Exhibit 10.24

 

 

 

OPERATING AGREEMENT

OF

NPT INVESTORS, LLC

 

 

 

 

 

 

TABLE OF CONTENTS

 

  PAGE     TABLE OF CONTENTS i ARTICLE 1 DEFINITIONS 2 Section 1.01 Definitions
2 ARTICLE 2 GENERAL PROVISIONS 10 Section 2.01. Name 10 Section 2.02. Filing Of
Certificates 10 Section 2.03. Purpose 10 Section 2.04. Powers 10 Section 2.05.
Principal Business Office 10 Section 2.06. Limited Liability 11 Section 2.07.
Title To Company Property 11 Section 2.08. No Right Of Partition 11 ARTICLE 3
UNITS; CAPITAL CONTRIBUTIONS 11 Section 3.01. Units 11 Section 3.02. Common
Member Interest 11 Section 3.03. Preferred Interests 11 Section 3.04. Ranking of
Preferred Interests 12 ARTICLE 4 PREFERRED UNITS 12 Section 4.01. Mandatory
Monthly Distributions 12 Section 4.02. Liquidation Preference 13 Section 4.03.
Redemption 14 Section 4.04. Redemption Procedures 16 ARTICLE 5 ALLOCATIONS 16
Section 5.01. Net Profit 16 Section 5.02. Net Loss 16 Section 5.03. Allocations
in Specified Circumstances 17 Section 5.04. Tax Allocations 17 ARTICLE 6 OTHER
DISTRIBUTIONS 17 Section 6.01. Distributions 17 Section 6.02. Authority to
Withhold; Treatment of Withheld Tax 18 Section 6.03. Dissolution 18 ARTICLE 7
MANAGEMENT OF COMPANY 18 Section 7.01. Management 18 Section 7.02. Approval
Rights 19 Section 7.03. Officer 21 Section 7.04. Lack of Authority 21 Section
7.05. Limitations on the Company's Activities 21 ARTICLE 8 TAX AND ACCOUNTING
MATTERS: BOOKS AND RECORDS 22 Section 8.01. Fiscal Year 22 Section 8.02.
Partnership for Tax Purposes 22 Section 8.03. Tax Matters 22

 

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Section 8.04. Books and Records 22 Section 8.05. Annual Budgets 22 ARTICLE 9
CERTAIN COVENANTS 23 Section 9.01. Single Purpose Entity 23 ARTICLE 10
DISPOSITION OF UNITS; TRIGGER EVENTS AND CONSEQUENCES 25 Section 10.01.
Transfers 25 Section 10.02. Trigger Events 26 Section 10.03. Consequences of
Trigger Event 27 ARTICLE 11 EXCULPATION AND INDEMNIFICATION 29 Section 11.01.
Exculpation and Indemnification. 29 Section 11.02. Waiver of Corporate
Opportunity 31 ARTICLE 12 TERMINATION, DISSOLUTION AND LIQUIDATION 31 Section
12.01. Term 31 Section 12.02. Winding Up Events 31 Section 12.03. Winding Up 32
Section 12.04. Distribution Upon Dissolution of the Company 32 Section 12.05.
Rights of Members; Resignation 33 ARTICLE 13 MISCELLANEOUS 33 Section 13.01.
Notices 33 Section 13.02. Amendments; No Waivers 34 Section 13.03. Expenses 34
Section 13.04. Successors and Assigns 34 Section 13.05. Headings 34 Section
13.06. Governing Law 34 Section 13.07. Counterparts; Effectiveness 35 Section
13.08. Severability 35 Section 13.09. Further Assurances 35 Section 13.10.
Entire Agreement 35

 

Schedule A Membership Interests Schedule B Property Owner's Amended and Restated
Limited Liability Company Agreement

 

ii

 

  

OPERATING AGREEMENT

 

OF

 

NPT INVESTORS, LLC

 

THIS OPERATING AGREEMENT (this "Agreement") of NPT Investors, LLC, a Delaware
limited liability company (the "Company"), is made and entered into as of April
30, 2013 (the "Effective Date"), by and among Bluerock Real Estate, LLC, a
Delaware limited liability company ("Manager"), the persons whose names are set
forth on Schedule A of this Agreement (the "Common Members"), and Bluerock
Special Opportunity + Income Fund III, LLC, a Delaware limited liability company
("SOIF"), as the Preferred Member.

 

RECITALS:

 

WHEREAS, the Company was formed on April 29, 2013 in connection with the
intended contribution (the "Transfer Distribution") to BR-NPT Springing Entity,
LLC (the "Property Owner") of the apartment project known as ''North Park
Towers" and located at 16500 North Park Drive, Southfield, Oakland County,
Michigan (the "Property"), by BR-North Park Towers, DST, a Delaware statutory
trust (the "DST" or the "Trust") pursuant to that certain trust agreement of the
DST (the "Trust Agreement").

 

WHEREAS, simultaneous with the Transfer Distribution, that certain mortgage loan
in the original principal amount of $15,000,000 secured by the Property (the
"Previous Loan"), borrowed by the Trust from Bank of America and now
owned/controlled by Midland Loan Services as Special Servicer (the "Previous
Lender"), is being repaid (the "Refinancing Transaction") with the proceeds of a
mortgage loan in the face amount of $10,000,000 (together with any loan that
refinances such loan, the "Mortgage Loan") from KeyBank National Association
(together with its successors and assigns thereof, and any lender under any loan
that refinances the Mortgage Loan, the "Mortgage Lender").

 

WHEREAS, simultaneous with the Transfer Distribution and the Refinancing
Transaction described above, the Property Owner is being recapitalized pursuant
to a capital call (the "Recapitalization") and certain other transactions (the
"Proposed Actions") voted upon and approved by the owners of the DST in
connection with that certain Proposed Action Notice dated April 11, 2013 (the
"Action Notice").

 

WHEREAS, in connection with the Recapitalization of the Property Owner, the
Company will invest a total of $1,969,289.00 in the Property Owner, in exchange
for which the Company will be issued 754.20 Common Membership Interests in the
Property Owner, representing ownership of seventy-five and forty-two
one-hundredths percent (75.42%) of the Property Owner (collectively, the
"Company Investment"). A true copy of the Property Owner's Amended and Restated
Limited Liability Company Agreement is attached hereto as Schedule B.

 

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WHEREAS, SOIF is contributing to the Company the Preferred Contribution (defined
below), and the Common Members are contributing to the Company the Common Member
Contribution (defined below), each asof the Effective Date (the "Closing Date"),
to enable the Company to make the Company Investment in the Property Owner, to
enable the Property Owner, simultaneous with its receipt of other
Recapitalization proceeds and the net proceeds from Mortgage Lender under the
Refinancing Transaction, to repay the Previous Loan and thereby permit the DST
to complete the Transfer Distribution, to result in Property Owner succeeding to
full ownership of the Property subject to the Mortgage Loan.

 

WHEREAS, the Manager and the Members now wish to provide for, among other
things, (i) the admission of SOIF as a Preferred Member of the Company, (ii) the
payment of the Preferred Contribution by SOIF to the Company, (iii) the payment
of the Common Member Contribution by the Common Members to the Company, (iv) the
making by the Company of the Company Investment in Property Owner to become a
common member of the Property Owner, the allocation of Profits, Losses, credits
and distribution of cash flow and other proceeds of the Company, and (vi) the
respective rights, obligations and interests of the Members to each other and to
the Company, all as hereinafter provided.

 

NOW, THEREFORE, in consideration of the mutual covenants and agreements herein,
the parties agree to enter into this Agreement as of the Effective Date as
follows:

 

ARTICLE 1

 

DEFINITIONS

 

Section 1.01.     Definitions. (a) As used herein, the following terms have the
following meanings:

 

"Affiliate" means, with respect to any specified Person any other Person owning
beneficially, directly or indirectly, any ownership interest in such specified
Person or directly or indirectly controlling or controlled by or under direct or
indirect common control with such specified Person. For purposes of this
definition, "control," when used with respect to any specified Person, shall
mean the power to direct the management and policies of such Person, directly or
indirectly, whether through the ownership of voting securities, by contract or
otherwise; and the terms "controlling" and "controlled" shall have meanings
correlative to the foregoing.

 

"Agreement" has the meaning set forth in the Preamble hereto.

 

"Annual Budget" means the operating budget, including all planned capital
expenditures, for the Property prepared by the Property Owner for the applicable
Fiscal Year or other period.

 

"Bankruptcy" means, with respect to any Person, if such Person (i) makes an
assignment for the benefit of creditors, (ii) files a voluntary petition in
bankruptcy, (iii) is adjudged a bankrupt or insolvent, or has entered against it
an order for relief, in any bankruptcy or insolvency proceedings, (iv) files a
petition or answer seeking for itself any reorganization, arrangement,
composition, readjustment, liquidation or similar relief under any statute, law
or regulation, (v) files an answer or other pleading admitting or failing to
contest the material allegations of a petition filed against it in any
proceeding of this nature, (vi) seeks, consents to or acquiesces in the
appointment of a trustee, receiver or liquidator of the Person or of all or any
substantial part of its Property, or (vii) if 120 days after the commencement of
any proceeding against the Person seeking reorganization, arrangement,
composition, readjustment, liquidation or similar relief under any statute, law
or regulation, if the proceeding has not been dismissed, or if within 90 days
after the appointment without such Person's consent or acquiescence of a
trustee, receiver or liquidator of such Person or of all or any substantial part
of its Property, the appointment is not vacated or stayed, or within 90 days
after the expiration of any such stay, the appointment is not vacated. The
foregoing definition of "Bankruptcy" is intended to replace and shall supersede
and replace the definition of "Bankruptcy" set forth in Sections 18-101(l) and
18-304 of the Delaware Act.

 

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"Bluerock" means Bluerock Real Estate, L.L.C., a Delaware limited liability
company.

 

"BRPM" means Bluerock Property Management, LLC.

 

"Business Day" means a day which is not a Saturday, Sunday or legal holiday on
which commercial banking institutions in New York, New York are authorized to
close.

 

"Capital Account" means an account maintained for each Member to which shall be
credited the amount of money and fair market value of any property (net of any
liabilities to which such property is subject) contributed to the Company by
such Member and any Net Profit allocated to such Member pursuant to Article 5,
and to which shall be debited the amount of money and fair market value of any
property (net of any liabilities to which such property is subject) distributed
by the Company to such Member and any Net Loss allocated to such Member pursuant
to Article 5. Such Capital Account shall be maintained solely for purposes of
determining the allocations of Net Profit and Net Loss under Article 5 for
income tax purposes and shall not have any effect on the Members' rights to
distributions from the Company.

 

"Capital Contribution'' shall mean the gross amount invested in the Company by a
Member, whether in cash, property or services.

 

"Casualty" means any damage or destruction, in whole or in part, by fire or
other casualty of all or any part of the Property.

 

"Closing Date" means the Effective Date.

 

"Code" means the Internal Revenue Code of 1986, as amended from time to time.

 

"Commercial Disposition Effort" has the meaning set forth in Section 10.03(b).

 

''Common Member" means a Member who is a holder of Common Units, acting in its
capacity as such.

 

"Common Percentage Interest" means, with respect to any Common Member at any
time, the percentage derived by dividing (i) the aggregate number of Common
Units held by such Common Member as of such time by (ii) the aggregate number of
Common Units held by all Common Members as of such time.

 

"Common Units" has the meaning set forth in Section 3.01.

 

"Company" has the meaning set forth in the Preamble hereto.

 

"Company Optional Redemption" has the meaning set forth in Section 4.03(a).

 

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"Condemnation" means a temporary or permanent talking by any governmental
authority as the result or in lieu or in anticipation of the exercise of the
right of condemnation or eminent domain, of all or any part of the Property, or
any interest therein or right accruing thereto, including any right of access
thereto or any change of grade affecting the Property or any part thereof.

 

"Condemnation Proceeds" means the proceeds arising out of any Condemnation
action, whether paid in connection with a final ruling, a deed in lieu or any
other related proceeding, net of any costs of collection.

 

"Control" (including the correlative terms "controlling", "controlled by" and
"under common control with") means the possession, directly or indirectly, of
the power to direct or cause the direction of management and policies of the
business and affairs of the entity in question by reason of the ownership of
beneficial interests, by contract or otherwise.

 

"Covered Persons" has the meaning set forth in Section 11.01(a).

 

"Covered Sale'' has the meaning set forth in Section 4.03(b).

 

"Creditors' Rights Laws" shall mean with respect to any Person, any existing or
future law of any jurisdiction, domestic or foreign, relating to bankruptcy,
insolvency, reorganization, conservatorship, arrangement, adjustment,
winding-up, liquidation, dissolution, composition or other relief with respect
to its debts or debtors.

 

"Delaware Act'' means the Delaware Limited Liability Company Act, 6 Del. Code
Section 18-101, el seq.

 

"Distribution Period" means, with respect to any Preferred Payment Date, the
period commencing on and including the fifteenth (15th) day of the preceding
calendar month and terminating on and including the fourteenth (14th day) of the
calendar month in which such Preferred Payment Date occurs; provided, however,
that the initial Distribution Period shall begin on and include the Closing Date
and shall end on and include June 15, 2013.

 

"DST" and the "Trust" have the meaning set forth in the Recitals hereto.

 

"Effective Date" has the meaning set forth in the preamble hereto.

 

"Fiscal Year" has the meaning set forth in Section 8.01.

 

"GAAP" means United States generally accepted accounting principles as in effect
from time to time.

 

"Guarantor" or "Guarantors" means, individually or collectively, as the context
may require, Bluerock Special Opportunity + Income Fund, LLC, Bluerock Special
Opportunity + Income Fund II, LLC and Bluerock Special Opportunity + Income Fund
III, LLC.

 

"Guaranty" or "Guarantees" means, individually or collectively, as the context
may require, the Guaranty Agreement and Environmental and Hazardous Substances
Indemnity Agreement and the other documents executed by Guarantors in connection
with the Mortgage Loan Documents.

 

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"Insurance Proceeds" means any proceeds payable with respect to any insurance
policies affecting the Property in connection with any destruction or casualty
to the Property, net of any expenses of collection.

 

"Interest" means, with respect to any Member, such Member's limited liability
company interest in the Company.

 

"Junior Securities" means any Common Units or any other limited liability
company interests issued by the Company that would rank junior to the Preferred
Units as to periodic distributions or distributions upon a liquidation or
dissolution of the Company.

 

"Junior Securities Distribution" has the meaning set forth in Section 4.0l(d).

 

"Lien" means, with respect to any asset, any mortgage, lien, pledge, charge,
security interest or encumbrance of any kind (other than restrictions under
applicable securities laws).

 

"Liquidation Event" has the meaning set forth in Section 4.02(b).

 

"Liquidation Preference" means, as of any date of determination, with respect to
each Preferred Unit, the Total Redemption Amount divided by the total number of
Preferred Units outstanding.

 

"Manager" has the meaning set forth in Section 7.01(a).

 

"Material Action" means (a) to file any bankruptcy, insolvency, or
reorganization case or proceeding, (b) to institute proceedings to have the
Company be adjudicated bankrupt or insolvent, (c) to institute proceedings under
any applicable insolvency law to have the Company be adjudicated bankrupt or
insolvent, (d) to seek any relief under any law relating to relief from debts or
the protection of debtors generally, (e) to consent to the filing or institution
of bankruptcy, reorganization or insolvency proceedings against the Company, (f)
to file a petition seeking, or consent to, bankruptcy, insolvency,
reorganization or relief with respect to the Company under any applicable
federal or state law relating to bankruptcy or insolvency, (g) to seek or
consent to the appointment of a receiver, liquidator, assignee, trustee,
sequestrator, custodian, or any similar official of or for the Company or a
substantial part of its property, (h) to make any assignment for the benefit of
creditors of the Company, (i) to admit in writing the Company's inability to pay
its debts generally as they become due or (j) to take action in furtherance of
any of the foregoing.

 

"Material Adverse Effect" means any event or condition that has a material
adverse effect on (i) the Property taken as a whole, (ii) the use, operation, or
value of the Property, (iii) the business, profits, operations or financial
condition of the Company, or (iv) the ability of the Company to satisfy any of
the Company's obligations under this Agreement.

 

"Member" means any Person that holds a limited liability company interest in the
Company and is admitted as a member of the Company pursuant to the provisions of
this Agreement and the Delaware Act.

 

"Monthly Distribution Shortfall" means the failure to pay on any Preferred
Payment Date, any Preferred Monthly Distribution.

 

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"Mortgage Debt" means the outstanding portion of the principal amount set forth
in, and evidenced by, the Mortgage Loan Documents together with all interest
accrued and unpaid thereon and all other sums due to Mortgage Lender in respect
of the Mortgage Loan.

 

"Mortgage Lender" has the meaning set forth in the Recitals hereto.

 

"Mortgage Loan" means (a) the loan in the original face amount of Ten Million
and No/100 Dollars ($10,000,000.00), made by KeyBank National Association to the
Property Owner and (b) any loan that refinances such loan.

 

"Mortgage Loan Default" means an "Event of Default" under the Mortgage Loan
Documents subject to all applicable notice, grace and cure periods related
thereto, but regardless of whether or not such Event of Default is or may have
been waived by Mortgage Lender.

 

"Mortgage Loan Documents" means all documents or instruments evidencing,
securing or guaranteeing any portion of the Mortgage Debt, including, without
limitation, any loan agreement, note, mortgage, pledge, security agreement,
control agreement, deposit agreement or other written agreement or document
evidencing or securing the Mortgage Debt.

 

"Net Proceeds" has the meaning set forth in Section 4.03(b)(v).

 

"Net Profit" or "Net Loss" means, for each fiscal year or other period, an
amount equal to the Company's taxable income or loss for such year or period,
determined in accordance with Code Section 703(a) (for this purpose, all items
of income, gain, loss or deduction required to be stated separately pursuant to
Code Section 703(a)(1) shall be included in taxable income or loss), with the
following adjustments:

 

(i)          any income of the Company that is exempt from federal income tax
and not otherwise taken into account in computing Net Profit or Net Loss shall
be added to such taxable income or loss; and

 

(ii)         the computation of Net Profit or Net Loss shall include any
expenditures of the Company described in Code Section 705(b)(2)(B) or treated as
Code Section 705(b)(2)(B) expenditures pursuant to Regulations Section
1.704-1(b)(2)(iv)(i) and not otherwise taken into account in computing Net
Profit or Net Loss shall be subtracted to such taxable income or loss.

 

The Tax Matters Partner shall make further adjustments as the Tax Matters
Partner shall deem necessary in its reasonable discretion.

 

"Net Sales Proceeds" means the proceeds from the sale of the Property after
deducting therefrom all expenses incurred in connection with the sale, including
any applicable commissions or sales fees, provided however, disposition or
similar sales fees earned by or payable to the Manager or its Affiliates in
connection with the sale by the Property Owner of the Property shall be
subordinated to the receipt by the Preferred Member of its Total Redemption
Amount.

 

"OFAC List" means the list of specially designated nationals and blocked persons
subject to financial sanctions that is maintained by the U.S. Treasury
Department, Office of Foreign Assets Control and accessible through the internet
website www.treas.gov/ofoc/t11sdn.pdf.

 

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"Ownership Interest" means any direct ownership interest in the Company,
contingent or fixed, of any nature whatsoever, whether in the form of a
partnership interest, stock interest, membership interest, equitable interest,
beneficial interests, profit interest, loss interest, voting rights, control
rights, management rights or otherwise.

 

"Parity Securities" has the meaning set forth in Section 3.04(b).

 

"Permitted Transfer" has the meaning set forth in Section 10.01(a).

 

"Person" means an individual, corporation, partnership, association, trust,
limited liability company or any other entity or organization, including a
government or political subdivision or an agency, unit or instrumentality
thereof.

 

"Preferred Contribution" means one million seven hundred nineteen thousand two
hundred eighty nine and no/100 Dollars ($1,719,289.00).

 

"Preferred Member" means the Preferred Member described in the Preamble hereto
and each other Member who is a holder of Preferred Units, acting in its capacity
as such.

 

"Preferred Member Transferee" means a permitted transferee of any holder of
Preferred Units who is admitted to the Company as a Preferred Member pursuant to
Section 10.01(d).

 

"Preferred Monthly Distribution" has the meaning set forth in Section 4.01(a).

 

"Preferred Payment Date" means the fifteenth (15th) day of each calendar month
or, if such day is not a Business Day, the immediately preceding Business Day.

 

"Preferred Percentage Interest" means, with respect to any Preferred Member at
any time, the percentage derived by dividing (i) the aggregate number of
Preferred Units held by such Preferred Member as of such time by (ii) the
aggregate number of Preferred Units held by all of the Preferred Members as of
such time.

 

"Preferred Return" means the amounts payable to the holders of Preferred Units
pursuant to Section 4.01(a).

 

"Preferred Return Rate" means, with respect to any period of calculation, a rate
per annum equal to thirty five percent (35%) per annum.

 

"Preferred Units" has the meaning set forth in Section 3.01.

 

"Previous Loan" has the meaning set forth in the Recitals hereto.

 

"Previous Lender" has the meaning set forth in the Recitals hereto.

 

"Prohibited Person" means any Person:

 

(a)          listed in the Annex to, or otherwise subject to the provisions of,
the Executive Order No. 13224 on Terrorist Financing, effective September 24,
2001, and relating to Blocking Property and Prohibiting Transactions With
Persons Who Commit, Threaten to Commit, or Support Terrorism (the "Executive
Order");

 

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(b)          that is owned or controlled by, or acting for or on behalf of, any
Person that is listed on the Annex to, or is otherwise subject to the provisions
of, the Executive Order;

 

(c)          with whom any Member is prohibited from dealing or otherwise
engaging in any transaction by any terrorism or money laundering law, including
the Executive Order;

 

(d)          who commits, threatens or conspires to commit or supports
"terrorism" as defined in the Executive Order;

 

(e)          that is named as a "specially designated national and blocked
person" on the most current list published by the U.S. Treasury Department
Office of Foreign Assets Control at its official website,
http://www.treas.gov.ofac/tllsdn.pdf or at any replacement website or other
replacement official publication of such list; or

 

(t)          who is an Affiliate of a Person listed above.

 

"Property" means the 313-unit townhome complex located at located at 16500 North
Park Drive, Southfield, Oakland County, Michigan, all improvements thereon and
all personal property owned by the Property Owner, together with all rights
pertaining to such property and improvements, as more particularly described in
the Mortgage Loan Documents.

 

"Property Manager" means (a) as of the Closing Date, BRPM (provided, that the
Property Manager may sub-contract some or all of its management responsibilities
under the Property Management Agreement subject to any requirements of the
Mortgage Loan Documents), or (b) if the context requires, such successor
Property Manager who is managing the Property.

 

"Property Management Agreement" means (a) that certain Property Management
Agreement to be entered into by and between the Property Owner and the Property
Manager, pursuant to which the Property Manager is to provide management and
other services with respect to the Property, and (b) any replacement management
agreement entered into by and between the Property Owner and a successor
Property Manager.

 

"Regulations" means the Treasury Regulations, including Temporary Regulations,
promulgated under the Code, as such regulations are in effect from time to time.
References to specific provisions of the Regulations include references to
corresponding provisions of successor regulations.

 

"Senior Securities'' has the meaning set forth in Section 3.04(b).

 

"Schedule A" means Schedule A to this Agreement, as amended from time to time in
accordance with the terms of this Agreement. The Manager shall amend Schedule A
to reflect (i) any increase in the capital contribution made by the Members and
(ii) any permitted transfers of Units, in each case in accordance with the terms
of this Agreement and shall deliver copies of such revised Schedule A to all
Members.

 

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"SOIF" has the meaning set forth in the Recitals.

 

"Special Purpose Provisions" has the meaning set forth in Section 7.05(b).

 

"Subsidiary" with respect to any Person means any other Person of which (i) such
first-mentioned Person, or its Subsidiary, is the general partner or manager or
(ii) such first-mentioned Person (either directly or through or together with
another Subsidiary of such first-mentioned Person) owns more than 50% of the
voting stock (or its equivalent) or value.

 

"Tax Matters Partner" has the meaning set forth in Section 8.03(a).

 

"Third Party" means any Person who is not an Affiliate of any Member or of the
Manager.

 

"Total Redemption Amount" means, as of any date of determination, an amount
equal to, without duplication, the sum of (a) the Unreturned Preferred
Contribution, plus (b) all accrued but unpaid Preferred Return through and
including the end of the applicable Distribution Period in which such payment
occurs.

 

"Transfer" means any direct or indirect, voluntary or involuntary, sale,
transfer, exchange, pledge, hypothecation, encumbrance, assignment or other
disposition, by operation of law or otherwise, by any Member to any Person of
all or any portion of such Member's Units (or any interest therein) and
"Transfer", used as a verb, has a corresponding meaning.

 

"Trigger Event" has the meaning set forth in Section 10.02(a).

 

"UCC" means the Uniform Commercial Code in effect in the state of Delaware from
time to time.

 

"Unallocated Preferred Return" means, with respect to the Preferred Units at any
time, the excess, if any, of (i) aggregate Preferred Monthly Distributions that
have been paid (or, with respect to any Preferred Monthly Distribution that has
accrued but is not yet payable as of such time, to the extent that such
Distribution is paid on or within 5 days after the Preferred Payment Date with
respect to such Preferred Monthly Distribution) with respect to the Preferred
Units over (ii) the net cumulative amount of Net Profit allocated to the
Preferred Units pursuant to Section 5.01(c).

 

"Units" means units representing the limited liability company interests of the
Company, denominated as Common Units and Preferred Units.

 

"Unreturned Preferred Contribution" means, as of any date of determination, that
portion of the Preferred Contribution that has not been redeemed, plus the
aggregate amount of all accrued but unpaid distributions thereon (whether or not
earned or declared) through the date of payment.

 

"Winding Up Event" has the meaning set forth in Section 12.02.

 

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(b)       The words "hereof ", "herein" and "hereunder" and words of like import
used in this Agreement shall refer to this Agreement as a whole and not to any
particular provision of this Agreement. The captions herein are included for
convenience of reference only and shall be ignored in the construction or
interpretation hereof. References to Articles, Sections, Exhibits and Schedules
are to Articles, Sections, Exhibits and Schedules of this Agreement unless
otherwise specified. All Exhibits and Schedules annexed hereto or referred to
herein are hereby incorporated in and made a part of this Agreement as if set
forth in full herein. Any capitalized terms used in any Exhibit or Schedule but
not otherwise defined therein, shall have the meaning as defined in this
Agreement. Any singular term in this Agreement shall be deemed to include the
plural, and any plural te1111 the singular. Whenever the words "include",
"includes" or "including" are used in this Agreement, they shall be deemed to be
followed by the words "without limitation", whether or not they are in fact
followed by those words or words of like import. "Writing", "written" and
comparable terms refer to printing, typing and other means of reproducing words
(including electronic media) in a visible form.

 

ARTICLE 2

 

GENERAL PROVISIONS

 

Section 2.01.   Name. The name of the Company is "NPT Investors, LLC".

 

Section 2.02.  Filing Of Certificates. Christopher Vohs, as an "authorized
person" within the meaning of the Delaware Act, has executed, delivered and
filed the Certificate of Formation of the Company with the office of the
Secretary of State of the State of Delaware. Upon the filing of such
Certificate, his powers as an "authorized person" ceased and the Manager became
the designated "authorized person" within the meaning of the Delaware Act. The
Manager shall execute, deliver and file, or cause the execution, delivery and
filing of, all other certificates required or permitted by the Delaware Act to
be filed in the Office of the Secretary of State of the State of Delaware and
any other certificates, notices or documents required or permitted by Law for
the Company to qualify to do business in any jurisdiction in which the Company
may wish to conduct business.

 

Section 2.03.  Purpose. The purpose of the Company is to engage in any lawful
act or activity for which limited liability companies may be formed under the
Delaware Act. Notwithstanding the foregoing, so long as any Preferred Units, the
Mortgage Loan and/or any other loan secured by the Property are outstanding, the
Company shall not engage in any business other than owning common membership
interests in the Property Owner subject to the terms and conditions of this
Agreement.

 

Section 2.04.  Powers. In furtherance of its purposes, but subject to all of the
provisions of this Agreement, the Company shall have and may exercise all the
powers now or hereafter conferred by Delaware law on limited liability companies
formed under the Delaware Act. The Company shall have the power to do any and
all acts necessary, appropriate, proper, advisable, incidental or convenient to
or for the protection and benefit of the Company, and shall have, without
limitation, any and all of the powers that may be exercised on behalf of the
Company by a Member.

 

Section 2.05.  Principal Business Office. The principal business office of the
Company shall be at 712 Fifth Avenue, 9th Floor, New York, New York 10019, or at
such other location as may hereafter be determined by the Manager.

 

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Section 2.06.   Limited Liability. Except as required by the Delaware Act, the
debts, obligations and liabilities of the Company, whether arising in contract,
tort or otherwise, shall be solely the debts, obligations and liabilities of the
Company, and the Members shall not be obligated personally for any such debt,
obligation or liability of the Company solely by reason of being a Member of the
Company.

 

Section 2.07.   Title To Company Property. All property of the Company, whether
real or personal, tangible or intangible, shall be deemed to be owned by the
Company as an entity, and no Member, individually, shall have any direct
ownership interest in such property.

 

Section 2.08.   No Right Of Partition. No Member shall have the right to seek or
obtain partition by court decree or operation of law of any Company property, or
the right to own or use particular or individual assets of the Company.

 

ARTICLE 3

 

UNITS; CAPITAL CONTRIBUTIONS

 

Section 3.01.   Units. The Company shall be authorized to issue common Units at
a value of $1.00 per common Unit in cash ("Common Units") and one series of
preferred Units at a value per preferred Unit of $1.00 in cash ("Preferred
Units") from time to time in accordance with this Agreement.

 

Section 3.02.  Common Member Interest. (a) The Capital Contribution of each of
the Common Members is equal to the percentage interest held by such Common
Member in the Company. The number of Common Units issued to and held by each
Common Member in exchange for its Capital Contribution as of the Closing Date
(collectively, the "Common Member Contributions") are set forth opposite each
Common Member's name on Schedule A. The Common Units reflected on Schedule A as
of the Closing Date represent 100% of Common Units outstanding and issued by the
Company as of the Closing Date.

  

(b) Subject to the provisions of this Article 3, the Common Members may from
time to time make additional capital contributions to the Company for use for
any purposes set forth in this Agreement if and only if such capital
contributions are requested in writing by the Manager; provided that such
capital contributions represent consideration for the issuance of Common Units.
The Common Members may participate on a pro rata basis in proportion to each
Common Members Common Units. The Common Members are not required to comply with
such request. The Manager shall amend Schedule A to reflect such additional
Common Units set forth opposite the Common Member's name and shall deliver a
copy of such revised Schedule A to the Preferred Member and all other Members.

 

Section 3.03.   Preferred Interests. (a) On the Closing Date, the Preferred
Member shall make the Preferred Contribution, and shall receive the number of
Preferred Units, set forth opposite the Preferred Member's name on Schedule A
representing 100% of the Preferred Units.

 

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(b)     Subject to the provisions of this Article 3, the Preferred Member may
from time to time make additional capital contributions to the Company for use
for any purposes set forth in this Agreement, to the extent that the Manager has
requested additional capital contributions from the Common Members and less than
all of the Common Members participate as to their proportionate share; provided
that such capital contributions represent consideration for the issuance of
Preferred Units. The Manager shall amend Schedule A to reflect such additional
Preferred Units set forth opposite the Preferred Member's name and shall deliver
a copy of such revised Schedule A to the Preferred Member and all other Members.

 

Section 3.04.  Ranking of Preferred Interests. (a) The holders of Preferred
Units shall rank in preference or priority to the holders of all other Units as
to the payment of distributions and redemptions and as to the distribution of
assets upon liquidation, dissolution or winding up of the Company as set forth
in this Agreement.

 

(b)     The Company shall not authorize, create or issue any Units that shall be
deemed Senior Securities or Parity Securities. For this purpose, "Senior
Securities" means any Units ranking prior to the Preferred Units, as to the
payment of distributions and redemptions and as to the distribution of assets
upon liquidation, dissolution or winding up of the Company, if the holders of
such Units shall be entitled to the receipt of distributions or redemptions or
amounts distributable upon liquidation, dissolution or winding up of the
Company, as the case may be, in preference or priority to the holders of
Preferred Units. For this purpose, ''Parity Securities" means any Units on a
parity with the Preferred Units, as to the payment of distributions and
redemptions and as to the distribution of assets upon liquidation, dissolution
or winding up of the Company, whether or not the distribution rates,
distribution payment dates or redemption payment dates or liquidation prices
thereof be different from those of the Preferred Units, if the holders of such
Units and the Preferred Units shall be entitled to the receipt of distributions
and redemptions and of amounts distributable upon liquidation, dissolution or
winding up of the Company in proportion to their respective amounts of accrued
and unpaid distributions per Unit or liquidation preferences, without preference
or priority one over the other.

 

ARTICLE 4

 

PREFERRED UNITS

 

Section 4.01.  Mandatory Monthly Distributions. (a) The holders of Preferred
Units shall, subject to any restrictive terms of the Mortgage Loan Documents, be
entitled to receive on each Preferred Payment Date, pro-rata among such holders
in accordance with their respective Preferred Percentage Interests, a monthly
cash distribution (a "Preferred Monthly Distribution") for each Distribution
Period which shall accrue on the Unreturned Preferred Contribution as of the
commencement of the applicable Distribution Period at a rate equal to the
Preferred Return Rate (calculated on the basis of a 360-day year and the number
of days in such Distribution Period), which Preferred Monthly Distribution shall
be paid from cash flow or Net Proceeds available for distribution pursuant to
Section 4.03(b)(v). If permitted pursuant to the terms of the Mortgage Loan
Documents, such Preferred Monthly Distribution shall be payable in arrears on
each Preferred Payment Date commencing on June 15, 2013. Any distributions not
payable due to any restrictions in the Mortgage Loan Documents shall remain due
and payable and shall be paid promptly payable upon the removal of any such
restrictions.

 

(b) Distributions on the Preferred Units shall be cumulative from the date of
issue, and shall accrue whether or not funds of the Company are legally
available for the payment of such distributions and, to the extent unpaid, shall
accrue at the Preferred Return Rate in accordance with Section 4.0l (a).
Distributions shall be payable to the Preferred Member identified on Schedule A
or to any Preferred Member Transferee of which the Manager has written notice
prior to any Preferred Payment Date in accordance with the terms hereof.

 

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(c) Except as otherwise expressly provided in this Agreement, the Preferred
Member shall not be entitled to any distributions (other than the liquidation
distributions under Section 4.02 and redemptions under Section 4.03), whether
payable in cash, property or stock, in excess of the cumulative distributions
provided in this Section 4.0 l . Except as otherwise expressly provided in this
Agreement (including as provided in Section 4.0 l(b)), no other interest or sum
of money in lieu of interest shall be payable in respect of any distribution
payment on the Preferred Units that may be in arrears.

 

(d)  So long as any Preferred Units are outstanding, the Company shall not
declare, pay or set apart for payment any distributions on any Junior Securities
(other than distributions paid in Junior Securities, or options, warrants or
other rights exercisable into, exchangeable for or convertible solely into
Junior Securities) or make any mandatory or optional redemption, sinking fund or
other similar payment in respect of, or otherwise acquire any Junior Securities
(any such distributions, redemptions, other payments or other acquisitions being
a ''Junior Securities Distribution") for any consideration, except by exercise
into, exchange for or conversion into Junior Securities, unless in each case,
(i) the full cumulative distributions have been paid or are contemporaneously
declared and paid in cash, or are declared and a cash amount sufficient for the
payment thereof has been set apart for such payment, on the entire Unreturned
Preferred Contribution for all Distribution Periods terminating on or before the
date of payment of such Junior Securities Distribution; and (ii) such Junior
Securities Distribution in respect of any Distribution Period are no greater
than the amount of Net Cash Flow in respect of such Distribution Period.
Notwithstanding anything to the contrary contained in this Agreement, no Junior
Securities Distribution of any kind shall be made at any time following the
occurrence of, and, to the extent the same may be cured thereafter, during the
continuance of, any Trigger Event.

 

As used herein, "Net Cash Flow" means all cash distributed to the Company by the
Property Owner, after any reasonable reserves held back by the Manager; provided
that Net Cash Flow shall not include any proceeds from the sale of assets
described in Section 4.03(b)(i)(B).

 

Section 4.02.  Liquidation Preference. (a) Upon the liquidation, dissolution or
winding-up of the Company, whether voluntary or involuntary, before any payment
or distribution of the Company's assets (whether capital or surplus) shall be
made to or set apart for the holders of any Junior Securities, the holders of
Preferred Units shall be entitled to receive, and the Company shall pay to such
holders pro-rata in accordance with their respective Preferred Percentage
Interests, an amount equal to the Total Redemption Amount. If, upon the
liquidation, dissolution or winding-up of the Company, the Company's assets, or
proceeds thereof, distributable to the holders of Preferred Units are
insufficient to pay in full the Total Redemption Amount, then such assets, or
the proceeds thereof, shall be distributed among the holders of Preferred Units
ratably in proportion to their respective Preferred Percentage Interests in the
order set forth in Section 4.03(b)(v) below.

 

(b) For purposes of Section 4.02(a), notwithstanding anything else in this
Agreement, a liquidation, dissolution or winding up of the Company, whether
voluntary or involuntary, shall be deemed to have occurred upon:

 

13

 

  

(i) a sale, conveyance, exchange or transfer (for cash, shares of stock,
securities or other consideration) of all or substantially all of the assets of
the Property Owner (whether in a single transaction or in a series of related or
substantially contemporaneous transactions, and including any such sale pursuant
to Section 10.03(b));

 

(ii) any merger, share purchase or sale, reorganization, consolidation or other
business combination involving the Company (whether in a single transaction or
in a series of related or substantially contemporaneous transactions) in which,
as a result of such merger, share purchase or sale, reorganization,
consolidation or other business combination, the holders of Common Units as of
the date hereof possess less than a majority of Common Units after such
transaction;

 

(iii) at any time that the Manager as of the date hereof, or another Affiliate
of Bluerock, ceases to control the day-to-day operations of the Company; or

 

(iv) any financing, refinancing or prepayment in whole or in part of the
Mortgage Debt (unless all of the outstanding Preferred Units are redeemed in
connection with such financing, refinancing or prepayment) other than as
provided in Section 4.03(b)(i)(D) below.

 

Any liquidation, dissolution or winding-up of the Company, whether voluntary or
involuntary, and any event described in clauses (i), (ii), (iii) and (iv) of
this Section 4.02(b), is referred to herein as a "Liquidation Event".

 

(c) After the Total Redemption Amount has been paid on all outstanding shares of
Preferred Units, as provided in this Section 4.02, the holders of Junior
Securities shall be entitled to receive any and all assets remaining to be paid
or distributed in accordance with Section 12.04(c) and any other terms and
conditions applicable to the Junior Securities, and holders of Preferred Units
shall not be entitled to share therein.

 

Section 4.03.  Redemption.

 

(a)     Redemption at the Option of the Company. The Company may, at its option,
to the extent the Company has funds lega.lly available for such purpose, redeem
the outstanding Preferred Units, at any time, in whole or in part, for a
redemption price with respect to each Preferred Unit equal to the Liquidation
Preference for such Preferred Unit, (with any fractional Preferred Units being
rounded down to the nearest whole Preferred Unit) (any such redemption, a
"Company Optional Redemption"). All such amounts shall be made pro-rata among
the parties constituting Preferred Member in accordance with their respective
Preferred Percentage Interests and distributed in the order set forth in Section
4.03(b)(v) below.

 

(b)     Mandatory Redemption. (i) In the event of (A) any sale of (1) Junior
Securities or (2) Senior Securities or Parity Securities in violation of the
provisions of Section 3.04(b), in each case by the Company for cash, (B) any
sale of assets by the Company or its Subsidiaries (including any such sale
pursuant to Section 10.03(b)) for cash, (C) any sale of the Property by the
Property Owner, (D) any financing or refinancing by the Property Owner (other
than the refinancing of the $10,000,000 Key Bank Mortgage Loan) of any assets of
the Company or its Subsidiaries, or (E) the occurrence of a Casualty or
Condemnation to the extent that any Insurance Proceeds, Condemnation Proceeds
and/or title insurance proceeds are not applied to the restoration of any of the
Property pursuant to the provisions of the Mortgage Loan Documents and are
instead ratably distributed by the Property Owner to the Company (each of
clauses (A), (B), (C), (D), and (E), a "Covered Sale"), the Company shall,
immediately upon the completion of such Covered Sale, redeem the number of
Preferred Units determined pursuant to Section 4.03(b)(iii).

 

14

 

 

(ii)         If a Trigger Event occurs, in addition to the other rights and
remedies available to the Preferred Member hereunder, the Preferred Member shall
have the right, but not the obligation, to give written notice to the Manager
requiring the Company to immediately redeem in cash all of the Preferred Units
at a redemption price equal to the Total Redemption Amount.

 

(iii)        The Preferred Units to be redeemed in respect of any Covered Sale
or Trigger Event shall be determined as follows:

 

(A) if at such time Preferred Units are held by more than one Preferred Member,
the total number of Preferred Units of each Preferred Member to be redeemed
shall equal the quotient of (x) the Net Proceeds of such Covered Sale, divided
by (y) the Liquidation Preference per Preferred Unit, with any fractional
Preferred Units being rounded down to the nearest whole Preferred Unit; and

 

(B) any redemption pursuant to Section 4.03(b)(iii)(A) above shall be made
pro-rata among the parties constituting the Preferred Member in accordance with
their respective Preferred Percentage Interests.

 

(iv)        Notwithstanding the foregoing, the Company shall not be required to
redeem Preferred Units pursuant to this Section 4.03(b) from additional capital
contributions made pursuant to Section 3.02(b).

 

(v)         As used herein, "Net Proceeds" means the net proceeds to the Company
resulting from (A) the applicable sale of Junior Securities, Senior Securities,
Parity Securities or assets (including, without limitation, the Property), and
(B) all Insurance Proceeds, Condemnation Proceeds, Awards and title insurance
proceeds, in each case following the payment of all actual out-of-pocket Third
Party costs and expenses incurred by the Company in connection with such Covered
Sale and the payment of the Mortgage Debt, and (C) all Net Sales Proceeds. All
Net Proceeds, and the Liquidation Preference payable in connection with any
Company Optional Redemption, shall be applied and distributed to the maximum
extent permitted by law, in the following order:

 

(1)         first, to the parties constituting the Preferred Member pro-rata in
accordance with their respective Preferred Percentage Interests, until all
accrued but unpaid Preferred Return, through and including the end of the
applicable Distribution Period in which such payment occurs, has been paid in
full;

 

(2)         second, to the parties constituting the Preferred Member pro-rata in
accordance with their respective Preferred Percentage Interests, until the
Unreturned Preferred Contribution has been reduced to zero;

 

(3)         third, the balance, if any, to the holders of Junior Securities.

 

(c)          If and so long as any obligation of the Company to redeem any
Preferred Units pursuant to Section 4.03(b) is not fully discharged, the Company
shall not, and shall cause its Subsidiaries not to, directly or indirectly,
declare or make any Junior Securities Distribution.

 

(d)          A holder of Preferred Units shall cease to be a Member once all of
such holder's Preferred Units have been redeemed by the Company in accordance
with this Agreement.

 

 

15

 

 

Section 4.04.   Redemption Procedures.

 

(a) If less than the entire Unreturned Preferred Contribution is to be redeemed
pursuant to Section 4.03(a), the total number of Preferred Units held by each
Preferred Member to be redeemed shall be determined by the Manager and such
total number of Preferred Units shall be redeemed ratably among the parties
constituting the Preferred Member in accordance with their respective Preferred
Percentage Interests (with any fractional Preferred Units being rounded down to
the nearest whole Preferred Unit).

 

(b) If the Company proposes to redeem any Preferred Units pursuant to Section
4.03(a) or Section 4.03(b), the Company shall deliver to each holder of
Preferred Units irrevocable written notice of such redemption five Business Days
before the applicable redemption date (which notice may be waived by such
Preferred Member). Each such notice shall state: (i) the redemption date; (ii)
if fewer than all the Preferred Units are to be redeemed, the number of
Preferred Units to be redeemed from such Preferred Member; (iii) the redemption
price for each Preferred Unit; and (iv) that distributions on the Preferred
Units to be redeemed will cease to accrue on the date of redemption.

 

ARTICLE 5

 

ALLOCATIONS

 

Section 5.01.  Net Profit. Subject to Section 5.03, Net Profit for any fiscal
year or other period shall be allocated as of the last day of such fiscal year
or other period in the following order and priority:

 

(a)     First, if Net Loss has been allocated pursuant to Section 5.02(b) in
respect of any prior fiscal years or other periods, Net Profit shall be
allocated to the Preferred Member in a manner that will reverse, on a cumulative
basis, the effect of such prior Net Loss allocations to such Members.

 

(b)    Second, if Net Loss has been allocated pursuant to Section 5.02(a) in
respect of any prior fiscal years or other periods, Net Profit shall be
allocated to the Common Members in a manner that will reverse, on a cumulative
basis, the effect of such prior Net Loss allocations to such Members.

 

(c)     Third, any remaining Net Profit shall be allocated to the parties
constituting Preferred Member in accordance with their respective Preferred
Percentage Interests, to the extent of the Unallocated Preferred Return of the
Preferred Units.

 

(d)     Fourth, any remaining Net Profit shall be allocated to the Common
Members in accordance with their respective Common Percentage Interests.

 

Section 5.02.   Net Loss.

 

(a)          First, subject to Section 5.03, Net Loss shall be allocated to the
Common Members in accordance with, and to the extent of, their respective
positive Capital Account balances.

 

(b)          Second, any remaining Net Loss shall be allocated to the Preferred
Member in accordance with, and to the extent of, its positive Capital Account
balances.

 

16

 

  

(c)          Third, any remaining Net Loss shall be allocated to the Common
Members in accordance with their respective Common Percentage Interests.

 

Section 5.03.   Allocations in Specified Circumstances. Notwithstanding anything
else in Sections 5.01 or 5.02, in the event of a redemption of all outstanding
Preferred Units at a price in excess of the Total Redemption Amount, prior to
any allocation of Net Profit to the Common Members in the fiscal year or other
period in which such redemption occurs, the parties constituting Preferred
Members shall be allocated, in accordance with their respective Preferred
Percentage Interests, an amount of Net Profits equal to such excess.

 

Section 5.04. Tax Allocations. (a) Except as otherwise required by the Code or
the Regulations, all items of Company income, gain, loss, expense, deduction and
any other items shall be allocated among the Members for federal income tax
purposes in the same proportions as they share the corresponding items pursuant
to this Article 5.

 

(b) Any elections or other decisions relating to allocations pursuant to this
Section 5.04 shall be made by the Tax Matters Partner, in any manner that
reasonably reflects the purpose and intention of this Agreement. Allocations
pursuant to this Section 5.04 are solely for purposes of federal, state, and
local taxes and shall not affect, or in any way be taken into account in
computing, any Member's share of book income, gain, loss, expense, deduction,
other items, or distributions pursuant to any provision of this Agreement.

 

ARTICLE 6

 

OTHER DISTRIBUTIONS

 

Section 6.01.  Distributions. (a) To the extent not prohibited by Article 4 and
so long as (i) no Monthly Distribution Shortfall has occurred and is continuing,
(ii) no Trigger Event has occurred and, to the extent the same may be capable of
cure, is continuing, and (iii) all distributions required pursuant to Section
4.02 and Section 4.03(b) following any Liquidation Event or Covered Sale have
been fully paid by the Company then, distributions on the Common Units out of
funds legally available for any such distribution and after first taking into
account any reasonable reserves as reasonably determined by the Manager, shall
be paid by the Company to the Common Members in accordance with the irrespective
Common Percentage Interests.

 

(b) Notwithstanding any provision of this Agreement to the contrary, the Company
shall not make a distribution to any Member on account of its Interest if such
distribution would violate Section 18-607 of the Delaware Act or other
applicable law; provided, however, that the foregoing shall, to the fullest
extent permitted by law, not affect or in any way be taken to relieve the
Company of its obligation to make distributions to the Preferred Member in
accordance with the terms of this Agreement or be deemed to waive any resulting
Trigger Event.

 

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Section 6.02. Authority to Withhold; Treatment of Withheld Tax. Notwithstanding
any other provision of this Agreement, each Member hereby authorizes the Company
to withhold and to pay over, or otherwise pay, any withholding or other taxes
payable by the Company or any of its Affiliates (pursuant to the Code or any
provision of United States federal, state or local or non-U.S. tax law) with
respect to such Member or as a result of such Member's participation in the
Company. If and to the extent that the Company shall be required to withhold or
pay any such withholding or other taxes, such Member shall be deemed for all
purposes of this Agreement to have received a payment or distribution from the
Company as of the time such withholding or other tax is required to be paid. To
the extent that the aggregate of such payments to a Member for any period
exceeds the distributions that such Member would have received for such period
but for such withholding, the Manager shall notify such Member as to the amount
of such excess and such Member shall make a prompt payment to the Company of
such amount by wire transfer. Any withholdings by the Company referred to in
this Section 6.02 shall be made at the maximum applicable statutory rate under
the applicable tax law unless the Manager shall have received an opinion of
counsel or other evidence, satisfactory to the Manager, to the effect that a
lower rate is applicable, or that no withholding is applicable. Any and all
payments under this Section 6.02 shall be treated as a distribution for purposes
of this Agreement.

 

Section 6.03. Dissolution. Upon dissolution and winding up of the Company, the
Company shall make distributions in accordance with Section 12.04.

 

ARTICLE 7

 

MANAGEMENT OF COMPANY

 

 Section 7.01.     Management.

 

(a)          Manager. The Company shall have one manager (the "Manager") within
the meaning of the Delaware Act. Until replaced as provided herein, the Manager
shall hold office until a successor is elected and qualified or until its
resignation or, subject to Section 7.01(e), removal. Subject to Section 7.06,
the business, property and affairs of the Company shall be managed solely by or
under the direction of the Manager, as and to the extent set forth in this
Section 7.01. The initial Manager is Bluerock. The Manager is a "manager" within
the meaning of Section 18-101(10) of the Delaware Act.

 

(b)          Powers. Subject to Section 7.02, the Manager shall have the power
to do any and all acts necessary, convenient or incidental to or for the
furtherance of the purposes set forth in Section 2.03. Subject to Section 7.02,
the Manager has the authority to bind the Company.

 

(c)          Meetings of the Company. The Company may hold meetings, both
regular and special, within or outside the State of Delaware. Meetings of the
Company may be called by the Manager or any Member on not less than five
business days' notice to the Company. The notice requirement may be waived if
the Manager and the parties constituting the Preferred Member holding a majority
of the outstanding Preferred Units participate in the meeting and agree to waive
the notice with respect to that meeting. Any action required or permitted to be
taken at any meeting of the Company may be taken without a meeting if the
Manager and, if such action requires the approval of the Preferred Member, the
parties constituting the Preferred Member holding a majority of the outstanding
Preferred Units, consent to that action in writing, and the writing or writings
are filed with the minutes of proceedings of the Company.

 

(d)          Electronic Communications. The Company may hold meetings by means
of telephone conference or similar communications equipment that allows all
persons participating in the meeting to hear each other, and participation in a
meeting in this fashion shall constitute presence in person at the meeting. If
all the participants are participating by telephone conference or similar
communications equipment, the meeting shall be deemed to be held at the
principal place of business of the Company.

 

18

 

 

(e)          Removal of Manager. The Manager may be removed at any time by
Common Members holding at least seventy-five percent (75%) of the outstanding
Common Units, but only for the Manager's fraud or gross negligence with respect
to the Property, and any vacancy caused by any such removal may be filled only
by Common Members holding a majority of the outstanding Common Units; provided,
however, that so long as any obligation under the Mortgage Loan remains
outstanding and not discharged in full, consent of the Mortgage Lender shall
also be required for removal of a Manager and appointment of a successor
Manager; provided, further, that so long as any Preferred Units remain
outstanding, consent of a majority of the Preferred Units shall also be required
for removal of a Manager and appointment of a successor Manager.

  

(f)          Manager as Agent. To the extent of its powers set forth in this
Agreement and subject to Section 7.02, the Manager is an agent of the Company
for the purpose of the Company's business, and any actions of the Manager that
are taken in accordance with the provisions set forth in this Agreement shall
bind the Company.

 

Section 7.02. Approval Rights. (a) Notwithstanding anything that may be deemed
to be to the contrary in this Agreement, except as otherwise permitted by this
Agreement, so long as any Preferred Units are outstanding, the Manager and the
Company shall not take, or agree or commit to take, directly, or indirectly
through the Property Owner or otherwise, any of the following actions without
the approval of the Preferred Member:

 

(i)          Sale of Assets. Sell, assign, transfer, lease or otherwise dispose
of (A) any portion or all of the Property (other than a sale of the Property in
accordance with the Mortgage Loan Documents provided that the Net Sales Proceeds
are distributed to the Company); or (B) any other material assets of the Company
(other than ordinary course replacements), in one transaction or a series of
related transactions.

 

(ii)         Issuances of Limited Liability Company Interests. Issue any limited
liability company interests in the Company other than the Common Units and the
Preferred Units, or issue any Senior Securities or Parity Securities in
violation of the provisions of Section 3.04(b), or make any additional capital
calls with respect to the Preferred Units.

 

(iii)        Debt. Incur, assume, guarantee, or otherwise become, directly or
indirectly, liable with respect to, any Indebtedness other than (A) the Mortgage
Debt evidenced by the Mortgage Loan Documents; and (B) trade payables incurred
in the ordinary course of its business, provided that such debt (1) is not
evidenced by a note, (2) is paid within sixty (60) days of the date an invoice
is submitted for payment thereof or such earlier date required for payment
pursuant to such invoice (unless such invoice is being contested in good faith
and in a commercially reasonable manner, in which case such sum shall be paid
promptly upon a determination that such sum is due), (3) with respect to the
Company, does not exceed in the aggregate $25,000, and (4) is payable to trade
creditors and in amounts as are normal and reasonable under the circumstances.

 

(iv)       Liens on Property. Intentionally create, incur, assume or suffer to
exist, or permit or cause any of its Subsidiaries to create, incur, assume or
suffer to exist, any Lien on any portion of the Property, except as permitted
under the Mortgage Loan Documents.

 

(v)        Financing or Refinancing of Mortgage Debt. Any financing, refinancing
or prepayment of the Mortgage Debt, unless the Preferred Units shall have been
(or shall simultaneously be) redeemed in full in accordance with the terms of
this Agreement.

 

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(vi)        Merger or Consolidation. Merge, reorganize or consolidate the
Company or any of its Subsidiaries (whether in a single transaction or in a
series of related or substantially contemporaneous transactions) with or into
another Person (or engage in any other transaction having substantially the same
effect), or acquire, either directly or indirectly, the equity interests in
another Person.

 

(vii)       Bankruptcy. Commence any bankruptcy or insolvency proceeding,
acquiesce to the appointment of a receiver, trustee, custodian or liquidator or
admit the material allegations of a petition filed against the Company in any
bankruptcy proceeding.

 

(viii)      Transaction with Affiliates. Except as otherwise permitted by this
Agreement or in connection with a bona fide management compensation arrangement
of the Company, enter into any material transactions with the Manager (acting
other than in its capacity as manager of the Company), or any of its Affiliates,
except for (A) the Property Management Agreement with the Property Manager and
(B) any transaction which is substantially on the terms and conditions then
prevailing in the market for such type of transactions.

 

(ix)         Tax Matters. Take any material election or action by the Tax
Matters Partner pursuant to Section 8.03.

 

(x)          Amendments To Charter Documents. Terminate, amend or modify the
legal structure of the Company and/or the single purpose nature and bankruptcy
remoteness of the Company in violation of the provisions of Section 7.05 and
Section 9.01 and/or the Company's certificate of formation, operating agreement
and other charter documents, except to provide for any administrative or
ministerial changes that could not adversely affect any Preferred Member;
provided that written notice of any such administrative or ministerial change
shall be promptly delivered to the Preferred Member.

 

(xi)         Material Amendments to Mortgage Loan Documents. (A) Amend, modify,
supplement or waive any terms or provisions of any of the Mortgage Loan
Documents in any material respect or to the extent any such amendment,
modification, supplement or waiver would, whether or not material, reasonably be
expected to adversely affect any Preferred Member, or (B) request from the
Mortgage Lender any waiver of any of the terms or provisions of its applicable
Mortgage Loan Documents.

 

(xii)        Material Agreements Affecting Property. Enter into any new material
contract or agreement, or materially amend or modify any existing contract or
agreement that is binding on the Company or Manager with respect to or affecting
the Property.

 

(xiii)       Amendments to and Actions under Property Management Agreement. (A)
Amend, modify or supplement any terms or provisions of the Property Management
Agreement in any material respect, or rescind or terminate the Property
Management Agreement, or enter into any replacement Property Management
Agreement, or (B) take any action under the Property Management Agreement that
is inconsistent with the terms of this Agreement.

 

20

 

  

(b)    With respect to the approval of any proposed action to be taken pursuant
to Section 7.02(a) above, the Manager shall send to the Preferred Member a
notice setting forth in reasonable detail the terms of each such proposed action
and a written request for approval thereof. If the Preferred Member shall fail
to approve or reject the proposed action within five (5) Business Days after
receipt of such written request from the Manager, the proposed action shall be
deemed to have been approved by the Preferred Member.

 

Section 7.03. Officers. The Manager may, from time to time as it deems
advisable, select natural persons who are employees or agents of Bluerock or its
Affiliates or of the Company and designate them as officers of the Company and
assign titles to any such person. Unless the Manager decides otherwise, if the
title is one commonly used for officers of a business corporation formed under
the Delaware General Corporation Law, the assignment of such title shall
constitute the delegation to such person of the authorities and duties that are
normally associated with that office. Any delegation pursuant to this Section
7.03 may be revoked at any time by the Manager. Any officer of the Company may
be removed with or without cause by the Manager.

 

Section 7.04. Lack of Authority. No Member in its capacity as such has the
authority or power to act for or on behalf of the Company in any manner, to do
any act that would be (or could be construed as) binding on the Company or to
make any expenditures on behalf of the Company, unless such specific authority
has been expressly granted to such Member by the Manager.

 

Section 7.05. Limitations on the Company's Activities. (a) This Section 7.05 is
being adopted in order to comply with certain provisions required in order to
qualify the Company as a "special purpose entity".

 

(b) Notwithstanding anything to the contrary in this Agreement or in any other
document governing the formation, management or operation of the Company,
neither the Manager nor the Company shall amend, alter or change any of Sections
2.03, 2.04, 2.08 and 3.04, Article 4, Section 7.01(a), (e), and (f), Section
7.02, this Section 7.05, Section 9.01, Article 10, Section 11.01, Sections
12.01, 12.02, 12.03, 12.04, 13.02 and 13.06 (the "Special Purpose Provisions"),
without the written consent of the Mortgage Lender and the Preferred Member.
Subject to this Section 7.05 and Section 7.02, the Manager reserves the right to
amend, alter, change or repeal any provisions contained in this Agreement in
accordance with Section 13.02. In the event of any conflict between any of the
Special Purpose Provisions and any other provision of this or any other document
governing the formation, management or operation of the Company, the Special
Purpose Provisions shall control.

 

(c)          Notwithstanding any other provision of this Agreement and any
provision of law that otherwise so empowers the Company, any Common Member, the
Manager, any officer or any other Person, neither the Company nor the Common
Members nor the Manager nor any other Person shall be authorized or empowered,
nor shall they permit the Company to, and the Company shall not, without the
prior unanimous written consent of the Preferred Member, the Manager and the
Mortgage Lender, take any Material Action. Notwithstanding anything to the
contrary in this Agreement or in any other document governing the formation,
management or operation of the Company, prior to taking any Material Action, the
Members and the Manager shall, to the fullest extent permitted by law, including
Section 18-l101(c) of the Delaware Act, take into account the interest of the
Company's creditors, as well as those of the Company.

 

(d)          The Manager shall cause the Company to do or cause to be done all
things necessary to preserve and keep in full 'force and effect its existence,
rights (charter and statutory) and franchises; provided, however, that the
Company shall not be required to preserve any such right or franchise if the
Manager shall determine that the preservation thereof is no longer desirable for
the conduct of its business and that the loss thereof is not disadvantageous in
any material respect to the Company.

 

21

 

  

(e)          The Manager also shall cause the Company to and the Company shall
comply with all the requirements set forth in Section 9.01 hereof.

 

ARTICLE 8

 

TAX AND ACCOUNTING MATTERS;

BOOKS AND RECORDS

 

Section 8.01. Fiscal Year. The fiscal year of the Company (the "Fiscal Year")
shall begin on January 1 (except for the first Fiscal Year, which began on the
Effective Date) and end on December 31 of each year.

 

Section 8.02. Partnership for Tax Purposes. Unless otherwise required by
applicable law, the Members hereby agree that the Company shall be treated as a
partnership for tax purposes under U.S. federal, state and local income tax laws
or other laws, and further agree not to take any position or any action or to
make any election, in a tax return or otherwise, inconsistent herewith.

 

Section 8.03. Tax Matters. (a) The tax matters partner (the "Tax Matters
Partner") for purposes of Section 6231 of the Code shall be the Manager.

 

(b)          All necessary tax information (including all tax returns of the
Company, together with any schedules or other information which each Member may
require) shall be delivered to each Member as promptly as is practicable after
the end of each Fiscal Year of the Company.

 

(c)          All elections by the Company for income and franchise tax purposes
and all determinations for tax purposes regarding the fair market value of any
Company assets, book basis, depreciation or amortization and all other matters
relating to all tax returns (including amended returns) filed by the Company,
including tax audits and related matters and controversies, shall be made and
conducted by the Tax Matters Partner. The Tax Matters Partner shall, at the
expense of the Company, cause to be prepared and filed all tax returns
(including amended returns) required to be filed by the Company. The Tax Matters
Partner shall provide notice to the Members of any audit or other administrative
proceeding being conducted by a taxing authority.

 

Section 8.04. Books and Records. The Company shall keep, or cause to be kept,
appropriate books and records with respect to the Company's business. The
Company shall further provide the Common Members with reports consistent with
the reports previously provided to the Common Members as beneficial members
under the DST.

 

Section 8.05. Annual Budgets. For the partial year period commencing on the date
hereof, and for each Fiscal Year thereafter, the Company shall deliver to the
Members the Property Owner's annual budget, not later than sixty (60) days prior
to the commencement of such period or Fiscal Year (each such annual budget, an
"Annual Budget").

 

22

 

  

ARTICLE 9

 

CERTAIN COVENANTS

 

Section 9.01.   Single Purpose Entity.         So long as any Mortgage Loan is
outstanding and except for any transaction contemplated in this Agreement or in
the Mortgage Loan Documents, the Manager shall not cause the Company to, and the
Company shall not:

 

(a)          engage in any business or activity other than the ownership and
management of the Company's ownership interests in the Property Owner and
business activities incidental thereto, and entering into this Agreement and
activities incidental thereto;

 

(b)          acquire or own any material assets other than the Company's
ownership interests in the Property Owner;

 

(c)           merge into or consolidate with any Person or, to the fullest
extent permitted by applicable law, dissolve, terminate or, to the fullest
extent permitted by applicable law, liquidate in whole or in part, transfer or
otherwise dispose of all or substantially all of its assets, change its legal
structure, or engage in any other business activity;

 

(d)          (i) fail to observe its organizational formalities or preserve its
existence as an entity duly organized, validly existing and in good standing (if
applicable) under the laws of the jurisdiction of its organization or formation,
or (ii) amend, modify, terminate or fail to comply with the Special Purpose
Provisions of this Agreement, and/or of the Company's articles of organization
or similar organizational documents, as the case may be (except as required by
applicable law);

 

(e)           other than the Company's ownership interests in the Property
Owner, own any Subsidiary or make any investment in, any other Person without
the prior written consent of the Mortgage Lender or the Preferred Member, which
consent shall not be unreasonably denied, withheld, conditioned or delayed;

 

(f)           other than as may be permitted or required by the Mortgage Loan
Documents, commingle its assets with the assets of any of its members, managing
members, general partners, Affiliates, principals or of any other Person,
participate in a cash management system with any other Person, or fail to use
its own separate stationery, invoices and checks;

 

(g)          incur any debt, secured or unsecured, direct or contingent
(including guaranteeing any obligation), other than (i) the Mortgage Debt; (ii)
[intentionally deleted], and (iii) trade payables incurred in the ordinary
course of its business, provided that such debt (A) is not evidenced by a note,
(B) is paid within sixty (60) days of the date an invoice is submitted for
payment thereof or such earlier date required for payment pursuant to such
invoice (unless such invoice is being contested in good faith and in a
commercially reasonable manner, in which case such sum shall be paid promptly
upon a determination that such sum is due), (C) does not exceed in the aggregate
$50,000, and (D) is payable to trade creditors and in amounts as are normal and
reasonable under the circumstances;

 

23

 

 

(h)          to the extent of then available distributions from the Property
Owner, fail, at any time (i) to maintain adequate capital for the normal
obligations reasonably foreseeable in a business of its size and character and
in light of its contemplated business operations and (ii) to remain solvent and
to pay its debts and liabilities (including, as applicable, shared personnel and
overhead expenses) from its assets as the same have or shall become due, and to
maintain adequate capital for the normal obligations reasonably foreseeable in a
business of its size and character and in light of its contemplated business
operations;

 

(i)           (i) fail to maintain its records (including financial statements),
books of account and bank accounts separate and apart from those of the members,
managing members, general partners, principals and Affiliates of the Company,
the Affiliates of a member, managing member, general partner or principal of the
Company and any other Person; (ii) permit its assets or liabilities to be listed
as assets or liabilities on the financial statement of any other Person; or
(iii) include the assets or liabilities of any other Person on its financial
statements, provided, however, the Company's assets may be included in a
consolidated financial statement of its Affiliates provided that appropriate
notations shall be made on such consolidated financial statement to indicate the
separateness of the Company and its Affiliates and to indicate that none of any
such Affiliate's assets and credit are available to satisfy the debts and other
obligations of the Company;

 

(j)           other than the Property Management Agreement, enter into any
contract or agreement with any member, managing member, general partner,
principal or Affiliate of the Company, or any member, managing member, general
partner, principal or Affiliate thereof, except upon terms and conditions that
are commercially reasonable, intrinsically fair and substantially similar to
those that would be available on an arm's length basis with third parties other
than any member, managing member, general partner, principal or Affiliate of the
Company, or any member, managing member, general partner, principal or Affiliate
thereof;

 

(k)           fail to refrain, to the fullest extent permitted by applicable
law, from seeking the dissolution or winding up in whole, or in part, of the
Company;

 

(l)            fail to correct any known misunderstandings regarding the
separate identity of the Company or any member, managing member, general
partner, principal or Affiliate thereof or any other Person;

 

(m)          guarantee or become obligated for the debts of any other Person or
hold itself out to be responsible for the debts of another Person;

 

(n)          make any loans or advances to any Third Party, including any
member, managing member, general partner, principal or Affiliate of the Company
or any member, managing member, general partner, principal or Affiliate thereof,
and shall not acquire obligations or securities of any member, managing member,
general partner, principal or Affiliate of the Company or any member, managing
member, general partner, or Affiliate thereof;

 

(o)           fail to file its own tax returns or be included on the tax returns
of any other Person except as required or permitted by applicable law;

 

24

 

  

(p)          fail either to hold itself out to the public as a legal entity
separate and distinct from any other Person or to conduct its business solely in
its own name or a name franchised or licensed to it by an entity other than an
Affiliate of the Company and not as a division or part of any other entity in
order not (i) to mislead others as to the identity with which such other party
is transacting business, or (ii) to suggest that the Company is responsible for
the debts of any Third Party (including any member, managing member, general
partner, principal or Affiliate of the Company or any member, managing member,
general partner, principal or Affiliate thereof);

 

(q)           fail to maintain its assets in such a manner that it will not be
costly or difficult to segregate, ascertain or identify its individual assets
from those of any other Person;

 

(r)           share any common logo with or hold itself out as or be considered
as a department or division of (i) any general partner, principal, managing
member, member or Affiliate of the Company, (ii) any Affiliate of a general
partner, principal, managing member or member of the Company, or (iii) any other
Person

 

(s)           pledge its assets for the benefit of any other Person;

 

(t)           fail to maintain a sufficient number of employees in light of its
contemplated business operations taking into account the services to be provided
by the Manager pursuant to this Agreement;

 

(u)          fail to hold its assets in its own name;

 

(v)          have any of its obligations guaranteed by an Affiliate; and

 

(w)          identify, at any time, its partners, members or shareholders, or
any Affiliate of any of them, as a division or part of it, and has not
identified itself, and shall not identify itself, as a division of any other
Person.

 

ARTICLE 10

 

DISPOSITION OF UNITS;

TRIGGER EVENTS AND CONSEQUENCES

 

Section 10.01.     Transfers. (a) Subject to compliance with the terms and
conditions of this Agreement (including, without limitation, Sections 4.02 and
4.03(b)) and the provisions of the Mortgage Loan Documents, any Common Member
may freely Transfer any or all of its Common Units, so long as such Transfer is
not to a Prohibited Person (each, a "Permitted Transfer"). Upon request from the
Preferred Member, the Manager shall promptly deliver to the Preferred Member an
updated organizational chart showing the ultimate beneficial owners in the
Company, together with all intervening entities and corresponding ownership
percentages.

 

(b)          Notwithstanding anything to the contrary herein, the Preferred
Member shall have the right to Transfer all or any portion of its Preferred
Units to any Person without restriction or consent of the Company, the Manager
or any other Member; provided, that (A) such Transfer shall not cause a default
under the Mortgage Loan Documents, and (B) the Preferred Member shall, as a
condition to any such Transfer, be solely responsible for all costs of any such
Transfer.

 

(c)          Any Transfer of all or any portion of the Units which is not made
in compliance with the provisions of this Agreement shall, to the fullest extent
permitted by law, be void, and the Company shall not recognize any such
Transfer. Notwithstanding anything else contained herein, no Transfer shall be
made except in compliance with all applicable laws, including the Securities Act
of 1933, as amended. No transferee shall be admitted to the Company as a Member
unless the Transfer was permitted under this Agreement.

 

25

 

 

 (d)        If (i) Units are Transferred in accordance with the terms of this
Agreement and (ii) the transferee is to be admitted to the Company as a Member,
the following shall apply:

 

(A)       the transferee shall execute and deliver to the Company such
instruments (including a counterpart of this Agreement), in form and substance
reasonably satisfactory to the Manager, as the Manager shall reasonably deem
necessary or desirable to confirm the agreement of such transferee to be bound
by all the terms and provisions of this Agreement (as it may be amended in
connection with the admission of such transferee as a Member);

 

(B)        upon execution of such instruments, the transferee shall be admitted
to the Company as a Member of the Company;

 

(C)        immediately following the admission of the transferee to the Company
as a Member of the Company, any Member who has thereby transferred all of its
Units shall cease to be a Member of the Company;

 

(D)       the transferee, as a Member of the Company, and any other Members are
hereby authorized to, and shall, continue the business of the Company without
dissolution; and

 

(E)        any transferee who is admitted to the Company as a Member shall
succeed to the rights and powers, and be subject to the restrictions and
liabilities, of the transferor Member to the extent of the Interest transferred.

 

 (e)          If a party ceases to own any Units in accordance with the terms of
this Agreement, its rights and obligations hereunder shall terminate except as
provided in Section 11.01(b) or as otherwise expressly provided herein to
survive such cessation of ownership.

 

 (f)          Notwithstanding anything to the contrary herein, no Member may
Transfer any Units if such Transfer would result in the Company having more than
99 Members. Any Transfer of Units that would have the result prescribed in the
preceding sentence shall be void, and the Company shall not recognize any such
Transfer.

 

Section 10.02. Trigger Events.

 

(a) Event. The occurrence of any one or more of the following events shall
constitute a trigger event (each, a "Trigger Event"):

 

(i)          Any payment (including, the payment of the Liquidation Preference
or the Total Redemption Amount) or distribution to any Preferred Member
hereunder is not made when due and, in the case of any amount due on any
Preferred Payment Date, is not cured within fifteen (15) days thereafter.

 

(ii)         Any representation or warranty made by the Company or the Common
Members herein, or in any report, certificate, financial statement or other
instrument, agreement or document furnished to the Preferred Member, shall have
been false in any material respect as of the date the representation or warranty
was made;

 

26

 

  

(iii)        [intentionally deleted];

 

(iv)        The Company and/or the Manager shall fail to obtain the approval of
the Preferred Member with respect to any matter subject to approval rights under
Section 7.02;

 

(v)         Bluerock shall at any time no longer control, directly or
indirectly, the day-to-day management and operations of the Manager and the
Company;

 

(vi)        Any Transfer shall be made in violation of the provisions of Section
10.0l(a); or

 

(vii)       The Company, the Manager or any Guarantor shall make an assignment
for the benefit of creditors in contravention of this Agreement;

 

(viii)      A receiver, liquidator or trustee shall be appointed for the Company
or the Manager, or the Company, the Manager or any Guarantor shall be
adjudicated a bankrupt or insolvent, or any petition for bankruptcy,
reorganization or arrangement pursuant to federal bankruptcy law, or any similar
federal or state law, shall be filed by or against, consented to, or acquiesced
in by the Company, the Manager or any Guarantor, or any proceeding for the
dissolution or liquidation of the Company, the Manager or any Guarantor shall be
instituted; provided, however, that if such appointment, adjudication, petition
or proceeding was involuntary and not consented to by the Company, the Manager
or any Guarantor, as the case may be, the same shall constitute a Trigger Event
only upon the same not being discharged, stayed or dismissed within sixty (60)
days and, in the case of any stay, until the expiration or lifting thereof;

 

(ix)        Any Property Management Agreement (or any replacement Property
Management Agreement) with respect to the Property is terminated for any reason
and a successor Property Manager is not appointed within forty five (45) days
after such termination; or

 

(x)        Any Mortgage Loan Default shall occur and be continuing.

 

Section 10.03.     Consequences of Trigger Event. Upon the delivery of written
notice to the Manager that a Trigger Event has occurred and is continuing, the
Preferred Member, in addition to and without limiting all other remedies
permitted hereunder or at law or in equity, may do any one or more of the
following:

 

(a)          Mandatory Redemption. The Preferred Member shall have the right,
but not the obligation, to give written notice to the Manager requiring the
Company to immediately redeem in cash the entire Unreturned Preferred
Contribution at a redemption price equal to the Total Redemption Amount in
accordance with Section 4.03(b)(ii) of this Agreement.

 

27

 

  

 (b)          Disposition of Company Assets. Subject to the terms and provisions
of the Mortgage Loan Documents, the Preferred Member may (but shall not be
required to) elect to cause the Company to irrevocably assign, transfer and
convey all the Company's right, title and interest in and to the Property or any
of them to a Person for cash or other consideration which shall be paid to the
Preferred Member and credited against the Total Redemption Amount, until it has
been reduced to zero, at which time the Preferred Contribution shall be deemed
to have been reduced to zero, and the balance of the cash or other consideration
from such assignment, transfer or conveyance shall be paid to the Company,
provided that any such disposition shall be made in connection with a sales
effort conducted in a commercially reasonable manner, determined by reference to
the standards of commercial reasonableness applicable to a secured party's
disposition of collateral after default under the provisions of Article 9 of the
UCC (a "Commercial Disposition Effort"). The parties acknowledge and agree that
a sales effort involving a sixty (60) day market exposure period during which
invitations to bid are transmitted to the Manager and five (5) additional
Persons that Manager reasonably determines, in its discretion, are qualified to
purchase any Property being sold or transferred shall constitute a Commercial
Disposition Effort conducted in a commercially reasonable manner.

 

 (c) Other Remedies. The Preferred Member shall have any other rights and
remedies available hereunder or at law or in equity. More specifically, but not
in limitation of the rights and remedies of the Preferred Member, the Preferred
Member may, subject to the terms and conditions of the Mortgage Loan Documents,
do or cause the Company (and any Subsidiary) to do any or all of the following:

 

(i)          collect by legal proceedings or otherwise (including by foreclosure
of any lien) all dividends, distributions, interest, principal or other sums now
or hereafter payable upon or on account of any assets of the Company;

 

(ii)         subject to the provisions of Section 10.03(c) above, enter into any
extension or reorganization agreement or any other agreement relating to or
affecting any asset of the Company or any other contracts or arrangements of the
Company and, in connection therewith, deposit or surrender control of any asset
of the Company or accept other property in exchange therefore;

 

(iii)        settle, compromise or release, on terms acceptable to the Preferred
Member, in whole or in part, any amounts owing on any asset of the Company or
any disputes with respect thereto;

 

(iv)       subject to the provisions of Section 10.03(c) above, exercise any and
all other rights, powers, privileges and remedies of an owner of the assets of
the Company or any of them.

 

(d)         Sale of Property.

 

(i)          The receipt given by the Preferred Member, on behalf of the
Company, for the purchase money paid at the sale of any Property conducted in
accordance with Section 10.03(c) above shall be a sufficient discharge therefor
to any purchaser of all or any part of such Property sold. No such purchaser,
after paying such purchase money and receiving such receipt, shall be bound to
see to the application of such purchase money or any part thereof or in any
manner be answerable for any loss, misapplication or nonapplication of any such
purchase money, or any part thereof; or be bound to inquire as to the
authorization, necessity, expediency or regularity of any such sale.

 

28

 

  

(ii)         Each purchaser at any sale or other disposition by the Preferred
Member (on behalf of the Company or in its own name) conducted in accordance
with Section 10.03(c) above shall hold the Property so sold absolutely, free
from any claim or right of any kind whatsoever of the Manager and the other
Members, including, without limitation, any equity or right of redemption of the
Manager and the other Members. The Manager and the other Members, to the fullest
extent permitted by law, hereby specifically waive all rights of redemption,
principal, stay, valuation or appraisal which they have or may have under any
rule, law or statute now existing or hereafter in force in connection with a
sale or other disposition of any one or more of the Property conducted in
accordance with Section 10.03(c) above.

 

(iii)        In case of any sale of the Property conducted in accordance with
Section 10.03(c) above on credit or for future delivery, the Property so sold
may be retained by the Preferred Member until the selling price is paid by the
purchaser thereof, but the Preferred Member shall not incur any liability in
case of the failure of such purchaser to take up and pay for the Property so
sold and, in case of any such failure, such Property may again be sold upon like
notice in accordance with Section l0.03(c) above. No credit shall be given
against the Total Redemption Amount unless and until the Preferred Member
receives payment on any such credit sale.

 

(iv)      Subject to any requirements of applicable law and the Preferred
Member's compliance with its obligations set forth in this Agreement, neither
the Manager nor the other Common Members shall at any time have or assert any
right pertaining to the marshaling of assets, the sale of property in the
inverse order of alienation or the administration of estates of decedents to
prevent or hinder the exercise of the rights of the Preferred Member or any
purchaser of the Property or any of them pursuant to this Agreement, and the
Manager and the other Common Members, to the fullest extent permitted by
applicable law, but subject to the Preferred Member's compliance with its
obligations set forth in this Agreement, hereby waive the benefit of any such
rights. The Manager and the other Common Members further waive, to the fullest
extent permitted by law, but subject to the Preferred Member's compliance with
its obligations set forth in this Agreement, any right to require the Preferred
Member (1) to pursue any remedy whatsoever that the Preferred Member may
possess, (2) to obtain any bond or other security under claim and delivery
proceedings or otherwise, (3) to retain possession and not dispose of the
Property taken under claim and delivery proceedings until after trial or final
judgment, (4) to provide a traditional hearing prior to the time the Preferred
Member exercises any rights or takes any action under this Agreement, or (5) to
concede possession to the Manager and the other Common Members pending the
initiation or conclusion of judicial process.

 

ARTICLE 11

 

EXCULPATION AND INDEMNIFICATION

 

Section 11.01.  Exculpation and Indemnification. (a) No Member, Manager or Tax
Matters Partner, or any officer of the Company or any of their respective
Affiliates or any of their respective shareholders, partners, members,
employees, representatives or agents (collectively, "Covered Persons") shall be
liable to the Company or any other Covered Person for monetary damages for any
breach of fiduciary duty relating to the Company to the fullest extent permitted
by the laws of the State of Delaware.

 

29

 

 

(b)           Each Person (and the heirs, executors or administrators of such
Person) who was or is a party or is threatened to be made a party to, or is
involved in any threatened, pending or completed action, suit or proceeding,
whether civil, criminal, administrative, or investigative, by reason of the fact
that such Person is or was a Covered Person shall be indemnified and held
harmless by the Company to the fullest extent permitted by the laws of the State
of Delaware. The right to indemnification conferred in this Section 11.01 shall
also include the right to be advanced by the Company the expenses incurred in
connection with any such proceeding in advance of its final disposition to the
fullest extent permitted by the laws of the State of Delaware; provided, that
any Covered Person shall promptly repay all such advances to the Company if it
shall be ultimately determined by a court of competent jurisdiction that such
Covered Person was not entitled to be indemnified by the Company in connection
with such proceeding; and provided, further, that until such time as all of the
obligations under the Mortgage Loan Documents have been satisfied in full, no
indemnity payment to any Covered Person (except to the Preferred Member) from
funds of the Company (as distinct from funds from other sources, such as
insurance) of any indemnity under this Article 11 shall be payable from amounts
allocable to any other Person pursuant to this Agreement and the Mortgage Loan
Documents. The right to indemnification conferred in this Section 11.01 shall be
a contract right.

 

(c)         The Company may, by action of the Manager, provide indemnification
to such other officers, employees and agents of the Company or of any Covered
Person or other persons who are or were serving at the request of the Company as
a director, officer, employee or agent of another limited liability company,
corporation, partnership, joint venture, trust or other enterprise to such
extent and to such effect as the Manager shall determine to be appropriate.

 

(d)          The Company shall have the power to purchase and maintain insurance
on behalf of any person who is or was a Covered Person or an officer, employee
or agent of the Company, or is or was serving at the request of the Company as a
member, manager, director, officer, employee or agent of another limited
liability company, corporation, partnership, joint venture, trust or other
enterprise against any expense, liability or loss incurred by such person in any
such capacity or arising out of his status as such, whether or not the Company
would have the power to indemnify such entity or individual against such
liability under the laws of the State of Delaware.

 

(e)          Notwithstanding the provisions of this Section 11.01 to the
contrary, the Company shall be personally liable to the Preferred Member for the
actual Damages that the Preferred Member incurs to the extent arising out of,
resulting from or in connection with any one or more of the following:

 

(1)         any wrongful removal or destruction of any portion of the Property
or any intentional waste of the Property or any portion thereof;

 

(2)         any misrepresentation, miscertification or breach of warranty by the
Company, a Common Member or Guarantor with respect to any representation,
warranty or certification contained in this Agreement or any Mortgage Loan
Document or in any document executed in connection therewith, pursuant hereto
and/or the Mortgage Loan Documents or otherwise to induce the Preferred Member
to make the Preferred Contribution;

 

(3)         any misapplication or misappropriation by the Company of (A) any
Insurance Proceeds paid by reason of any loss, damage or destruction to any of
the Property, (B) any Awards or other amounts received in connection with the
Condemnation of all or a portion of the Property, (C) any rents from the
Property received following a Mortgage Loan Default, or (D) any security
deposits or rents from the Property paid more than one month in advance;

 

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(4)         any misapplication or misappropriation by the Company of Net Sales
Proceeds or any distributions or other payments made in respect of any of the
Property; and/or

 

(5)         the Company making a distribution to one or more of its equity
owners in violation of this Agreement.

 

(f)          The rights and authority conferred in this Section 11.01 shall not
be exclusive of any other right which any Person may otherwise have or hereafter
acquire.

 

(g)          Neither the amendment of this Section 11.01, nor to the fullest
extent permitted by the laws of the State of Delaware, any modification of law,
shall eliminate or reduce the effect of this Section 11.01 in respect of any
acts or omissions occurring prior to such amendment or modification.

 

Section 11.02. Waiver of Corporate Opportunity. To the fullest extent permitted
by applicable law, the doctrine of corporate opportunity, or any other analogous
doctrine, shall not apply with respect to the Company, and no Member, Manager,
Tax Matters Partner or Affiliate of a Member, Manager or Tax Matters Partner
shall have any obligation to refrain from (i) engaging in similar activities or
lines of business as the Company or developing or marketing any products or
services that compete, directly or indirectly, with those of the Company, (ii)
investing or owning any interest publicly or privately in, serving as a director
or officer of or developing a business relationship with, any Person engaged in
similar activities or lines of business as, or otherwise in competition with,
the Company, (iii) doing business with any client or customer of the Company or
(iv) employing or otherwise engaging a former officer or employee of the
Company; and neither the Company nor any Member, Manager or Tax Matters Partner
(or Affiliate of such Member, Manager or Tax Matters Partner) shall have any
right by virtue of this Agreement in or to, or to be offered any opportunity to
participate or invest in, any venture engaged or to be engaged in by the other
Members, the Manager, the Tax Matters Partner or any Affiliate of the other
Members, the Manager or the Tax Matters Partner, or any right by virtue of this
Agreement in or to any income or profits derived therefrom.

 

ARTICLE 12

TERMINATION, DISSOLUTION

AND LIQUIDATION

 

Section 12.01. Term. The term of the Company shall continue until it is
dissolved, wound up and terminated pursuant to this Article 12. The existence of
the Company as a separate legal entity shall continue until cancellation of the
Certificate of Formation as provided in the Delaware Act.

 

Section 12.02. Winding Up Events. (a) The Company shall dissolve and commence
winding up upon the first to occur of any of the following events (each a
"Winding Up Event"):

 

      (i)          the termination of the legal existence of the last remaining
member of the Company or the occurrence of any other event which terminates the
continued membership of the last remaining member of the Company in the Company
unless the Company is continued without dissolution in a manner permitted by
this Agreement or the Delaware Act;

 

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     (ii)         subject to Section 7.02, the written election of the Manager
to dissolve, wind up and liquidate the Company; or

 

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

 

(b)          Upon the occurrence of any event that causes the last remaining
member of the Company to cease to be a Member of the Company, to the fullest
extent permitted by law, the personal representative of such Member is hereby
authorized to, and shall, within 90 days after the occurrence of the event that
terminated the continued membership of such Member in the Company, agree in
writing (i) to continue the Company and (ii) to the admission of the personal
representative or its nominee or designee, as the case may be, as a substitute
member of the Company, effective as of the occurrence of the event that
terminated the continued membership of the last remaining member of the Company
or the Member in the Company.

 

(c)          Notwithstanding any other provision of this Agreement, the
Bankruptcy of a Member shall not cause such Member to cease to be a member of
the Company and upon the occurrence of such an event, the Company shall continue
without dissolution.

 

Section 12.03. Winding Up. Upon the occurrence of a Winding Up Event, the
Company shall continue solely for the purposes of winding up its affairs in an
orderly manner, liquidating its assets, and satisfying or making reasonable
provision for the satisfaction of the claims of its creditors and Members, and
no Member shall take any action that is inconsistent with, or not necessary to
or appropriate for, the winding up of the Company's business and affairs;
provided that all covenants contained in this Agreement and obligations provided
for in this Agreement shall continue to be fully binding upon the Members until
such time as the assets or property or the proceeds from the sale thereof have
been distributed pursuant to this Article 12 and the Company has terminated by
the filing of a Certificate of Cancellation of the Certificate of Formation of
the Company with the Secretary of State of the State of Delaware. The Manager
shall be responsible for overseeing the winding up and dissolution of the
Company. The Manager shall take full account of the Company's assets and
liabilities, and the Company's affairs shall be wound up in an orderly manner.
To the extent that the Manager determines that any or all of the assets of the
Company shall be sold, such assets shall be sold as promptly as possible, but in
a business-like manner so as not to involve undue sacrifice. Notwithstanding the
foregoing, in the event of the winding up or dissolution of the Company as a
result of a Trigger Event, the Preferred Member shall be entitled to appoint a
Third Party to act as an independent liquidating trustee pursuant to the
Delaware Act with responsibility for overseeing the winding up and dissolution
of the Company.

 

Section 12.04. Distribution Upon Dissolution of the Company. The Company's
assets or the proceeds from the sale thereof pursuant to this Article 12 to the
extent sufficient therefor shall be applied and distributed to the maximum
extent permitted by law, in the following order:

 

(a)          first, to the satisfaction (whether by payment or by the making of
reasonable provision for payment) of all of the Company's debts and liabilities
to Third Party creditors;

 

(b)         second, to the Preferred Member in the amounts specified in Section
4.02(a); and

 

(c)          third, the balance, if any, to the Common Members in accordance
with their respective Common Interest Percentages.

 

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Section 12.05. Rights of Members; Resignation.

 

(a)          Except as otherwise provided in this Agreement or in any agreement
referred to in this Agreement, each Member shall look solely to the assets of
the Company for the return of its Capital Contributions and shall have no right
or power to demand or receive property other than cash from the Company.

 

(b)          No Member shall resign from the Company prior to the dissolution
and winding up of the Company in accordance with this Agreement except as a
consequence of a permitted Transfer of all of such Member's Interest.

 

ARTICLE 13

 

MISCELLANEOUS

 

Section 13.01. Notices. All notices, requests and other communications to any
party or to the Company shall be in writing (including facsimile or similar
writing) and shall be given, in the case of any Member, to the address of such
Member as set forth in the books and records of the Company, and

 

  if to the Company or the Manager, to: c/o Bluerock Real Estate, LLC   712
Fifth Avenue, 9th Floor   New York, NY 10019   Attention: Jordan Ruddy and
Michael Konig   Facsimile: (212) 278-4220       with a copy to: Hirschler
Fleischer   Edgeworth Building   2100 East Cary Street   Richmond, Virginia
23223   Attention: S. Edward Flanagan, Esq.   Facsimile: (804) 644-0957       if
to Preferred Member, to: c/o Bluerock Real Estate, LLC   712 Fifth Avenue, 9th
Floor   New York, NY 10019   Attention: Jordan Ruddy and Michael Konig  
Facsimile: (212) 278-4220

 

33

 

  

with a copy to: Hirschler Fleischer   Edgeworth Building   2100 East Cary Street
  Richmond, Virginia 23223   Attention: S. Edward Flanagan, Esq.   Facsimile:
(804) 644-0957

 

or, in each case, to such other address or facsimile number as such party or the
Company may hereafter specify for the purpose by notice to the other parties and
the Company. All such notices, requests and other communications shall be deemed
received on the date of receipt by the recipient thereof if received prior to 5
p.m. in the place of receipt and such day is a Business Day in the place of
receipt. Otherwise, any such notice, request or communication shall be deemed
not to have been received until the next succeeding Business Day in the place of
receipt.

 

Section 13.02. Amendments; No Waivers. (a) Any provision of this Agreement may
be amended or waived if, and only if, such amendment or waiver is in writing and
agreed to, (i) in the case of an amendment, (A) by Common Members holding a
majority of the outstanding Common Units and (B) by the Preferred Member with
respect to any amendment that would reasonably be expected to adversely affect
any Preferred Member or (ii) in the case of a waiver, by the party or parties
against whom the waiver is to be effective; provided that this Agreement shall,
without any further action required, be deemed amended from time to time to
reflect admission of a new Member and the withdrawal or resignation of a Member,
in each case that is made in accordance with the provisions hereof.

 

(b)          Except as expressly set forth herein, no failure or delay by any
party in exercising any right, power or privilege hereunder shall operate as a
waiver thereof nor shall any single or partial exercise thereof preclude any
other or further exercise thereof or the exercise of any other right, power or
privilege. Except as otherwise provided herein, the rights and remedies herein
provided shall be cumulative and not exclusive of any rights or remedies
provided by law.

 

Section 13.03. Expenses. All costs and expenses incurred in connection with this
Agreement and the transactions contemplated hereby shall be paid by the party
incurring such costs and expenses.

 

Section 13.04. Successors and Assigns. The provisions of this Agreement shall be
binding upon and inure to the benefit of the parties hereto and their respective
permitted successors and assigns. This Agreement is for the sole benefit of the
parties hereto and, except as provided in Article 11, nothing herein expressed
or implied shall give or be construed to give any Person, other than the parties
hereto, any legal or equitable rights hereunder.

 

Section 13.05. Headings. Headings are for ease of reference only and shall not
form a part of this Agreement.

 

Section 13.06. Governing Law. THIS AGREEMENT SHALL BE CONSTRUED AND INTERPRETED
IN ACCORDANCE WITH AND GOVERNED BY THE LAW OF THE STATE OF DELAWARE WITHOUT
GIVING EFFECT TO THE PRINCIPLES OF CONFLICTS OF LAWS THEREOF. PRINCIPLES), ALL
RIGHTS AND REMEDIES BEING GOVERNED BY SAID LAWS.

 

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Section 13.07. Jurisdiction and Venue. Members consent to the exclusive
jurisdiction of the Federal and state courts situated in the County of New York,
New York in connection with any action arising out of or based on this Agreement
and the transactions contemplated by this Agreement.

 

Section 13.08. Waiver of Jury Trial. Members hereby waive trial by jury in any
action, proceeding or counterclaim brought by either of the parties hereto
against the other on any matters whatsoever arising out of or in any way
connected with this Agreement, and any emergency statutory or any other
statutory remedy.

 

Section 13.09. Counterparts; Effectiveness. This Agreement may be signed in any
number of counterparts, each of which shall be deemed an original. This
Agreement shall become effective when each party shall have received a
counterpart hereof signed by each of the other parties.

 

Section 13.10. Severability. In case any one or more of the provisions or part
of a provision contained in this Agreement shall for any reason be held to be
invalid, illegal or unenforceable, such invalidity, illegality or
unenforceability shall be deemed not to affect any other provision or part of a
provision of this Agreement, but the Agreement shall be reformed and construed
as if such provision or part of a provision held to be invalid, illegal or
unenforceable had never been contained herein and such provision or part
reformed so that it would be valid, legal and enforceable to the maximum extent
possible.

 

Section 13.11. Further Assurances. The parties hereto will execute and deliver
such further instruments and do such further acts and things as may be required
to carry out the intent and purpose of this Agreement.

 

Section 13.12. Entire Agreement. This Agreement, including the exhibits and
schedules hereto and thereto, constitute the entire agreement among the parties
hereto and thereto with respect to the subject matter hereof and thereof, and
supersede all other prior agreements or undertakings with respect thereto, both
written and oral. The parties acknowledge and agree that no representations,
warranties, instruments, promises, understandings or conditions have been made
or relied upon by the parties or any of their Affiliates in connection with the
transactions contemplated hereby except as set forth herein or therein.

 

[Remainder of Page Intentionally Left Blank; Signature Page Follows]

 

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IN WITNESS WHEREOF, the parties hereto have entered into this Agreement or have
caused this Agreement to be duly executed by their respective authorized
officers, in each case as of the day and year first above written.

 

  BLUEROCK REAL ESTATE, LLC,   as Manager         By: /s/ R. Ramin Kamfar    
Name: R. Ramin Kamfar     Title: CEO         BLUEROCK SPECIAL OPPORTUNITY AND  
INCOME FUND III, LLC   as Preferred Member         By: BR SOIF III Manager, LLC,
a Delaware limited     liability company, its manager           By: /s/ R. Ramin
Kamfar     Name: R. Ramin Kamfar     Title: Authorized Signatory         COMMON
MEMBERS:         /s/ R. Ramin Kamfar   R. Ramin Kamfar         /s/ Randy I.
Anderson   Randy I. Anderson         /s/ Jordan Ruddy   Jordan Ruddy         /s/
Jerold V. Novack for Jenco Business  Advisors, Inc.   Jerold V. Novack for Jenco
Business  Advisors, Inc.         /s/ James Babb III   James Babb III         /s/
Ryan MacDonald   Ryan MacDonald

 

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Schedule A

 

Membership Interests

 

 

Member  Number of Units   Percentage of Units            Common Members      
    R. Ramin Kamfar   167,552.59    67.02% Randy I. Anderson   14,017.10  
 5.61% Jordan Ruddy   21,706.62    8.68% Jenco Business           Advisors,
Inc.   24,919.30    9.97% James Babb III   14,017.10    5.61% Ryan MacDonald 
 7.787.28    3.11%     250,000.00    100.00%

 

Preferred Member                   Bluerock Special   1,719,289 Preferred Units
  100% Preferred Units Opportunity  + Income         Fund III, LLC      

 

 

 

  

SCHEDULE B

PROPERTY OWNER'S AMENDED AND RESTATED
LIMITED LIABILITY COMPANY AGREEMENT