35       17.6 Severability 35       17.7
Counterparts 35       17.8 Entire Agreement and Amendment 35       17.9 Further
Assurances 35       17.10 No Third Party Rights 36       17.11 Incorporation by
Reference 36       17.12 Limitation on Liability 36       17.13 Remedies
Cumulative 36       17.14 No Waiver 36

 

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17.15 Limitation On Use of Names 36       17.16 Publicly Traded Partnership
Provision 37       17.17 Uniform Commercial Code 37       17.18 Reserved 37    
  17.19 No Construction Against Drafter 37

 

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BR BERRY HILL MANAGING MEMBER II, LLC

LIMITED LIABILITY COMPANY AGREEMENT

 

This Limited Liability Company Agreement (this “Agreement”) is adopted,
executed, and agreed to effective on December 9, 2014, by and among Bluerock
Special Opportunity + Income Fund III, LLC, a Delaware limited liability company
(“SOIF III”), and BEMT Berry Hill, LLC, a Delaware limited liability company
(“BEMT”), as Members (together, the “Members”), and BEMT, as Manager (the
“Manager”).

 

WITNESSETH

 

WHEREAS, BR Berry Hill Managing Member II, LLC, a Delaware limited liability
company (the “Company”), was formed on October 23, 2014 pursuant to the Act;

 

WHEREAS, pursuant to the terms of that certain Contribution and Distribution
Agreement dated of even date herewith by and among the Company, BR Berry Hill
Managing Member I, LLC (“BR MM I”), SOIF III and BEMT (the “Contribution
Agreement”), SOIF III and BEMT, the sole members of BR MM I, have caused BR MM I
to assign a membership interest in Stonehenge Bluerock Berry Hill JV as
contributions to the capital of the Company on behalf of SOIF III and BEMT, and
SOIF III and BEMT have received their respective Interests in the Company in
exchange for such contributions;

 

WHEREAS, BEMT and SOIF III now desire to provide for the operation and
governance of the Company in accordance with the terms of this Agreement.

 

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

 

Section 1.               Definitions. As used in this Agreement:

 

“Act” shall mean the Delaware Limited Liability Company Act (currently Chapter
18 of Title 6 of the Delaware Code), as amended from time to time.

 

“Adjusted Capital Account Deficit” shall mean, with respect to any Member, the
deficit balance, if any, in such Member’s Capital Account as of the end of the
applicable Fiscal Year after (i) crediting such Capital Account with any amounts
which such Member is deemed to be obligated to restore pursuant to Regulations
Sections 1.704-2(g)(l) arid 1.704-2(i)(5), and (ii) debiting such Capital
Account by the amount of the items described in Regulations Sections
1.704-l(b)(2)(ii)(d)(4), (5) and (6). The foregoing definition of Adjusted
Capital Account Deficit is intended to comply with the provisions of Regulations
Section 1.704- 1(b)(2)(ii)(d) and shall be interpreted consistently therewith.

 

 

 

 

“Affiliate” shall mean as to any Person any other Person that directly or
indirectly controls, is controlled by, or is under common control with such
first Person. For the purposes of this Agreement, a Person shall be deemed to
control another Person if such Person possesses, directly or indirectly, the
power to direct or cause the direction of the management, policies and/or
decision making of such other Person, whether through the ownership of voting
securities, by contract or otherwise. In addition, “Affiliate” shall include as
to any Person any other Person related to such Person within the meaning of Code
Sections 267(b) or 707(b)(l ).

 

“Agreed Upon Value” shall mean the fair market value (net of any debt) agreed
upon pursuant to a written agreement between the Members of property contributed
by a Member to the capital of the Company, which shall for all purposes
hereunder be deemed to be the amount of the Capital Contribution applicable to
such property contributed.

 

“Agreement” shall mean this Limited Liability Company, as amended from time to
time.

 

“Applicable Adjustment Percentage” shall have the meaning set forth in Section
5.2(b)(3).

 

“Bankruptcy Code” shall mean Title 11 of the United States Code, as amended or
any other applicable bankruptcy or insolvency statute or similar law.

 

“Bankruptcy/Dissolution Event” shall mean, with respect to the affected party,
(i) the entry of an Order for Relief under the Bankruptcy Code, (ii) the
admission by such party of its inability to pay its debts as they mature, (iii)
the making by it of an assignment for the benefit of creditors generally, (iv)
the filing by it of a petition in bankruptcy or a petition for relief under the
Bankruptcy Code or any other applicable federal or state bankruptcy or
insolvency statute or any similar law, (v) the expiration of sixty (60) days
after the filing of an involuntary petition under the Bankruptcy Code without
such petition being vacated, set aside or stayed during such period, (vi) an
application by such party for the appointment of a receiver for the assets of
such party, (vii) an involuntary petition seeking liquidation, reorganization,
arrangement or readjustment of its debts under any other federal or state
insolvency law, provided that the same shall not have been vacated, set aside or
stayed within sixty (60) days after filing, (viii) the imposition of a judicial
or statutory lien on all or a substantial part of its assets unless such lien is
discharged or vacated or the enforcement thereof stayed within sixty (60) days
after its effective date, (ix) an inability to meet its financial obligations as
they accrue, or (x) a dissolution or liquidation.

 

“Beneficial Owner” shall have the meaning provided in Section 5.7.

 

“BEMT” shall have the meaning set forth in the recitals.

 

“BEMT Transferee” shall have the meaning set forth in Section l 2.2(b)(i).

 

“Capital Account” shall have the meaning provided in Section 5.6.

 

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“Capital Contribution” shall mean, with respect to any Member, the aggregate
amount of (i) cash, and (ii) the Agreed Upon Value of other property contributed
by such Member to the capital of the Company net of any liability secured by
such property that the Company assumes or takes subject to.

 

“Cash Flow” shall mean, for any period for which Cash Flow is being calculated,
gross cash receipts of the Company (but excluding Capital Contributions, less
the following payments and expenditures (i) all payments of operating expenses
of the Company, (ii) all payments of principal of, interest on and any other
amounts due with respect to indebtedness, leases or other commitments or
obligations of the Company (and other loans by Members to the Company), (iii)
all sums expended by the Company for capital expenditures, (iv) all prepaid
expenses of the Company, and (v) all sums expended by the Company which are
otherwise capitalized.

 

“Certificate of Formation” shall mean the Certificate of Formation of the
Company, as amended from time to time.

 

“Code” shall mean the Internal Revenue Code of 1986, as amended from time to
time, including the corresponding provisions of any successor law.

 

“Collateral Agreement” shall mean any agreement, instrument, document or
covenant concurrently or hereafter made or entered into under, pursuant to, or
in connection with this Agreement and any certifications made in connection
therewith or amendment or amendments made at any time or times heretofore or
hereafter to any of the same.

 

“Company” shall mean BR Berry Hill Managing Member II, LLC a Delaware limited
liability company organized under the Act.

 

“Company Interest” shall mean all of the Company’s interest in Stonehenge
Bluerock Berry Hill JV, including its limited liability company interest
therein.

 

“Company Minimum Gain” shall have the meaning given to the term “partnership
minimum gain” in Regulations Sections 1.704-2(b)(2) and l .704-2(d).

 

“Confidential Information” shall have the meaning provided in Section 10(a).

 

“Default Amount” shall have the meaning provided in Section 5.2(b).

 

“Default Loan” shall have the meaning provided in Section 5.2(b)(l).

 

“Default Loan Rate” shall have the meaning provided in Section 5.2(b)(l).

 

“Defaulting Member” shall have the meaning provided in Section 5.2(b).

 

“Delaware UCC” shall mean the Uniform Commercial Code as in effect in the State
of Delaware from time to time.

 

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“Developer” shall mean Stonehenge Real Estate Group, LLC, a Georgia limited
liability company.

 

“Development Agreement” shall mean that certain development agreement, as
amended, between 23Hundred, LLC, a Delaware limited liability company, BGF
Member and Stonehenge SPE, as owners, and Developer, as developer, pursuant to
which Developer provides certain development services for the Properties.

 

“Dissolution Event” shall have the meaning provided in Section 13.2.

 

“Distributable Funds” with respect to any month or other period, as applicable,
shall mean the sum of (x) an amount equal to the Cash Flow of the Company for
such month or other period, as applicable, as reduced by reserves for
anticipated capital expenditures, future working capital needs and operating
expenses, contingent obligations and other purposes, the amounts of which shall
be reasonably determined from time to time by the Manager.

 

“Distributions” shall mean the distributions payable (or deemed payable) to a
Member (including, without limitation, its allocable portion of Distributable
Funds).

 

“ERISA” shall mean the Employee Retirement Income Security Act of 1974, as
amended from time to time.

 

“Fiscal Year” shall mean each calendar year ending December 31.

 

“Flow Through Entity” shall have the meaning provided in Section 5.7.

 

“Foreign Corrupt Practices Act” shall mean the Foreign Corrupt Practices Act of
the United States, 15 U.S.C. Sections 78a, 78m, 78dd-1, 78dd-2, 78dd-3, and
78ff, as amended, if applicable, or any similar law of the jurisdiction where
the Property is located or where the Company or any of its Subsidiaries
transacts business or any other jurisdiction, if applicable.

 

“Imputed Closing Costs” means an amount (not to exceed one and one quarters
percent (1.25%) of the purchase price) that would normally be incurred by a
Subsidiary if the Property were sold for an amount specified in Section 15.1 or
Section 15.2 (as applicable), for title insurance premiums, survey costs,
brokerage commissions, legal fees, and other commercially reasonable closing
costs.

 

“Income” shall mean the gross income of the Company for any month, Fiscal Year
or other period, as applicable, including gains realized on the sale, exchange
or other disposition of the Company’s assets.

 

“Indemnified Party” shall have the meaning provided in Section 14.3(a).

 

“Indemnifying Party” shall have the meaning provided in Section 14.3(a).

 

“Inducement Agreements” shall have the meaning provided in Section 14.3(a).

 

“Initiating Member” shall have the meaning provided in Section 15.2(a).

 

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“Interest” of any Member shall mean the entire limited liability company
interest of such Member in the Company, which includes, without limitation, any
and all rights, powers and benefits accorded a Member under this Agreement and
the duties and obligations of such Member hereunder.

 

“Loss” shall mean the aggregate of losses, deductions and expenses of the
Company for any month, Fiscal Year or other period, as applicable, including
losses realized on the sale, exchange or other disposition of the Company’s
assets.

 

“Major Decision” means any decision for the Company to take, or refrain from
taking, any action or incurring any obligation with respect to the following
matters (or the effectuation of any such action or obligation), including in the
Company’s capacity as a member of the Stonehenge Bluerock Berry Hill JV with
respect to making or refraining to make a decision on the following matters to
the extent the vote or approval of the Company is required:

 

(i)any merger, conversion or consolidation involving the Company or any
Subsidiary or the sale, lease, transfer, exchange or other disposition of all or
substantially all of the Company’s assets, including the Company Interest, or
all of the Interests of the Members in the Company, in one or a series of
related transactions;

 

(ii)except as expressly provided in Sect ion 12 with respect to Transfers.by
SOIF III or a SOIF III Transferee to a SOIF III Transferee and with respect to
Transfers by BEMT or a BEMT Transferee to a BEMT Transferee as permitted
thereunder, the admission or removal of any Member or the Company’s issuance to
any third party of any equity interest in the Company (including interests
convertible into, or exchangeable for, equity interests in the Company);

 

(iii)except as provided in Section 13, any liquidation, dissolution or
termination of the Company;

 

(iv)the incurrence by the Company, in an amount in excess of US $25,000, of any
indebtedness for borrowed money or any capitalized lease obligation or the entry
into of any agreement, commitment, assumption or guarantee with respect to any
of the foregoing;

 

(v)expenditures or distributions of cash or property by the Company, in an
amount in excess of US $25,000, which are not otherwise provided for in this
Agreement or the establishment of any reserves;

 

(vi)entering into any material agreement, including without limitation any
management agreement or development agreement, contract, license or lease that
could result in an obligation or liability of the Company in excess of US
$25,000;

 

(vii)doing any act which would make it impossible or unreasonably burdensome to
carry on the business of the Company;

 

(viii)any material change in the strategic direction of the Company or any
material expansion of the business of the Company, whether into new or existing
lines of business or any change in the structure of the Company;

 

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(x)giving, granting or undertaking any options, rights of first refusal, deeds
of trust, mortgages, pledges, ground leases, security or other interests in or
encumbering the Property, any portion thereof or any other material assets;

 

(xi)selling, conveying, refinancing or effecting any material asset of the
Company, including the Company Interest, or any portion thereof or the entering
into of any agreement, commitment or assumption with respect to any of the
foregoing;

 

(xii)confessing a judgment against the Company (or any Subsidiary), submitting a
Company claim to arbitration or engaging, terminating and/or replacing counsel
to defend or prosecute on behalf of the Company any action or proceeding;

 

(xiii)on behalf of the Company, acquiring by purchase, ground lease or
otherwise, any real property or other material asset or the entry into of any
agreement, commitment or assumption with respect to any of the foregoing, or the
making or posting of any deposit (refundable or non-refundable);

 

(xiv)taking any action by the Company that is reasonably likely to result in any
Member or any of its Affiliates having individual liability under any so called
“bad boy” guaranties or similar agreements provided to third party lenders in
respect of financings relating to the Company, the Subsidiaries or any of their
assets which provide for recourse as a result of willful misconduct, fraud or
gross negligence or failure to comply with the covenants or any other provisions
of such “bad boy” guaranties;

 

(xv)the amount of, whether and when to make, contributions to the Company (other
than the contributions under Section 5.1(a) made contemporaneously with the
execution of this Agreement) and Distributions by the Company; or

 

(xvi)amendment of the Company’s Certificate of Formation or this Agreement.

 

“Member” and “Members” shall mean SOIF III, BEMT and any other Person admitted
to the Company pursuant to this Agreement. For purposes of the Act, the Members
shall constitute a single class or group of members.

 

“Member in Question” shall have the meaning provided in Section 17.12.

 

“Member Minimum Gain” shall mean an amount, determined in accordance with
Regulations Section 1.704-2(i)(3) with respect to each Member Nonrecourse Debt,
equal to the Company Minimum Gain that would result if such Member Nonrecourse
Debt were treated as a Nonrecourse Liability.

 

“Member Nonrecourse Debt” shall have the meaning given the term “partner
nonrecourse debt” in Regulations Section 1.704-2(b)(4).

 

“Member Nonrecourse Deductions” shall have the meaning given the term “partner
nonrecourse deductions” in Regulations Section 1.704-2(i).

 

“Net Income” shall mean the amount, if any, by which Income for any period
exceeds Loss for such period.

 

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“Net Loss” shall mean the amount, if any, by which Loss for any period exceeds
Income for such period.

 

“New York UCC” shall have the meaning provided in Section 17.17.

 

“Non-Initiating Member” shall have the meaning provided in Section l 5.2(a).

 

“Nonrecourse Deduction” shall have the meaning given such term in Regulations

Section l.704-2(b)(l ).

 

“Nonrecourse Liability” shall have the meaning given such term in Regulations
Section l.704-2(b)(3).

 

“Offer” shall have the meaning provided in Section l 5.2(a).

 

“Offeree ‘ shall have the meaning provided in Section 15.l(b).

 

“Offeror” shall have the meaning provided in Section 15.l(b).

 

“Ownership Entity” shall have the meaning provided in Section 15.2(a).

 

“Percentage Interest” shall have the meaning provided in Section 5.3.

 

“Person” shall mean any individual, corporation, partnership, joint venture,
association, joint-stock company, limited liability company, trust,
unincorporated organization, government or any agency or political subdivision
thereof or any other legal entity.

 

“Property” shall have the meaning provided in the Stonehenge Bluerock Berry Hill
Operating Agreement.

 

“Property Manager” shall mean Matrix Residential.

 

“Property Management Agreement” shall mean that certain Property Management
Agreement, as amended, by and between Company Subsidiary, BGF Member and
Stonehenge SPE.

 

“Property Manager Reports” shall have the meaning set forth in Section 8.2(c).
“Pursuer” shall have the meaning provided in Section 10(c).

 

“Regulations” shall mean the Treasury Regulations promulgated pursuant to the
Code, as amended from time to time, including the corresponding provisions of
any successor regulations.

 

“REIT” shall mean a real estate investment trust as defined in Code Section 856.

 

“REIT Member” shall mean any Member, if such Member is a REIT or a direct or
indirect subsidiary of a REIT.

 

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“REIT Requirements” shall mean the requirements for qualifying as a REIT under
the Code and Regulations.

 

“Representatives” shall mean the representatives of the Management Committee.
“Response Period” shall have the meaning provided in Section 15.2(b).

 

“Sale Notice” shall have the meaning provided in Section l 5.2(a).

 

“Securities Act” shall mean the Securities Act of 1933, as amended.

 

“SOIF III” shall have the meaning provided in the first paragraph of this
Agreement.

 

“SOIF III Transferee” shall have the meaning provided in Section l 2.2(b)(i).

 

“Stonehenge Bluerock Berry Hill JV” shall mean BR Stonehenge 23Hundred JV, LLC,
a Delaware limited liability company.

 

“Stonehenge Bluerock Berry Hill JV Operating Agreement” shall mean the Limited
Liability Company Agreement of BR Stonehenge 23Hundred JV, as amended from time
to time.

 

“Stonehenge SPE” shall mean SH 23Hundred TIC, LLC.

 

“Subsidiary” shall mean any corporation, partnership, limited liability company
or other entity of which fifty percent (50%) of which at least a majority of the
capital stock or other equity securities is owned by the Company or more is
owned by the Company.

 

“Tax Matters Member” shall have the meaning provided in Section 8.3.

 

“TIC Agreement” shall mean that certain Tenant in Common Agreement by and
between Company Subsidiary, BGF Member and Stonehenge SPE.

 

“Total Investment” shall mean the sum of the aggregate Capital Contributions
made by a Member.

 

“Transfer” means, as a noun, any transfer, sale, assignment, exchange, charge,
pledge, gift, hypothecation, conveyance, encumbrance or other disposition,
voluntary or involuntary, by operation of law or otherwise and, as a verb,
voluntarily or involuntarily, by operation of law or otherwise, to transfer,
sell, assign, exchange, charge, pledge, give, hypothecate, convey, encumber or
otherwise dispose of.

 

“Valuation Amount” shall have the meaning provided in Section 15.l(b).

 

Section 2.             Organization of the Company.

 

2.1               Name. The name of the Company shall be “BR Berry Hill Managing
Member II, LLC”. The business and affairs of the Company shall be conducted
under such name or such other name as the Manager deems necessary or appropriate
to comply with the requirements of law in any jurisdiction in which the Company
may elect to do business.

 

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2.2               Place of Registered Office; Registered Agent. The address of
the registered office of the Company in the State of Delaware is 160 Greentree
Drive, Suite 101, Dover, Delaware 19904. The name and address of the registered
agent for service of process on the Company in the State of Delaware is National
Registered Agents, Inc., 160 Greentree Drive, Suite 101, Dover, Delaware 19904.
The Manager may at any time on five (5) days prior notice to all Members change
the location of the Company’s registered office or change the registered agent.

 

2.3               Principal Office. The principal address of the Company shall
be c/o Bluerock Real Estate, L.L.C., 712 Fifth Avenue, 9th Floor, New York, New
York 10019, or, in each case, at such other place or places as may be determined
by the Manager from time to time.

 

2.4               Filings. On or before execution of this Agreement, an
authorized person within the meaning of the Act shall have duly filed or caused
to be filed the Certificate of Formation of the Company with the office of the
Secretary of State of Delaware, as provided in Section 18-201 of the Act, and
the Members hereby ratify such filing. The Manager shall use its best efforts to
take such other actions as may be reasonably necessary to perfect and maintain
the status of the Company as a limited liability company under the laws of
Delaware. Notwithstanding anything contained herein to the contrary, the Company
shall not do business in any jurisdiction that would jeopardize the limitation
on liability afforded to the Members under the Act or this Agreement.

 

2.5               Term. The Company shall continue in existence in perpetuity,
unless and until the Company is dissolved as provided in Section 13.

 

2.6               Expenses of the Company. Other than the reimbursements of
costs and expenses as provided herein, no fees, costs or expenses shall be
payable by the Company to any Member (or its Affiliates).

 

Section 3.             Purpose.

 

The Company is organized for the purpose of engaging in any lawful business,
purpose or activity that may be undertaken by a limited liability company
organized under and governed by the Act. The Company shall possess and may
exercise all of the powers and privileges granted by the Act, by any other law
or by this Agreement, together with any powers incidental thereto, including
such powers and privileges as are necessary or convenient to the conduct,
promotion or attainment of the business, purposes or activities of the Company.

 

Section 4.             Reserved.

 

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Section 5.             Capital Contributions, Loans, Percentage Interests and
Capital Accounts.

 

5.1               Capital Contributions. SOIF III and BEMT have each previously
made or been attributed Capital Contributions to the Company as reflected on the
Company’s books.

 

5.2               Additional Capital Contributions.

 

(a)               Additional Capital Contributions may be called for from the
Members by the Manager from time to time as and to the extent capital is
necessary to effect an investment. Except as otherwise agreed by the Members,
such additional Capital Contributions shall be in an amount for each Member
equal to the product of the amount of the aggregate Capital Contribution called
for multiplied by their respective Percentage Interest. Such additional Capital
Contributions shall be payable by the Members to the Company upon the earlier of
(i) twenty (20) days after written request from the Company, or (ii) the date
when the Capital Contribution is required, as set forth in a written request
from the Company.

 

(b)               If a Member (a “Defaulting Member”) fails to make a Capital
Contribution that is required as provided in Section 5.2(a) within the time
frame required therein (the amount of the failed contribution and related loan
shall be the “Default Amount”), the other Member, provided that it has made the
Capital Contribution required to be made by it, in addition to any other
remedies it may have hereunder or at law, shall have one or more of the
following remedies:

 

(1)                to advance to the Company on behalf of, and as a loan to the
Defaulting Member, an amount equal to the Default Amount to be evidenced by a
promissory note in form reasonably satisfactory to the non-failing Member (each
such loan, a “Default Loan”). The Capital Account of the Defaulting Member shall
be credited with the amount of such Default Amount attributable to a Capital
Contribution and the aggregate of such amounts shall constitute a debt owed by
the Defaulting Member to the non-failing Member. Any Default Loan shall bear
interest at the rate of twenty (20%) percent per annum, but in no event in
excess of the highest rate permitted by applicable laws (the “Default Loan
Rate”), and shall be payable by the Defaulting Member on demand from the
non-failing Member and from any Distributions due to the Defaulting Member
hereunder. Interest on a Default Loan to the extent unpaid, shall accrue and
compound on a quarterly basis. A Default Loan shall be prepayable, in whole or
in part, at any time or from time to time without penalty. Any such Default
Loans shall be with full recourse to the Defaulting Member and shall be secured
by the Defaulting Member’s interest in the Company including, without
limitation, such Defaulting Member’s right to Distributions. In furtherance
thereof, upon the making of such Default Loan, the Defaulting Member hereby
pledges, assigns and grants a security interest in its Interest to the
non-failing Member and agrees to promptly execute such documents and statements
reasonably requested by the non-failing Member to further evidence and secure
such security interest. Any advance by the non-failing Member on behalf of a
Defaulting Member pursuant to this Section 5.2(b)(l) shall be deemed to be a
Capital Contribution made by the Defaulting Member except as otherwise expressly
provided herein. All Distributions to the Defaulting Member hereunder shall be
applied first to payment of any interest due under any Default Loan and then to
principal until all amounts due thereunder are paid in full. While any Default
Loan is outstanding, the Company shall be obligated to pay directly to the
non-failing Member, for application to and until all Default Loans have been
paid in full, the amount of (x) any Distributions payable to the Defaulting
Member, and (y) any proceeds of the sale of the Defaulting Member’s Interest in
the Company;

 

10

 

  

(2)                subject to any applicable thin capitalization limitations on
indebtedness of the Company, to treat its portion of such Capital Contribution
as a loan to the Company (rather than a Capital Contribution) and to advance to
the Company as a loan to the Company an amount equal to the Default Amount,
which loan shall be evidenced by a promissory note in form reasonably
satisfactory to the non-failing Member and which loan shall bear interest at the
Default Loan Rate and be payable on a first priority basis by the Company from
available Cash Flow and prior to any Distributions made to the Defaulting
Member. If each Member has loans outstanding to the Company under this
provision, such loans shall be payable to each Member in proportion to the
outstanding balances of such loans to each Member at the time of payment. Any
advance to the Company pursuant to this Section 5.2(b)(2) shall not be treated
as a Capital Contribution made by the Defaulting Member;

 

(3)                to make an additional Capital Contribution to the Company
equal to the Default Amount whereupon the Percentage Interests of the Members
shall be recalculated to (i) increase the non-defaulting Member’s Percentage
Interest by the percentage (“Applicable Adjustment Percentage”) determined by
dividing one hundred fifty percent (150%) of the Default Amount by the sum of
the Members’ Total Investment (taking into account the actual amount of such
additional Capital Contribution) and by increasing its Capital Account by one
and one-half of the amount of the Default Amount, and (ii) to reduce the
Defaulting Member’s Percentage Interest by the Applicable Adjustment Percentage
and by decreasing its Capital Account by one-half of the amount of the Default
Amount; or

 

(4)                in lieu of the remedies set forth in subparagraphs (1), (2)
or (3), revoke its portion of such additional Capital Contribution, whereupon
the portion of the Capital Contribution made by the non-failing Member shall be
returned within ten (10) days with interest computed at the Default Loan Rate by
the Company.

 

(c)               Notwithstanding the foregoing provisions of this Section 5.2,
no additional Capital Contributions shall be required from any Member if (i) the
Company or any other Person shall be in default (or with notice or the passage
of time or both, would be in default) in any material respect under any loan,
indenture, mortgage, lease, agreement or instrument to which the Company or any
of its Subsidiaries is a party or by which the Company (or any of its
Subsidiaries) or any of its properties or assets is or may be bound, (ii) any
other Member, the Company or any of its Subsidiaries shall be insolvent or
bankrupt or in the process of liquidation, termination or dissolution, (iii) any
other Member, the Company or any of its Subsidiaries shall be subjected to any
pending litigation (x) in which the amount in controversy exceeds $500,000, (y)
which litigation is not being defended by an insurance company who would be
responsible for the payment of any judgment in such litigation, and (z) which
litigation if adversely determined could have a material adverse effect on such
other Member and/or the Company or any of its Subsidiaries and/or could
interfere with their ability to perform their obligations hereunder or under any
Collateral Agreement, (iv) there has been a material adverse change in
(including, but not limited to, the financial condition of) any other Member
(and/or its Affiliates) which, in Member’s reasonable judgment, prevents such
other Member (and/or its Affiliates from performing, or substantially interferes
with their ability to perform, their obligations hereunder or under any
Collateral Agreement. If any of the foregoing events shall have occurred and any
Member elects not to make a Capital Contribution on account thereof, then any
other Member which has made its pro rata share of such Capital Contribution
shall be entitled to a return of such Capital Contribution from the Company.

 

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5.3               Percentage Ownership Interest. The Members shall have the
initial percentage ownership interests (as the same are adjusted as provided in
this Agreement, a “Percentage Interest”) in the Company set forth on Exhibit A
immediately following the Capital Contributions provided for in Section 5.1. The
Percentage Interests of the Members in the Company shall be adjusted monthly so
that the respective Percentage Interests of the Members at any time shall be in
proportion to their respective cumulative Total Investment made (or deemed to be
made) pursuant to Sections 5.1 and 5.2, as the same may be further adjusted
pursuant to Section 5.2(b)(3). Percentage Interests shall not be adjusted by
distributions made (or deemed made) to a Member.

 

5.4               Return of Capital Contribution. Except as approved by each of
the Members, no Member shall have any right to withdraw or make a demand for
withdrawal of the balance reflected in such Member’s Capital Account (as
determined under Section 5.6) until the full and complete winding up and
liquidation of the business of the Company.

 

5.5               No Interest on Capital. Interest earned on Company funds shall
inure solely to the benefit of the Company, and no interest shall be paid upon
any Capital Contributions nor upon any undistributed or reinvested income or
profits of the Company.

 

5.6               Capital Accounts. A separate capital account (the “Capital
Account”) shall be maintained for each Member in accordance with Section
l.704-l(b)(2)(iv) of the Regulations. Without limiting the foregoing, the
Capital Account of each Member shall be increased by (i) the amount of any
Capital Contributions made by such Member, (ii) the amount of Income allocated
to such Member and (iii) the amount of income or profits, if any, allocated to
such Member not otherwise taken into account in this Section 5.6. The Capital
Account of each Member shall be reduced by (i) the amount of any cash and the
fair market value of any property distributed to the Member by the Company (net
of liabilities secured by such distributed property that the Member is
considered to assume or take subject to), (ii) the amount of Loss allocated to
the Member and (iii) the amount of expenses or losses, if any, allocated to such
Member not otherwise taken into account in this Section 5.6. The Capital
Accounts of the Members shall not be increased or decreased pursuant to
Regulations Section 1.704- 1(b)(2)(iv)(f) to reflect a revaluation of the
Company’s assets on the Company’s books in connection with any contribution of
money or other property to the Company pursuant to Section 5.2 by existing
Members. If any property other than cash is distributed to a Member, the Capital
Accounts of the Members shall be adjusted as if such property had instead been
sold by the Company for a price equal to its fair market value, the gain or loss
allocated pursuant to Section 7, and the proceeds distributed in the manner set
forth in Section 6.1 or Section 13.3(e)(iii). No Member shall be obligated to
restore any negative balance in its Capital Account. No Member shall be
compensated for any positive balance in its Capital Account except as otherwise
expressly provided herein. The foregoing provisions and the other provisions of
this Agreement relating to the maintenance of Capital Accounts are intended to
comply with the provisions of Regulations Section l.704-l(b)(2) and shall be
interpreted and applied in a manner consistent with such Regulations.

 

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5.7               New Members. The Company may issue additional Interests and
thereby admit a new Member or Members, as the case may be, to the Company, only
if such new Member (i) has delivered to the Company its Capital Contribution,
(ii) has agreed in writing to be bound by the terms of this Agreement by
becoming a party hereto, and (iii) has delivered such additional documentation
as the Company shall reasonably require to so admit such new Member to the
Company. Without the prior written consent of each then-current Member, a new
Member may not be admitted to the Company if the Company would, or may, have in
the aggregate more than one hundred (100) members. For purposes of determining
the number of members under this Section 5.7, a Person (the “beneficial owner”)
indirectly owning an interest in the Company through a partnership, grantor
trust or S corporation (as such terms are used in the Code) (the “flow-through
entity”) shall be considered a member, but only if (i) substantially all of the
value of the beneficial owner’s interest in the flow-through entity is
attributable to the flow-through entity’s interest (direct or indirect) in the
Company and (ii) in the sole discretion of the Manager, a principal purpose of
the use of the flow-through entity is to permit the Company to satisfy the
100-member limitation.

 

Section 6.             Distributions.

 

6.1               Distribution of Distributable Funds

 

(a)               The Manager shall calculate and determine the amount of
Distributable Funds for each applicable period. Except as provided in Sections
5.2(b), 6.l(b) or 13.3 or otherwise provided hereunder, Distributable Funds, if
any, shall be distributed to the Members, in proportion to their Percentage
Interests, on the 15th day of each month or from time to time as determined by
the Manager.

 

(b)               Any distributions otherwise payable to a Member under this
Agreement shall be applied first to satisfy amounts due and payable on account
of the indemnity and/or contribution obligations of such Member under this
Agreement and/or any other agreement delivered by such Member to the Company or
any other Member but shall be deemed distributed to such Member for purposes of
this Agreement.

 

6.2               Distributions in Kind. In the discretion of the Manager,
Distributable Funds may be distributed to the Members in cash or in kind and
Members may be compelled to accept a distribution of any asset in kind even if
the percentage of that asset distributed to it exceeds a percentage of that
asset that is equal to the percentage in which such Member shares in
distributions from the Company. In the case of all assets to be distributed in
kind, the amount of the distribution shall equal the fair market value of the
asset distributed as determined by the Manager. In the case of a distribution of
publicly traded property, the fair market value of such property shall be deemed
to be the average closing price for such property for the thirty (30) day period
immediately prior to the distribution, or if such property has not yet been
publicly traded for thirty (30) days, the average closing price of such property
for the period prior to the distribution in which the property has been publicly
traded.

 

13

 

 

Section 7.             Allocations.

 

7.1               Allocation of Net Income and Net Losses Other than in
Liquidation. Except as otherwise provided in this Agreement, Net Income and Net
Losses of the Company for each Fiscal Year shall be allocated among the Members
in a manner such that, as of the end of such Fiscal Year and taking into account
all prior allocations of Net Income and Net Losses of the Company and all
distributions made by the Company through such date, the Capital Account of each
Member is, as nearly as possible, equal to the distributions that would be made
to such Member pursuant to Section 6.1 if the Company were dissolved, its
affairs wound up and assets sold for cash equal to their tax basis (or book
value in the case of assets that have been revalued in accordance with Section
704(b) of the Code), all Company liabilities were satisfied, and the net assets
of the Company were distributed in accordance with Section 6.1 immediately after
such allocation.

 

7.2               Allocation of Net Income and Net Losses in Liquidation. Net
Income and Net Losses realized by the Company in connection with the liquidation
of the Company pursuant to Section 13 shall be allocated among the Members in a
manner such that, taking into account all prior allocations of Net Income and
Net Losses of the Company and all distributions made by the Company through such
date, the Capital Account of each Member is, as nearly as possible, equal to the
amount which such Member is entitled to receive pursuant to Section
13.3(d)(iii).

 

7.3               U.S. Tax Allocations.

 

(a)               Subject to Section 704(c) of the Code, for U.S. federal and
state income tax purposes, all items of Company income, gain, loss, deduction
and credit shall be allocated among the Members in the same manner as the
corresponding item of income, gain, loss, deduction or credit was allocated
pursuant to the preceding paragraphs of this Section 7.

 

(b)               Code Section 704(c). In accordance with Code Section 704(c)
and the Treasury regulations promulgated thereunder, income and loss with
respect to any property contributed to the capital of the Company (including, if
the property so contributed constitutes a partnership interest, the applicable
distributive share of each item of income, gain, loss, expense and other items
attributable to such partnership interest whether expressly so allocated or
reflected in partnership allocations) shall, solely for U.S. federal income tax
purposes, be allocated among the Members so as to take account of any variation
between the adjusted basis of such property to the Company for U.S. federal
income tax purposes and its Agreed Upon Value at the time of contribution. Such
allocation shall be made in accordance with such method set forth in Regulations
Section 1.7043(b) as the Manager in its reasonable discretion approves.

 

Any elections or other decisions relating to such allocations shall be made by
BEMT in any manner that reasonably reflects the purpose and intention of this
Agreement. Allocations pursuant to this Section 7.3 are solely for purposes of
U.S. federal, state and local income taxes and shall not affect, or in any way
be taken into account in computing, any Member’s share of Net Income, Net Loss,
other items or distributions pursuant to any provisions of this Agreement.

 

14

 

 

Section 8.             Books, Records, Tax Matters and Bank Accounts.

 

 

8.1           Books and Records. The books and records of account of the Company
shall be maintained in accordance with industry standards and shall be based on
the Property Manager Reports. The books and records shall be maintained at the
Company’s principal office or at a location designated by the Manager, and all
such books and records (and the dealings and other affairs of the Company and
its Subsidiaries, including Stonehenge Bluerock Berry Hill JV) shall be
available to any Member at such location for review, investigation, audit and
copying, at such Member’s sole cost and expense, during normal business hours on
at least twenty-four (24) hours prior notice.

 

8.2           Reports and Financial Statements.

 

(a)           Within thirty (30) days of the end of each Fiscal Year, the
Manager shall cause each Member to be furnished with two sets of the following
additional annual reports computed as of the last day of the Fiscal Year:

 

(i)               An unaudited balance sheet of the Company;

 

(ii)              An unaudited statement of the Company’s profit and loss; and

 

(iii)             A statement of the Members’ Capital Accounts and changes
therein for such Fiscal Year.

 

(b)           Within fifteen (15) days of the end of each quarter of each Fiscal
Year, the Manager shall cause to be furnished to BEMT or any REIT Member such
information as requested by BEMT or any REIT Member as is necessary for BEMT or
any REIT Member to determine its qualification as a REIT and its compliance with
REIT Requirements as shall be requested by BEMT or any REIT Member.

 

(c)           The Members acknowledge that the Developer is obligated to perform
Project-related accounting and furnish Project-related accounting statements
under the terms of the Development Agreement and that the Property Manager is
obligated to perform Property- related accounting and furnish Property-related
accounting statements under the terms of the Property Management Agreement (and
any future property manager for the Property shall be required to do the same)
(the “Property Manager Reports”). The Manager shall be entitled to rely on the
Property Manager Reports with respect to its obligations under this Section 8,
and the Members acknowledge that the reports to be furnished shall be based on
the Property Manager Reports, without any duty on the part of the Manager to
further investigate the completeness, accuracy or adequacy of the Property
Manager Reports.

 

15

 

 

(d)               The Manager will use its commercially best efforts to obtain
such financial statements (audited or unaudited), information and attestations
as may be required by any Member or any of its Affiliates in connection with
public reporting, attestation, certification and other requirements under the
Securities Exchange Act of 1934, as amended, and the Sarbanes-Oxley Act of 2002,
as amended, applicable to such entity, and work in good faith with the
designated accountants or auditors of any Member or any of its Affiliates in
connection therewith, including for purposes of testing internal controls and
procedures of any Member or any of its Affiliates.

 

8.3               Tax Matters Member. BEMT is hereby designated as the “tax
matters partner” of the Company and the Subsidiaries, as defined in Section
6231(a)(7) of the Code (the “Tax Matters Member ‘) and shall prepare or cause to
be prepared all income and other tax returns of the Company and the Subsidiaries
pursuant to the terms and conditions of Section 8.5. Except as otherwise
provided in this Agreement, all elections required or permitted to be made by
the Company and the Subsidiaries under the Code or state tax law shall be timely
determined and made by SOIF III. The Members intend that the Company be treated
as a partnership for U.S. federal, state and local tax purposes, and the Members
will not elect or authorize any person to elect to change the status of the
Company from that of a partnership for U.S. federal, state and local income tax
purposes. SOIF III agrees to consult with BEMT with respect to any written
notice of any material tax elections and any material inquiries, claims,
assessments, audits, controversies or similar events received from any taxing
authority. In addition, upon the request of any Member, the Company and each
Subsidiary shall make an election pursuant to Code Section 754 to adjust the
basis of the Company’s property in the manner provided in Code Sections 734(b)
and 743(b). The Company hereby indemnifies and holds harmless SOIF III from and
against any claim, loss, expense, liability, action or damage resulting from its
acting or its failure to take any action as the “tax matters partner” of the
Company and the Subsidiaries, provided that any such action or failure to act
does not constitute gross negligence or willful misconduct.

 

8.4               Bank Accounts. All funds of the Company are to be deposited in
the Company’s name in such bank account or accounts as may be designated by the
Manager and shall be withdrawn on the signature of such Person or Persons as the
Manager may authorize.

 

8.5               Tax Returns. The Manager shall cause to be prepared all income
and other tax returns of the Company and the Subsidiaries required by applicable
law. No later than the due date or extended due date thereof, the Manager shall
deliver or cause to be delivered to each Member a copy of the tax returns for
the Company and such Subsidiaries with respect to such Fiscal Year, together
with such information with respect to the Company and such Subsidiaries as shall
be necessary for the preparation by such Member of its U.S. federal and state
income or other tax and information returns.

 

8.6               Expenses. Notwithstanding any contrary provision of this
Agreement, the Members acknowledge and agree that the reasonable expenses and
charges incurred directly or indirectly by or on behalf of the Manager in
connection with its obligations under this Section 8 will be reimbursed by the
Company to the Manager.

 

16

 

 

Section 9.             Management.

 

9.1               Management.

 

(a)               The Company shall be managed by BEMT (the “Manager”). To the
extent that BEMT or a BEMT Transferee Transfers all or a portion of its Interest
in accordance with Section 12 to a BEMT Transferee, such BEMT Transferee may be
appointed as an additional Manager under this Section 9.l (a) by BEMT or a BEMT
Transferee then holding all or a portion of an Interest without any further
action or authorization by any Member. The Manager may not be removed by the
Members other than for an act or omission related to the Company constituting
gross negligence or fraud.

 

(b)               The Manager shall have the authority to exercise all of the
powers and privileges granted by the Act, any other law or this Agreement,
together with any powers incidental thereto, and to take any other action not
prohibited under the Act or other applicable law, so far as such powers or
actions are necessary or convenient or related to the conduct, promotion or
attainment of the business, purposes or activities of the Company, except that
any Major Decision or other matter submitted by the Manager to the Members shall
require the express and unanimous approval of the Members. Notwithstanding any
provision herein to the contrary, only BEMT, and not any other Member of the
Company, shall have the power and authority to exercise the powers and
privileges of the Company as manager of the Stonehenge Bluerock Berry Hill JV.

 

(c)               The Manager may appoint individuals to act on behalf of the
Company with such titles and authority as determined from time to time by the
Manager. Each of such individuals shall hold office until his or her death,
resignation or replacement by any Manager.

 

9.2              Affiliate Transactions. No agreement shall be entered into by
the Company or any Subsidiary with a Member or any Affiliate of a Member and no
decision shall be made in respect of any such agreement (including, without
limitation, the enforcement or termination thereof) unless such agreement or
related decision shall have been approved unanimously in writing by the Members.

 

9.3              Other Activities.

 

(a)               Right to Participation in Other Member Ventures. Neither the
Company nor any Member (or any Affiliate of any Member) shall have any right by
virtue of this Agreement either to participate in or to share in any other now
existing or future ventures, activities or opportunities of any of the other
Members or their Affiliates, or in the income or proceeds derived from such
ventures, activities or opportunities. Neither the Company nor any Member (or
any Affiliate of any Member) shall have any right by virtue of this Agreement
either to participate in or to share in any other now existing or future
ventures, activities or opportunities of any of the other Members or their
Affiliates, or in the income or proceeds derived from such ventures, activities
or opportunities.

 

(b)               Limitation on Actions of Members; Binding Authority. No Member
shall take any action on behalf of, or in the name of, the Company, or enter
into any contract, agreement, commitment or obligation binding upon the Company,
or, in its capacity as a Member or Manager of the Company, perform any act in
any way relating to the Company or the Company’s assets, except in a manner and
to the extent consistent with the provisions of this Agreement.

 

17

 

 

9.4           Operation in Accordance with REOC/REIT Requirements.

 

(a)            The Members acknowledge that one or more Affiliates of the
Members (an “BR Affiliate”) intends to qualify as a “real estate operating
company” or “venture capital operating company” within the meaning of U.S.
Department of Labor Regulation 29 C.F.R. §2510.3-101 (a “REOC”), and agree that
the Company and its Subsidiaries shall be operated in a manner that will enable
such BR Affiliate to so qualify. Notwithstanding anything herein to the
contrary, the Company and its Subsidiaries shall not take, or refrain from
taking, any action that would result in a BR Affiliate from failing to qualify
as a REOC. No Member shall fund any Capital Contribution “with the ‘plan assets’
of any ‘employee benefit plan’ within the meaning of Section 3(3) of the
Employee Retirement Income Security Act of 1974, as amended or any ‘plan’ as
defined by Section 4975 of the Internal Revenue Code of 1986, as amended.

 

(b)           Notwithstanding anything in this Agreement to the contrary, unless
specifically agreed to by the Manager in writing, neither the Company nor its
Subsidiaries shall hold any investment, incur any indebtedness or otherwise take
any action that would cause any Member of the Company (or any Person holding an
indirect interest in the Company through an entity or series of entities treated
as partnerships for U.S. federal income tax purposes) to realize any “unrelated
business taxable income” as such term is defined in Code Sections 511 through
514.

 

(c)           The Company (and any direct or indirect Subsidiary of the Company)
may not engage in any activities or hold any assets that would constitute or
result in the occurrence of a REIT Prohibited Transaction as defined herein.
Notwithstanding anything to the contrary contained in this Agreement, during the
time a REIT Member is a Member of the Company, neither the Company, any direct
or indirect Subsidiary of the Company, nor any Member of the Company shall take
or refrain from taking any action which, or the effect of which, would
constitute or result in the occurrence of a REIT Prohibited Transaction by the
Company or any direct or indirect Subsidiary thereof, including without limiting
the generality of the foregoing, but in amplification thereof:

 

(i)               Entering into any lease, license, concession or other
agreement or permitting any sublease, license, concession or other agreement
that provides for rent or other payment based in whole or in part on the income
or profits of any person, excluding for this purpose a lease that provides for
rent based in whole or in part on a fixed percentage or percentages of gross
receipts or gross sales of any person without reduction for any costs of the
lessee (and in the case of a sublease, without reduction for any sublessor
costs);

 

(ii)              Leasing personal property, excluding for this purpose a lease
of personal property that is entered into in connection with a lease of real
property where the rent attributable to the personal property is less than 15%
of the total rent provided for under the lease;

 

18

 

 

(iii)             Acquiring or holding any debt investments, excluding for these
purposes “debt” solely between wholly-owned Subsidiaries of the Company, unless
(I) the amount of interest income received or accrued by the Company under such
loan does not, directly or indirectly, depend in whole or in part on the income
or profits of any person, and (II) the debt is fully secured by mortgages on
real property or on interests in real property. Notwithstanding anything to the
contrary herein, in the case of debt issued to the Company by a Subsidiary which
is treated as a “taxable REIT subsidiary” of the REIT Member, such debt shall be
secured by a mortgage or similar security interest, or by a pledge of the equity
ownership of a subsidiary of such taxable REIT subsidiary;

 

(iv)             Acquiring or holding, directly or indirectly, more than 10% of
the outstanding securities of any one issuer (by vote or value) other than an
entity which either (i) is taxable as a partnership or a disregarded entity for
United States federal income tax purposes, (ii) has properly elected to be a
taxable REIT subsidiary of the REIT Member by jointly filing with REIT, IRS Form
8875, or (iii) has properly elected to be a real estate investment trust for
U.S. federal income tax purposes;

 

(v)              Entering into any agreement where the Company receives amounts,
directly or indirectly, for rendering services to the tenants of any property
that is owned, directly or indirectly, by the Company other than (i) amounts
received for services that are customarily furnished or rendered in connection
with the rental of real property of a similar class in the geographic areas in
which the Property is located where such services are either provided by (A) an
Independent Contractor (as defined in Section 856(d)(3) of the Code) who is
adequately compensated for such services and from which the Company or REIT
Member do not, directly or indirectly, derive revenue or (B) a taxable REIT
subsidiary of REIT Member who is adequately compensated for such services or
(ii) amounts received for services that are customarily furnished or rendered in
connection with the rental of space for occupancy only (as opposed to being
rendered primarily for the convenience of the Property’s tenants);

 

(vi)             Entering into any agreement where a material amount of income
received or accrued by the Company under such agreement, directly or indirectly,
does not qualify as either (i) “rents from real property” or (ii) “interest on
obligations secured by mortgages on real property or on interests in real
property,” in each case as such terms are defined in Section 856(c) of the Code;

 

(vii)            Holding cash of the Company available for operations or
distribution in any manner other than a traditional bank checking or savings
account;

 

(viii)           Selling or disposing of any property, subsidiary or other asset
of the Company prior to (i) the completion of a two (2) year holding period with
such period to begin on the date the Company acquires a direct or indirect
interest in such property and begins to hold such property, subsidiary or asset
for the production of rental income, and (ii) the satisfaction of any other
requirements under Section 857 of the Code necessary for the avoidance of a
prohibited transaction tax on the REIT; or

 

19

 

 

(ix)             Failing to make current cash distributions to REIT Member each
year in an amount which does not at least equal the taxable income allocable to
REIT Member for such year. Notwithstanding the foregoing provisions of this
Section 9.4(c), the Company may enter into a REIT Prohibited Transaction if it
receives the prior written approval of the REIT Member specifically
acknowledging that the REIT Member is approving a REIT Prohibited Transaction
pursuant to this Section 9.4(c). For purposes of this Section 9.4(c), “REIT
Prohibited Transactions” shall mean any of the actions specifically set forth in
this Section 9.4(c).

 

9.5           FCPA.

 

(a)               In compliance with the Foreign Corrupt Practices Act, each
Member will not, and will ensure that its officers, directors, employees,
shareholders, members, agents and Affiliates, acting on its behalf or on the
behalf of the Company or any of its Subsidiaries or Affiliates do not, for a
corrupt purpose, offer, directly or indirectly, promise to pay, pay, promise to
give, give or authorize the paying or giving of anything of value to any
official representative or employee of any government agency or instrumentality,
any political party or officer thereof or any candidate for office in any
jurisdiction, except for any facilitating or expediting payments to government
officials, political parties or political party officials the purpose of which
is to expedite or secure the performance of a routine governmental action by
such government officials or political parties or party officials. The term
“routine governmental action” for purposes of this provision shall mean an
action which is ordinarily and commonly performed by the applicable government
official in (i) obtaining permits, licenses, or other such official documents
which such Person is otherwise legally entitled to; (ii) processing governmental
papers; (iii) providing police protection, mail pick-up and delivery or
scheduling inspections associated with contract performance or inspections
related to transit of goods across country; (iv) providing phone service, power
and water supply, loading and unloading of cargo, or protecting perishable
products or commodities from deterioration; or (v) actions of a similar nature.

 

The term routine governmental action does not include any decision by a
government official whether, or on what terms, to award new business to or to
continue business with a particular party, or any action taken by an official
involved in the decision making process to encourage a decision to award new
business to or continue business with a particular party.

 

(b)               Each Member agrees to notify immediately the other Member of
any request that such Member or any of its officers, directors, employees,
shareholders, members, agents or Affiliates, acting on its behalf, receives to
take any action that may constitute a violation of the Foreign Corrupt Practices
Act.

 

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Section 10.           Confidentiality.

 

(a)           Any information relating to a Member’s business, operation or
finances which are proprietary to, or considered proprietary by, a Member are
hereinafter referred to as “Confidential Information”. All Confidential
Information in tangible form (plans, writings, drawings, computer software and
programs, etc.) or provided to or conveyed orally or visually to a receiving
Member, shall be presumed to be Confidential Information at the time of delivery
to the receiving Member. All such Confidential Information shall be protected by
the receiving Member from disclosure with the same degree of care with which the
receiving Member protects its own Confidential Information from disclosure. Each
Member agrees: (i) not to disclose such Confidential Information to any Person
except to those of its employees or representatives who need to know such
Confidential Information in connection with the conduct of the business of the
Company and who have agreed to maintain the confidentiality of such Confidential
Information and (ii) neither it nor any of its employees or representatives will
use the Confidential Information for any purpose other than in connection with
the conduct of the business of the Company; provided that such restrictions
shall not apply if such Confidential Information:

 

(x)               is or hereafter becomes public, other than by breach of this
Agreement;

 

(y)               was already in the receiving Member’s possession prior to any
disclosure of the Confidential Information to the receiving Member by the
divulging Member; or

 

(z)                has been or is hereafter obtained by the receiving Member
from a third party not bound by any confidentiality obligation with respect to
the Confidential Information;

 

provided, further, that nothing herein shall prevent any Member from disclosing
any portion of such Confidential Information (1) to the Company and allowing the
Company to use such Confidential Information in connection with the Company’s
business, (2) pursuant to judicial order or in response to a governmental
inquiry, by subpoena or other legal process, but only to the extent required by
such order, inquiry, subpoena or process, and only after reasonable notice to
the original divulging Member, (3) as necessary or appropriate in connection
with or to prevent the audit by a governmental agency of the accounts of any
Member, (4) in order to initiate, defend or otherwise pursue legal proceedings
between the parties regarding this Agreement, (5) necessary in connection with a
Transfer of an Interest permitted hereunder or (6) to a Member’s respective
attorneys or accountants or other representative.

 

(b)               The Members and their Affiliates shall each act to safeguard
the secrecy and confidentiality of, and any proprietary rights to, any
non-public information relating to the Company and its business, except to the
extent such information is required to be disclosed by law or reasonably
necessary to be disclosed in order to carry out the business of the Company.
Each Member may, from time to time, provide the other Members written notice of
its non- public information which is subject to this Section 10(b).

 

(c)               Without limiting any of the other terms and provisions of this
Agreement, to the extent a Member (the “Pursuer”) provides the other Member with
information relating to a possible investment opportunity then being actively
pursued by the Pursuer on behalf of the Company, the other Member receiving such
information shall not use such information to pursue such investment opportunity
for its own account to the exclusion of the Pursuer so long as the Pursuer is
actively pursuing such opportunity on behalf of the Company and shall not
disclose any Confidential Information to any Person (except as expressly
permitted hereunder) or take any other action in connection therewith that is
reasonably likely to cause damage to the Pursuer.

 

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Section 11.           Representations and Warranties.

 

11.1             In General. As of the date hereof, each of the Members hereby
makes each of the representations and warranties applicable to such Member as
set forth in Section 11.2. Such representations and warranties shall survive the
execution of this Agreement.

 

11.2             Representations and Warranties.     Each Member hereby
represents and warrants that:

 

(a)               Due Incorporation or Formation; Authorization of Agreement.
Such Member is a corporation duly organized or a partnership or limited
liability company duly formed, validly existing and in good standing under the
laws of the jurisdiction of its incorporation or formation and has the
corporate, partnership or company power and authority to own its property and
carry on its business as owned and carried on at the date hereof and as
contemplated hereby. Such Member is duly licensed or qualified to do business
and in good standing in each of the jurisdictions in which the failure to be so
licensed or qualified would have a material adverse effect on its financial
condition or its ability to perform its obligations hereunder. Such Member has
the corporate, partnership or company power and authority to execute and deliver
this Agreement and to perform its obligations hereunder, and the execution,
delivery and performance of this Agreement has been duly authorized by all
necessary corporate, partnership or company action. This Agreement constitutes
the legal, valid and binding obligation of such Member.

 

(b)               No Conflict with Restrictions; No Default. Neither the
execution, delivery or performance of this Agreement nor the consummation by
such Member (or any of its Affiliates) of the transactions contemplated hereby
(i) does or will conflict with, violate or result in a breach of (or has
conflicted with, violated or resulted in a breach of) any of the terms,
conditions or provisions of any law, regulation, order, writ, injunction,
decree, determination or award of any court, any governmental department, board,
agency or instrumentality, domestic or foreign, or any arbitrator, applicable to
such Member or any of its Affiliates, (ii) does or will conflict with, violate,
result in a breach of or constitute a default under (or has conflicted with,
violated, resulted in a breach of or constituted a default under) any of the
terms, conditions or provisions of the articles of incorporation, bylaws,
partnership agreement or operating agreement of such Member or any of its
Affiliates or of any material agreement or instrument to which such Member or
any of its Affiliates is a party or by which such Member or any of its
Affiliates is or may be bound or to which any of its properties or assets is
subject, (iii) does or will conflict with, violate, result in (or has conflicted
with, violated or resulted in) a breach of, constitute (or has constituted) a
default under (whether with notice or lapse of time or both), accelerate or
permit the acceleration of (or has accelerated) the performance required by,
give (or has given) to others any material interests or rights or require any
consent, authorization or approval under any indenture, mortgage, lease,
agreement or instrument to which such Member or any of its Affiliates is a party
or by which such Member or any of its Affiliates or any of their properties or
assets is or may be bound or (iv) does or will result (or has resulted) in the
creation or imposition of any lien upon any of the properties or assets of such
Member or any of its Affiliates.

 

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(c)           Governmental Authorizations. Any registration, declaration or
filing with, or consent, approval, license, permit or other authorization or
order by, or exemption or other action of, any governmental, administrative or
regulatory authority, domestic or foreign, that was or is required in connection
with the valid execution, delivery, acceptance and performance by such Member
under this Agreement or consummation by such Member (or any of its Affiliates)
of any transaction contemplated hereby has been completed, made or obtained on
or before the date hereof.

 

(d)          Litigation. There are no actions, suits, proceedings or
investigations pending, or, to the knowledge of such Member or any of its
Affiliates, threatened against or affecting such Member or any of its Affiliates
or any of their properties, assets or businesses in any court or before or by
any governmental department, board, agency or instrumentality, domestic or
foreign, or any arbitrator which could, if adversely determined (or, in the case
of an investigation could lead to any action, suit or proceeding which if
adversely determined could) reasonably be expected to materially impair such
Member’s ability to perform its obligations under this Agreement or to have a
material adverse effect on the consolidated financial condition of such Member;
such Member or any of its Affiliates has not received any currently effective
notice of any default, and such Member or any of its Affiliates is not in
default, under any applicable order, writ, injunction, decree, permit,
determination or award of any court, any governmental department, board, agency
or instrumentality, domestic or foreign, or any arbitrator which could
reasonably be expected to materially impair such Member’s (or any of its
Affiliate’s) ability to perform its obligations under this Agreement or to have
a material adverse effect on the consolidated financial condition of such
Member.

 

(e)           Investigation. Such Member is acquiring its Interest based upon
its own investigation, and the exercise by such Member of its rights and the
performance of its obligations under this Agreement will be based upon its own
investigation, analysis and expertise. Such Member is a sophisticated investor
possessing an expertise in analyzing the benefits and risks associated with
acquiring investments that are similar to the acquisition of its Interest.

 

(f)           Broker. No broker, agent or other person acting as such on behalf
of such Member was instrumental in consummating this transaction and that no
conversations or prior negotiations were had by such party with any broker,
agent or other such person concerning the transaction that is the subject of
this Agreement.

 

(g)          Investment Company Act. Neither such Member nor any of its
Affiliates is, nor will the Company as a result of such Member holding an
interest therein be, an “investment company” as defined in, or subject to
regulation under, the Investment Company Act of 1940, as amended.

 

(h)          Securities Matters.

 

(i)None of the Interests are registered under the Securities Act or any state
securities laws. Such Member understands that the offering, issuance and sale of
the Interests are intended to be exempt from registration under the Securities
Act, based, in part, upon the representations, warranties and agreements
contained in this Agreement. Such Member is an “accredited investor” as such
term is defined in Rule 501 of Regulation D promulgated under the Securities
Act.

 

23

 

 

(ii)Neither the Securities and Exchange Commission nor any state securities
commission has approved the Interests or passed upon or endorsed the merits of
the offer or sale of the Interests. Such Member is acquiring the Interests
solely for such Member’s own account for investment and not with a view to
resale or distribution thereof in violation of the Securities Act.

 

(iii)Such Member is unaware of, and in no way relying on, any form of general
solicitation or general advertising in connection with the offer and sale of the
Interests, and no Member has taken any action which could give rise to any claim
by any person for brokerage commissions, finders’ fees (without regard to any
finders’ fees payable by the Company directly) or the like relating to the
transactions contemplated hereby.

 

(iv)Such Member is not relying on the Company or any of its officers, directors,
employees, advisors or representatives with regard to the tax and other economic
considerations of an investment in the Interests, and such Member has relied on
the advice of only such Member’s advisors.

 

(v)Such Member understands that the Interests may not be sold, hypothecated or
otherwise disposed of unless subsequently registered under the Securities Act
and applicable state securities laws, or an exemption from registration is
available. Such Member agrees that it will not attempt to sell, transfer,
assign, pledge or otherwise dispose of all or any portion of the Interests in
violation of this Agreement.

 

(vi)Such Member has adequate means for providing for its current financial needs
and anticipated future needs and possible contingencies and emergencies and has
no need for liquidity in the investment in the Interests.

 

(vii)Such Member is knowledgeable about investment considerations and has a
sufficient net worth to sustain a loss of such Member’s entire investment in the
Company in the event such a loss should occur. Such Member’s overall commitment
to investments which are not readily marketable is not excessive in view of such
Member’s net worth and financial circumstances and the purchase of the Interests
will not cause such commitment to become excessive. The investment in the
Interests is suitable for such Member.

 

(viii)Such Member represents to the Company that the information contained in
this subparagraph (h) and in all other writings, if any, furnished to the
Company with regard to such Member (to the extent such writings relate to its
exemption from registration under the Securities Act) is complete and accurate
and may be relied upon by the Company in determining the availability of an
exemption from registration under federal and state securities laws in
connection with the sale of the Interests.

 

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Section 12.            Sale, Assignment, Transfer or other Disposition.

 

12.1        Prohibited Transfers. Except as otherwise provided in this Section
12, Sections 5.2{b) or as approved by the Manager, no Member shall Transfer all
or any part of its Interest, whether legal or beneficial, in the Company, and
any attempt to so Transfer such Interest (and such Transfer) shall be null and
void and of no effect. Notwithstanding the foregoing, either Member shall have
the right, with the consent of the other Member, at any time to pledge to a
lender or creditor, directly or indirectly, all or any part of its Interest in
the Company for such purposes as it deems necessary in the ordinary course of
its business and operations.

 

12.2        Affiliate Transfers.

 

(a)          Subject to the provisions of Section 12.2(b) hereof, and subject in
each case to the prior written approval of each Member (such approval not to be
unreasonably withheld), any Member may Transfer all or any portion of its
Interest in the Company at any time to an Affiliate of such Member, provided
that such Affiliate shall remain an Affiliate of such Member at all times that
such Affiliate holds such Interest. If such Affiliate shall thereafter cease
being an Affiliate of such Member while such Affiliate holds such Interest, such
cessation shall be a non-permitted Transfer and shall be deemed void ab initio,
whereupon the Member having made the Transfer shall, at its own and sole
expense, cause such putative transferee to disgorge all economic benefits and
otherwise indemnify the Company and the other Member(s) against loss or damage
under any Collateral Agreement.

 

(b)          Notwithstanding anything to the contrary contained in this
Agreement, the following Transfers shall not require the approval set forth in
Section 12.2(a):

 

(i)               Any Transfer by SOIF III or a SOIF III Transferee of up to one
hundred percent (100%) of its Interest to any Affiliate of SOIF III, including
but not limited to (A) BRG or any Person that is directly or indirectly owned by
BRG; (B) Bluerock Special Opportunity + Income Fund, LLC (“SOIF”) or any Person
that is directly or indirectly owned by SOIF; (C) Bluerock Special Opportunity +
Income Fund II, LLC (“SOIF II”) or any Person that is directly or indirectly
owned by SOIF II; (D) Bluerock Special Opportunity + Income Fund III, LLC (“SOIF
III”) or any Person that is directly or indirectly owned by SOIF III; and/or (E)
Bluerock Growth Fund, LLC (“BGF”) or any Person that is directly or indirectly
owned by BGF (collectively, a “ SOIF III Transferee”);

 

(ii)             Any Transfer by BEMT or a BEMT Transferee of up to one hundred
percent (100%) of its Interest to any Affiliate of BEMT, including but not
limited to (A) BRG or any Person that is directly or indirectly owned by BRG;
(B) SOIF or any Person that is directly or indirectly owned by SOIF; (B) SOIF II
or any Person that is directly or indirectly owned by SOIF II; (C) SOIF III or
any Person that is directly or indirectly owned by SOIF III; and/or (D) BGF or
any Person that is directly or indirectly owned by BGF;

 

25

 

 

provided however, as to subparagraphs (b)(i) and (b)(ii), and as to subparagraph
(a), no Transfer shall be permitted and shall be void ab initio if it shall
violate any “Transfer” provision of any applicable Collateral Agreement with
third party lenders.

 

(c)               Upon the execution by any such BEMT Transferee or SOIF III
Transferee of such documents necessary to admit such party into the Company and
to cause the BEMT Transferee or SOIF III Transferee (as applicable) to become
bound by this Agreement, the BEMT Transferee or SOIF III Transferee (as
applicable) shall become a Member, without any further action or authorization
by any Member.

 

12.3             Admission of Transferee; Partial Transfers. Notwithstanding
anything in this Section 12 to the contrary and except as provided in Sections
5.2(b), no Transfer of Interests in the Company shall be permitted unless the
potential transferee is admitted as a Member under this Section 12.3:

 

(a)               If a Member Transfers all or any portion of its Interest in
the Company, such transferee may become a Member if (i) such transferee executes
and agrees to be bound by this Agreement, (ii) the transferor and/or transferee
pays all reasonable legal and other fees and expenses incurred by the Company in
connection with such assignment and substitution and (iii) the transferor and
transferee execute such documents and deliver such certificates to the Company
and the remaining Members as may be required by applicable law or otherwise
advisable; and

 

(b)              Notwithstanding the foregoing, any Transfer or purported
Transfer of any Interest, whether to another Member or to a third party, shall
be of no effect and void ab initio, and such transferee shall not become a
Member or an owner of the purportedly transferred Interest, if the Management
Committee determines in its sole discretion that:

 

(i)          the Transfer would require registration of any Interest under, or
result in a violation of, any federal or state securities laws;

 

 

(ii)         the Transfer would result in a termination of the Company under
Code Section 708(b);

 

(iii)        as a result of such Transfer the Company would be required to
register as an investment company under the Investment Company Act of 1940, as
amended, or any rules or regulations promulgated thereunder;

 

(iv)        if as a result of such Transfer the aggregate value of Interests
held by “benefit plan investors” including at least one benefit plan investor
that is subject to ERISA, could be “significant” (as such terms are defined in
U.S. Department of Labor Regulation 29 C.F.R. 2510.3-101(f)(2)) with the result
that the assets of the Company could be deemed to be “plan assets” for purposes
of ERISA;

 

26

 

 

(v)         as a result of such Transfer, the Company would or may have in the
aggregate more than one hundred (100) members and material adverse federal
income tax consequences would result to a Member. For purposes of determining
the number of members under this Section 12.3(b)(v), a Person (the “beneficial
owner”) indirectly owning an interest in the Company through a partnership,
grantor trust or S corporation (as such terms are used in the Code) (the
“flow-through entity”) shall be considered a member, but only if (i)
substantially all of the value of the beneficial owner’s interest in the
flow-through entity is attributable to the flow-through entity’s interest
(direct or indirect) in the Company and (ii) in the sole discretion of the
Manager, a principal purpose of the use of the flow-through entity is to permit
the Company to satisfy the 100-member limitation; or

 

(vi)        the transferor failed to comply with the provisions of Sections
12.2(a) or (b).

 

The Manager may require the provision of a certificate as to the legal nature
and composition of a proposed transferee of an Interest of a Member and from any
Member as to its legal nature and composition and shall be entitled to rely on
any such certificate in making such determinations under this Section 12.3.

 

12.4            Withdrawals. Each of the Members does hereby covenant and agree
that it will not withdraw, resign, retire or disassociate from the Company,
except as a result of a Transfer of its entire Interest in the Company permitted
under the terms of this Agreement and that it will carry out its duties and
responsibilities hereunder until the Company is terminated, liquidated and
dissolved under Section 13. No Member shall be entitled to receive any
distribution or otherwise receive the fair market value of its Interest in
compensation for any purported resignation or withdrawal not in accordance with
the terms of this Agreement.

 

Section 13.           Dissolution.

 

13.1         Limitations. The Company may be dissolved, liquidated and
terminated only pursuant to the provisions of this Section 13, and, to the
fullest extent permitted by law but subject to the terms of this Agreement, the
parties hereto do hereby irrevocably waive any and all other rights they may
have to cause a dissolution of the Company or a sale or partition of any or all
of the Company’s assets.

 

13.2         Exclusive Events Requiring Dissolution. The Company shall be
dissolved only upon the earliest to occur of the following events (a
“Dissolution Event”):

 

(a)            the expiration of the specific term set forth in Section 2.5;

 

(b)            at any time at the election of the Manager in writing;

 

(c)            at any time there are no Members (unless otherwise continued in
accordance with the Act); or

 

27

 

 

(d)           the entry of a decree of judicial dissolution pursuant to Section
18-802 of the Act 

 

13.3         Liquidation. Upon the occurrence of a Dissolution Event, the
business of the Company shall be continued to the extent necessary to allow an
orderly winding up of its affairs, including the liquidation of the assets of
the Company pursuant to the provisions of this Section 13.3, as promptly as
practicable thereafter, and each of the following shall be accomplished:

 

(a)            The Manager shall cause to be prepared a statement setting forth
the assets and liabilities of the Company as of the date of dissolution, a copy
of which statement shall be furnished to all of the Members.

 

(b)            The property and assets of the Company shall be liquidated or
distributed in kind under the supervision of the Manager as promptly as
possible, but in an orderly, businesslike and commercially reasonable manner.

 

(c)            Any gain or loss realized by the Company upon the sale of its
property shall be deemed recognized and allocated to the Members in the manner
set forth in Section 7.2. To the extent that an asset is to be distributed in
kind, such asset shall be deemed to have been sold at its fair market value on
the date of distribution, the gain or loss deemed realized upon such deemed sale
shall be allocated in accordance with Section 7.2 and the amount of the
distribution shall be considered to be such fair market value of the asset.

 

(d)           The proceeds of sale and all other assets of the Company shall be
applied and distributed as follows and in the following order of priority:

 

(i)             to the satisfaction of the debts and liabilities of the Company
(contingent or otherwise) and the expenses of liquidation or distribution
(whether by payment or reasonable provision for payment), other than liabilities
to Members or former Members for distributions;

 

(ii)            to the satisfaction of loans made pursuant to Section 5.2(b) in
proportion to the outstanding balances of such loans at the time of payment;

 

(iii)           the balance, if any, to the Members in accordance with Sections
6.1.

 

13.4          Continuation of the Company. Notwithstanding anything to the
contrary contained herein, the death, retirement, resignation, expulsion,
bankruptcy, dissolution or removal of a Member shall not in and of itself cause
the dissolution of the Company, and the Members are expressly authorized to
continue the business of the Company in such event, without any further action
on the part of the Members.

 

28

 

 

Section 14.           Indemnification.

 

14.1             Exculpation of Members. No Member, Manager, representative or
officer of the Company shall be liable to the Company or to the other Members
for damages or otherwise with respect to any actions or failures to act taken or
not taken relating to the Company, except to the extent any related loss results
from fraud, gross negligence or willful or wanton misconduct on the part of such
Member, Manager, representative or officer or the willful breach of any
obligation under this Agreement.

 

14.2            Indemnification by Company. The Company hereby indemnifies,
holds harmless and defends the Members, the Manager, the officers and each of
their respective agents, officers, directors, members, partners, shareholders
and employees from and against any loss, expense, damage or injury suffered or
sustained by them (including but not limited to any judgment, award, settlement,
reasonable attorneys’ fees and other costs or expenses incurred in connection
with the defense of any actual or threatened action, proceeding or claim) by
reason of or arising out of (i) their activities on behalf of the Company or in
furtherance of the interests of the Company, including, without limitation, the
provision of guaranties to third party lenders in respect of financings relating
to the Company or any of its assets (but specifically excluding from such
indemnity by the Company any so called “bad boy” guaranties or similar
agreements which provide for recourse as a result of failure to comply with
covenants, willful misconduct or gross negligence, (ii) their status as Members,
Manager, representatives, employees or officers of the Company, or (iii) the
Company’s assets, property, business or affairs (including, without limitation,
the actions of any officer, director, member or employee of the Company or any
of its Subsidiaries), if the acts or omissions were not performed or omitted
fraudulently or as a result of gross negligence or willful or wanton misconduct
by the indemnified party or as a result of the willful breach of any obligation
under this Agreement by the indemnified party. For the purposes of this Section
14.2, officers, directors, employees and other representatives of Affiliates of
a Member who are functioning as representatives of such Member in connection
with this Agreement shall be considered representatives of such Member for the
purposes of this Section 14. Reasonable expenses incurred by the indemnified
party in connection with any such proceeding relating to the foregoing matters
shall be paid or reimbursed by the Company in advance of the final disposition
of such proceeding upon receipt by the Company of (x) written affirmation by the
Person requesting indemnification of its good faith belief that it has met the
standard of conduct necessary for indemnification by the Company and (y) a
written undertaking by or on behalf of such Person to repay such amount if it
shall ultimately be determined by a court of competent jurisdiction that such
Person has not met such standard of conduct, which undertaking shall be an
unlimited general obligation of the indemnified party but need not be secured.

 

14.3             General Indemnification by the Members.

 

(a)               Notwithstanding any other provision contained herein, each
Member (the “Indemnifying Party”) hereby indemnifies and holds harmless the
other Members, the Company and each of their subsidiaries and their agents,
officers, directors, members, partners, shareholders and employees (each, an
“Indemnified Party”) from and against all losses, costs, expenses, damages,
claims and liabilities (including reasonable attorneys’ fees) as a result of or
arising out of (i) any breach of any obligation of the Indemnifying Party under
this Agreement, or (ii) any breach of any obligation by or any inaccuracy in or
breach of any representation or warranty made by the Indemnifying Party, whether
in this Agreement or in any other agreement with respect to the conveyance,
assignment, contribution or other transfer of the Properties (or interests
therein), assets, agreements, rights or other interests conveyed, assigned,
contributed or otherwise transferred to the Company (collectively, the
“Inducement Agreements”).

 

29

 

 

(b)           Except as otherwise provided herein or in any other agreement,
recourse for the indemnity obligation of the Members under this Section 14.3
shall be limited to such Indemnifying Party’s Interest in the Company.

 

(c)           The indemnities, contributions and other obligations under this
Agreement shall be in addition to any rights that any Indemnified Party may have
at law, in equity or otherwise. The terms of this Section 14 shall survive
termination of this Agreement.

 

Section 15.           Sale Rights

 

15.1         Push /Pull Rights.

 

(a)               Availability of Rights. At any time that the Members are
unable to agree on a Major Decision and such failure to agree has continued for
fifteen (15) days after written notice from one Member to the other Member
indicating an intention to exercise rights under this Section 15.1, either
Member may exercise its right to initiate the provisions of this Section 15.1.

 

(b)               Exercise. The Member wishing to exercise its rights pursuant
to this Section 15.1 (the “Offeror”) shall do so by giving notice to the other
Member (the “Offeree”) setting forth a statement of intent to invoke its rights
under this Section 15.l, stating therein the aggregate dollar amount (the
“Valuation Amount”) that the Offeror would be willing to pay for the assets of
the Company as of the Closing Date (as defined below) free and clear of all
liabilities, and setting forth all oral or written offers and inquiries received
by the Offeror during the previous twelve-month period relating to the
financing, disposition or leasing of any Company property.

 

(c)               Offeree Response. After receipt of such notice, the Offeree
shall elect to either (i) sell its entire Interest to the Offeror for an amount
equal to the amount the Offeree would have been entitled to receive if the
Company had sold its assets for the Valuation Amount on the Closing Date and the
Company had immediately paid all Company liabilities and Imputed Closing Costs
and distributed the net proceeds of sale to the Members in satisfaction of their
Interests pursuant to Section 13.3, or (ii) purchase the entire Interest of the
Offeror for an amount equal to the amount the Offeror would have been entitled
to receive if the Company had sold all of its assets for the Valuation Amount on
the Closing Date and the Company had immediately paid all Company liabilities
and Imputed Closing Costs and distributed the net proceeds of the sale to the
Members in satisfaction of their Interests pursuant to Section 13.3. The Offeree
shall have thirty (30) days from the giving of the Offeror’s notice in which to
exercise either of its options by giving written notice to the Offeror. If the
Offeree does not elect to acquire the Offeror’ s Interest within such time
period, the Offeree shall be deemed to have elected to sell its Interest to the
Offeror as provided in subsection (i) above.

 

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(d)           Earnest Money. Within five (5) business days after an election has
been made or deemed made under Section 15.1(c), the acquiring Member shall
deposit with a mutually acceptable third-party escrow agent a non-refundable
earnest money deposit in the amount of five percent (5%) of the amount the
selling Member is entitled to receive for its Interest under this Section 15.1,
which amount shall be applied to the purchase price at closing. If the acquiring
Member should thereafter fail to consummate the transaction for any reason other
than a default by the selling Member or a refusal by any lender of the Company
or any Subsidiary who has a right under its loan documents to consent to such
transfer to so consent, (i) (A) the earnest money deposit shall be distributed
from escrow to the selling Member, free of all claims of the acquiring Member,
as liquidated damages and constituting the sole and exclusive remedy available
to the selling Member because of a default by the acquiring Member or (B) the
selling Member may, by delivering to the acquiring Member written notice
thereof, elect to buy the acquiring Member’s entire Interest for an amount equal
to the amount the acquiring Member would have been entitled to receive if the
Company had sold all of its assets for the Valuation Amount and the Company had
immediately paid all Company liabilities and Imputed Closing Costs and
distributed the net proceeds of the sale to the Members in satisfaction of their
Interests pursuant to Section 13.3, in which case, the Closing Date therefor
shall be the date specified in the selling Member’s notice, and (ii) if the
acquiring Member was the Offeror, the non- refundable earnest money deposit for
any future election by the acquiring Member to buy the selling Member’s Interest
shall be twenty percent (20%) of the amount the selling Member is entitled to
receive for its Interest in connection with such future election.

 

(e)           Closing. The closing of an acquisition pursuant to this Section
15.1 shall be held at the principal place of business of the Company on a
mutually acceptable date (the “Closing Date”) not later than sixty (60) days
(or, if the Offeree is the acquiring Member, ninety (90) days) after an election
has been made or deemed made under Section 15.1(c). At such closing, the
following shall occur:

 

(i)               The selling Member shall assign to the acquiring Member or its
designee the selling Member’s Interest in accordance with the instructions of
the acquiring Member, and shall execute and deliver to the acquiring Member all
documents which may be required to give effect to the disposition and
acquisition of such interests, in each case free and clear of all liens, claims,
and encumbrances, with covenants of general warranty; and

 

(ii)               The acquiring Member shall pay to the selling Member the
consideration therefor in cash.

 

(f)           Enforcement. It is expressly agreed that the remedy at law for
breach of the obligations of the Members set forth in this Section 15.l is
inadequate in view of (i) the complexities and uncertainties in measuring the
actual damage to be sustained by reason of the failure of a Member to comply
fully with such obligations, and (ii) the uniqueness of the Company’s business
and the Members’ relationships. Accordingly, each of such obligations shall be,
and is hereby expressly made, enforceable by an order of specific performance.

 

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15.2            Forced Sale Rights.

 

(a)               Offers. If, at any time, (i) either Member desires to offer
the Company Interest for sale on specified terms, or (ii) receives from an
unaffiliated purchaser a bona fide written cash offer (i.e., not seller
financed) for the purchase of such Company Interest on terms that such Member
desires for the Company to accept (such specified terms or bona fide offer being
herein called the “Offer”), then the Member desiring to make or accept the Offer
(the “Initiating Member”) shall provide written notice of the terms of such
Offer (the “Sale Notice”) to the other Member (the “Non-Initiating Member”).

 

(b)               Response. The Non-Initiating Member shall have thirty (30)
days from the date of the Sale Notice (the “Response Period”) to provide written
notice to the Initiating Member of whether the Company should make or accept the
Offer; the failure to timely deliver such notice shall be deemed to constitute
an election to accept the Offer and sell such Company Interest on the terms of
the Offer.

 

(c)                Offer Unacceptable. If the Non-Initiating Member does not
wish for the Company to make or accept the Offer, the Initiating Member may
elect to sell its Interest to the Non-Initiating Member, in which case the
Non-Initiating Member must purchase the Initiating Member’s Interest for an
amount equal to the amount that would be distributable to the Initiating Member
if the Company had accepted the Offer, closed the sale pursuant to such Offer
and wound up its affairs pursuant to Section 13.

 

For purposes of the foregoing calculations, the purchase price for a sale shall
be reduced by Imputed Closing Costs therefor. The Initiating Member must
exercise this option, if at all, by delivering written notice thereof to the
Non-Initiating Member within twenty (20) days after the end of the Response
Period. The Non-Initiating Member shall pay the Initiating Member cash for its
Interest, as the case may be. Closing shall take place on or before the date
specified in the Sale Notice, but if the Non-Initiating Member is purchasing the
Initiating Member’s Interest, the Non-Initiating Member shall have until 120
days after the Sale Notice in which to close. If the Initiating Member or the
Non-Initiating Member defaults at closing, the non-defaulting party shall have
the right to bring suit for damages, for specific performance, or exercise any
other remedy available at law or in equity. Upon payment at closing, the
Initiating Member shall execute and deliver all documents reasonably required to
transfer the interest being sold.

 

(d)               Offer Acceptable. If the Non-Initiating Member consents (or is
deemed to have consented) to the Company selling the Company Interest on the
terms of the Offer, then the Initiating Member shall be allowed to sell the
Company Interest for cash on the terms of the Offer for a period of up to one
hundred eighty (180) days following the expiration of the Response Period. If
the Initiating Member obtains a bonafide third party contract to sell the
Company Interest on the terms of the offer within such one hundred eighty (180)
day period, the Initiating Member shall have an additional period of ninety (90)
days after the date of such contract (that is, not to exceed 270 days after the
expiration of the Response Period) in which to consummate the sale. If after
having received the consent (or deemed consent) of the Non- Initiating Member to
the sale of such Company Interest on the terms of the Offer, the Initiating
Member is unable to obtain a bona fide contract within such one hundred eighty
(180) day period, or if after having obtained such bona fide contract, the
Initiating Member is unable to consummate such sale within 270 days after the
expiration of the Response Period, then the Initiating Member must again submit
an Offer to the Non-Initiating Member under the terms of this Section 15.2
before it may sell such Company Interest.

 

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Section 16.           Mediation and Arbitration of Disputes .

 

16.1            Events Giving Rise To Mediation or Arbitration. In the event
that there is a dispute between the Manager or the Members as to any action or
issue, or in the event of a deadlock between the Members, then and in such event
all of the Members agree, upon the written request of any one Member, to submit
to mediation within ten (10) days of receipt of the request for mediation for
the purpose of resolving the dispute. If mediation is not successful in
resolving the dispute; one or more of the Members may elect to have the dispute
submitted to binding arbitration as provided in this Article 10 by giving
written notice to each of the Members of such Member’s election to require
arbitration of such dispute. Said written notice shall set forth (i) the action
or issue in dispute and (ii) a brief description of the position of the electing
Member with respect to such dispute.

 

16.2           Selection of Arbitrators. Within ten (10) days of the date upon
which the notice is sent pursuant to Section 10.1, the Members shall meet for
the purpose of selecting three (3) persons to act as arbitrators for the Company
for such dispute. In the event that the Members are unable to agree upon the
selection of the arbitrators at such meeting, then within ten (10) days
following such meeting, the Member(s) requesting such arbitration shall select
one (1) person to serve as an arbitrator and the remaining Member(s) shall
select one (1) person to serve as an arbitrator and, within five (5) days of the
date of their selection, the two persons so selected shall select a third person
to serve as the third and final arbitrator. In the event that the Member(s)
requesting such arbitration select one such person within such ten (10) day
period, but the remaining Member(s) fails to select one such person within such
ten (10) day period, or vice versa, then the person selected shall serve as the
sole arbitrator and shall make the determination required hereunder. In the
event the two selected arbitrators are unable to agree upon the identity of the
person to serve as the third and final arbitrator, such determination shall be
made by the American Arbitration Association in accordance with its
then-existing rules and regulations. No person selected by the Members and/or by
the arbitrators may be employed by, doing substantial business with or otherwise
affiliated with any of the Members (including, but not limited to, acting as an
attorney or accountant for any one or more of the Members or for the Company).

 

16.3            Arbitration Hearing. Not later than fifteen (15) days following
the selection of the third arbitrator, a hearing shall be convened by the
arbitrators at a mutually agreeable site. At such hearing, each Member shall be
entitled to present arguments in favor of and call witnesses in support of such
Member’s position with respect to the item in dispute; provided, however, that
absent a written agreement of the Members to the contrary, presentation and/or
arguments (including the direct testimony of any witnesses called by a Member)
of each side of the dispute shall be limited to three (3) hours.

 

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16.4             Decision of the Arbitrators/Binding Effect. The arbitrators
shall render their decision regarding the matter in dispute within ten (10) days
following the date of the hearing set forth in Section 10.3 hereinabove and said
decision shall be final and binding upon the Members and the Company. Each of
the Members hereby covenant and agree that they shall comply with the decision
of the arbitrators.

 

Section 17.           Miscellaneous.

 

17.1             Notices.

 

(a)               All notices, requests, approvals, authorizations, consents and
other communications required or permitted under this Agreement shall be in
writing and shall be (as elected by the Person giving Such notice) hand
delivered by messenger or overnight courier service, mailed (airmail, if
international) by registered or certified mail (postage prepaid), return receipt
requested, or sent via facsimile (provided such facsimile is immediately
followed by the delivery of an original copy of same via one of the other
foregoing delivery methods) addressed to:

 

If to SOIF III:

 

c/o Bluerock Real Estate, L.L.C.

712 Fifth Avenue, 9th Floor

New York, New York 10019

Attn: Michael L. Konig, Esq.

 

If to BEMT:

 

c/o Bluerock Real Estate, L.L.C.

712 Fifth Avenue, 9th Floor

New York, New York 10019

Attn: Michael L. Konig, Esq.

 

(b)               Each such notice shall be deemed delivered (a) on the date
delivered if by hand delivery or overnight courier service or facsimile, and (b)
on the date upon which the return receipt is signed or delivery is refused or
the notice is designated by the postal authorities as not deliverable, as the
case may be, if mailed (provided, however, if such actual delivery occurs after
5:00 p.m. (local time where received), then such notice or demand shall be
deemed delivered on the immediately following business day after the actual day
of delivery).

 

(c)               By giving to the other parties at least fifteen (15) days
written notice thereof, the parties hereto and their respective successors and
assigns shall have the right from time to time and at any time during the term
of this Agreement to change their respective addresses.

 

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17.2             Governing Law. This Agreement and the rights of the Members
hereunder shall be governed by, and interpreted in accordance with, the laws of
the State of Delaware. Each of the parties hereto irrevocably submits to the
jurisdiction of the New York State courts and the Federal courts sitting in the
State of New York and agree that all matters involving this Agreement shall be
heard and determined in such courts. Each of the parties hereto waives
irrevocably the defense of inconvenient forum to the maintenance of such action
or proceeding.

 

17.3             Successors. This Agreement shall be binding upon, and inure to
the benefit of, the parties and their successors and permitted assigns. Except
as otherwise provided herein, any Member who Transfers its Interest as permitted
by the terms of this Agreement shall have no further liability or obligation
hereunder, except with respect to claims arising prior to such Transfer.

 

17.4             Pronouns. Whenever from the context it appears appropriate,
each term stated in either the singular or the plural shall include the singular
and the plural, and pronouns stated in either the masculine, the feminine or the
neuter gender shall include the masculine, feminine and neuter.

 

17.5             Table of Contents and Captions Not Part of Agreement. The table
of contents and captions contained in this Agreement are inserted only as a
matter of convenience and in no way define, limit or extend the scope or intent
of this Agreement or any provisions hereof.

 

17.6             Severability. If any provision of this Agreement shall be held
invalid, illegal or unenforceable in any jurisdiction or in any respect, then
the validity, legality and enforceability of the remaining provisions contained
herein shall not in any way be affected or impaired, and the Members shall use
their best efforts to amend or substitute such invalid, illegal or unenforceable
provision with enforceable and valid provisions which would produce as nearly as
possible the rights and obligations previously intended by the Members without
renegotiation of any material terms and conditions stipulated herein.

 

17.7             Counterparts. This Agreement may be executed in several
counterparts, each of which shall be deemed an original but all of which shall
constitute one and the same instrument.

 

17.8             Entire Agreement and Amendment. This Agreement and the other
written agreements described herein between the parties hereto entered into as
of the date hereof, constitute the entire agreement between the Members relating
to the subject matter hereof. In the event of any conflict between this
Agreement or such other written agreements, the terms and provisions of this
Agreement shall govern and control.

 

17.9             Further Assurances. Each Member agrees to execute and deliver
any and all additional instruments and documents and do any and all acts and
things as may be necessary or expedient to effectuate more fully this Agreement
or any provisions hereof or to carry on the business contemplated hereunder.

 

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17.10           No Third Party Rights. The provisions of this Agreement are for
the exclusive benefit of the Members and the Company, and no other party
(including, without limitation, any creditor of the Company) shall have any
right or claim against any Member by reason of those provisions or be entitled
to enforce any of those provisions against any Member.

 

17.11           Incorporation by Reference. Every Exhibit and Annex attached to
this Agreement is incorporated in this Agreement by reference.

 

17.12           Limitation on Liability. Except as set forth in Section 14 and
with respect to a Default Loan as set forth in Section 5.2(b), the Members shall
not be bound by, or be personally liable for, by reason of being a Member, a
judgment, decree or order of a court or in any other manner, for the expenses,
liabilities or obligations of the Company, and the liability of each Member
shall be limited solely to the amount of its Capital Contributions as provided
under Section 5. Except with respect to a Default Loan as set forth in Section
5.2(b), any claim against any Member (the “Member in Question”) which may arise
under this Agreement shall be made only against, and shall be limited to, such
Member in Question’s Interest, the proceeds of the sale by the Member in
Question of such Interest or the undivided interest in the assets of the Company
distributed to the Member in Question pursuant to Section 13.3(d) hereof. Except
with respect to a Default Loan as set forth in Section 5.2(b), any right to
proceed against (i) any other assets of the Member in Question or (ii) any
agent, officer, director, member, partner, shareholder or employee of the Member
in Question or the assets of any such Person, as a result of such a claim
against the Member in Question arising under this Agreement or otherwise, is
hereby irrevocably and unconditionally waived.

 

17.13           Remedies Cumulative. The rights and remedies given in this
Agreement and by law to a Member shall be deemed cumulative, and the exercise of
one of such remedies shall not operate to bar the exercise of any other rights
and remedies reserved to a Member under the provisions of this Agreement or
given to a Member by law. In the event of any dispute between the parties
hereto, the prevailing party shall be entitled to recover from the other party
reasonable attorney’s fees and costs incurred in connection therewith.

 

17.14            No Waiver. One or more waivers of the breach of any provision
of this Agreement by any Member shall not be construed as a waiver of a
subsequent breach of the same or any other provision, nor shall any delay or
omission by a Member to seek a remedy for any breach of this Agreement or to
exercise the rights accruing to a Member by reason of such breach be deemed a
waiver by a Member of its remedies and rights with respect to such breach.

 

17.15            Limitation On Use of Names. Notwithstanding anything contained
in this Agreement or otherwise to the contrary, each of SOIF III and BEMT as to
itself agree that neither it nor any of its Affiliates, agents, or
representatives is granted a license to use or shall use the name of the other
under any circumstances whatsoever, except such name may be used in furtherance
of the business of the Company but only as and to the extent approved by the
Manager.

 

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17.16           Publicly Traded Partnership Provision. Each Member hereby
severally covenants and agrees with the other Members for the benefit of such
Members, that (i) it is not currently making a market in Interests in the
Company and will not in the future make such a market and (ii) it will not
Transfer its Interest on an established securities market, a secondary market or
an over-the-counter market or the substantial equivalent thereof within the
meaning of Code Section 7704 and the Regulations, rulings and other
pronouncements of the U.S. Internal Revenue Service or the Department of the
Treasury thereunder. Each Member further agrees that it will not assign any
Interest in the Company to any assignee unless such assignee agrees to be bound
by this Section and to assign such Interest only to such Persons who agree to be
similarly bound.

 

17.17           Uniform Commercial Code. The interest of each Member in the
Company shall be a “certificated security” governed by Article 8 of the Delaware
UCC and the UCC as enacted in the State of New York (the “New York UCC”),
including, without limitation, (i) for purposes of the definition of a
“security” thereunder, the interest of each Member in the Company shall be a
security governed by Article 8 of the Delaware UCC and the New York UCC and (ii)
for purposes of the definition of a “certificated security” thereunder.

 

17.18           Reserved. Reserved.

 

17.19           No Construction Against Drafter. This Agreement has been
negotiated and prepared by SOIF III and BEMT and their respective attorneys and,
should any provision of this Agreement require judicial interpretation, the
court interpreting or construing such provision shall not apply the rule of
construction that a document is to be construed more strictly against one party.

 

37

 

 

IN WITNESS WHEREOF, the Members have executed this Limited Liability Company

Agreement as of the date set forth above.

 

  MEMBERS:   Bluerock Special Opportunity + Income Fund III, LLC,   a Delaware
limited liability company         By: BR SOIF III Manager, LLC   a Delaware
limited liability   Its: Manager         By: /s/ Jordan B. Ruddy   Name: Jordan
B. Ruddy   Its: President         BEMT Berry Hill, LLC,   a Delaware limited
liability company         By: Bluerock Residential Holdings, LP   a Delaware
limited partnership   Its: Sole Member         By: Bluerock Residential Growth
REIT, Inc.,   a Maryland corporation   Its: General Partner         By: /s/
Michael L. Konig   Name: Michael L. Konig   Its:   Senior Vice President and
Chief Operating Officer

 

[Signature Page to Limited Liability Company Agreement of BR Berry Hill Managing
Member

II, LLC]

 

38

 

 

EXHIBIT A

 

Percentage Interests

 

   Percentage  Member Name  Interest        Bluerock Special Opportunity + 
 53.0522% Income Fund III, LLC             BEMT Berry Hill, LLC   46.9478%