Exhibit 10.8

 

MEMBERSHIP INTEREST

PURCHASE AND SALE AGREEMENT

 

(BH INTERESTS)

 

FROM

 

BEHRINGER HARVARD MULTIFAMILY OP I LP

 

TO

 

MILKY WAY PARTNERS, L.P.

 

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CONTENTS

 

Clause

 

Page

 

 

 

 

Article 1.

SCHEDULE; DEFINITIONS; PURCHASE PRICE

 

2

 

 

 

 

1.1

Schedule

 

2

1.2

Definitions

 

2

1.3

Purchase and Sale

 

2

1.4

Earnest Money

 

2

 

 

 

 

Article 2.

INSPECTION

 

3

 

 

 

 

2.1

Due Diligence; Indemnity

 

3

2.2

Seller’s Delivery of Specified Documents

 

3

2.3

Title and Survey

 

4

2.4

Objection Notice

 

4

 

 

 

 

Article 3.

OPERATIONS AND RISK OF LOSS

 

5

 

 

 

 

3.1

Ongoing Operations

 

5

3.2

Damage

 

6

3.3

Condemnation

 

6

3.4

Certain Tax Matters

 

7

3.5

Restructuring of Wholly Owned Properties

 

7

 

 

 

 

Article 4.

CLOSING

 

8

 

 

 

 

4.1

Closing

 

8

4.2

Conditions to the Parties’ Obligations to Close

 

8

4.3

Seller’s and BH’s Deliveries in Escrow

 

11

4.4

Buyer’s Deliveries in Escrow

 

11

4.5

Closing Statements

 

12

 

 

 

 

Article 5.

PRORATIONS; COSTS

 

12

 

 

 

 

5.1

Prorations

 

12

5.2

Post-Closing Corrections

 

12

5.3

Costs; Transfer Taxes

 

12

5.4

Sales Commissions

 

12

 

 

 

 

Article 6.

REPRESENTATIONS AND WARRANTIES

 

13

 

 

 

 

6.1

Seller’s Representations and Warranties as to Seller

 

13

6.2

Seller’s Representations and Warranties as to Interests and Companies

 

15

6.3

Seller’s Representations and Warranties as to the Properties

 

18

6.4

Buyer’s Representations and Warranties

 

21

6.5

Survival of Representations and Warranties

 

22

 

 

 

 

Article 7.

DEFAULT AND REMEDIES

 

22

 

 

 

 

7.1

Seller’s Default

 

22

7.2

Buyer’s Default

 

22

 

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CONTENTS

 

Clause

 

Page

 

 

 

 

7.3

Other Expenses

 

23

 

 

 

 

Article 8.

INDEMNIFICATION AND LIMITATION ON LIABILITY

 

23

 

 

 

 

8.1

Indemnification

 

23

8.2

Limitation on Seller’s Liability

 

23

8.3

Tax Indemnification

 

23

8.4

Survival

 

23

8.5

No Liability for Exception Matters

 

24

 

 

 

 

Article 9.

MISCELLANEOUS

 

24

 

 

 

 

9.1

Parties Bound

 

24

9.2

Headings; Entirety; Amendments

 

25

9.3

Invalidity and Waiver

 

25

9.4

Governing Law; Calculation of Time Periods; Time

 

25

9.5

No Third Party Beneficiary

 

25

9.6

Confidentiality

 

25

9.7

Enforcement Expenses

 

26

9.8

Notices

 

26

9.9

Construction

 

26

9.10

Execution in Counterparts

 

26

9.11

Further Assurances

 

26

9.12

Waiver of Jury Trial; Forum

 

26

9.13

Mutual Execution

 

26

9.14

Cooperation

 

27

9.15

Termination of Related PSA Upon Termination of this Agreement

 

27

 

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PURCHASE AND SALE AGREEMENT

SCHEDULE OF EXHIBITS AND APPENDICES

 

Exhibit A

 

-

 

Ventures, Properties and Percentage Interests

 

 

 

 

 

Exhibits B-1 to B-5

 

-

 

Org Charts

 

 

 

 

 

Appendix 1.2

 

-

 

Defined Terms

 

 

 

 

 

Appendix 1.4

 

-

 

Escrow Agreement

 

 

 

 

 

Appendix 2.2(a)

 

-

 

Property Information

 

 

 

 

 

Appendix 2.2(b)

 

-

 

Company Information

 

 

 

 

 

Appendix 4.3(b)

 

-

 

FIRPTA Certificate

 

 

 

 

 

Appendix 4.3(f-1)

 

-

 

Form of Amended and Restated Venture Agreement for Waterford Venture

 

 

 

 

 

Appendix 4.3(f-2)

 

-

 

Form of Amended and Restated Venture Agreement for each Venture other than
Waterford Venture

 

 

 

 

 

Appendix 5.1

 

-

 

Proration Method

 

 

 

 

 

Appendix 6.2-6.3

 

-

 

Disclosure Schedule

 

 

 

 

 

Appendix 9.8

 

-

 

Notice Addresses

 

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MEMBERSHIP INTEREST

PURCHASE AND SALE AGREEMENT

 

(BH Interests)

 

This Purchase and Sale Agreement (this “Agreement”) is made as of the Effective
Date (defined below), by and between BEHRINGER HARVARD MULTIFAMILY OP I LP, a
Delaware limited liability company (“Seller”), and MILKY WAY PARTNERS, L.P., a
Delaware limited partnership (“Buyer”).

 

R E C I T A L S

 

A.  Seller is the sole member of each of Behringer Harvard Belmar, LLC, a
Delaware limited liability company (“Belmar Managing Member”), Behringer Harvard
Cyan, LLC, a Delaware limited liability company (“Cyan Managing Member”), and
Behringer Harvard Waterford Place, LLC, a Delaware limited liability company
(“Waterford Managing Member”).  Belmar Managing Member is the managing member
of, and is the owner and holder of a 70% limited liability company membership
interest in, Behringer Harvard Belmar Venture, LLC, a Delaware limited liability
company (“Belmar Venture”), Cyan Managing Member is the managing member of, and
is the owner and holder of a 70% limited liability company membership interest
in, Behringer Harvard Cyan Venture, LLC, a Delaware limited liability company
(“Cyan Venture”); and Waterford Managing Member is the managing member of, and
is the owner and holder of a 55% limited liability company membership interest
in, Behringer Harvard Waterford Place Venture, LLC, a Delaware limited liability
company (“Waterford Venture”), which interest represents a 95% indirect limited
liability company membership interest in Waterford Venture’s indirect interest
in Behringer Harvard Argenta, LLC, a Delaware limited liability company
(“Argenta Title Holder”).  Each of Belmar Venture, Cyan Venture and Waterford
Venture is the 99.9% indirect owner of its respective Property (as defined in
Appendix 1.2), through one or more Subsidiaries (as defined in Appendix 1.2)
controlled by such entity, as shown in the organizational charts attached to
this Agreement as Exhibits B-1, B-2 and B-3.

 

B.  Seller is the sole member of and owner and holder of all of the limited
liability company membership interests in each of (i) Behringer Harvard NOHO,
LLC, a Delaware limited liability company (“NOHO Title Holder”), (ii) Behringer
Harvard Park Crest Commercial, LLC, a Delaware limited liability company (“Park
Crest Commercial Title Holder”) and (iii) Behringer Harvard Park Crest LLC, a
Delaware limited liability company (“Park Crest Residential Title Holder”, and
collectively with Park Crest Commercial Title Holder, the “Park Crest Title
Holders”).

 

C.  Seller is (i) the sole member of and owner and holder of all of the limited
liability company membership interests in Behringer Harvard Santa Rosa GP, LLC,
a Delaware limited liability company (“Acacia GP”) and (ii) the sole limited
partner of and owner and holder of a 99.9% limited partnership interest in
Behringer Harvard Santa Rosa LP, a Delaware limited partnership (“Acacia Title
Holder”; and collectively with Acacia GP, the “Acacia Entities”); and Acacia GP
is the sole general partner of and owner and holder of a 0.1% general partner
interest in Acacia Title Holder.

 

D.  Seller desires to sell, and Buyer desires to purchase from Seller, (i) a 15%
limited liability company membership interest in each of Belmar Venture and Cyan
Venture; (ii) a 45% limited liability company membership interest in each of
certain limited liability companies to be formed as provided in this Agreement
to own and hold, indirectly, the limited liability company and partnership
interests in, respectively, (x) NOHO Title Holder, (y) Park Crest Title Holders;
and (z) the Acacia Entities; and (iii) a 40% limited liability company
membership interest in Waterford Venture, representing an indirect 40% limited
liability company membership interest in Argenta Title Holder.

 

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NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, Seller and Buyer agree as follows:

 

ARTICLE 1.  SCHEDULE; DEFINITIONS; PURCHASE PRICE

 

1.1                               Schedule.  The following basic terms are made
a part of this Agreement:

 

Purchase Price:

 

$178,600,000. Payment of the Purchase Price at Closing is subject to adjustment
for prorations and other adjustments as provided herein.

 

 

 

Earnest Money:

 

$2,500,000, plus interest thereon.

 

 

 

Effective Date:

 

The latest date of execution of this Agreement by Seller and Buyer, as indicated
on the signature page.

 

 

 

Escrow Agent:

 

Chicago Title Insurance Company (National Division, Dallas, Texas).

 

 

 

Due Diligence Period:

 

The period ending at 5:30 p.m. (Chicago, Illinois time) on the Effective Date.

 

 

 

Closing Date:

 

December 1, 2011; provided that if the Debt Conditions have not been satisfied
by November 22, 2011, either Buyer or Seller may extend the outside date for
Closing to December 15, 2011 by written notice to the other on or prior to
November 23, 2011. If such extension is exercised, the Closing Date shall be the
date which is eight days after satisfaction of the Debt Conditions (or in the
case of the New Loan, satisfaction of all conditions to closing of such New Loan
other than funding) and delivery of notice of such satisfaction from Seller or
BH to Buyer (or the next succeeding Business Day if such date is not a Business
Day); but not later than December 15, 2011. Seller and BH shall notify Buyer
within one Business Day after satisfaction of the Debt Conditions.

 

 

 

Notice Addresses:

 

See Appendix 9.8 attached hereto.

 

1.2                               Definitions.  Certain terms, capitalized but
not defined in the body of this Agreement or otherwise designated in Section 1.1
hereof, shall have the meanings ascribed to them on Appendix 1.2 attached
hereto.

 

1.3                               Purchase and Sale.  Seller agrees to sell and
convey and cause the applicable Managing Members to sell and convey to Buyer,
and Buyer agrees to purchase from Seller, the Interests on the terms and
conditions set forth herein.

 

1.4                               Earnest Money.  If Buyer does not exercise its
right to terminate this Agreement on or before the expiration of the Due
Diligence Period pursuant to Section 2.4, (i) Seller, Buyer and the Escrow Agent
shall execute the escrow agreement substantially in the form of Appendix 1.4
attached hereto (the “Escrow Agreement”) and (ii) on or before the date which is
eight (8) days following the Effective Date, Buyer shall deposit the Earnest
Money with the Escrow Agent.  The Earnest Money shall be held and disbursed as
provided in the Escrow Agreement.  If the Earnest Money becomes payable to
Seller pursuant to any provision of this Agreement prior to the date the Earnest
Money has been deposited with the Escrow Agent, then the Earnest Money shall
nevertheless be deposited with the Escrow Agent and held and disbursed as
provided in the Escrow Agreement.

 

2

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ARTICLE 2.  INSPECTION

 

2.1                               Due Diligence; Indemnity.  Buyer shall have
the Due Diligence Period in which to examine and inspect the Properties, and the
Companies to determine, in its sole discretion, whether the Properties, the
Companies and the Interests are satisfactory to Buyer.  Upon reasonable advance
notice to Seller and BH subject to the rights of tenants under Leases, Buyer and
other parties designated by it (“Buyer’s Representative”) shall have reasonable
access to the Properties and all books and records for the Properties and the
Companies that are in Seller’s or its property manager’s possession or control
for the purpose of conducting surveys, inspections and tests (including
reasonable intrusive inspection and sampling), required by Buyer.  Seller shall
have the right to accompany Buyer during its inspection and investigation of the
Properties.  In the course of its investigations, but subject to the provisions
of Section 9.6, Buyer may make inquiries to third parties, including, without
limitation, municipal, local and other government representatives.

 

If any inspection or test damages a Property, Buyer will restore such Property
to its condition immediately prior to any such inspection or test. 
Notwithstanding the foregoing, Buyer shall not conduct any soil borings, core
samples or other invasive testing without the prior written consent of Seller
and BH, which consent will not unreasonably withheld, delayed or conditioned and
which shall be deemed given unless the Seller or BH provides written notice of
objection to Buyer, specifying the basis for such objection, within three (3)
days after submission by Buyer of a request for such testing.  Buyer shall
indemnify, defend, and hold Seller and each Title Holder harmless from any liens
arising out of its inspections as well as any claims asserted by third parties
against Seller or any Title Holder (other than those arising out of the gross
negligence or willful misconduct of Seller or BH or any of their respective
Affiliates) to recover for personal injury or property damage as a result of
Buyer’s Representative’s entry onto the Properties; provided, however, the
indemnity shall not extend to protect Seller from any pre-existing liabilities
for matters merely discovered by Buyer (i.e., latent environmental
contamination) so long as Buyer’s actions do not intentionally exacerbate any
pre-existing liability of Seller.  Buyer shall procure and continue in force
from and after the date Buyer and Buyer’s designated agents first enter the
Properties, and continuing throughout the term of this Agreement, liability
insurance of not less than $5,000,000.  Prior to entering the Property, Buyer
shall provide to Seller a certificate of insurance evidencing such coverage. 
Buyer’s obligations under this Section 2.1 shall survive the termination of this
Agreement for a period of twelve (12) months.

 

2.2                               Seller’s Delivery of Specified Documents. 
Buyer acknowledges that, prior to the Effective Date, Seller or BH has provided
to Buyer access to a virtual data room containing information with respect to
the Properties and the Existing Companies.  Seller or BH shall, within two (2)
Business Days after the Effective Date, provide to Buyer complete copies of any
of the following in the possession or control of either which has not previously
been made available to Buyer through the virtual data room: (a) the items set
forth on Appendix 2.2(a) to this Agreement with respect to each Property
(collectively, the “Property Information”), and (b) the Charter Documents of
each of the Existing Companies and the other documents listed on Appendix 2.2(b)
(the “Company Information”).  During the pendency of this Agreement, (i) Seller
and BH shall post in the virtual data room any document described above as and
when it comes into Seller’s, BH’s or its property manager’s possession or
control or is produced by Seller, BH or its property manager after the initial
delivery of the Property Information; and (ii) Seller and BH shall endeavor to
keep Buyer reasonably informed as to the material operation of the Properties,
and shall post in such virtual data room copies of leasing status reports,
operating statements and other management reports with respect to the Properties
prepared in the ordinary course of business.  Without limiting the foregoing,
Seller and BH shall make all other documents, files and information concerning
the Properties and the Existing Companies in the possession or control of Seller
or BH available for Buyer’s inspection at the Properties, in such virtual data
room or such other location as the parties may reasonably agree. 
Notwithstanding any contrary provision of this Section 2.2, Seller, BH, any of
their

 

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respective Affiliates and/or the property manager (each, a “Disclosing Party”)
shall have no obligation to provide Buyer with any document reasonably believed
by such Disclosing Party to be proprietary or confidential, or whose disclosure
to Buyer would require disclosure by such Disclosing Party in connection with
its financial reporting, securities disclosures or other legal, tax or financial
requirements or guidelines applicable to such Disclosing Party, including any
disclosures required to the Securities and Exchange Commission.  Buyer
acknowledges that, prior to the Effective Date, Seller and Heitman Capital
Management LLC entered into that certain Access and Confidentiality Agreement
dated as of August 15, 2011, pursuant to which Buyer, directly or indirectly,
has been granted access to the Property Information and Company Information in
compliance with this Section 2.2.

 

2.3                               Title and Survey.  Buyer, at its expense, may,
during the Due Diligence Period, order (i) any no further action letters, date
down endorsements, updated title reports with respect to each of the Existing
Title Policies, or commitments for new owner’s title insurance policies as it
desires, (ii) such surveys or updates to existing surveys with respect to the
Properties as it desires and (iii) such UCC, judgment, lien and bankruptcy
searches with respect to Seller, the Companies and the Properties as it
desires.  Seller and BH shall cooperate to cause the Title Holders and other
parties, as applicable, to execute owner’s affidavits, GAP undertakings,
non-imputation affidavits, and no-change affidavits with respect to existing
surveys, in customary form and modified to reflect existing facts, as Buyer may
reasonably request, to enable Buyer to obtain at Closing new title insurance
policies inuring the Title Holders or date-downs to Existing Title Policies
(collectively, “Title Coverage Deliveries”).

 

2.4                               Objection Notice.  If Buyer is not satisfied
in its sole discretion with any of its inspections, reviews or with any other
matter concerning the Properties or the Companies, Buyer may, either (i) on or
prior to the expiration of the Due Diligence Period, terminate this Agreement by
notice to Seller, in which event neither party shall have further obligations
hereunder, except for the payment of certain expenses pursuant to Section 5.3
and except with respect to the provision of Section 2.1, or (ii) on or prior to
October 3, 2011, raise certain objections by providing notice in writing (the
“Objection Notice”), which Objection Notice may, at Buyer’s option, specify in
reasonable detail which matters (the “Objections”) Buyer does not find
satisfactory with respect to the Properties.

 

If Buyer timely provides an Objection Notice, then Seller shall have three
Business Days (3) after delivery of such Objection Notice to notify Buyer in
writing as to whether it intends to remove or cause to be corrected to Buyer’s
satisfaction, any of such Objections, and removal or correction of any such
Objections which Seller elects to remove or correct (or is obligated to remove
or correct hereunder) shall be a condition to Borrower’s obligation to close
(collectively, “Mandatory Cure Items”).  Anything herein to the contrary
notwithstanding, Seller shall not have any obligation to remove or correct any
Objections other than voluntary Encumbrances of the Interests or the Properties
(but not including liens and security interests securing the Loans), or any
other Objections which Seller elects to cure as provided above, all of which
shall be removed by Seller on or before Closing.  The foregoing notwithstanding,
Seller shall be required to (i) remove any mechanic’s or material liens
encumbering the Properties or (ii) cause such liens to be insured over on the
title policies or date down endorsements obtained by Buyer at Closing or
otherwise bonded over or secured to Buyer’s reasonable satisfaction.

 

If Seller does not elect in writing to remove or correct any Objection to
Buyer’s satisfaction within such three (3) Business Day period, then Buyer shall
elect by written notice to Seller on or prior to the expiration of the Due
Diligence Period, to terminate this Agreement, in which event the Earnest Money
(to the extent deposited with the Escrow Agent) shall be immediately returned to
Buyer and neither party shall have any further obligations hereunder, except for
the payment of certain expenses pursuant to Section 5.3 and except with respect
to the provisions of Section 2.1, or (ii) accept the Interests and the
Properties subject to any Objections (other than Mandatory Cure Items), and
proceed to close as

 

4

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to all of the Interests, with the further right to deduct from the Purchase
Price amounts required to remove any Mandatory Cure Items that are liens of an
ascertainable amount.

 

If this Agreement is not terminated on or prior to the expiration of the Due
Diligence Period, then Buyer shall proceed to close under this Agreement subject
only to the satisfaction of Buyer’s closing conditions set forth in Section 4.2
of this Agreement.

 

ARTICLE 3.  OPERATIONS AND RISK OF LOSS

 

3.1                               Ongoing Operations.  From the Effective Date
through the Closing Date:

 

(a)                                 Operation of Properties.  Seller and BH
shall use Commercially Reasonable Efforts to cause each Title Holder to maintain
each Property in substantially its current condition, subject to ordinary wear
and tear, natural deterioration and obsolescence between the Effective Date and
the Closing Date, and in material compliance with all applicable Laws.  Except
as necessary to comply with the preceding sentence, Seller and BH shall not make
or permit any material alterations to the Properties or any portion thereof
without Buyer’s prior written consent, which shall not be unreasonably withheld,
conditioned or delayed.  Seller and BH will cause each Managing Member and each
Company to perform its material obligations under all Leases, Service Contracts
and other agreements that may affect it or its Property or the Interests. 
Seller and BH will not remove or permit the removal of any Personal Property
except as may be required for necessary repair or replacement, and repair and
replacement shall be of equal quality and quantity as existed as of the time of
its removal.  None of Seller, BH nor their employees, agents or contractors,
shall knowingly or intentionally take or permit to be taken any action that
causes Seller’s representations or warranties to become materially untrue or
that causes one or more of Buyer’s conditions to Closing to be unsatisfied or
knowingly or intentionally fail to take any action within its actual control
that is required to cause Seller’s representations and warranties to be true.

 

(b)                                 New Contracts.  Seller and BH shall not, and
shall not knowingly or intentionally cause or permit any of the Managing Members
or the Companies to, (i) without Buyer’s prior written consent (which may be
withheld in Buyer’s reasonable discretion prior to the expiration of the Due
Diligence Period and in Buyer’s sole discretion after the end of the Due
Diligence Period), amend, grant concessions or waivers regarding or under, or
enter into any material contract or other agreement that will be an obligation
affecting any of the Companies or any Property after Closing or binding on any
of the Companies after Closing, except leases or service contracts in the
ordinary course of business consistent with past practices (and consistent with
then-current concessions and parameters) and contracts terminable by any of the
Companies without penalty on no later than 60 days’ notice or (ii) list the
Interests or any Property with any broker or otherwise solicit, negotiate or
accept any offers to sell all or any part of the Interests or the Properties or
any interest therein or in any of the Subsidiaries.  If Buyer fails to respond
to a request of Seller for consent required by Section 3.1(b)(i) within five (5)
days after Buyer’s receipt of Seller’s written request and all information
reasonably required in order to make an informed decision, Buyer shall (A) prior
to the expiration of the Due Diligence Period, be deemed to have consented to
Seller entering into such contract or agreement and (B) after the expiration of
the Due Diligence Period, be deemed to have objected to such proposed action.

 

(c)                                  Maintenance of Permits and Insurance. 
Seller and BH shall cause each of the Managing Members and Existing Companies to
maintain in existence all licenses, permits and approvals necessary or
reasonably appropriate to the ownership, operation or improvement of its
Property or Properties as well as all insurance currently affecting the
Properties.

 

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(d)                                 Leasing.  Seller and BH shall not cause or
permit any Title Holder or any of the Managing Members or the Companies to enter
into any Leases, or grant any lease concessions, incentives or waivers, except
in the ordinary course of business consistent with current practices.

 

(e)                                  Loan Documents.  Seller and BH will cause
the Managing Members and the Companies to timely comply with all of the terms
and conditions of the Loan Documents.  Except for any amendments expressly
contemplated hereby, Seller and BH shall not and shall not cause or permit any
of Managing Members and the Companies to amend or terminate the Loan Documents
without Buyer’s prior written consent (which may be withheld in Buyer’s
reasonable discretion prior to the expiration of the Due Diligence Period and in
Buyer’s sole discretion after the end of the Due Diligence Period).

 

(f)                                   Property Encumbrances.  Except for any
liens and security interests securing any New Loan, Seller and BH shall not
create or acquiesce to the creation of, and shall not permit any Title Holder to
create or acquiesce to the creation of, any Encumbrances to title with respect
to any Property other than the Existing Title Exceptions with respect to such
Property, without in each case the prior written consent of Buyer, which consent
may not be unreasonably withheld, conditioned or delayed prior to the expiration
of the Due Diligence Period, but which may be withheld in Buyer’s sole
discretion following the expiration of the Due Diligence Date.

 

(g)                                  Ownership Interests.  Seller and BH shall
not, and shall not permit any of the Managing Members or the Companies to, sell,
assign, convey, transfer, pledge, hypothecate or otherwise Encumber any
membership or partnership interest in any of the Companies, other than (i) the
assignment of the Interests pursuant to this Agreement, and (ii) the
contribution of the interests in NOHO Title Holder, the Park Crest Title Holders
and the Acacia Entities to the New REIT Subs as contemplated by this Agreement.

 

3.2                               Damage.  Risk of loss up to and including the
Closing Date shall be borne by Seller.  Seller shall promptly give Buyer written
notice of any damage to the Properties, describing such damage, stating whether
such damage and loss of rents is covered by insurance and the estimated cost of
repairing such damage.  In the event of any “material damage” (described below)
to any Property, Buyer may, at its option, by notice to Seller given within ten
(10) Business Days after Seller has provided the above described notice (and if
necessary the Closing Date as it pertains to such Property, but only as it
pertains to such Property, shall be extended to give Buyer the full ten (10)
Business Day period to make its election) to:  (i) terminate this Agreement, or
(ii) proceed under this Agreement including the Interest in the Venture which
owns the damaged Property, and receive a credit at Closing for Seller’s
applicable percentage of any applicable deductible amount under any insurance
policies.  If Buyer fails to timely make such election, Buyer shall be deemed to
have elected to terminate this Agreement.  If the applicable Property is not
materially damaged, then (x) Buyer shall not have the right to terminate this
Agreement and (y) at Closing, Buyer shall receive a credit for the applicable
Percentage Interest of any deductible amount under said insurance policies and
any uninsured loss.  “Material damage” and “materially damaged” means, with
respect to each Property, damage which in Buyer’s and Seller’s reasonable
estimation (based on a third party report, prepared by a qualified third party,
that is mutually acceptable to Buyer and Seller, each acting in its reasonable
discretion) exceeds $500,000 to repair.

 

3.3                               Condemnation.  In the event any proceedings in
eminent domain are contemplated, threatened or instituted against any portion of
any Property by any Governmental Authority having the power of eminent domain,
Buyer may, at its option, by notice to Seller given within ten (10) Business
Days after Seller provides written notice to Buyer of such proceedings together
with all relevant information concerning such proceedings (and if necessary the
Closing Date as it pertains to such Property, but only as it pertains to such
Property, shall be extended to give Buyer the full ten (10) Business Day period
to make such election):  (i) terminate this Agreement, or (ii) proceed under
this

 

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Agreement as to the Interests including the affected Interest, in which case
Buyer shall receive a credit at Closing in an amount equal to, (x) with respect
to any Wholly Owned Property, 45% of any condemnation proceeds with respect to
such taking previously distributed to Seller, (y) with respect to Belmar or
Cyan, 21.43% of any condemnation proceeds with respect to such Taking previously
distributed to Seller or the respective Managing Member; and with respect to
Argenta, 42.1% of any condemnation proceeds with respect to such Taking
previously distributed to Seller or the respective Managing Member.  If Buyer
fails to timely make such election, Buyer shall be deemed to have elected to
terminate this Agreement.

 

3.4                               Certain Tax Matters.

 

(a)                                 For that portion of its taxable year in
which the Closing occurs which ends on the Closing Date, Seller covenants and
agrees to cause each Existing REIT Sub to operate and take any other actions
necessary to cause each Existing REIT Sub to qualify as a REIT under the Code
and avoid the imposition of U.S. federal income tax under Section 857(c) of the
Code or Section 4981 of the Code.

 

(b)                                 Between the Effective Date and the Closing
Date, Seller shall give Buyer and its authorized representatives full access to
all books, records and tax returns of or relating to the Existing REIT Subs,
whether in possession of an Existing REIT Sub, Seller, BH or any of their
Affiliates or any third-party professional advisor or representative, in order
that Buyer may have full opportunity to make such investigations as it shall
desire to make of the affairs of the Existing REIT Subs.  Seller and BH shall
use Commercially Reasonable Efforts to cause all of their respective third-party
advisors and representatives, including without limitation accountants and
attorneys, to fully cooperate and be available to Buyer in connection with such
investigation.

 

(c)                                  Not later than December 31, 2011, Seller
shall cause each of the New REIT Subs to file a valid election, effective as of
the day immediately following the Closing Date, pursuant to Treasury Regulations
Section 301.7701-3(c) to be treated as an association taxable as a corporation
for U.S. federal income tax purposes.  Seller covenants and agrees that Seller
shall cause each New REIT Sub to file, on its return for the taxable year
beginning on the first day such New REIT Sub is treated as an association
taxable as a corporation, an election pursuant to Section 856(c)(1) of the Code
to be treated as a REIT.  The provisions of this Section 3.4(c) shall survive
Closing.

 

3.5                               Restructuring of Wholly Owned Properties.

 

(a)                                 Prior to the Closing Date, Seller shall form
a new Delaware limited liability company with respect to each of the Wholly
Owned Properties (each a “New Venture” and collectively the “New Ventures”). 
Prior to Closing Seller shall be the sole member of each New Venture, and
following Closing, Seller shall be the 55% managing member and Buyer shall be
the 45% non-managing member of each new Venture, as provided in the applicable
Amended and Restated Venture Agreement.  The parties hereto intend that each New
Venture shall initially be classified as an entity disregarded as separate from
its owner for U.S. federal income tax purposes, and Seller agrees to take no
action inconsistent with such treatment.

 

(b)                                 Prior to the Closing Date, Seller shall
cause each New Venture to form a new Delaware limited liability company
Subsidiary (each a “New REIT Sub” and collectively, the “New REIT Subs”), in
which such New Venture shall be the owner and holder of all REIT Units in such
New REIT Sub and, prior to Closing, the sole member of such New REIT Sub.  The
limited liability company operating agreement for each New REIT Sub shall be in
a form approved by Buyer and Seller.  The parties hereto intend that each New
REIT Sub shall initially be classified as an entity disregarded as separate from
its

 

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owner for U.S. federal income tax purposes and Seller agrees to take no action,
and to cause each New Venture to take no action, inconsistent with such
treatment.

 

(c)                                  Prior to the Closing Date Seller shall
contribute all of its membership or partnership interests, as applicable, in
NOHO Title Holder, the Park Crest Title Holders and the Acacia Entities to the
applicable New REIT Sub.

 

ARTICLE 4.  CLOSING

 

4.1                               Closing.  The Closing shall occur on the
Closing Date through an escrow with the Title Company at the offices of the
Title Company.  Buyer and Seller shall execute supplemental escrow instructions
as may be appropriate to enable the Title Company to comply with the terms of
this Agreement, so long as such instructions are not in conflict with this
Agreement.  The transactions described herein shall be closed by means of
concurrent delivery of the documents of title, transfer of interest, delivery of
title policies or endorsements (or the Title Company’s written irrevocable
commitment to issue such title policies or endorsements) and the Purchase Price.

 

4.2                               Conditions to the Parties’ Obligations to
Close.

 

(a)                                 Debt Conditions.

 

A.                                    As a condition to Buyer’s obligation to
close, any consent of a Lender to the conveyance of the Interests and the
Restructuring required under any of the Loan Documents shall have been obtained
from each applicable Lender and any terms and conditions imposed by any such
Lender in connection with issuing such consent shall be satisfactory to the
Buyer in its sole discretion.

 

B.                                    As a condition to Buyer’s obligation to
close, the provisions governing permitted transfers under the Loan Documents
shall have been modified to the extent necessary to (i) provide Buyer with the
same rights to transfer or Encumber the Interests as currently provided to the
Related Seller and its constituent entities, (ii) eliminate any restrictions on
transfer or encumbrance of direct or indirect interests in Buyer; and (iii)
permit the issuance of Preferred Units in each New REIT Sub.

 

C.                                    As a condition to Buyer’s obligation to
close, neither Buyer nor any of its direct or indirect owners shall be obligated
to assume any personal liability for any of the undertakings under the Loan
Documents.

 

D.                                    As a condition to Buyer’s obligation to
close, as of the Closing Date there shall not exist any uncured event of default
under the Loan Documents and each Title Holder shall have paid in full all
interest and other amounts (including, without limitation, installments of
principal and interest and any applicable fees, charges or penalties) that are
then due and payable under the Loan Documents to which it is a party at or prior
to Closing.

 

E.                                     As a condition to Buyer’s, Seller’s and
BH’s obligation to close, Seller and BH shall have obtained and consummated a
mortgage loan for the residential portion of Park Crest (but not including the
commercial portion of Park Crest) (a “New Loan”) with a loan to value ratio
(based on the value for such Property as agreed by Buyer, Seller and BH) not to
exceed 50%, and otherwise on terms mutually satisfactory to Buyer, Seller and
BH.  Following the expiration of the Due Diligence Period Seller and BH shall
use Commercially Reasonable Efforts to obtain and consummate a New Loan for each
such Property.  Buyer, Seller and BH shall promptly provide to each Lender all
information the Lender may reasonably require in order to consummate such New
Loan.  Except to the extent set forth in clause (ii) of

 

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the immediately following paragraph, costs incurred in obtaining any New Loan
shall be borne by the applicable Title Holder.

 

F.                                      As a condition to Buyer’s obligation to
close, Seller and BH shall have obtained a term sheet for a mortgage loan for
the commercial portion of Park Crest, on terms mutually satisfactory to Buyer,
Seller and BH.  The closing of such loan shall not be a condition to Closing,
but Seller and BH shall use commercially reasonable efforts to effect such
closing as soon as practicable after the Closing, which obligation shall survive
Closing.

 

The conditions precedent set forth in this Section 4.2(a), and in Section 4.2(a)
of the Related PSA, are referred to collectively in this Agreement as the “Debt
Conditions”.  If Buyer does not exercise its right to terminate this Agreement
on or before the expiration of the Due Diligence Period pursuant to Section 2.4,
following the expiration of the Due Diligence Period, Seller and BH shall use
Commercially Reasonable Efforts to cause the Debt Conditions to be satisfied and
Buyer agrees to cooperate in good faith and with reasonable diligence with such
efforts.  At Closing Buyer shall pay (or reimburse Seller or BH, as applicable,
with respect to) (i) 100% of any payments required to be made to any Lender and
100% of the reasonable legal fees of BH’s debt counsel incurred in connection
with satisfaction of the Debt Conditions in Sections 4.2(a)(A) and (B) and (ii)
45% of any payments required to be made and actually paid (or to be paid on the
Closing Date) to any Lender and 45% of the reasonable legal fees of BH’s debt
counsel theretofore incurred and actually paid (or to be paid on the Closing
Date), in each case, in connection with satisfaction of the Debt Condition in
Section 4.2(a)(E).  Buyer shall have no obligation to pay or reimburse any fees,
costs or other expenses in connection with satisfaction of the Debt Conditions
in Sections 4.2(a)(C) and (D).  Buyer shall have the right to participate with
Seller and BH with respect to negotiation with each Lender concerning
satisfaction of the Debt Conditions.

 

(b)                                 Intentionally Omitted.

 

(c)                                  REIT Opinions.  As a condition to Buyer’s
obligation to close, Buyer shall have received an opinion from DLA Piper, which
shall also be addressed to Seller, in form and substance satisfactory to Buyer,
as to each Existing REIT Sub, that such Existing REIT Sub has been organized and
operated in conformity with the requirements for qualification as a REIT for
U.S. federal income tax purposes for all taxable periods commencing with the
first year that such Existing REIT Sub elected to be classified as a REIT under
the Code through and including the Closing Date.

 

(d)                                 Approval of Limited Partner.  As a condition
to Buyer’s obligation to close, on or before December 1, 2011, this Agreement
and the Related PSA and the transactions hereunder and thereunder, shall have
been approved by Buyer’s limited partner (the “Approval Condition”).  Buyer
shall promptly notify Seller and BH upon receipt of such approval.  If Buyer
does not provide notice to Seller and BH with respect to satisfaction of the
Approval Condition on or before December 1, 2011, the Approval Condition shall
be deemed to have not been met.  If the Approval Condition is not met, the
Earnest Money (if previously deposited by Buyer) shall be returned to Buyer,
this Agreement shall terminate, and no party shall have any further obligation
to any other, except for obligations which survive termination as expressly
provided in this Agreement.

 

(e)                                  Title Policies.  It shall be a condition to
Buyer’s obligation to close that the Title Company (or another national title
insurance company reasonably acceptable to Buyer) shall be committed to issue,
upon the condition of the payment of its applicable premium and other standard
conditions contained in commercially available commitments for title insurance
(e.g., delivery of organizational documents and consents, affidavits and
transaction documents), an ALTA form (or other form required by state law)
owner’s policy of title insurance with respect to each Property, with extended
coverage (i.e., with ALTA General Exceptions 1 through 5 deleted, or if the
Property is located in a non-

 

9

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ALTA state, with corresponding deletions to the extent available), insuring the
applicable Title Holder in the amount of the value allocated to such Property as
shown on Appendix 1.1, that title to the Property is vested of record in such
Title Holder on the Closing Date, with a non-imputation endorsement and with
such endorsements as Buyer and the applicable title company shall have agreed
prior to the end of the Due Diligence Period, subject only to the printed
conditions and exceptions of such policy and the Permitted Exceptions.  The
foregoing notwithstanding, Buyer, at its sole discretion, may elect as to any
Property to accept a date down endorsement to the Existing Title Policy for such
Property in lieu of a new title insurance policy, but subject to the same
requirement that such date down endorsement include non-imputation coverage and
show no exceptions other than the Permitted Exceptions.

 

(f)                                   Conditions under each Related PSA.  The
obligation of Seller and BH, on the one hand, and Buyer, on the other hand, to
consummate the Closing, shall be contingent upon the satisfaction of all
conditions precedent to such party’s obligation to close the transactions under
each Related PSA.  It is the intention of the parties that the transactions
under this Agreement and each Related PSA shall be closed concurrently.

 

(g)                                  Performance Conditions.  The obligation of
Seller and BH to consummate the Closing shall be contingent upon the following:
(i) Buyer’s representations and warranties contained herein shall be true and
correct in all material respects as of the date of this Agreement and the
Closing Date, except to the extent the inaccuracy of which would not have a
Material Adverse Effect, without giving effect to any knowledge based
qualifications; (ii) as of the Closing Date, Buyer shall have performed its
obligations hereunder that are to be performed on or prior to the Closing Date
and all deliveries to be made at or prior to the Closing Date shall have been
tendered.  The obligation of Buyer to consummate the Closing shall be contingent
upon the following:  (x) Seller’s and BH’s representations and warranties
contained herein shall be true and correct in all material respects as of the
date of this Agreement and the Closing Date, without giving effect to any
knowledge based qualifications or to any Exception Matters pursuant to Section
8.6, (y) as of the Closing Date, except to the extent the inaccuracy of which
would not have a Material Adverse Effect, each of Seller and BH shall have
performed its respective obligations hereunder that are to be performed on or
prior to the Closing Date and all deliveries to be made at or prior to the
Closing Date shall have been tendered (other than the failure by Seller or BH to
provide or make available any immaterial document or information in accordance
with Section 2.2).

 

(h)                                 Other Mutual Conditions.  The obligation of
Seller and BH, on the one hand, and Buyer, on the other hand, to consummate the
Closing shall be contingent upon the following:  (i) there shall exist no
actions, suits, arbitrations, claims, attachments, proceedings, assignments for
the benefit of creditors, insolvency, bankruptcy, reorganization or other
proceedings pending against any other party that would materially and adversely
affect the operation or value of any Property (or with respect to Buyer’s
obligation to close, any of the Companies) or the other party’s ability to
perform its obligations under this Agreement; and (ii) all other conditions set
forth in this Agreement to the other party’s obligation to close shall have been
satisfied or waived in writing by such other party.

 

(i)                                     Uncured Violations.  As a condition to
Buyer’s obligation to close: there shall be no notice issued after the
expiration of the Due Diligence Period of any material violation or alleged
material violation of any applicable Law, with respect to any Property or any of
the Companies, which has not been corrected to the satisfaction of the issuer of
the notice.

 

(j)                                    Failure of Condition.  So long as a party
is not in default hereunder beyond any applicable notice and cure periods, if
any condition to such party’s obligation to proceed with the Closing set forth
in this Agreement has not been satisfied as of the Closing Date (as it may have
been extended by Buyer as provided herein), such party may, in its sole
discretion, (i) terminate this Agreement in whole by delivering written notice
to the other party on or before the Closing Date, or (ii) elect on or before the

 

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Closing Date to effect the Closing, notwithstanding the non-satisfaction of such
condition, in which event such party shall be deemed to have waived any such
condition.  Any failure to elect on or before the Closing Date under clauses (i)
or (ii) above, shall be deemed an election under clause (i) above. If this
Agreement is terminated due to a failure of a condition, which failure was not
the result of a default by Buyer hereunder, the Earnest Money shall be returned
to Buyer.

 

4.3                               Seller’s and BH’s Deliveries in Escrow.  At
least two (2) Business Days prior to the Closing Date, Seller and BH shall
deliver or cause to be delivered in escrow to the Title Company or to Buyer (for
release only upon written confirmation of Seller or its Counsel) the following,
each duly executed and, where appropriate, in recordable form and notarized:

 

(a)                                 Assignment of Interest.  Two counterparts of
an assignment of the Interests with respect to each Venture in form reasonably
satisfactory to Buyer, executed by Seller or the applicable Managing Member (the
“Assignment of Interests”);

 

(b)                                 FIRPTA.  The certification of Seller (the
“FIRPTA Certificate”) substantially in the form of Appendix 4.3(b) attached
hereto;

 

(c)                                  Authority.  Evidence of the existence,
organization and authority of Seller and of the authority of the persons
executing documents on behalf of Seller reasonably satisfactory to Buyer;

 

(d)                                 Debt Condition Documents.  Such documents
and deliveries from or on behalf of Seller, BH or any Title Holder or Affiliate
of any of them as may be required by any Lender to satisfy the Debt Conditions;
together with a written certification by Seller to Buyer that there is no
uncured default under the Loan Documents and that each Title Holder has paid in
full all interest and other amounts (including, without limitation, installments
of principal and interest and any applicable fees, charges or penalties) which
are then due and payable under the Loan Documents to which such Title Holder is
a party at or prior to Closing;

 

(e)                                  Bring-Down Certificate.  A written
certification by Seller to Buyer certifying that Seller’s representations and
warranties in Article 6 of this Agreement are true and correct in all material
respects as of the Closing Date, except as expressly disclosed in such
certificate and except to the extent the inaccuracy of which would not have a
Material Adverse Effect;

 

(f)                                   Amended and Restated Venture Agreements. 
An amended and restated or new Venture Agreement for each Existing Venture and
New Venture (each an “Amended and Restated Venture Agreement” and collectively,
the “Amended and Restated Venture Agreements”), in the forms attached hereto as
Appendix 4.3(f-1) with respect to Waterford Venture, and Appendix 4.3(f-2) with
respect to each other Venture, each duly executed by the applicable Managing
Member;

 

(g)                                  Updated Rent Roll and Schedule of Service
Contracts.  For each Property, an updated Rent Roll and updated schedule of
Service Contracts, dated not earlier than 10 day prior to the Closing Date; and

 

(h)                                 Other Deliveries.  Such other documents,
certificates and instruments reasonably necessary in order to effectuate the
transaction described herein, including without limitation, Title Coverage
Deliveries, transfer tax declarations, broker lien waivers, and any other
Closing deliveries required to be made by or on behalf of Seller or BH.

 

4.4                               Buyer’s Deliveries in Escrow.  Except as
specified below, at least two (2) Business Days prior to the Closing Date, Buyer
shall deliver or cause to be delivered in escrow to the Title

 

11

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Company or to Seller (for release only upon written confirmation from Buyer or
its counsel) the following, each duly executed and, where appropriate, in
recordable form and notarized:

 

(a)                                 Purchase Price.  The Purchase Price, less
the Earnest Money, plus or minus applicable prorations and adjustments as
provided herein, deposited by Buyer with the Title Company on the Closing Date
in immediate, same-day federal funds wired for credit into the Title Company’s
escrow account;

 

(b)                                 Assignment of Interests.  Two counterparts
of each of the Assignment of Interests, executed by Buyer;

 

(c)                                  Bring-Down Certificate.  A written
certification by Buyer to Seller certifying that Buyer’s representations and
warranties in Article 6 of this Agreement are true and correct as of the Closing
Date, except as expressly disclosed in such certificate;

 

(d)                                 Amended and Restated Venture Agreements. 
The Amended and Restated Venture Agreements executed by Buyer; and

 

(e)                                  Other Deliveries.  Such other documents,
certificates and instruments reasonably necessary in order to effectuate the
transactions described herein.

 

4.5                               Closing Statements.  At least two (2) Business
Days prior to the Closing Date, Seller and Buyer shall deposit with the Title
Company executed closing statements consistent with this Agreement.

 

ARTICLE 5.  PRORATIONS; COSTS

 

5.1                               Prorations.  Buyer and Seller agree to use the
proration method set forth on Appendix 5.1 to determine all prorations and
adjustments to be made between Buyer and Seller at Closing.

 

5.2                               Post-Closing Corrections.  Either party shall
be entitled to a post-Closing adjustment for any incorrect proration or
adjustment, provided such adjustment is claimed by such party within twelve
months after Closing.  The provisions of this Section 5.2 shall survive the
Closing.

 

5.3                               Costs; Transfer Taxes.  Buyer shall pay (i)
the Title Company’s escrow fee, closing charges and any cancellation fee, (ii)
the cost of any date down and other endorsements to the Existing Title Policies
or new title policies and endorsements obtained by Buyer, (iii) the costs of any
survey updates or new surveys obtained by Buyer, (iv) other costs associated
with Buyer’s due diligence activities and (v) any Transfer Taxes due and payable
with respect to the conveyance of the Interests.  Seller shall pay the cost of
removing any encumbrances on the Interests.  Except as provided in Section
4.2(a), Section 7.1, Section 7.3, Section 8.1, Section 8.3 and Section 9.7 of
this Agreement, or in any document or instrument executed pursuant to this
Agreement, each party shall be responsible for their own attorneys’ and other
professional fees.  Seller and Buyer shall execute any required city, county and
state transfer tax or other declarations.

 

5.4                               Sales Commissions.  Seller and Buyer represent
and warrant each to the other that they have not dealt with any real estate
broker or sales person in connection with this transaction.  In the event of any
claim for broker’s or finder’s fees or commissions in connection with the
negotiation, execution or consummation of this Agreement or the transactions
contemplated hereby, each party shall indemnify, defend and hold harmless the
other party from and against any such claim based upon any actual or

 

12

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alleged statement, representation or agreement of the indemnifying party.  This
provision shall survive the Closing and any termination of this Agreement.

 

5.5                               Excluded Obligations and Assets.

 

(a)                                 Park Crest Fee.  Seller has advised Buyer
that, pursuant to that certain Agreement dated as of March 16, 2010, by and
between Park Crest Residential Title Holder and Penrose Financial Services, LLC,
a Virginia limited liability company (“Penrose”), a fee is payable to Penrose
with respect to a future sale of Park Crest (the “Park Crest Fee”).  Seller, as
owner of Park Crest Residential Title Holder, shall retain the obligation to pay
the Park Crest Fee, if and when the same is due and payable, and neither Buyer
nor any Venture shall have any obligation to pay the Park Crest Fee.  Seller
shall indemnify, defend and hold Buyer and the applicable Venture and Title
Holder harmless from and against any liability, claim, demand, loss, expense or
damage arising out of the failure by Seller to pay the Park Crest Fee in full as
and when due.

 

(b)                                 Excluded NoHo Assets.  The following assets
of NoHo Title Holder (“Excluded NoHo Assets”) shall be excluded from the sale
hereunder and shall not be taken into account for purposes of prorations under
Appendix 5.1:  (i) a prorated portion of the 2011 CRA Payment for the period
from July 1, 2011 through and including the day proceeding the Closing Date; and
(ii) the tax increment financing receivable having an approximately $400,000 net
present value, including all payments of principal and interest thereunder.  For
purposes of this Agreement and the applicable Amended and Restated Venture
Agreement, the Excluded NoHo Assets shall not be deemed to be assets of NoHo
Title Holder or the applicable Venture, shall remain the property of Seller, and
shall be distributed to Seller upon receipt.

 

(c)                                  Survival.  The provisions of this Section
5.5 shall survive Closing indefinitely and shall not be subject to the
limitations set forth in Section 6.5 or Article 8.

 

ARTICLE 6.  REPRESENTATIONS AND WARRANTIES

 

6.1                               Seller’s Representations and Warranties as to
Seller.  As a material inducement to Buyer to execute this Agreement and
consummate the Closing, Seller represents and warrants to Buyer that:

 

(a)                                 Seller has been duly formed or organized as
a limited partnership, is validly existing and is in good standing in the State
of Delaware, and is authorized to exercise all its powers, rights and
privileges.

 

(b)                                 Seller has the power and authority, under
its Charter Documents, to own and operate its assets, to carry on its business
as now conducted, and to enter into and perform its obligations under this
Agreement.

 

(c)                                  All partner, member, or other action on the
part of Seller and each Managing Member necessary for Seller’s authorization,
execution and delivery of this Agreement, and the performance of all obligations
of Seller hereunder and the completion of the Closing pursuant hereto has been
taken or will be taken prior to the Closing.  This Agreement constitutes a
legally binding and valid obligation of Seller, enforceable against Seller in
accordance with its terms, subject to bankruptcy, insolvency, reorganization,
moratorium or other similar laws affecting creditors’ rights and remedies
generally, and subject, as to enforceability, to general principles of equity,
including principles of commercial reasonableness, good faith and fair dealing
(regardless of whether enforcement is sought in a proceeding at law or in
equity).

 

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(d)                                 The execution and delivery of this Agreement
by Seller and the performance by Seller of its obligations pursuant hereto will
not result in any violation of, be in conflict with, or constitute a default
under, with or without the passage of time or the giving of notice:  (x) any
provision of Seller’s, Managing Members’ or the Companies’ Charter Documents as
such documents exist immediately prior to the Closing; (y) any provision of any
judgment, decree or order to which Seller, any Managing Members or any Company
is a party or by which any of them or their respective properties or assets are
bound; or (z) any statute, rule or governmental regulation applicable to Seller,
any Managing Member or the Companies, or their respective property or assets.

 

(e)                                  The execution and delivery of this
Agreement by Seller and the performance by Seller of its obligations pursuant
hereto will not result in any violation of, be in conflict with, or constitute a
default under, with or without the passage of time or the giving of notice any
material contract or agreement to which Seller, any Managing Member, or any
Company is a party, assuming receipt of the consents referred to in Section
4.2(d) and satisfaction of the Debt Conditions.

 

(f)                                   The execution, delivery and performance by
Seller of this Agreement does not require the consent, approval, clearance,
waiver, order or authorization of any Person or Governmental Authority that has
not been obtained, except for any required consents of Lenders to be obtained in
satisfaction of the Debt Conditions and except for the approval described in
Section 4.2(d).

 

(g)                                  There is no action, suit, proceeding or
investigation pending or, to the knowledge of Seller, threatened in writing
against Seller that challenges the validity of this Agreement or the right of
Seller to enter into this Agreement, or that might result, either individually
or in the aggregate, in Seller’s inability to perform its obligations under this
Agreement.  There is no material judgment, decree or order of any court,
arbitrator, tribunal or governmental or similar authority in effect against
Seller, any Managing Member, or any Company, and neither Seller nor any Managing
Member nor any Company is in material default with respect to any order or any
court, arbitrator, tribunal or governmental or similar authority binding upon
Seller, any Managing Member, or any Company or by which any of them or their
respective properties or assets are bound, that would prevent Seller from
performing it obligations under this Agreement.

 

(h)                                 Seller is not and is not acting on behalf of
(i) an “employee benefit plan” within the meaning of Section 3(3) of the
Employee Retirement Income Security Act of 1974, as amended (“ERISA”), (ii) a
“plan” within the meaning of Section 4975 of the Internal Revenue Code of 1986,
as amended or (iii) an entity deemed to hold “plan assets” within the meaning of
29 C.F.R. §2510.3-101 of any such employee benefit plan or plans.

 

(i)                                     Seller is not acting, directly or
indirectly for, or on behalf of, any person, group, entity or nation named by
any Executive Order (including the September 24, 2001, Executive Order Blocking
Properties and Prohibiting Transactions With Persons Who Commit, Threaten to
Commit, or Support Terrorism) or the United States Treasury Department as a
terrorist, “Specially Designated National and Blocked Person,” or other banned
or blocked person, entity, or nation pursuant to any Law that is enforced or
administered by the Office of Foreign Assets Control, and is not engaging in the
transactions described herein, directly or indirectly, on behalf of, or
instigating or facilitating the transactions described herein, directly or
indirectly, on behalf of, any such person, group, entity or nation.

 

(j)                                    Seller is not insolvent and will not
become insolvent by executing or performing its obligations under this Agreement
or the documents to be executed in connection herewith.

 

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6.2                               Seller’s Representations and Warranties as to
Interests and Companies.  As a material inducement to Buyer to execute this
Agreement and consummate the Closing, Seller represents and warrants to Buyer
that:

 

(a)                                 Each of the Managing Members and Existing
Companies is duly formed as a limited partnership or limited liability company,
as applicable, is validly existing and is in good standing under the laws of the
state of its formation.  At Closing each of the New Companies will be duly
formed as a limited liability company, and will be validly existing and in good
standing under the laws of the state of its formation.

 

(b)                                 Each of the Title Holders is qualified to do
business in and is in good standing in the state where its Property is located.

 

(c)                                  Seller is the owner and holder of all of
the membership interests in each of the Managing Members, each of Belmar
Managing Member and Cyan Managing Member is the owner and holder of a 70%
limited liability company membership interest in each of Belmar Venture and Cyan
Venture, respectively, and Waterford Managing Member is the owner and holder of
a 55% limited liability company membership interest in Waterford Venture, which
represents an indirect 95% limited liability company membership interest in
Argenta Title Holder and an indirect 55% limited liability company membership
interest in its other, respective Title Holders, in each case free and clear of
any lien or security interest, subject only to restrictions on transfer imposed
under applicable U.S. federal and state securities Laws and the limited
liability company agreement of each such Venture; and the applicable Managing
Member has not conveyed, transferred, assigned, pledged or hypothecated any
interests in its Existing Venture, in whole or in part, or granted any rights,
options or rights of first refusal or first offer to purchase any of such
interests or any portion thereof (except for the rights of Buyer under this
Agreement with respect to the Interests in the Existing Ventures).  Prior to the
Restructuring, Seller is the owner and holder of all of the membership interests
in each of NOHO Title Holder, the Park Crest Title Holders and Acacia GP, and
all of the limited partnership interests in Acacia Title Holder, and Acacia GP
is the owner and holder of all of the general partnership interests in Acacia
Title Holder, in each case free and clear of any lien or security interest,
subject only to restrictions on transfer imposed under applicable U.S. federal
and state securities Laws; and Seller has not conveyed, transferred, assigned,
pledged or hypothecated any of its interests in the Wholly Owned Entities.  Upon
consummation of the Restructuring and at all times thereafter prior to the
Closing, Seller will be the owner and holder of all of the membership interests
in each New Venture, free and clear of any lien or security interest, subject
only to restrictions on transfer imposed under applicable U.S. federal and state
securities Laws; and Seller shall not have conveyed, transferred, assigned,
pledged or hypothecated any interests in the New Ventures, in whole or in part,
or granted any rights, options or rights of first refusal or first offer to
purchase any of such interests or any portion thereof (except the rights of
Buyer under this Agreement with respect to the Interests in the New Ventures). 
Upon consummation of the Restructuring and on the Closing Date, each New Venture
will be the owner and holder of all of the membership interests in its
respective New REIT Sub and each New REIT Sub will be the owner and holder of
all of the interests in the respective Wholly Owned Entities to be contributed
to it as contemplated by the Restructuring, in each case free and clear of any
lien or security interest, subject only to restrictions on transfer imposed
under applicable U.S. federal and state securities Laws; Seller shall not have
conveyed, transferred, assigned, pledged or hypothecated any interests in any
New Venture, in whole or in part, or granted any rights, options or rights of
first refusal or first offer to purchase any of such interests or any portion
thereof (except the rights of Buyer under this Agreement with respect to the
Interests in the New Ventures); and none of the New Ventures or New REIT Subs
shall have conveyed, transferred, assigned, pledged or hypothecated any
interests in any of its respective Subsidiaries, in whole or in part, or granted
any rights, options or rights of first refusal or first offer to purchase any of
such interests or any portion thereof.  The Interests in the Existing Ventures
have been duly and validly issued and, except as contemplated by this Agreement
or the limited liability

 

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company agreement of each such Existing Venture, there exists no agreement,
arrangement or obligation (actual or contingent) to issue, transfer, redeem,
repay or repurchase any such Interest or any portion thereof.  Upon consummation
of the Restructuring and as of the Closing, the Interests in the New Ventures
will have been duly and validly issued and, except as contemplated by this
Agreement or the limited liability company agreement of each such New Venture,
there shall exist no agreement, arrangement or obligation (actual or contingent)
to issue, transfer, redeem, repay or repurchase any such Interest or any portion
thereof.

 

(d)                                 Other than as provided in the limited
liability company agreement of each Venture, there are no options, warrants,
stock appreciation rights, calls, pre-emptive rights, subscriptions,
contribution rights, convertible securities, or other rights or other agreements
or commitments of any character whatsoever which are an obligation of Seller,
any Managing Member or any of the Companies to issue, transfer or sell any
securities exercisable for, or otherwise evidencing a right to acquire, any
interests of any kind in any of the Companies (except the rights of the Buyer
under this Agreement).

 

(e)                                  The organizational charts attached to this
Agreement as Exhibits B-1 through B-3 are correct and correctly show each of the
Existing Ventures and its respective Subsidiaries and the percentage of the
ownership interest of each holder of interests in the Existing Ventures and its
respective Subsidiaries immediately prior to the Closing hereunder.  Upon
consummation of the Restructuring and as of the Closing, the organizational
charts attached to this Agreement as Exhibits B-4 through B-6 will be correct
and correctly show each of the New Ventures and their respective Subsidiaries
and the percentage of the ownership interest of each holder of interests in the
New Ventures and their respective Subsidiaries immediately prior to the Closing
hereunder.

 

(f)                                   Seller has delivered or made available to
the Buyer complete and correct copies, as amended to date, of the Charter
Documents of each of the Existing Companies and Tax information filings and
returns of such entities, including all amendments thereto since the initial
formation of such entities.

 

(g)                                  None of the Existing Companies owns, and
upon consummation of the Restructuring, none of the New Companies will own,
assets or property, or any interests therein (whether direct or indirect),
except the applicable Properties and interests in the other Companies as shown
on the Org Charts, or engages or will engage in any business or activity other
than in connection with its ownership of the Properties and interests in other
Companies.

 

(h)                                 The information contained in the Recitals to
this Agreement is true and correct.

 

(i)                                     The books and records of each Existing
Company required to be kept by Law are current and have been maintained in all
material respects in accordance with all applicable Laws on a proper and
consistent basis and contain complete and accurate records, in all material
respects, of all matters required to be dealt with in such books and records and
all such books and records are in the possession and control of the Seller or
the Existing Ventures.

 

(j)                                    The financial statements of the Existing
Companies (collectively the “Financial Statements”) provided to Buyer in the Due
Diligence Materials are complete and correct in all material respects, have been
prepared in accordance with generally accepted accounting principles,
consistently applied, present fairly in all material respects the financial
position and result of operations of the applicable Companies, at the dates and
for the periods to which they relate and show all material liabilities, absolute
or contingent, of the Existing Companies; provided, however, that any Financial
Statements for periods other than the fiscal year end of the Existing Companies
are subject to modification resulting from the absence of footnotes thereto and
ordinary course fiscal year-end audit

 

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adjustments.  Except as set forth in the Financial Statements, the Existing
Companies have no liabilities, debts, or other obligations, contingent or
otherwise, other than (i) liabilities incurred in the ordinary course of
business of the Title Holders subsequent to the respective dates of the
Financial Statements, (ii) obligations under contracts and commitments incurred
in the ordinary course of business of the Title Holders and not required under
generally accepted accounting principles to be reflected in the Financial
Statements, which, individually and in the aggregate, are immaterial in amount,
(iii) obligations under contracts or arrangements described in Appendix 6.2-6.3
(the “Disclosure Schedule”), not including any breach of such contracts or
agreements, and (iv) liabilities identified and prorated pursuant to Section
5.1.

 

(k)                                 The Companies have not had any employees and
will not have any employees from the date hereof through the Closing Date.

 

(l)                                     There is no claim, litigation,
arbitration or other proceeding pending or, to the knowledge of Seller,
threatened, in writing, against any of the Managing Members or the Companies,
except as set forth on the Disclosure Schedule.

 

(m)                             All books, files and records delivered by or on
behalf of Seller to the Buyer, or made available by Seller to Buyer for review,
are the complete and unaltered copies, in all material respects, of such books,
files and records in Seller’s possession or control.  All books, files and
records related to the Companies in the Seller’s possession or control have
been, or will be during the Due Diligence Period, delivered or made available to
Buyer for review.

 

(n)                                 Each Existing REIT Sub has an Existing
Venture as its managing member and such Venture owns REIT Units. The REIT Units
currently constitute 100% of the common membership interests in each Existing
REIT Sub.  The Preferred Units currently are the only other outstanding equity
interests in each Existing REIT Sub.  Each applicable Existing Venture holds all
right, title and interest in and to its REIT Units, free of all Encumbrances,
and such Venture’s REIT Units were not issued in violation of the preemptive
right of any person or any agreement or laws by which an Existing REIT Sub at
the time of issuance was bound.  Upon consummation of the Restructuring and as
of Closing, (a) each New REIT Sub has a New Venture as its managing member and
such Venture owns REIT Units; (b) the REIT Units in each New REIT Sub constitute
100% of the common membership interests in each New REIT Sub; (c) no Preferred
Units are outstanding in any New REIT Sub; and (d) each applicable New Venture
holds all right, title and interest in and to its REIT Units, free of all
Encumbrances, and such Venture’s REIT Units were not issued in violation of the
preemptive right of any person or any agreement or laws by which a New REIT Sub
at the time of issuance was bound.

 

(o)                                 With respect to the following tax matters,
to Seller’s knowledge:

 

A.                                    All Tax or information filings and returns
required to be filed by each of the Existing Companies have been properly
prepared and duly filed, and, except with respect to appeals of any property tax
assessments that are being contested in good faith in the ordinary course of
business, all Taxes required to be paid by any of the Existing Companies have
been paid in full.  There are no (A) pending audits, actions, proceedings or
examinations of any of the Existing Companies or of any of the Tax or
information returns of the Existing Companies, as applicable, being conducted by
any federal, state, local, or foreign taxing authority, (B) pending or
threatened claims or disputes relating to any Taxes allegedly owed by any of the
Existing Companies or (C) outstanding agreements or waivers extending the
statutory limitations period applicable to the payment of any Taxes by or on
behalf of any of the Existing Companies with respect to any filed returns.  The
Due Diligence Materials contain true, correct and complete copies, in all
material respects, of all tax returns of the Existing Companies since the
formation of each, including copies of all Schedules K-1 issued or received by
any partnership or limited liability company.

 

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B.                                    An election has been made to treat each
Existing REIT Sub as a REIT for U.S. federal income tax purposes beginning with
its first taxable year.  Effective following the Closing Date an election shall
be made to treat each New REIT Sub as a REIT for U.S. federal income tax
purposes in accordance with Section 3.4(c).

 

C.                                    No Company other than an Existing REIT Sub
has elected, and will not elect prior to the Closing Date, to be classified as a
corporation for U.S. federal income tax purposes.

 

D.                                    Each Existing Venture is currently
classified as a partnership for U.S. federal income tax purposes and shall not
(I) make an election pursuant to Treasury Regulations Section 301.7701-3(c) to
be treated as an entity other than a partnership or (II) make an election
pursuant to Section 761(a) of the Code to be excluded from the provisions of
subchapter K of the Code.

 

E.                                     Each Subsidiary other than an Existing
REIT Sub is currently classified as an entity disregarded as separate from its
owner for U.S. federal income tax purposes.

 

F.                                      No tax attributes of an Existing REIT
Sub are subject to limitations described in Section 382 of the Code, nor will
any tax attributes of an Existing REIT Sub be subject to limitations described
in Section 382 of the Code as a result of Buyer’s purchase of Interests in the
Ventures as contemplated by this Agreement.

 

G.                                    No REIT Sub directly or indirectly holds
any Real Property as a dealer for U.S. federal income tax purposes and no REIT
Sub has otherwise undertaken any action which would cause a sale or disposition
of such Real Property to be treated as a “prohibited transaction” pursuant to
Section 857(b)(6)(B)(iii) of the Code.

 

H.                                   Each Existing REIT Sub has been organized
and has continuously operated in conformity with the requirements for
qualification as a REIT under the Code for all taxable periods commencing with
the first year that such Existing REIT Sub elected to be classified as a REIT
under the Code through and including the Closing Date.

 

6.3                               Seller’s Representations and Warranties as to
the Properties.  As a material inducement to Buyer to execute this Agreement and
consummate the Closing, Seller represents and warrants to Buyer that:

 

(a)                                 The most current Rent Roll for each Property
delivered to Buyer as part of the Property Information is the Rent Roll relied
upon by Seller in the ordinary course of business.

 

(b)                                 To Seller’s knowledge, each Title Holder has
complied in all material respects with its obligations under each of the Leases
in effect with respect to its Property.

 

(c)                                  The list of Service Contracts included in
the Due Diligence Materials is true and correct in all material respects as of
the date of its preparation.  Other than the Service Contracts delivered to
Buyer as part of the Property Information, there are, to Seller’s knowledge, no
other property or asset management contracts or other arrangements, contracts
and agreements to which any of the Companies is a party affecting the ownership,
repair, maintenance, leasing or operation of the Properties, and the copies of
such documents delivered to Buyer are true and correct in all material
respects.  To Seller’s knowledge, neither the applicable Title Holder nor any
other party to any of the Service Contracts is in default thereunder beyond any
applicable notice or cure period.

 

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(d)                                 There are no pending or, to Seller’s
knowledge, threatened in writing (a) eminent domain proceedings for the
condemnation of any portion of the Land or (b) litigation against the Title
Holder or any of the Companies in respect of any Property which, if decided
adversely to the Title Holder or any of the Companies, would have a Material
Adverse Effect.

 

(e)                                  To Seller’s knowledge, and except as set
forth on the Disclosure Schedule: (a) all material licenses or permits necessary
to operate each Property in material compliance with applicable Laws and
otherwise as presently operated are in full force and effect and (b) the Title
Holder is in compliance in all material respects with each such license and
permit.

 

(f)                                   Except as set forth on the Disclosure
Schedule, no Company has received written notice from any governmental authority
or agency having jurisdiction over its Property that the Property or its use is
in material violation of any Law that would have a Material Adverse Effect.

 

(g)                                  To Seller’s knowledge, and except as may be
disclosed in the environmental reports made available to Buyer as a part of the
Property Information, Hazardous Materials have, during the period of each Title
Holder’s ownership of its respective Property, existed or currently exist in, on
or under, or have been or are being disposed of or released from, such Property
in quantities that exceed reportable concentrations under current applicable
Environmental Laws; and, to Seller’s knowledge, no well or wells, underground
storage tank or tanks (whether existing or abandoned) exist or have, during the
period of each Title Holder’s ownership of its respective Property, existed on
or under such Property.

 

(h)                                 Copies of the Property Information and all
documents containing information material to the ownership or operation of the
Properties have been delivered to Buyer and are true, correct and complete
copies; and Seller is not aware of any material inaccuracy or omission in such
information.

 

(i)                                     The Loan Documents delivered to the
Buyer as part of the Property Information include true, accurate and complete
copies in all material respects of all of the documents and instruments in
effect with respect to the Loans, including all amendments, modifications and
supplements thereto.  No material default or breach exists under any Loan
Document beyond any applicable cure period, nor does there exist any material
default or breach, or any material event or circumstance, which, with the giving
of notice or passage of time, or both, would constitute, to Seller’s knowledge,
a material default or breach by the Title Holder or any other party under any of
the Loan Documents.

 

(j)                                    Each Title Holder is the owner of its
respective Personal Property free and clear of all Encumbrances other than the
Permitted Exceptions, and has not previously assigned its rights in and to its
Personal Property except for security interests granted as security for the
Loans. Except as set forth in the Property Information, the Title Holders do not
lease any equipment or other personal property in connection with the ownership
or operation of their respective Properties.

 

(k)                                 All vacant rental units at the Properties
are in rent ready condition, except in the case of units which have been vacant
for not more than 5 days for such cleaning and other routine maintenance as is
customarily performed by each Title Holder in preparing vacated rental units for
re-letting in the ordinary course of business consistent with current practices.

 

(l)                                     Each Property which is subject to
Affordable Housing Requirements is in material compliance with such
requirements.

 

(m)                             Except as set forth in the Disclosure Schedule,
Seller has not received written notice of any uncured violation of any
declaration of covenants, conditions and restrictions, reciprocal easement
agreements or similar instrument governing or affecting the use, operation,
maintenance, management or

 

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improvement of all of any portion of any Property (collectively “CCRs”), and to
Seller’s knowledge no Title Holder is in material default under, and each
Property is in compliance in all material respects with, all applicable CCRs. 
Without limiting the foregoing, to Seller’s knowledge, no Title Holder is in
default with respect to payment of any material contributions or assessments
payable by such Title Holder under any CCRs.

 

(n)                                 Except for the representations and
warranties contained in Section 6.1, Section 6.2 and Section 6.3 (as modified by
the Exception Matters, Appendices and Schedules hereto), or any documents
delivered to Buyer at Closing in connection with this Agreement (collectively,
“Seller’s Reps”), neither Seller nor any other Person  (including, for the
avoidance of doubt, any equity holder of Seller) makes any other express or
implied representation or warranty in respect of any of the Companies, the
Properties or the transactions contemplated hereby, and Seller disclaims all
other representations or warranties, whether made by any of the Companies or any
of their respective Affiliates, officers, directors, employees, agents or
representatives.  Except for Seller’s Reps, Seller hereby disclaims all
liability and responsibility for any representation, warranty, projection,
forecast, statement, or information made, communicated, or furnished (orally or
in writing) to Buyer or its Affiliates or representatives (including any
opinion, information, projection or advice that may have been or may be provided
to Buyer by any director, officer, employee, agent, consultant or representative
of any of the Companies or any of their respective Affiliates).  The disclosure
of any matter or item in any schedule hereto shall not be deemed to constitute
an acknowledgment that any such matter is required to be disclosed. EXCEPT FOR
AND SUBJECT ONLY TO SELLER’S REPS, SELLER MAKES NO REPRESENTATIONS OR WARRANTIES
WHATSOEVER, EXPRESS, IMPLIED OR STATUTORY, RELATING TO THE PROPERTIES OR ANY
PORTION THEREOF, OR THE CONDITION OF OR MATERIALS RELATING TO THE PROPERTIES, IN
WHOLE OR IN PART, OR ANY OTHER MATTER, ALL SUCH REPRESENTATIONS AND WARRANTIES
BEING HEREBY EXPRESSLY DISCLAIMED.  WITHOUT LIMITING THE GENERALITY OF THE
FOREGOING, AND EXCEPT AS EXPRESSLY SET FORTH IN THIS AGREEMENT AND SUBJECT ONLY
TO SELLER’S REPS, BUYER IS PURCHASING THE PROPERTY “AS IS” AND “WITH ALL
FAULTS.”  EXCEPT FOR SELLER’S REPS, SELLER MAKES NO REPRESENTATIONS OR
WARRANTIES WITH RESPECT TO, AND BUYER IS NOT RELYING ON ANY REPRESENTATIONS WITH
RESPECT TO:  (a) environmental matters relating to the Property or any portion
thereof, including the presence of any Hazardous Materials on any Property; (b)
the presence of mold or other microbial agents in any Property; (c) geological
or seismic conditions, including, without limitation, subsidence, subsurface
conditions, water table, underground water reservoirs, and limitations regarding
the withdrawal of water there from, and faulting; (d) whether or not and the
extent to which any Property or any portion thereof is affected by any stream
(surface or underground), body of water, flood prone area, flood plain,
floodway, or special flood hazard; (e) drainage and soil conditions of any
Property; (f) the existence of or availability of any development rights; (g)
zoning requirements (including any special use permits) to which any Property or
any portion thereof may be subject or the status of compliance with such
requirements; (h) the availability of any utilities to any Property or any
portion thereof including, without limitation, water, sewage, gas and
electricity; (i) usages of any adjoining property; (j) access to any Property or
any portion thereof; (k) the value, compliance with specifications, size,
location, age, use, merchantability, quality, description, or condition of any
Property or any portion thereof, or suitability of any Property or any portion
thereof for Buyer’s purposes, or fitness for any use or purpose whatsoever; (l)
the compliance of any Property with applicable building codes, fire codes, land
use or access laws or ordinances including, without limitation, the Americans
with Disabilities Act (and the local equivalent thereof) or any similar Laws,
including Environmental Laws; (m) enforceability of any Lease or Contract; (n)
whether Seller will continue to own or operate any hospital adjacent to or in
proximity to any Property, (o) the square footage or leaseable area of the
Improvements and/or the real Property, or (p) the credit-worthiness of any
tenant under any of the Leases.  The disclaimer expressed in this Section 6.3(n)
shall survive Closing.

 

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(o)                                 As used herein, “Seller’s knowledge”, “known
to Seller” or similar phrases means (i) with respect to the representations and
warranties made in Section 6.2(o), the actual knowledge of Behringer Harvard
Multifamily Advisors I, LLC, a Texas limited liability company, the advisor to
BH, and (ii) with respect to the other representations and warranties in this
Agreement, the actual knowledge of the managing member of each Venture and for
any Property which is managed by an Affiliate of BH, the actual knowledge of
such Affiliate property manager.

 

6.4                               Buyer’s Representations and Warranties.  As a
material inducement to Seller to execute this Agreement and consummate the
Closing, Buyer represents and warrants to Seller that:

 

(a)                                 Buyer has been duly formed or organized as a
limited partnership, is validly existing and, as of Closing, will be in good
standing in the state of its formation or organization, and is authorized to
exercise all of its powers, rights and privileges.

 

(b)                                 Buyer has the power and authority, under its
Charter Documents, to own and operate its properties, to carry on its business
as now conducted, and to enter into and perform its obligations under this
Agreement.

 

(c)                                  All action on the part of the Buyer and its
partners, owners, members, managers, officers, directors and shareholders
necessary for the authorization, execution and delivery of this Agreement, the
performance of all obligations of Buyer hereunder and completion of the
transactions hereunder, has been taken or will be taken prior to the expiration
of the Due Diligence Period.  This Agreement constitutes a legally binding and
valid obligation of Buyer enforceable in accordance with its terms, subject to
bankruptcy, insolvency, reorganization, moratorium or other similar laws
affecting creditors’ rights and remedies generally, and subject, as to
enforceability, to general principles of equity, including principles of
commercial reasonableness, good faith and fair dealing (regardless of whether
enforcement is sought in a proceeding at law or in equity).

 

(d)                                 The execution and delivery of this Agreement
by Buyer and the performance by Buyer of its obligations pursuant hereto will
not result in any violation of, be in conflict with, or constitute a default
under, with or without the passage of time or the giving of notice:  (x) any
provision of Buyer’s Charter Documents; (y) any provision of any judgment,
decree or order to which Buyer is a party or by which it or its property or
assets are bound; or (z) any statute, rule or governmental regulation applicable
to Buyer or its property or assets.

 

(e)                                  The execution and delivery of this
Agreement by Buyer and the performance by Buyer of its obligations pursuant
hereto will not result in any violation of, be in conflict with, or constitute a
default under, with or without the passage of time or the giving of notice, any
material contract or agreement to which Buyer is a party.

 

(f)                                   There is no action, suit, proceeding or
investigation pending or, to the knowledge of Buyer, threatened in writing
against Buyer that challenges the validity of this Agreement or the right of
Buyer to enter into this Agreement, or that might result, either individually or
in the aggregate, in Buyer’s inability to perform its obligations under this
Agreement.  There is no judgment, decree or order of any court, arbitrator,
tribunal or governmental or similar authority in effect against Buyer, and the
Buyer is not in default with respect to any order of any court, arbitrator,
tribunal or governmental or similar authority binding upon Buyer or by which it
or its property or assets are bound that would prevent the Buyer from performing
its obligations under this Agreement.

 

(g)                                  Buyer is not acting, directly or indirectly
for, or on behalf of, any person, group, entity or nation named by any Executive
Order (including the September 24, 2001, Executive Order Blocking

 

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Property and Prohibiting Transactions With Persons Who Commit, Threaten to
Commit, or Support Terrorism) or the United States Treasury Department as a
terrorist, “Specially Designated National and Blocked Person,” or other banned
or blocked person, entity, or nation pursuant to any Law that is enforced or
administered by the Office of Foreign Assets Control, and is not engaging in the
transactions described herein, directly or indirectly, on behalf of, or
instigating or facilitating the transactions described herein, directly or
indirectly, on behalf of, any such person, group, entity or nation.

 

(h)                                 Buyer is acquiring the Interests for its own
account, for investment purposes only and not with a view to the distribution
(as such term is used in Section 2(11) of the Securities Act of 1933, as amended
(the “Securities Act”)) thereof.  Buyer understands that the Interests have not
been registered under the Securities Act and cannot be sold unless subsequently
registered under the Securities Act or an exemption from such registration is
available.

 

6.5                               Survival of Representations and Warranties. 
The representations and warranties set forth in this Article 6 are made as of
the Effective Date and each of Seller and Buyer shall be deemed to have remade
all of their respective representations and warranties as of the Closing Date. 
Such representations and warranties shall not be deemed to be merged into or
waived by the instruments of Closing, but shall survive the Closing for a period
of 12 months (the “Limitation Period”); provided that (a) the representations
set forth in Section 6.1(a), (b), (c) and (d), Section 6.2(c), (d), (e) and (n)
and Section 6.4(a), (c) and (d)  (the “Title and Authority Warranties”) shall
survive the Closing indefinitely and (b) the representations set forth in
Section 6.2(o) (the “Tax Warranties”) shall survive the Closing for a period
ending sixty (60) days after the expiration of the applicable statute of
limitations (including extensions thereof).  Seller and Buyer shall have the
right to bring an action for breach of such representations and warranties if
they give the other party written notice of the circumstances giving rise to the
alleged breach within the survival period specified therefor in this Section
6.5.

 

ARTICLE 7.  DEFAULT AND REMEDIES

 

7.1                               Seller’s Default.  If the Closing fails to
occur due to the default of Seller and such default is not cured within five (5)
days after notice to Seller, then Buyer may, at its sole discretion and as its
sole remedies:  (a) terminate this Agreement upon written notice to Seller
whereupon the Earnest Money (to the extent deposited with the Escrow Agent)
shall be immediately disbursed to Buyer and Buyer shall be entitled to recover
from Seller all of its reasonable and documented out of pocket costs and
expenses incurred in connection with this Agreement, and Buyer’s investigations
of the Interests, Companies and Properties, together with reasonable and
documented costs of enforcement and collection, provided that Seller’s liability
for costs and expenses under this Section 7.1 shall not exceed $1,000,000.00 or
(b) assert and seek specific performance of Seller’s obligations hereunder, it
being acknowledged that the Properties and Interests are unique and that
monetary damages would not be an adequate remedy.  If Buyer elects to seek
specific performance under clause (b), but the remedy of specific performance is
not available, Buyer shall be entitled to its remedies under clause (a)
 notwithstanding that Buyer first elected to seek its remedies under clause
(b).  Buyer hereby acknowledges and agrees that it unconditionally waives all
other rights and remedies available at law or in equity for Seller’s pre-Closing
breach of its obligations hereunder.

 

7.2                               Buyer’s Default.  If this transaction fails to
close due to the default of Buyer and such default is not cured within five (5)
days after notice to Buyer, then Seller’s sole remedy in such event shall be to
terminate this Agreement and to retain the Earnest Money as liquidated damages,
Seller waiving all other rights or remedies in the event of such default by
Buyer.  The parties acknowledge that Seller’s actual damages in the event of a
default by Buyer under this Agreement will be difficult to ascertain, and that
such liquidated damages represent the parties’ best estimate of such damages.

 

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7.3                               Other Expenses.  Notwithstanding the
respective limitations set forth in Section 7.1 and 7.2, if this Agreement is
terminated due to the default of a party, then the defaulting party shall pay
any fees due to the Escrow Agent for holding the Earnest Money and any fees due
to the Title Company for cancellation of the Title Commitment.

 

ARTICLE 8.  INDEMNIFICATION AND LIMITATION ON LIABILITY

 

8.1                               Indemnification.  Subject to Section 8.6,
Seller and Buyer shall indemnify, defend and hold the other (the “indemnified
party”) harmless from any liability, claim, demand, loss, expense or damage that
is: (a) suffered by, or asserted by any third party against the indemnified
party arising from any act or omission of the indemnitor, its agents, employees
or contractors or otherwise arising out of the ownership or operation of the
Interests first arising or occurring prior to the Closing (with respect to
Seller as indemnitor) or from and after the Closing (with respect to Buyer as
the indemnitor); (b) arising out of the breach or inaccuracy of any of the
indemnitor’s representations and warranties set forth herein; or (c) except as
provided in Article 7, arising out of any failure by Seller or Buyer to perform
any covenant or obligation of Seller or Buyer, as applicable, set out in this
Agreement.

 

8.2                               Limitation on Seller’s Liability. 
Notwithstanding any other provision of this Article 8 to the contrary, (a)
Seller shall not have any indemnification obligations for claims under Section
8.1 and Section 8.3 unless and until the aggregate amount of such claims exceeds
$30,000 (provided that, once the amount of such claims exceeds $30,000, Seller
shall pay damages from the first dollar of damages) and (b) in no event shall
Seller’s aggregate liability for claims under Section 8.1 and Section 8.3 of
this Agreement exceed $500,000; provided, however, that the limitations on
liability set forth in this Section 8.2 shall not apply to any loss or liability
arising from any breach of any of the Title and Authority Warranties, or to
Seller’s obligations with respect to reprorations under Section 5.2, which
liability and obligations shall not be credited against the foregoing cap. 
Except as provided in Article 7, the provisions of this Article 8 shall be the
sole and exclusive remedy of Buyer with respect to matters which are subject to
indemnification by Seller under Sections 8.1 and 8.3 of this Agreement, all
other remedies with respect to such matters being hereby waived.

 

8.3                               Tax Indemnification.

 

(a)                                 From and after the Closing Date, subject to
the limitations set forth herein, (i) Seller shall protect, defend, indemnify
and hold harmless Buyer and each Company (including, without limitation, each
REIT Sub) from any and all Taxes which are imposed on any Company in respect of
its income, business, property or operations or for which any Company may
otherwise be liable as a result of any inaccuracy or breach of any Tax
Warranties; and (ii) Seller shall reimburse Buyer, on an after-tax basis, for
all reasonable attorneys’ fees incurred or that may be incurred as a result of
any such claims or demands as well as for all losses, verdicts, judgments,
settlements, tax liability, interest, costs and other expenses incurred or that
may be incurred by Buyer as a result of any matter described in clause (i)
above.

 

(b)                                 Buyer will, as to any Taxes in respect of
which Seller has agreed to indemnify Buyer or any Company (including, without
limitation, each REIT Sub), promptly inform Seller of, and permit the
participation of Seller in, any investigation, audit or other proceeding by or
with the Internal Revenue Service or any other taxing authority empowered to
administer or enforce such a tax and will not consent to the settlement or final
determination in such proceeding without the prior written consent of Seller
(which consent will not be unreasonably withheld).

 

8.4                               Survival.  The provisions of this Article 8
shall survive the Closing; provided that claims under clause (a) or (b) of
Section 8.1 shall be subject to the time limitations set forth in Section 6.5. 
For the avoidance of doubt, the parties acknowledge that, notwithstanding that
claims under clause (a) of

 

23

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Section 8.1 may not arise out of a breach or inaccuracy of the indemnitor’s
representations or warranties, such claims are subject to the Limitation
Period.  Any claim for indemnification under Section 8.1(a) or (b) not made on
or prior to the expiration of the Limitation Period set forth in Section 6.5
shall be irrevocably and unconditionally waived and released.

 

8.5          No Liability for Exception Matters.  As used herein, the term
“Exception Matter” shall refer to a matter actually disclosed to Buyer in
writing or actually discovered by Buyer before the Closing, that would make a
representation or warranty of Seller contained in this Agreement untrue or
incorrect, including, without limitation, matters disclosed in writing to Buyer
by Seller or by any other person.  If Buyer obtains actual knowledge of any
Exception Matter after the date hereof and if Seller, in its sole discretion,
does not agree in writing to cure or remedy such Exception Matter, Buyer may, as
to any Exception Matter the existence of which would have a Material Adverse
Effect (a “Material Exception Matter”), as its sole and exclusive remedy,
terminate this Agreement in its entirety and receive a return of the Deposit
upon written notice to Seller, as provided below.  Buyer shall promptly notify
Seller in writing of any Material Exception Matter of which Buyer obtains actual
knowledge before the Closing.  If Buyer obtains actual knowledge of any Material
Exception Matter before the Closing, but nonetheless elects to proceed with the
Closing of this Agreement, Buyer shall consummate the transaction contemplated
herein subject to such Material Exception Matter and Seller shall have no
liability with respect to such Material Exception Matter following Closing,
notwithstanding any contrary provision, covenant, representation or warranty
contained in this Agreement; provided that the foregoing shall not be deemed to
waive Seller’s obligation to cure certain matters on or before Closing, or
Buyer’s right to offset certain costs against the Purchase Price, as expressly
provided elsewhere in this Agreement, including, without limitation, in Section
2.4.  If Buyer elects to terminate this Agreement on the basis of any Material
Exception Matter, Buyer shall so notify Seller in writing within five days
following Buyer’s discovery of the Material Exception Matter (but in all events
prior to Closing).  If Buyer so terminates this Agreement, the Earnest Money
shall be returned to Buyer.  Buyer’s failure to timely give such notice shall be
deemed a waiver by Buyer of such Material Exception Matter.  Upon any such
termination of this Agreement, neither party shall have any further rights or
obligations hereunder, other than as set forth herein with respect to rights or
obligations which survive termination.  Seller shall have no obligation to cure
or remedy any Material Exception Matter, and, subject to Buyer’s right to
terminate this Agreement as set forth above, Seller shall have no liability
whatsoever to Buyer with respect to any Material Exception Matters. 
Notwithstanding the foregoing, the limitation on Buyer’s remedies and Seller’s
liabilities set forth in this Section 8.5 in the event of a Material Exception
Matter before the Closing shall not apply (i) in the case of an intentional
breach by Seller of any of its covenants and obligations under this Agreement or
(ii) with respect to any matter which Seller is obligated to cure hereunder on
or before Closing or for which Buyer has an express right of offset against the
Purchase Price hereunder, including, without limitation, under Section 2.4.

 

ARTICLE 9.  MISCELLANEOUS

 

9.1          Parties Bound.  Neither party may assign this Agreement without the
prior written consent of the other, and any such prohibited assignment shall be
void; provided, however, that Buyer may assign this Agreement without Seller’s
consent to an Affiliate or to the client or an Affiliate of the client on whose
behalf Buyer has entered into this Agreement but any such assignment shall not
relieve Buyer of its obligations hereunder.  Upon Closing, Buyer shall be
relieved of its obligations under this Agreement in the event of any such
assignment and all actions to be taken by, or documents to be delivered to,
Buyer shall be made by or delivered to such assignee.  Subject to the foregoing,
this Agreement shall be binding upon and inure to the benefit of the respective
legal representatives, successors, permitted assigns, heirs, and devises of the
parties.

 

24

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9.2          Headings; Entirety; Amendments.  The article and paragraph headings
of this Agreement are for convenience only and in no way limit or enlarge the
scope or meaning of the language hereof.  All exhibits, schedules and appendices
attached to this Agreement are incorporated herein as if fully set forth in this
Agreement and shall be deemed to be a part of this Agreement.  This Agreement
embodies the entire agreement between the parties and supersedes all prior
agreements and understandings relating to the Properties.  This Agreement may be
amended or supplemented (except as noted in the preceding sentence) only by an
instrument in writing executed by the party against whom enforcement is sought.

 

9.3          Invalidity and Waiver.  If any portion of this Agreement is held
invalid or inoperative, then so far as is reasonable and possible the remainder
of this Agreement shall be deemed valid and operative, and, to the greatest
extent legally possible, effect shall be given to the intent manifested by the
portion held invalid or inoperative.  The failure by either party to enforce
against the other any term or provision of this Agreement shall not be deemed to
be a waiver of such party’s right to enforce against the other party the same or
any other such term or provision in the future.

 

9.4          Governing Law; Calculation of Time Periods; Time.  This Agreement
shall, in all respects, be governed and enforced in accordance with the laws of
the state of Delaware.  Unless otherwise specified, in computing any period of
time described herein, the day of the act or event after which the designated
period of time begins to run is not to be included and the last day of the
period so computed is to be included, unless such last day is a Saturday, Sunday
or legal holiday for national banks in Chicago, Illinois, in which event the
period shall run until the end of the next day which is neither a Saturday,
Sunday, or legal holiday.  The last day of any period of time described herein
shall be deemed to end at 5:30 p.m. Chicago, Illinois time.  Time is of the
essence in the performance of this Agreement.

 

9.5          No Third Party Beneficiary.  This Agreement is not intended to give
or confer any benefits, rights, privileges, claims, actions, or remedies to any
person or entity as a third party beneficiary, decree, or otherwise, other than
the indemnified parties referenced in Section 2.1 pursuant to and for purposes
of Section 2.1, who shall be express third party beneficiaries hereof solely for
purposes of Section 2.1 and the exonerated persons referenced in Section 6.3(n)
who shall be express third party beneficiaries hereto solely for purposes of
Section 6.3(n).

 

9.6          Confidentiality.  Neither Buyer nor Seller shall make a public
announcement or other disclosure of this Agreement or any information related to
this Agreement to outside brokers or third parties, before or after the Closing,
without the prior written specific consent of the other, which consent may not
be unreasonably conditioned, delayed or withheld so long as such public
disclosure is otherwise in compliance with this Agreement; provided, however,
that without the consent of the other party, a party may make (i) any public
disclosure it reasonably believes is required by applicable Law, rule or
regulation (in which event such party shall use reasonable efforts to advise the
other party prior to the making of such disclosure); (ii) such disclosure as may
be reasonably necessary to enforce any provision of this Agreement; (iii) any
disclosure to any lender or prospective lender, creditor, officer, employee,
agent, current or prospective investor and their advisors, current or
prospective financial partner, or Affiliate as necessary to perform its
obligations under this Agreement or (iv) any public disclosure that is deemed
advisable by such party or its counsel to be disclosed in connection with
financial reporting, securities disclosures or other legal, tax or financial
requirements or guidelines applicable to such party or any Affiliate thereof,
including any disclosures to the Securities and Exchange Commission and any
press release required by the Securities and Exchange Commission in connection
therewith.

 

Notwithstanding anything to the contrary set forth herein or in any other
agreement to which the parties hereto are parties or by which they are bound,
the obligations of confidentiality contained herein and therein, as they relate
to the transactions contemplated by this Agreement (the “Transaction”), shall

 

25

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not apply to the federal tax structure or federal tax treatment of the
Transaction, and each party hereto (and any employee, representative or agent of
any party hereto) may disclose to any and all persons, without limitation of any
kind, the federal tax structure and federal tax treatment of the Transaction. 
The preceding sentence is intended to cause the Transaction to be treated as not
having been offered under conditions of confidentiality for purposes of Section
1.6011-4(b)(3) (or any successor provision) of the Treasury Regulations
promulgated under Section 6011 of the Code, and shall be construed in a manner
consistent with such purpose.  In addition, each party hereto acknowledges that
it has no proprietary or exclusive rights to the federal tax structure of the
Transaction or any federal tax matter or federal tax idea related to the
Transaction.

 

9.7          Enforcement Expenses.  Should any party employ attorneys or
arbitrators to bring an action or arbitration to enforce any of the provisions
hereof, the non-prevailing party in such action or arbitration shall pay the
prevailing party all reasonable costs, charges, and expenses, including
attorneys’ fees and costs, expended or incurred in connection therewith (not to
exceed, in the aggregate, $500,000).  The limitations set forth in Section 8.2
shall not apply with respect to this Section 9.7.

 

9.8          Notices.  All notices required or permitted hereunder shall be in
writing and shall be served on the parties in the manner and at the addresses
set forth in Appendix 9.8.

 

9.9          Construction.  The parties acknowledge that the parties and their
counsel have reviewed and revised this Agreement and the documents to be
executed on or prior to the Closing Date and agree that the normal rule of
construction to the effect that any ambiguities are to be resolved against the
drafting party shall not be employed in the interpretation of this Agreement,
the documents to be delivered on or prior to the Closing Date or any exhibits or
amendments thereto.

 

9.10        Execution in Counterparts.  This Agreement may be executed in any
number of counterparts, and by each party hereto on separate counterparts, each
of which shall be deemed to be an original, and all of such counterparts shall
constitute one Agreement.  To facilitate execution of this Agreement, the
parties may execute and exchange by telephone facsimile or email counterparts of
the signature pages which shall be deemed original signatures for all purposes.

 

9.11        Further Assurances.  In addition to the acts and deeds recited
herein and contemplated to be performed, executed and/or delivered by either
party on or prior to the Closing Date, each party agrees to perform, execute and
deliver, but without any obligation to incur any additional liability or
expense, on or after the Closing any further deliveries and assurances as may be
reasonably necessary to consummate the transactions contemplated hereby or to
further perfect the conveyance, transfer and assignment of the Interests to
Buyer.

 

9.12        Waiver of Jury Trial; Forum.  TO THE EXTENT PERMITTED BY APPLICABLE
LAW, THE PARTIES HEREBY IRREVOCABLY WAIVE ANY AND ALL RIGHT TO TRIAL BY JURY IN
ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT, OR THE
TRANSACTIONS CONTEMPLATED HEREBY.  EACH PARTY SHALL BRING ANY ACTION AGAINST THE
OTHER IN CONNECTION WITH THIS AGREEMENT IN A FEDERAL OR STATE COURT LOCATED IN
NEW CASTLE COUNTY, DELAWARE, CONSENTS TO THE JURISDICTION OF SUCH COURTS, AND
WAIVES ANY RIGHT TO HAVE ANY PROCEEDING TRANSFERRED FROM SUCH COURTS ON THE
GROUND OF IMPROPER VENUE OR INCONVENIENT FORUM.

 

9.13        Mutual Execution.  Until this Agreement has been duly executed by
Buyer, Seller and BH and a fully executed copy has been delivered to each of
Buyer, Seller and BH (which may occur by facsimile transmission or e-mail), this
Agreement shall not be legally binding against the parties.

 

26

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9.14        Cooperation.  Subject to the provisions of this Agreement, the
parties agree to cooperate and use Commercially Reasonable Efforts to consummate
the transactions contemplated hereby.

 

9.15        Termination of Related PSA Upon Termination of this Agreement. 
Unless otherwise agreed to by Buyer in its sole discretion, if Buyer terminates
this Agreement pursuant to any termination right granted to Buyer under this
Agreement, such termination shall also be deemed a termination of the Related
PSA in whole.  If this Agreement provides that Buyer is entitled to return of
the Earnest Money upon such termination (to the extent deposited with the Escrow
Agent), each Related Buyer shall also be entitled to a return of its earnest
money under the Related PSA (to the extent deposited with the Escrow Agent).

 

[Signature Page Follows]

 

27

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IN WITNESS WHEREOF, the parties hereto have duly executed and delivered this
Agreement on the day and year written below.

 

 

SELLER:

 

 

 

BEHRINGER HARVARD MULTIFAMILY OP I LP

 

a Delaware limited liability company

 

 

 

 

BY:

BHMF, INC., a Delaware corporation, its general partner

 

 

 

 

 

 

 

 

By:

/s/ Ross P. Odland

 

 

Name:

Ross P. Odland

 

 

Title:

Senior Vice President — Portfolio Management

 

 

 

Dated: November 29, 2011

 

 

 

 

 

 

 

 

 

BUYER:

 

 

 

MILKY WAY PARTNERS, L.P.

 

a Delaware limited partnership

 

 

 

 

BY:

MILKY WAY PARTNERS LLC, a Delaware limited liability company, its general
partner

 

 

 

 

 

By:

Heitman Capital Management LLC, an Iowa limited liability company, its sole
member

 

 

 

 

 

 

 

 

 

By:

/s/ Howard J. Edelman

 

 

 

Name:

Howard J. Edelman

 

 

 

Title:

Executive Vice President

 

 

 

Dated: November 29, 2011

 

 

 

--------------------------------------------------------------------------------

 

JOINDER

 

This joinder (this “Joinder”) is attached to and made a part of that certain
Membership Interest Purchase and Sale Agreement, dated as of November 29, 2011,
by and between Behringer Harvard Master Partnership I LP, a Delaware limited
partnership, and Milky Way Partners, L.P., a Delaware limited partnership (the
“Agreement”), and all terms capitalized but not defined herein shall have the
respective meanings given to them in the Agreement.  The undersigned, BEHRINGER
HARVARD MULTIFAMILY REIT I, INC., a Maryland corporation (“BH”), for good and
valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, hereby duly executes with proper authority and joins in the
execution of the Agreement for the purpose of agreeing to be bound by its
obligations and agreements set forth in Section 2.2, Section 2.3, Section 3.1,
Section 3.4, Section 4.2(a), Section 4.2(d) and Section 4.3 of the Agreement
(the “BH Agreements”).  Buyer shall have the right to proceed directly against
BH with respect to the BH Agreements without first making written demand to
Seller (and without any obligation to bring suit against the Seller) for the
satisfaction of any such obligations.

 

BH, on behalf of its Affiliate which is the Managing Member of each Venture,
hereby consents to the conveyance of the Interests to Buyer, pursuant to the
Agreement.

 

BH acknowledges that the execution of this Joinder is a material inducement and
condition to Buyer’s execution of the Agreement.  BH represents and warrants
that it has the legal right, power, authority and capacity to execute this
Joinder, that such execution does not violate the organizational documents of,
or any other material agreement or instrument by which BH is bound, and that
this Joinder is binding and enforceable against the undersigned, subject to
bankruptcy, insolvency, reorganization, moratorium or other similar laws
affecting creditors’ rights and remedies generally, and subject, as to
enforceability, to general principles of equity, including principles of
commercial reasonableness, good faith and fair dealing (regardless of whether
enforcement is sought in a proceeding at law or in equity).

 

The provisions of Section 2.2, Section 2.3, Section 3.1, Section 3.4, Section
4.2(a), Section 4.2(d), Section 4.3 and Article 9 of the Agreement are hereby
incorporated by reference into this Joinder as if fully set forth herein. 
Finally, any notice required or given hereunder shall be sent pursuant to the
provisions of Section 9.8 of the Agreement.

 

 

BEHRINGER HARVARD MULTIFAMILY REIT I, INC., a Maryland corporation

 

 

 

 

 

 

By:

/s/ M. Jason Mattox

 

Name:

M. Jason Mattox

 

Title:

Executive Vice President

 

--------------------------------------------------------------------------------

 

Exhibit A

 

Ventures, Properties and Percentage Interests

 

Venture

 

Property

 

City, State

 

Percentage
Interest

 

Behringer Harvard Cyan Venture, LLC

 

Cyan

 

Portland, OR

 

15

%

Behringer Harvard Belmar Venture, LLC

 

7166 at Belmar

 

Lakewood, CO

 

15

%

Behringer Harvard Waterford Place Venture, LLC*

 

Argenta

 

San Francisco, CA

 

40

%

NOHO Venture

 

The Gallery at Noho

 

North Hollywood, CA

 

45

%

Park Crest Venture

 

Lofts at Park Crest**

 

McLean, VA

 

45

%

Acacia Venture

 

Acacia

 

Santa Rosa, CA

 

45

%

 

--------------------------------------------------------------------------------

*Waterford Venture is the indirect owner of two properties in addition to
Argenta, with respect to which Buyer is acquiring additional interests in
Waterford Venture pursuant to the Related PA.  However such additional interests
are not addressed in this Agreement.

 

**The Lofts of Park Crest consists of a commercial portion, owned by Park Crest
Commercial Title Holder, and a residential portion, owned by Park Crest
Residential Title Holder.

 

--------------------------------------------------------------------------------

 

Exhibit B-1 to B-6

 

Org Charts

 

[SEE ATTACHMENTS]

 

--------------------------------------------------------------------------------

 

APPENDIX 1.2

 

Defined Terms

 

“2011 CRA Payment” shall have the meaning given to it in Section 2.1.6 of
Appendix 5.1.

 

“Acacia Entities” shall have the meaning given to it in the Recitals to this
Agreement.

 

“Acacia GP” shall have the meaning given to it in the Recitals to this
Agreement.

 

“Acacia Title Holder” shall have the meaning given to it in the Recitals to this
Agreement.

 

“Argenta Title Holder” shall have the meaning given to it in the Recitals to
this Agreement.

 

“Affiliate” shall mean:  (a) an entity that directly or indirectly controls, is
controlled by or is under common control with the party in question; or (b) an
entity at least a majority of whose economic interest is owned by the party in
question; and the term “control” means the power to direct the management of
such entity through voting rights, ownership or contractual obligations.

 

“Affordable Housing Requirements” shall mean any Laws or private covenants,
conditions and restrictions which require any residential dwelling units at any
Property to be made available as affordable housing units, low income housing
units or moderate income housing units or similar designation.

 

“Agreement’ shall have the meaning given to it in the preamble to this
Agreement.

 

“Amended and Restated Venture Agreement” and “Amended and Restated Venture
Agreements” shall each have the respective meaning given to it in Section 4.3(f)
hereof.

 

“Assignment of Interests” shall have the meaning given to it in Section 4.3(a)
hereof.

 

“Belmar Managing Member” shall have the meaning given to it in the Recitals to
this Agreement.

 

“Belmar Title Holder” shall have the meaning given to it in the Recitals to this
Agreement.

 

“Belmar Venture” shall have the meaning given to it in the Recitals to this
Agreement.

 

“BH” shall mean Behringer Harvard Multifamily REIT I, Inc., a Maryland
corporation.

 

“Business Day” “shall mean a day other than a Saturday, Sunday or other day on
which commercial banks are authorized or required to close under applicable
laws, or are in fact closed, in Chicago, Illinois or Dallas, Texas.

 

“Buyer” shall have the meaning given to it in the preamble to this Agreement.

 

“Buyer’s Representative” shall have the meaning given to it in Section 2.1
hereof.

 

“Charter Documents” shall mean, with respect to any entity, its articles of
incorporation, declaration of trust, bylaws, partnership agreement, statement of
partnership, certificate of limited partnership, limited liability company
agreement, limited liability certificate or articles, or other charter or

 

Appendix 1.2 - Page 1

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governing or organizational documents, and all amendments or supplements to any
of the foregoing (but excluding the Amended and Restated Venture Agreements).

 

“Closing” shall mean the occurrence of the following:  (i) the satisfaction of
all conditions precedent set forth herein (or the waiver in writing of such
condition by the party entitled to the benefit of such condition) and (ii) the
execution and delivery of the other documents and items to be executed and
delivered pursuant to Article 4 and the other provisions hereof; and (iii) the
consummation of the purchase and sale of the Interests as provided in this
Agreement.

 

“Closing Date” shall mean the date on which the Closing occurs.

 

“Code” shall mean the Internal Revenue Code of 1986, as amended from time to
time.

 

“Commercially Reasonable Efforts” shall mean, whenever there is imposed on any
party such standard, that such party shall be required to exert those efforts or
diligence only to the extent they are economically feasible, practicable and
reasonable under the circumstances and shall not impose upon such party material
financial or other burdens or require any party to institute any legal action.

 

“Companies” shall mean each of the Ventures and each of the Subsidiaries.

 

“Cyan Managing Member” shall have the meaning given to it in the Recitals to
this Agreement.

 

“Cyan Title Holder” shall have the meaning given to it in the Recitals to this
Agreement.

 

“Cyan Venture” shall have the meaning given to it in the Recitals to this
Agreement.

 

“Debt Conditions” shall have the meaning given to it in Section 4.2(a) hereof.

 

“Disclosing Party” shall have the meaning given to it in Section 2.2 hereof.

 

“Disclosure Schedule” shall have the meaning given to it in Section 6.2 hereof.

 

“Due Diligence Materials” shall mean the Property Information, the Company
Information and any other reports, financial statements or written materials
delivered or made available to Buyer by or on behalf of Seller prior to the end
of the Due Diligence Period.

 

“Encumber” shall mean to voluntarily or involuntarily create, or permit to
suffer the creation of, any Encumbrances.

 

“Encumbrances” shall mean any and all security interests, pledges, lien,
charges, easements, encroachments, claims, purchase options or other
encumbrances or restrictions of any kind on title to any asset, including,
without limitation, any restriction on the use, transfer, receipt of income or
other exercise of any attribute of ownership of such asset (not including
applicable Laws).

 

“Environmental Laws” shall mean, without limitation, the Resource Conservation
and Recovery Act and the Comprehensive Environmental Response Compensation and
Liability Act and other federal, state, county, municipal and other local laws
governing or relating to Hazardous Materials or the environment together with
their implementing regulations, ordinances and guidelines.

 

“ERISA” shall mean Section 3(3) of the Employee Retirement Income Security Act
of 1974, as amended.

 

Appendix 1.2 - Page 2

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“Escrow Agreement” shall have the meaning given to it in Section 1.4 hereof.

 

“Exception Matter” shall have the meaning given to it in Section 8.5 hereof.

 

“Existing Company” and “Existing Companies” shall mean, individually and
collectively, the Existing Ventures and their respective Subsidiaries, and the
Wholly Owned Entities.

 

“Existing REIT Sub” and “Existing REIT Subs” shall mean, the Subsidiaries which
are 99.9% directly owned by each Existing Venture, as shown on the
organizational charts attached to this Agreement as Exhibits B-1 through B-3.

 

“Existing Title Exceptions” shall mean as to each Existing Title Policy, the
exceptions set forth in such Existing Title Policy.

 

“Existing Title Policies” shall mean the most recent owner’s title insurance
policy insuring each Title Holder, copies of which have been or will be
delivered to Buyer as part of the Property Information.

 

“Existing Venture” and “Existing Ventures” shall mean, individually and
collectively, Belmar Venture, Cyan Venture and Waterford Venture.

 

“FIRPTA Certificate” shall have the meaning given to it in
Section 4.3(b) hereof.

 

“Governmental Authority” and “Governmental Authorities” shall mean any
governmental authority having jurisdiction over any of the Properties, Buyer,
Seller, BH, the Companies or any of their respective Affiliates, including,
without limitation, the United States of America, the state, county and
municipality where each Property is located, and any court, agency, department,
commission, board, bureau, utility district, flood control district, improvement
district or similar district, or other instrumentality of any of them.

 

“Hazardous Materials” shall mean, without limitation, polychlorinated biphenyls,
urea formaldehyde, radon gas, lead paint, radioactive matter, asbestos,
petroleum products, including crude oil or any fraction thereof, natural gas,
natural gas liquids, liquefied natural gas, or synthetic gas usable for fuel (or
mixtures of natural gas or such synthetic gas), and any substance, material,
waste, pollutant or contaminant listed or defined as hazardous, infectious or
toxic under any Environmental Law.

 

“Improvements” shall mean, as to each Property, all buildings, fixtures,
structures, parking areas, landscaping and other improvements located on the
applicable Land.

 

“Intangible Property” shall mean, as to each Property, all right, title and
interest of the applicable Title Holder in and to all intangible personal
property owned by such Title Holder and now or hereafter used in connection with
the operation, ownership, maintenance, management, or occupancy of the
applicable Real Property, including, without limitation, any and all trade names
and trademarks associated with such Real Property; the plans and specifications
for the applicable Improvements, including as-built plans; unexpired warranties,
guarantees, indemnities and claims against third parties; contract rights
related to the construction, operation, repair, renovation, ownership or
management of the Real Property; pending permit or approval applications as well
as existing permits, approvals and licenses (to the extent assignable);
insurance proceeds and condemnation awards; and books and records relating to
the applicable Property.

 

“Interest” shall mean, (i) as to each Belmar Venture and Cyan Venture, an
undivided portion of the applicable Managing Member’s membership interest in
such Existing Venture, constituting 15% of

 

Appendix 1.2 - Page 3

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the aggregate membership interests in such Existing Venture, (ii) as to
Waterford Venture,  an undivided portion of the applicable Managing Member’s
membership interest in such Existing Venture as to Argenta Title Holder only,
constituting 40% of the aggregate membership interests in such Existing Venture
with respect to Argenta Title Holder; and (ii) as to each New Venture, 45% of
the aggregate membership interests in such New Venture.

 

“Interests” shall mean a collective reference to the Interest in each Venture.

 

“Land” shall mean, for each Property, the land owned by the applicable Title
Holder, as described in the Existing Title Policy insuring such Title Holder,
and all rights, benefits, privileges, easements, tenements, hereditaments, and
appurtenances in anywise appertaining to the Land, including any and all mineral
rights, development rights, water rights and the like; and all right, title, and
interest of such Title Holder in and to all strips and gores and any land lying
in the bed of any street, road or alley, open or proposed, adjoining the Land.

 

“Laws” shall mean all applicable federal, state and local laws, rules,
ordinances, regulations and codes, including without limitation, all zoning,
building, health and safety, environmental, land use and persons with
disabilities requirements.

 

“Leases” shall mean, as to each Property, all leases, subleases or other
occupancy agreements pursuant to which any person has the right to occupy space
in the Improvements.

 

“Limitation Period” shall have the meaning given to it in Section 6.5 hereof.

 

“Loan” and “Loans” shall mean, individually and collectively as applicable, the
mortgage loans encumbering each of the Properties, including any mortgage loan
(if any) entered into after the Effective Date and on or prior to the Closing
Date.

 

“Loan Documents” shall mean the documents and instruments evidencing and
securing each of the Loans.

 

“Managing Member” and “Managing Members” shall mean, individually and
collectively, the managing member or general partner of each Existing Venture,
as shown on the organizational charts attached to this Agreement as Exhibits B-1
through B-3, each of which is indirectly owned and controlled by BH.

 

“Mandatory Cure Items” shall have the meaning given to it in Section 2.4.

 

“Material Adverse Effect” shall mean any circumstance, change or effect that
(a) is materially adverse to the business, assets, properties, results of
operations or financial condition of any Company or Property, individually or in
the Aggregate, or (b) materially impedes the ability of the Seller to consummate
the transactions contemplated hereby; provided, however, a Material Adverse
Effect shall exclude any circumstance, change or effect resulting from any one
or more of the following:  (i) any change in the United States or foreign
economies or securities or financial markets in general, that does not
materially disproportionately affect the business, assets, properties, results
of operations or financial condition of the Companies taken as a whole as
compared to other similarly situated Persons in the industries in which the
Companies operate, (ii) any change that generally affects any industry in which
any of the Companies operates, that does not materially disproportionately
affect the business, assets, properties, results of operations or financial
condition of the Companies taken as a whole as compared to other similarly
situated Persons in the industries in which the Companies operate; (iii) any
change arising in connection with hostilities, acts of war, sabotage or
terrorism or military actions or any escalation or

 

Appendix 1.2 - Page 4

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material worsening of any such hostilities, acts of war, sabotage or terrorism
or military actions existing or underway as of the date hereof; (iv) any action
taken by the Buyer or its Affiliates in respect of the transactions contemplated
hereby or in respect of any of the Companies; (v) any changes in applicable Laws
or accounting rules, which do not materially disproportionately affect the
Companies taken as a whole as compared to other similarly situated Persons in
the industries in which the Companies operate; or (vi) any effect resulting from
the public announcement of this Agreement, compliance with terms of this
Agreement or the consummation of the transactions contemplated hereby.

 

“New Company” and “New Companies” shall mean, individually and collectively, the
New Ventures and the New REIT Subs.

 

“New Loan” shall have the meaning given to it in Section 4.2(a)(E) hereof.

 

“New REIT Sub” and “New REIT Subs” shall each have the meaning given to it in
Section 3.5 hereof.

 

“New Venture” and “New Ventures” shall each have the meaning given to it in
Section 3.5 hereof.

 

“NOHO Title Holder” shall have the meaning given to it in the Recitals to this
Agreement.

 

“Objections” shall have the meaning given to it in Section 2.4 hereof.

 

“Objection Notice” shall have the meaning given to it in Section 2.4 hereof.

 

“Park Crest Commercial Title Holder” shall have the meaning given to it in the
Recitals to this Agreement.

 

“Park Crest Residential Title Holder” shall have the meaning given to it in the
Recitals to this Agreement.

 

“Park Crest Title Holders” shall have the meaning given to it in the Recitals to
this Agreement.

 

“Org Charts” shall mean the organizational charts attached to this Agreement as
Exhibits B-1 through B-6.

 

“Park Crest Fee” shall have the meaning given to it in Section 5.5 hereof.

 

“Penrose” shall have the meaning given to it in Section 5.5 hereof.

 

“Percentage Interest” shall mean as to each Venture, the percentage of the
aggregate membership interests of all the members of such Venture of the
Interest in such Venture to be purchased by Buyer hereunder.

 

“Permitted Exceptions” shall mean, the Existing Title Exceptions, any additional
exceptions approved or deemed approved by Buyer pursuant to Section 2.4 of this
Agreement, documents and instruments securing any Loan, including any New Loan,
real estate taxes not yet due and payable and the rights of tenants in
possession as tenants only under the Leases without any option to purchase or
right of first refusal with respect to the Property.

 

“Preferred Units” shall mean the preferred limited liability company interests
in a REIT Sub.

 

Appendix 1.2 - Page 5

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“Person” shall mean a corporation, partnership, limited liability company,
business trust or individual.

 

“Personal Property” shall mean as to each Real Property, all right, title and
interest of the applicable Title Holder in and to all tangible personal property
now or hereafter used in connection with the operation, ownership, maintenance,
management, or occupancy of such Real Property, including, without limitation,
all equipment, machinery, heating, ventilating and air conditioning units,
furniture, art work, furnishings, trade fixtures, office equipment and supplies,
and, whether stored on or off-site, all tools and maintenance equipment,
supplies, and construction and finish materials not yet incorporated in the
Improvements but held for repairs and replacements.

 

“Property” shall mean, for each property identified on Exhibit A, the Real
Property, the Leases, the Rents, the Personal Property, and the Intangible
Property.

 

“Properties” shall mean a collective reference to each Property.

 

“Property Information” shall have the meaning given to it in Section 2.2 hereof.

 

“Real Property” shall mean, the Land and the Improvements.

 

“Related Buyer” shall mean the buyer under each Related PSA.

 

“Related PSA” shall mean that certain Membership Interest Purchase and Sale
Agreement of even date herewith between Buyer and Behringer Harvard Master
Partnership I LP, a Delaware limited partnership, as seller.

 

“Related Seller” shall mean the seller under the Related PSA.

 

“Rent Roll” shall mean the rent roll for each Property delivered to Buyer as
part of the Property Information.

 

“REIT” shall mean a real estate investment trust under Sections 856-860 of the
Code.

 

“REIT Sub” and “REIT Subs” shall mean, individually and collectively, (i) the
Existing REIT Subs; and (ii) the New REIT Subs to be formed pursuant to this
Agreement as direct subsidiaries of each of the New Ventures, as shown on the
organizational charts attached to this Agreement as Exhibits B-3 through B-5.

 

“REIT Units” shall mean the common limited liability company interests in a REIT
Sub.

 

“Rents” shall mean, for each Property, all income from the applicable Real
Property, including without limitation, all fixed or base rent, percentage rent,
additional rent or other amounts payable by tenants under Leases with respect to
operating expenses, taxes or other charges under the Leases.

 

“Restructuring” shall mean the actions with respect to ownership of the Wholly
Owned Properties contemplated by Section 3.4(c) and Section 3.5.

 

“Seller” shall have the meaning given to it in the preamble to this Agreement.

 

“Service Contracts” shall mean, all service contracts and other contracts,
agreements or instruments relating to the ownership, use, management or
operation of the Properties, including equipment leases or any other lease in
which Title Holder is lessee, but excluding the Leases.

 

Appendix 1.2 - Page 6

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“Subsidiary” and “Subsidiaries” shall mean, individually and collectively, (i)
each of the limited liability companies owned directly or indirectly by each
Existing Venture, as shown on the organizational charts attached to this
Agreement as Exhibits B-1 and B-2; and (ii) each of NOHO Title Holder, the Park
Crest Title Holders, the Acacia Entities and the New REIT Subs.

 

“Taxes” shall mean all federal, state, local, foreign, and other taxes,
including, without limitation, income taxes, estimated taxes, alternative
minimum taxes, excise taxes, sales taxes, use taxes, value-added taxes, gross
receipts taxes, bulk sales taxes, transient occupancy taxes, franchise taxes,
capital stock taxes, employment and payroll-related taxes, withholding taxes,
stamp taxes, Transfer Taxes and property taxes, whether or not measured in whole
or in part by net income, and all deficiencies or other additions to taxes,
including interest, fines and penalties.

 

“Tax Warranties” shall have the meaning given to it in Section 6.5 hereof.

 

“Title and Authority Warranties” shall have the meaning given to it in Section
6.5 hereof.

 

“Title Company” shall mean Chicago Title Insurance Company (National Division,
Dallas, Texas).

 

“Title Coverage Deliveries” shall have the meaning given to it in Section 2.3
hereof.

 

“Title Holder” shall mean the respective Subsidiary which is the direct owner of
each Property, as shown on the Org Charts.

 

“Title Policy” shall mean, an ALTA Owner’s Policy (2006) (or other form required
by state law) of title insurance, with extended coverage, issued by the Title
Company (and such reinsurers or co-insurers as required by Buyer during the Due
Diligence Period) as of the date and time of the recording of the Deed, in the
amount of the Purchase Price, containing the Endorsements and containing such
reinsurance and co-insurance as required by Buyer during the Due Diligence
Period, insuring the Title Holder as the owner of fee simple title to the Real
Property, subject only to the Permitted Exceptions.

 

“Transaction” shall have the meaning given to it in Section 9.6 hereof.

 

“Transfer Taxes” shall mean any and all taxes on the transfer, or deemed
transfer, of the any Property as a result of the conveyance of the Interests
pursuant to this Agreement payable pursuant to applicable Laws, but if and only
to the extent that the conveyance of the applicable Interest pursuant to this
Agreement is deemed to constitute a transfer of such Property that is subject to
such tax, but not including real estate taxes or income taxes.

 

“Venture” and “Ventures” shall mean, individually and collectively, each of the
Existing Ventures and the New Ventures.

 

“Venture Agreement” shall mean the limited liability company operating agreement
governing each Venture, as amended, supplemented or amended and restated prior
to the Effective Date.

 

“Waterford Managing Member” shall have the meaning given to it in the Recitals
to this Agreement.

 

“Waterford Venture” shall have the meaning given to it in the Recitals to this
Agreement.

 

Appendix 1.2 - Page 7

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“Wholly Owned Entities” shall mean NOHO Title Holder, the Park Crest Title
Holders and the Acacia Entities.

 

“Wholly Owned Property” and “Wholly Owned Properties”, shall mean, individually
and collectively, the Gallery at NOHO, the Lofts at Park Crest and Acacia.

 

Appendix 1.2 - Page 8

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APPENDIX 1.4

 

Escrow Agreement

 

This Escrow Agreement (this “Agreement”) is made as of the        day of
                                                , 20     by and among
                                                             (“Seller”),
                                                                                         ,
a                                (“Buyer”) and
                                                 (“Escrow Agent”).

 

R E C I T A L S

 

A.                                    Seller and Buyer have entered into that
certain Membership Interest Purchase and Sale Agreement (the “Purchase
Agreement”) dated of even date herewith, with respect to certain membership
Interests described therein.

 

B.                                    All terms capitalized but not defined
herein shall have the respective meanings ascribed to them in the Purchase
Agreement.

 

C.                                    Pursuant to the Purchase Agreement, among
other things, Buyer has and will make deposits of Earnest Money to be held,
invested and disbursed as provided herein.

 

NOW, THEREFORE, for good and valuable consideration the receipt and sufficiency
of which are hereby acknowledged the parties hereto agree as follows:

 

1.                                      Recitals.  The recitals set forth above
are true and correct and are incorporated herein by reference.

 

2.                                      Investment and Use of Funds.  If
directed by Buyer, the Escrow Agent shall invest the Earnest Money in a money
market, U.S. Treasuries or similar investments as directed by Buyer, shall not
commingle the Earnest Money with any funds of the Escrow Agent or others except
as provided herein, and shall promptly provide Buyer and Seller with
confirmation of the investments made.  Escrow Agent agrees to act as “the person
responsible for closing” the transaction under the Purchase Agreement within the
meaning of Section 6045(a) of the Internal Revenue Code of 1986, as amended, and
to file all forms and returns required thereby.

 

4.                                      Termination.  Escrow Agent shall retain
the Earnest Money until it receives written instructions executed by both Seller
and Buyer as to the disposition and disbursement of the Earnest Money, or until
ordered by final court order, decree or judgment, which is not subject to
appeal, to deliver the Earnest Money to a particular party, in which event the
Earnest Money shall be delivered in accordance with such notice, instruction,
order, decree or judgment.

 

5.                                      Interpleader.  Seller and Buyer mutually
agree that in the event of any controversy regarding the Earnest Money, unless
mutual written instructions are received by the Escrow Agent directing the
Earnest Money’s disposition, the Escrow Agent shall not take any action, but
instead shall await the disposition of any proceeding relating to the Earnest
Money or, at the Escrow Agent’s option, the Escrow Agent may interplead all
parties and deposit the Earnest Money with a court of competent jurisdiction in
which event the Escrow Agent may recover all of its court costs and reasonable
attorneys’ fees.  Seller or Buyer, whichever loses in any such interpleader
action, shall be solely obligated to pay such costs and fees of the Escrow
Agent, as well as the reasonable attorneys’ fees of the prevailing party in
accordance with the other provisions of the Purchase and Sale Agreement.

 

Appendix 1.4 - Page 1

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6.                                      Liability of Escrow Agent.  The parties
acknowledge that the Escrow Agent is acting solely as a stakeholder at their
request and for their convenience, that the Escrow Agent shall not be deemed to
be the agent of either of the parties, and that the Escrow Agent shall not be
liable to either of the parties for any action or omission on its part taken or
made in good faith, and not in disregard of this Agreement, but shall be liable
for its willful misconduct and negligent acts and for any loss, cost or expense
incurred by Seller or Buyer resulting from the Escrow Agent’s mistake of law
respecting the Escrow Agent’s scope or nature of its duties.  Seller and Buyer
shall jointly and severally indemnify and hold the Escrow Agent harmless from
and against all costs, claims and expenses, including reasonable attorneys’
fees, incurred in connection with the performance of the Escrow Agent’s duties
hereunder, except with respect to actions or omissions taken or made by the
Escrow Agent in bad faith, in disregard of this Agreement or involving willful
misconduct or negligence on the part of the Escrow Agent.  In the event the
Escrow Agent is directed to invest the Earnest Money, the Escrow Agent shall not
be held responsible for any loss of principal or interest which may be incurred
as a result of making the directed investments or redeeming said investments at
the direction of the parties hereto.

 

7.                                      Escrow Fee.  Except as expressly
provided herein to the contrary, the escrow fee, if any, charged by the Escrow
Agent for holding the Earnest Money or conducting the Closing shall be paid by
Buyer.  There shall not be an escrow fee for holding the Earnest Money if the
transaction closes and if it fails to close, the escrow fee for holding the
Earnest Money shall be $150.00.

 

8.                                      Commingling.  Subject to Section 2, the
Escrow Agent may commingle the Earnest Money with other deposits or with its own
funds in the manner provided for in the administration of funds pursuant to
applicable law; provided, however, that nothing herein shall diminish the Escrow
Agent’s obligation to apply the full amount of the Earnest Money in accordance
with the terms of this Agreement.

 

9.                                      Closing.  At Closing, the Escrow Agent
shall fund the Earnest Money into the closing escrow, to be delivered to Seller
and applied as a credit against the Purchase Price.

 

10.                               Execution in Counterparts.  This Agreement may
be executed in any number of counterparts, each of which shall be deemed to be
an original, and all of such counterparts shall constitute one Agreement.  To
facilitate execution of this Agreement, the parties may execute and exchange by
telephone facsimile or email counterparts of the signature pages which shall be
deemed original signatures for all purposes.

 

11.                               Governing Law.  This Agreement shall, in all
respects, be governed, construed, applied, and enforced in accordance with the
law of the state of Texas.

 

IN WITNESS WHEREOF, the undersigned have duly executed and delivered this
Agreement as of the day and year first set forth above.

 

Appendix 1.4 - Page 2

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SELLER:

 

BUYER:

 

 

 

 

 

 

 

 

 

By:

 

 

By:

 

Name:

 

 

Name:

 

Title:

 

 

Title:

 

 

 

 

 

 

 

ESCROW AGENT:

 

 

 

 

 

 

 

 

 

 

 

By:

 

 

 

Name:

 

 

 

Title:

 

 

 

 

Appendix 1.4 - Page 3

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APPENDIX 2.2(a)

 

Property Information

 

The following items, to the extent in Seller’s possession or control (exclusive
of any items Seller reasonably determines to be confidential or proprietary:

 

1.

Standard Form Lease

2.

Leasing Status Reports

3.

A list of and copies of all Service Contracts, Equipment Leases, and Other
Contracts and Agreements

4.

Union Contracts

5.

Easement Agreements

6.

Licenses and Permits

7.

Annual Operating Budget (current year)

8.

Annual Operating Statements (last 3 years)

9.

Current Monthly and Year-to-Date Operating Statement

10.

Accounts Receivable/Delinquency Report

11.

Current Rent Roll including concessions, security deposits, in place rents and
market rents

12.

Residential demographic profile

13.

Expense General Ledger

14.

Appraisals of the Property

15.

Real Estate Tax Bills/Current Assessment Notice

16.

Current lender impound balances

17.

Real Estate Tax Consultant Report

18.

Schedule of Insurance

19.

Insurance Claims/Loss Report (last 3 years and year to date)

20.

Schedule of Employees/Positions/Compensation

21.

Vendor Files

22.

Demising Book/Lease Plan/Site Plan

23.

Plans and Specifications

24.

Certificates of Occupancy

25.

Guaranties & Warranties, unexpired

26.

Structural and Engineering Reports, Seismic and/or PML Studies Reports, and
Environmental Reports

27.

Existing Title Policies

28.

Underlying Recorded Documents

29.

Survey

30.

Correspondence/Complaint Logs/Security Reports

31.

Existing Management Agreements

32.

Market Surveys

33.

Loan Documents

34.

Leasing Guidelines

 

Appendix 2.2(a) - Page 1

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APPENDIX 2.2(b)

 

Company Information

 

1.                                      Financial statements of each Existing
REIT Sub for each of the prior five years (or since formation, if formed within
the prior five years)

2.                                      Tax returns of each Existing REIT Sub
for each of the prior five years (or since formation, if formed within the prior
five years)

3.                                      Tax returns of each Existing Venture for
each of the prior five years (or since formation, if formed within the prior
five years)

4.                                      A copy of resolutions and consents of
the members, board of directors, board of managers or any advisory committee of
the Companies, Seller or BH with respect to any of the Companies, as applicable
based on policies in place in the ordinary course of business of Seller or any
of its Affiliates.

 

Appendix 2.2(b) - Page 1

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APPENDIX 4.3(b)

 

FIRPTA Certificate

 

Section 1445 of the Internal Revenue Code of 1986, as amended, provides that a
transferee of a United States real property interest must withhold tax if the
transferor is a foreign person.  For U.S. tax purposes (including Section 1445),
the owner of a disregarded entity (which has legal to title to a U.S. real
property interest under local law) will be the transferor of the property and
not the disregarded entity.  To inform the Transferee (hereinafter defined) that
withholding of tax is not required upon the disposition of a United States real
property interest by
                                                            , a
                  (the “Transferor”) to
                                                                    , a
                              (the “Transferee”), the undersigned does hereby
certify the following on behalf of the Transferor:

 

1.                                      The undersigned is the
                                     of the Transferor and is familiar with the
business of the Transferor;

 

2.                                      The Transferor is not a foreign
corporation, foreign partnership, foreign trust or foreign estate (as all such
terms are defined in the Internal Revenue Code of 1986, as amended, and United
States Treasury Department Income Tax Regulations in effect as of the date
hereof);

 

3.                                      The Transferor is not a disregarded
entity as defined in Section 1.1445-2(b)(2)(iii);

 

4.                                      The Transferor is a                   
duly organized, validly existing and in good standing under the laws of the
State of                      ;

 

5.                                      The Transferor’s United States employer
identification number is                    ; and

 

6.                                      The Transferor’s office address is
                                                                    .

 

The Transferor understands that this certification may be disclosed to the
United States Internal Revenue Service by the Transferee and that any false
statement contained herein could be punished by fine, imprisonment, or both.

 

Under penalties of perjury, the undersigned declares that he has examined this
certificate, and to the best of the undersigned’s knowledge and belief, it is
true, correct and complete.  The undersigned further declares that he has
authority to sign this certificate on behalf of the Transferor.

 

Appendix 2.2(b) - Page 1

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This certificate is executed and delivered as of the        day of
                           , 20    .

 

 

By:

 

 

Name:

 

 

Title:

 

 

Appendix 2.2(b) - Page 2

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APPENDIX 4.3(f-1)

 

FORM OF AMENDED AND RESTATED VENTURE AGREEMENT

FOR WATERFORD VENTURE

 

Appendix 4.3(f-1) - Page 1

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AMENDED AND RESTATED

 

LIMITED LIABILITY COMPANY AGREEMENT

 

OF

 

BEHRINGER HARVARD WATERFORD PLACE VENTURE, LLC

 

(a Delaware Limited Liability Company)

 

 

Dated as of                 , 2011

 

THE INTERESTS (THE “INTERESTS”) OF BEHRINGER HARVARD WATERFORD PLACE VENTURE,
LLC HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
“SECURITIES ACT”), THE SECURITIES LAWS OF ANY STATE OR ANY OTHER APPLICABLE U.S.
OR NON-U.S. SECURITIES LAWS, IN EACH CASE IN RELIANCE UPON EXEMPTIONS FROM THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND SUCH LAWS.  THE INTERESTS
MAY BE ACQUIRED FOR INVESTMENT ONLY, AND NEITHER THE INTERESTS NOR ANY
PART THEREOF MAY BE OFFERED FOR SALE, PLEDGED, HYPOTHECATED, SOLD, ASSIGNED OR
TRANSFERRED AT ANY TIME EXCEPT IN COMPLIANCE WITH (I) THE SECURITIES ACT, ANY
APPLICABLE STATE SECURITIES LAWS AND ANY OTHER APPLICABLE SECURITIES LAWS, AND
(II) THE TERMS AND CONDITIONS OF THIS LIMITED LIABILITY COMPANY AGREEMENT.  THE
INTERESTS WILL NOT BE TRANSFERRED OF RECORD EXCEPT IN COMPLIANCE WITH SUCH LAWS
AND THIS LIMITED LIABILITY COMPANY AGREEMENT. THEREFORE, PURCHASERS OF THE
INTERESTS WILL BE REQUIRED TO BEAR THE RISK OF THEIR INVESTMENT FOR AN
INDEFINITE PERIOD OF TIME.

 

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TABLE OF CONTENTS

 

 

 

Page

 

 

 

ARTICLE 1

DEFINITIONS

2

 

 

 

ARTICLE 2

THE VENTURE

10

2.1

Formation of Venture

10

2.2

Venture Name and Principal Office

10

2.3

Office of and Agent for Service of Process

10

2.4

Term of the Venture

10

2.5

Title to Assets

10

2.6

Purpose and Powers

10

 

 

 

ARTICLE 3

MEMBERS AND CAPITAL CONTRIBUTIONS

13

3.1

Members; Capital Contributions

13

3.2

Capital Calls

13

3.3

Additional Capital Contributions

14

3.4

Failure to Make Capital Contributions

15

3.5

Return of Capital Contributions

16

3.6

Capital Account

16

3.7

Transfer of Capital Account

16

3.8

Tax Matters Partner

17

3.9

Liability for Venture’s Obligations

17

 

 

 

ARTICLE 4

ALLOCATIONS

17

4.1

Allocation of Profits and Losses

17

4.2

Tax Allocations

18

 

 

 

ARTICLE 5

DISTRIBUTIONS AND EXPENSES

18

5.1

Distributions of Net Cash Flow

18

5.2

Tax Provisions

19

5.3

Priority

19

5.4

Operating Expenses

20

 

 

 

ARTICLE 6

MANAGEMENT RIGHTS, DUTIES, AND POWERS OF THE MANAGER; TRANSACTIONS INVOLVING THE
MANAGER OR ITS AFFILIATES; ADDITIONAL OR SUCCESSOR MANAGER

20

6.1

Management of the Venture

20

6.2

Operating Plan

21

 

i

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TABLE OF CONTENTS

(continued)

 

 

 

Page

 

 

 

6.3

Major Decisions

22

6.4

Business with Affiliates; Other Activities

24

6.5

Maintenance of Domestic Status

25

6.6

Tax Status

26

6.7

Liability for Venture’s Obligations

26

6.8

Additional or Successor Manager

26

6.9

Removal of Manager for Cause

26

 

 

 

ARTICLE 7

LIMITATIONS ON LIABILITY AND INDEMNIFICATION

27

7.1

Limitation of Liability

27

7.2

Indemnification

27

 

 

 

ARTICLE 8

MEETINGS OF THE ADVISORY COMMITTEE

29

8.1

Advisory Committee

29

8.2

Meetings of the Advisory Committee

30

8.3

Dispute Resolution Procedure

30

 

 

 

ARTICLE 9

TRANSFER OF MEMBERS’ INTERESTS IN THE VENTURE; BUY/SELL

31

9.1

Transfers of a Member’s Interest

31

9.2

Buy/Sell Arrangement

33

9.3

Basis Election

39

9.4

Void Transfer

39

 

 

 

ARTICLE 10

EXCESS INTEREST PROVISIONS

39

10.1

Definitions

39

10.2

Ownership Limitation

41

10.3

Excess Interests

42

10.4

Prevention of Transfer

42

10.5

Notice

43

10.6

Information for the Venture

43

10.7

Other Action by Venture

43

10.8

Ambiguities

43

10.9

Modification of Existing Holder Limits

44

 

ii

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TABLE OF CONTENTS

(continued)

 

 

 

Page

 

 

 

10.10

Increase or Decrease in Ownership Limit

44

10.11

Limitations on Changes in Existing Holder and Ownership Limits

44

10.12

Waivers by Venture

44

10.13

Severability

45

10.14

Trust for Excess Interests

45

10.15

Distributions on Excess Interests

45

10.16

Voting of Excess Interests

45

10.17

Non-Transferability of Excess Interests

45

10.18

Call by the Venture on Excess Interests

46

 

 

 

ARTICLE 11

DISSOLUTION OF VENTURE

46

11.1

Bankruptcy of Member

46

11.2

Other Events of Dissolution

47

11.3

Distribution Upon Liquidation

47

11.4

Procedural and Other Matters

48

 

 

 

ARTICLE 12

REPRESENTATIONS AND WARRANTIES

48

12.1

Representations and Warranties of the Members

48

 

 

 

ARTICLE 13

BOOKS AND RECORDS; REPORTS TO MEMBERS

50

13.1

Books

50

13.2

Monthly and Quarterly Reports

50

13.3

Annual Reports

51

13.4

Electronic Data Transmission

51

13.5

Accountants; Tax Returns

51

13.6

Accounting and Fiscal Year

52

13.7

Property Management Reports

52

13.8

Additional Information

52

13.9

Cooperation with Project Valuation

52

13.10

Dissemination of Books, Records, Notices and Reports

52

 

 

 

ARTICLE 14

MISCELLANEOUS

53

14.1

Notices

53

14.2

Execution in Counterparts

54

 

iii

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TABLE OF CONTENTS

(continued)

 

 

 

Page

 

 

 

14.3

Amendments

55

14.4

Additional Documents

55

14.5

Validity

55

14.6

Governing Law

55

14.7

Waiver

55

14.8

Consent and Approval

55

14.9

Waiver of Partition

55

14.10

Binding Effect

55

14.11

Entire Agreement

56

14.12

Captions

56

14.13

No Strict Construction

56

14.14

Identification

56

14.15

Recourse to the Manager

56

14.16

Recourse to the Members

56

14.17

Remedies Not Exclusive

56

14.18

Use of Behringer Harvard Trade Name

56

14.19

Waiver of Jury Trial

57

14.20

Confidentiality

57

14.21

Public Disclosure

58

 

iv

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EXHIBITS

 

A

 

Members; Addresses; Capital Accounts; Percentage Interests

B-1

 

Legal Description of Argenta

B-2

 

Legal Description of Stonegate

B-3

 

Legal Description of West Village

C

 

Operating Plan for Fiscal Year Ended December 31, 2011

D

 

Monthly Reports

E

 

Electronic Data Transmission

 

v

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AMENDED AND RESTATED

 

LIMITED LIABILITY COMPANY AGREEMENT

 

OF

 

BEHRINGER HARVARD WATERFORD PLACE VENTURE, LLC

 

THIS AMENDED AND RESTATED LIMITED LIABILITY COMPANY AGREEMENT of BEHRINGER
HARVARD WATERFORD PLACE VENTURE, LLC is made and entered into as of [         
], 2011 by and between Behringer Harvard Waterford Place, LLC (“BH Waterford”),
a Delaware limited liability company that is an indirect wholly owned subsidiary
of Behringer Harvard Multifamily REIT I, Inc. (“BH Multifamily REIT”), a
Maryland corporation, with its principal office at 15601 Dallas Parkway,
Suite 600, Addison, Texas 75001, Milky Way Partners, L.P. (“MWP”), a Delaware
limited partnership with its principal office at 191 North Wacker Drive,
Suite 2500, Chicago, Illinois 60606, and Behringer Harvard Master Partnership I
LP (“BH MP”), a Delaware limited partnership with its principal office at 15601
Dallas Parkway, Suite 600, Addison, Texas 75001.

 

W I T N E S S E T H

 

WHEREAS, BH Waterford and BH MP formed the Venture for the purpose of jointly
owning, operating and managing the real property located at (i) 1 Polk Street,
San Francisco, California 94102, the legal description for which is set forth in
Exhibit B-1 hereof and which is known as Argenta (“Argenta”), (ii) 65 Silver
Leaf Way, Marlborough, Massachusetts 01752, the legal description for which is
set forth in Exhibit B-2 hereof and which is known as Stonegate Village
(“Stonegate”), and (iii) 792 West Street, Mansfield, Massachusetts 02048, the
legal description for which is set forth in Exhibit B-3 hereof and which is
known as West Village (“West Village”);

 

WHEREAS, BH Waterford and BH MP entered into a certain Limited Liability Company
Agreement of Behringer Harvard Waterford Place Venture, LLC (the “Venture”),
dated as of May 29, 2009 (the “Original Agreement”), to establish their
respective rights and duties relating to the Venture on the terms provided
therein;

 

WHEREAS, the Original Agreement was amended pursuant to a certain Amendment to
Limited Liability Company Agreement of Behringer Harvard Waterford Place
Venture, LLC, dated as of April 14, 2011;

 

WHEREAS, effective as of the date hereof, BH MP and BH Waterford have each
transferred certain of their Interests to MWP, on the terms and subject to the
conditions of those certain Membership Interest Purchase and Sale Agreements,
dated as of [          ], 2011, between BH MP and MWP and BH Waterford and MWP,
respectively (the “Purchase Agreements”);

 

WHEREAS, MWP desires to be admitted to the Venture as a Member and, pursuant to
the terms and conditions of the Purchase Agreements, the Manager has agreed to
admit MWP as a Member pursuant to Section 8.1 of the Original Agreement; and

 

1

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WHEREAS, the Members desire to amend and restate the Original Agreement, as
amended, in its entirety as hereinafter set forth.

 

NOW, THEREFORE, in consideration of the premises and the mutual covenants of the
parties hereto, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereby agree as
follows:

 

ARTICLE 1

 

DEFINITIONS

 

Capitalized terms used in this Agreement (including, without limitation,
Exhibits, Schedules and amendments) have the meanings set forth below or in the
Section of this Agreement referred to below, except as otherwise expressly
indicated or limited by the context in which they appear in this Agreement.  All
terms defined in this Agreement in the singular have the same meanings when used
in the plural and vice versa.  Accounting terms used but not otherwise defined
shall have the meanings given to them under U.S. GAAP.  References to Sections,
Articles and Exhibits and Schedules refer to the sections and articles of, and
the exhibits and schedules to, this Agreement, unless the context requires
otherwise.

 

“Act” means the Limited Liability Company Act of the State of Delaware, Del.
Code Ann. tit. 6, §§ 18-101 et seq., as it may be amended from time to time, and
any successor to such statute.

 

“Advisory Committee” has the meaning ascribed thereto in Section 8.1.

 

“Affiliate” means, when used with respect to a specified Person, (i) any Person
that, directly or indirectly through one or more intermediaries, controls, is
controlled by or is under common control with the specified Person or (ii) any
Person that is an officer, general partner or trustee of, or serves in a similar
capacity with respect to, the specified Person or of which the specified Person
serves in a similar capacity.  For this purpose, the term “control” (including,
without limitation, the terms “controlling,” “controlled by” and “under common
control with”) means the possession, direct or indirect, of the power to direct
or cause the direction of the management and policies of a Person, whether
through the ownership of voting securities, by contract or otherwise, which
shall conclusively be deemed to exist where one Person directly or indirectly is
the beneficial owner of fifty and one-tenths percent (50.1%) or more of any
class of voting equity securities or other voting ownership interests of another
Person.

 

“Affiliated Entity” means, with respect to the Manager, an Entity that is an
Affiliate of the Manager.  For the avoidance of doubt, an Affiliated Entity does
not include any individual that is an Affiliate of the Manager.

 

“Agreement” means this Amended and Restated Limited Liability Company Agreement,
as amended, modified, supplemented or restated from time to time.

 

“Alternative Offer Price” has the meaning ascribed thereto in
Section 9.2(b)(ii).

 

“Alternative Purchaser” has the meaning ascribed thereto in Section 9.2(e)(ii).

 

2

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“Arbitration Notice” has the meaning ascribed thereto in Section 9.2(e)(ii)(1).

 

“Argenta” has the meaning ascribed thereto in the recitals to this Agreement.

 

“Authorized Representatives” has the meaning ascribed thereto in Section 8.1.

 

“Bankruptcy” has the meaning ascribed thereto in Section 11.1(b).

 

“Bankruptcy Event” has the meaning ascribed thereto in Section 11.1(a).

 

“Behringer Holdings” means Behringer Harvard Holdings, LLC, a Delaware limited
liability company.

 

“Best Efforts” has the meaning ascribed thereto in Section 2.6(b)(ii).

 

“BH MP” has the meaning ascribed thereto in the recitals to this Agreement.

 

“BH Multifamily REIT” has the meaning ascribed thereto in the preamble to this
Agreement.

 

“BH Representative” has the meaning ascribed thereto in Section 8.1.

 

“BH Waterford” has the meaning ascribed thereto in the preamble to this
Agreement.

 

“Business Day” means a day other than a Saturday, Sunday or other day on which
commercial banks in New York City are authorized or required by applicable law
to close.

 

“Buy/Sell Interest” has the meaning ascribed thereto in Section 9.2(a)(ii).

 

“Buy/Sell Market Price” has the meaning ascribed thereto in
Section 9.2(e)(ii)(5).

 

“Capital Account” has the meaning ascribed thereto in Section 3.6.

 

“Capital Call” means a call for capital to be contributed to the Venture in
accordance with Section 3.3.

 

“Capital Contribution” means any initial capital contribution made pursuant to
the Original Agreement or any capital contribution made by a Member (or its
predecessor) to the Venture in accordance with Section 3.3 hereof.

 

“Cause” means (i) a material breach of this Agreement by the Manager involving
fraud; or (ii) the conviction of, or the entry of a guilty plea or plea of no
contest with respect to, a felony involving fraud, embezzlement or dishonesty by
BH Multifamily REIT or any Affiliate of BH Multifamily REIT.

 

“Certificate” means the Certificate of Formation of the Venture, as originally
filed with the office of the Secretary of State of the State of Delaware on
December 3, 2009, as amended, supplemented or otherwise modified from time to
time as herein provided or as provided in the Original Agreement.

 

3

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“Closing Date” has the meaning ascribed thereto in Section 9.2(d)(ii).

 

“Code” means the Internal Revenue Code of 1986, as amended from time to time (or
any corresponding provisions of succeeding law); any reference to any section of
the Code shall include any corresponding provision of succeeding laws.
Notwithstanding the foregoing, any change in the Code which causes the
Subsidiary REIT not to be a Domestically-Controlled REIT shall not be included
in the definition of “Code” hereunder, it being understood that MWP and BH MP
will bear the risk of such change; provided that the Manager will use
commercially reasonable efforts to minimize the financial impact to MWP and PGGM
PRE Fund (indirectly through BH MP) of any such change at the expense of MWP or
PGGM PRE Fund, as the case may be; provided further that the same does not
adversely affect the Manager’s tax status.

 

“Consent” means the vote, approval or consent, as the case may be, of a Person
to do the act or thing for which the vote, approval or consent is solicited, or
the act of voting or granting such approval or consent, as the context may
require.

 

“CPR” means The International Institute for Conflict Prevention and Resolution,
an international organization for public and private dispute resolution.

 

“Defaulting Purchaser” has the meaning ascribed thereto in Section 9.2(d)(i).

 

“Dispute Notice” has the meaning ascribed thereto in Section 8.3(a).

 

“Domestic Status Loss” means a disqualification of the Subsidiary REIT as a
“domestically-controlled qualified investment entity” within the meaning of
Section 897(h)(4)(B) of the Code.

 

“Domestically-Controlled REIT” means a REIT that is a “domestically-controlled
qualified investment entity” for purposes of Section 897(h)(4)(B) of the Code.

 

“Earnest Money Deposit” has the meaning ascribed thereto in Section 9.2(d)(i).

 

“Entity” means a partnership, corporation, business trust, limited liability
company, proprietorship, joint stock company, trust, estate, unincorporated
association, joint venture, pension fund, governmental entity, cooperative
association or other foreign or domestic entity or enterprise.

 

“Escrow Agent” has the meaning ascribed thereto in Section 9.2(d)(i).

 

“Funding Event” has the meaning ascribed thereto in Section 3.4(a).

 

“Funding Member” has the meaning ascribed thereto in Section 3.4(a).

 

“Indemnified Person” and “Indemnified Persons” have the meanings ascribed
thereto in Section 7.2(a).

 

“Information” has the meaning ascribed thereto in Section 14.20(a).

 

4

--------------------------------------------------------------------------------

 

“Interest” means, as to a Member, the ownership interest of such Member in the
Venture at any particular time, including the right of such Member to any and
all benefits to which such Member may be entitled as provided in this Agreement,
together with the obligations of such Member to comply with all the terms and
provisions of this Agreement.

 

“IRS” has the meaning ascribed thereto in Section 3.8.

 

“Liquidation” means (i) when used with reference to the Venture, the date upon
which the Venture ceases to be a going concern, and (ii) when used with
reference to any Member, the earlier of (A) the date upon which there is a
Liquidation of the Venture or (B) the date upon which such Member’s entire
Interest in the Venture is terminated other than by Transfer to a Person other
than the Venture.

 

“Liquidator” has the meaning ascribed thereto in Section 11.3(a).

 

“Major Decision” has the meaning ascribed thereto in Section 6.3(a).

 

“Major Dispute” means any disagreement of (i) BH MP and BH Waterford with
respect to the Venture, the Subsidiary REIT or Stonegate or (ii) BH Waterford
and MWP with respect to the Venture, the Subsidiary REIT, Argenta or West
Village, in either case in respect of (A) the establishment of sale objectives
and parameters for the applicable Project (it being understood that such
parameters shall be consistent with the provisions of this Agreement, including
Section 2.6(b)); (B) the sale or other disposition of the applicable Project or
any other property owned, directly or indirectly, by the Venture with respect to
such Project in excess of $100,000 (it being understood that such sale or other
disposition shall be consistent with the provisions of this Agreement, including
Section 2.6(b)); (C) incurring, materially restructuring or materially modifying
any indebtedness of the Venture, the Subsidiary REIT or the Sub-Sub REIT holding
such Project in excess of $100,000 or causing the Venture, the Subsidiary REIT
or the Sub-Sub REIT holding such Project to become liable as an endorser,
guarantor, surety or otherwise, except as otherwise contemplated under
Section 6.3(a)(iii); (D) a mortgage, pledge or hypothecation of the applicable
Project to secure indebtedness of the Subsidiary REIT or any Sub-Sub REIT,
except as otherwise contemplated under Section 6.3(a)(iv); or (E) selling any
additional interests in the Venture, the Subsidiary REIT or the Sub-Sub REIT
holding such Project.

 

“Management Company” means Behringer Harvard Multifamily Management Services,
LLC, a Texas limited liability company.

 

“Manager” means BH Waterford, or any permitted successor or delegee of BH
Waterford in accordance with this Agreement, in such Person’s capacity as the
manager of the Venture.

 

“Mark to Market Price” has the meaning ascribed thereto in
Section 9.2(e)(ii)(1).

 

“Member” means MWP, BH MP, BH Waterford, or any permitted successor or assign of
any of them that is admitted as a Member in accordance with this Agreement, in
such Person’s capacity as a member of the Venture.

 

“Member Loan” has the meaning ascribed thereto in Section 3.3(a).

 

5

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“Member Representatives” has the meaning ascribed thereto in Section 14.20(a).

 

“MP Representative” has the meaning ascribed thereto in Section 8.1.

 

“MWP” has the meaning ascribed thereto in the preamble to this Agreement.

 

“MWP Representative” has the meaning ascribed there in Section 8.1.

 

“Negotiation Deadline” has the meaning ascribed thereto in
Section 9.2(e)(ii)(1).

 

“Net Cash Flow,” for any period, means all cash receipts to the Venture from any
source during such period (other than from Capital Contributions), plus releases
from reserves, minus all cash expenditures by the Venture during such period
(but only to the extent not made from Capital Contributions), including costs,
expenses, fees and additions to reserves determined by the Manager in its sole
discretion.

 

“Non-Funding Member” has the meaning ascribed thereto in Section 3.4(a).

 

“Non-U.S. Member” means a direct or indirect (through another partnership or
limited liability company) Member of the Venture that is not a U.S. Person and
for whom the direct or indirect receipt of Real Estate Proceeds would have a
material adverse tax consequence on such Member.  For the avoidance of doubt,
MWP and PGGM PRE Fund are Non-U.S. Members.

 

“Offer Price” has the meaning ascribed thereto in Section 9.2(a)(ii).

 

“Offeree” has the meaning ascribed thereto in Section 9.2(a).

 

“Offering Notice” has the meaning ascribed thereto in Section 9.2(a).

 

“Offeror” has the meaning ascribed thereto in Section 9.2(a).

 

“Operating Expenses” has the meaning ascribed thereto in Section 5.4.

 

“Option Period” has the meaning ascribed thereto in Section 9.2(b).

 

“Original Agreement” has the meaning ascribed thereto in the recitals to this
Agreement.

 

“Percentage Interest” means, as to any Member and with respect to any Project,
its percentage ownership interest in the Venture with respect to such Project as
set forth in Exhibit A, as the same may be amended from time to time.

 

“Permitted Temporary Investments” means investments in (i) U.S. government and
agency obligations with maturities of not more than one (1) year and one (1) day
from the date of acquisition, (ii) commercial paper with maturities of not more
than six (6) months and one (1) day from the date of acquisition and having a
rating assigned to such commercial paper by Standard & Poor’s Ratings Services
or Moody’s Investors Service, Inc. (or, if neither such organization shall rate
such commercial paper at such time, by any nationally recognized rating
organization in the United States of America) equal to one of the two highest
commercial paper ratings assigned by such organization, it being understood that
as of the date hereof such ratings

 

6

--------------------------------------------------------------------------------

 

by Standard and Poor’s Rating Services are “P1” and “P2” and such ratings by
Moody’s Investors Service, Inc. are “A1” and “A2,” (iii) interest bearing
deposits in U.S. banks with an unrestricted surplus of at least $250 million,
maturing within one (1) year and (iv) money market mutual funds with assets of
not less than $500 million, substantially all of which assets are believed by
the Manager to consist of items described in the foregoing clause (i), (ii) or
(iii).

 

“Person” means an individual or Entity.

 

“PGGM PRE Fund” means Stichting Depositary PGGM Private Real Estate Fund, a
Dutch foundation, acting in its capacity as depositary of and for the account
and risk of PGGM Private Real Estate Fund, a Dutch fund for the joint account of
the participants (fonds voor gemene rekening).

 

“Prime Rate” means the highest prime rate (or base rate) reported in the Money
Rates column or section of The Wall Street Journal published on the second
Business Day of each month as having been the rate in effect for corporate loans
at large United States money center commercial banks (whether or not such rate
has actually been charged by any such bank) as of the first Business Day of such
month for which such rate is published.  The Prime Rate shall change monthly and
shall be effective for the entire calendar month.  If The Wall Street Journal
ceases publication of the Prime Rate, the “Prime Rate” shall mean the prime rate
(or base rate) announced by JPMorgan Chase & Co., New York, New York or its
successors (whether or not such rate has actually been charged by such bank). 
If such bank discontinues the practice of announcing the Prime Rate, the “Prime
Rate” shall mean the highest rate charged by such bank on short-term, unsecured
loans to its most creditworthy large corporate borrowers.

 

“Prior Operating Plan” has the meaning ascribed thereto in Section 6.2(b).

 

“Profits” or “Losses” means, for each period taken into account under Article 4,
an amount equal to the Venture’s taxable income or taxable loss for such period,
determined in accordance with U.S. federal income tax principles, adjusted to
the extent the Manager determines that such adjustment is necessary to comply
with the requirements of Section 704(b) of the Code.

 

“Prohibited Member” means any Person who is (i) a “designated national,”
“specially designated national,” “specially designated terrorist,” “specially
designated global terrorist,” “foreign terrorist organization,” or “blocked
person” within the definitions set forth in the regulations of the United States
Treasury Department’s Office of Foreign Assets Control; (ii) acting on behalf
of, or a Person owned or controlled by, any government against whom the United
States maintains economic sanctions or embargoes under the regulations of the
United States Treasury Department, including, but not limited to, the
“Government of Sudan,” the “Government of Iran” and the “Government of Cuba”;
(iii) within the scope of Executive Order 13224—Blocking Property and
Prohibiting Transactions with Persons who Commit, Threaten to Commit, or Support
Terrorism, effective September 24, 2001; (iv) subject to additional restrictions
imposed by the following statutes (or regulations and executive orders issued
thereunder): the Trading with the Enemy Act, the Iraq Sanctions Act, the
National Emergencies Act, the Antiterrorism and Effective Death Penalty Act of
1996, the International Emergency Economic Powers Act, the United Nations
Participation Act, the International Security and

 

7

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Development Cooperation Act, the Nuclear Proliferation Prevention Act of 1994,
the Foreign Narcotics Kingpin Designation Act, the Iran and Libya Sanctions Act
of 1996, the Cuban Democracy Act, the Cuban Liberty and Democratic Solidarity
Act, and the Foreign Operations, Export Financing, and Related Programs
Appropriations Act; (v) designated or blocked, associated or involved in
terrorism, subject to restrictions under laws, regulations or executive orders
similar to, or any other law, regulation or executive order of similar import
as, those set forth above under the preceding clauses (i) through (iv), if and
to the extent such laws, regulations or executive orders are in effect; or
(vi) as any of the laws, regulations or executive or other orders in the
preceding clauses (i) through (v) may be amended, supplemented, adjusted,
modified, reviewed or interpreted from time to time.

 

“Project” means each of Argenta, Stonegate and West Village.

 

“Project Net Capital” means, for each Member for each Project, the Member’s net
capital attributable to such Project.  The Manager, in its reasonable
discretion, shall determine each Member’s Project Net Capital attributable to
each Project from time to time.  Each Member’s Project Net Capital attributable
to each Project shall equal (i) all Capital Contributions of such Member (or its
predecessor) that were used to acquire such Project or are otherwise used in
connection with such Project; minus (ii) all Net Cash Flow attributable to such
Project that has been distributed to such Member (or its predecessor).  For the
avoidance of doubt, the Project Net Capital for BH MP in respect of Argenta and
West Village is and shall hereafter be zero and the Project Net Capital for MWP
in respect of Stonegate is and shall hereafter be zero.

 

“Purchase Agreements” has the meaning ascribed thereto in the recitals to this
Agreement.

 

“Purchase Price” has the meaning ascribed thereto in Section 9.2(d)(i).

 

“Purchaser” has the meaning ascribed thereto in Section 9.2(d)(i).

 

“Purchaser Venture” has the meaning ascribed thereto in Section 9.2(e)(i).

 

“Qualifying Opinion” means a written opinion of outside, reputable tax counsel
licensed to practice law in the United States and acting reasonably.

 

“Real Estate Proceeds” means proceeds from the direct sale of any Project (as
opposed to proceeds from the sale of interests in the Subsidiary REIT or a
Sub-Sub REIT).

 

“REIT” means a real estate investment trust under the Code.

 

“REIT Disposition Requirement” has the meaning ascribed thereto in
Section 2.6(b)(i).

 

“Seller” has the meaning ascribed thereto in Section 9.2(d)(i).

 

“Senior Executives” has the meaning ascribed thereto in Section 8.3(a).

 

“Shares” means the shares of beneficial interests (including, for the avoidance
of doubt, membership interests) in the Subsidiary REIT or a Sub-Sub REIT, as
applicable.

 

8

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“Stonegate” has the meaning ascribed thereto in the recitals to this Agreement.

 

“Subsequent Operating Plan” has the meaning ascribed thereto in Section 6.2(b).

 

“Subsidiary REIT” means Behringer Harvard Waterford Place REIT, LLC, a
subsidiary of the Venture.

 

“Substitute Capital” has the meaning ascribed thereto in Section 3.4(c).

 

“Substituted Purchase Price” has the meaning ascribed thereto in
Section 9.2(d)(i).

 

“Substituted Purchaser” has the meaning ascribed thereto in Section 9.2(d)(i).

 

“Sub-Sub REIT” means any subsidiary of the Subsidiary REIT that is or is
required by this Agreement or the Purchase Agreements to become structured as a
REIT under the Code.

 

“Tax Matters Partner” has the meaning ascribed thereto in Section 6231(a)(7) of
the Code.

 

“Taxes” means all taxes, charges, fees, duties, levies or other assessments,
including without limitation, income, gross receipts, net proceeds, ad valorem,
turnover, real and personal property (tangible and intangible), sales, use,
franchise, excise, value added, stamp, leasing, lease, user, transfer, fuel,
excess profits, occupational and interest equalization, windfall profits,
severance and employees’ income withholding and Social Security taxes, which are
imposed by the United States, or any state, local or foreign government or
subdivision or agency thereof, and such term shall include any interest,
penalties or additions to tax attributable to such Taxes.

 

“Tax Return” means any report, return or other information required to be
supplied to a taxing authority in connection with Taxes.

 

“Transfer” means to give, sell, assign, pledge, hypothecate, devise, bequeath or
otherwise dispose of, transfer or permit to be transferred, during life or at
death.  The term “Transfer,” when used as a noun, means any Transfer
transaction.

 

“U.S. GAAP” means U.S. generally accepted accounting principles at the time in
effect.

 

“U.S. Person” means a “U.S. Person” as such term is defined in
Section 7701(a)(30) of the Code.

 

“Venture” has the meaning ascribed thereto in the recitals to this Agreement.

 

“Waterford SPE” has the meaning ascribed thereto in Section 13.5(c).

 

“West Village” has the meaning ascribed thereto in the recitals to this
Agreement.

 

9

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ARTICLE 2

 

THE VENTURE

 

2.1                               Formation of Venture.  The Venture has been
formed as a limited liability company pursuant to the provisions of the Act, and
the rights and liabilities of the Members shall be as provided in the Act except
as herein otherwise expressly provided.

 

2.2                               Venture Name and Principal Office.  The name
of the Venture shall be “Behringer Harvard Waterford Place Venture, LLC” or such
other name as the Manager may determine.  The principal place of business and
the principal administrative office of the Venture shall be 15601 Dallas
Parkway, Suite 600, Addison, Texas 75001.  The Venture may change such office
and may have such additional offices as the Manager may determine.

 

2.3                               Office of and Agent for Service of Process. 
The registered office of the Venture in the State of Delaware shall be 2711
Centerville Road, Suite 400, Wilmington, Delaware 19808 and the Venture’s agent
for service of process on the Venture in the State of Delaware shall be
Corporation Service Company.  The Venture may change, at any time and from time
to time, the location of such registered office and/or such registered agent
upon written notice of the change to the Members.

 

2.4                               Term of the Venture.  The term of the Venture
commenced on the date the Certificate was first filed with the Secretary of
State of the State of Delaware.  Unless sooner terminated as hereinafter
provided or by operation of law, the term of the Venture shall continue until
December 31, 2057.

 

2.5                               Title to Assets.  Record title to all assets
acquired by the Venture shall be held in the name of the Venture, and no Member
shall have any property interest in such assets.

 

2.6                               Purpose and Powers.

 

(a)                                 The Venture has been organized for the
object and purpose of investing in each Project through the Subsidiary REIT,
owning, managing, supervising and disposing of such investment as provided in
this Agreement, sharing the profits and losses therefrom and engaging in such
activities necessary, incidental or ancillary thereto and in any other lawful
act or activity in furtherance of the foregoing for which limited liability
companies may be organized under the Act.  Notwithstanding any other provision
of this Agreement, the Venture, and the Manager on behalf of the Venture, may
execute, deliver and perform such agreements and documents as the Manager
determines are necessary or desirable for the formation, organization and
continuation of the Venture.  Any provision herein regarding the purpose and
powers of the Venture and the authorization of actions hereunder may be done
through the Subsidiary REIT (and any subsidiary thereof).  In furtherance of
this purpose, subject to the limitations and restrictions set forth elsewhere in
this Agreement, including, without limitation, Section 6.3 hereof, the Venture
shall have all powers necessary, suitable or convenient for the accomplishment
of the aforesaid purpose, as principal or agent, including, without limitation,
all of the powers that may be exercised by the Manager on behalf of and, except
as specifically provided herein, at the expense

 

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of, the Venture pursuant to this Agreement or the Act, and further including,
without limitation, the following:

 

(i)            to organize or cause to be organized the Subsidiary REIT and any
subsidiary thereof and to act as manager of the Subsidiary REIT, and to exercise
all of the powers, duties, rights and responsibilities associated therewith;

 

(ii)           to borrow money, encumber assets and otherwise incur recourse and
non-recourse indebtedness (including, without limitation, the issuance of
guarantees of the payment or performance of obligations by any Person) in
connection with or in furtherance of the acquisition or development or the
financing or refinancing of any Project;

 

(iii)          to improve, develop, redevelop, construct, reconstruct, maintain,
renovate, rehabilitate, reposition, manage, lease, mortgage and otherwise deal
with the assets and/or businesses of the Venture;

 

(iv)          to lend money on a secured or unsecured basis and, if applicable,
in connection therewith take as collateral a mortgage or pledge of any real or
personal property and to extend or modify the terms of any such financing;

 

(v)           to alter or restructure the Venture’s investment in any Project at
any time during the term of the Venture without any precondition that the
Manager make any distributions to the Members in connection therewith;

 

(vi)          to make additional investments in any Project (including, without
limitation, additional investments made to finance any capital improvements,
tenant improvements or other improvements or alterations to any property
constituting such Project or otherwise to protect the Venture’s investment in
such Project or to provide working capital for such Project);

 

(vii)         to invest the Venture’s funds in Permitted Temporary Investments;

 

(viii)        to pay commissions, fees or other charges to Persons that may be
applicable in connection with any transactions entered into by or on behalf of
the Venture;

 

(ix)          to open, maintain and close bank accounts and draw checks and
other orders for the payment of moneys;

 

(x)           to engage outside accountants, custodians, appraisers, attorneys,
property managers, leasing brokers and any and all other third-party agents and
assistants, both professional and nonprofessional, and to compensate them in
such reasonable degree and manner as the Manager may deem necessary or
advisable;

 

(xi)          subject to Section 2.6(b), to enter into, make and perform all
contracts, agreements and other undertakings as may be necessary or advisable or
incidental to carrying out its purpose, including, without limitation, such
agreements as the Manager deems necessary or appropriate for the operation,
management, financing, sale or other disposition of each Project or as otherwise
contemplated by this Agreement;

 

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(xii)         to sue and be sued, to prosecute, arbitrate, settle or compromise
all claims of or against third parties, to compromise, arbitrate, settle or
accept judgment with respect to claims of or against the Venture and to execute
all documents and make all representations, admissions and waivers in connection
therewith;

 

(xiii)        to make any and all elections and filings for federal, state,
local and foreign tax purposes, including, without limitation, any consent
dividend on IRS Form 972;

 

(xiv)        to purchase, and otherwise enter into contracts of, insurance
(including, without limitation, property and casualty insurance, terrorism
insurance, and liability insurance in respect of any liabilities for which the
Venture, the Manager or any other Indemnified Party would otherwise be entitled
to indemnification under this Agreement);

 

(xv)         to enter into and perform the terms of any credit facility as
borrower or guarantor and cause the Subsidiary REIT to enter into and perform
the terms of any credit facility as borrower, including, without limitation,
repaying borrowings under any credit facility on behalf of the Venture;

 

(xvi)        to do such other things and engage in such other activities as the
Manager may deem necessary, convenient or advisable with respect to the conduct
of the business of the Venture, and have and exercise all of the powers and
rights conferred upon limited liability companies formed pursuant to the Act.

 

(b)           (i)            Subject to Section 6.3(c), the interest in each
Project owned by the Venture may only be sold, exchanged or otherwise disposed
of (A) by selling, exchanging or otherwise disposing of for cash the Venture’s
Shares in the Subsidiary REIT or causing the Subsidiary REIT to sell, exchange
or otherwise dispose of its membership interests in any Sub-Sub REIT that has
made a valid REIT election pursuant to Section 13.5(c), or (B) in connection
with a like-kind exchange of any Project pursuant to Section 1031 of the Code
that does not result in the recognition of any taxable gain to the Subsidiary
REIT or a Sub-Sub REIT, an involuntary conversion of any Project pursuant to
Section 1033 of the Code that does not result in the recognition of any taxable
gain to the Subsidiary REIT or a Sub-Sub REIT, or any other disposition or
transfer that pursuant to a nonrecognition provision in the Code does not result
in the recognition of any taxable gain to the Subsidiary REIT or a Sub-Sub REIT;
provided that, in a transaction within the description of the foregoing clause
(B) the Members with an interest in the applicable Project agree on the asset or
assets to be acquired as a result of such transaction (the “REIT Disposition
Requirement”).

 

(ii)           The Manager shall use “Best Efforts” to cause the Subsidiary REIT
and each Sub-Sub REIT that has made a valid REIT election pursuant to
Section 13.5(c) to satisfy the requirements for taxation as a
Domestically-Controlled REIT; provided, however, that the Manager and its
Affiliates shall not be required to engage in any transaction with, or on behalf
of, the Venture or contribute additional capital to the Venture in connection
with such obligation.  For purposes of the foregoing sentence, the Manager’s
“Best Efforts” means that (A) no Capital Contribution shall be accepted and no
redemption of interests in the Venture shall be allowed if as a result thereof
more than forty-nine percent (49%) of the interests in the Subsidiary REIT or
any Sub-Sub REIT that has made a valid REIT election pursuant to Section 13.5(c)

 

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would be held, directly or indirectly (including, without limitation, through
the Venture) by Persons that are not U.S. Persons, and (B) no Transfer of less
than all of the Venture’s interest in the Subsidiary REIT or the Subsidiary
REIT’s interest in any Sub-Sub REIT that has made a valid REIT election pursuant
to Section 13.5(c) shall be permitted if such Transfer would result in the
Subsidiary REIT or any such Sub-Sub REIT no longer qualifying as a
Domestically-Controlled REIT.  In satisfying the requirements of this
Section 2.6(b)(ii), in the absence of actual knowledge to the contrary, the
Manager shall be entitled to rely upon the most recent written representations
of the direct or indirect partners or members and prospective partners or
members of the Venture regarding the extent to which they are, or are owned by,
U.S. Persons.

 

(iii)                               The Manager shall cause the limited
liability company agreement, charter or other governing document of the
Subsidiary REIT and each Sub-Sub REIT to provide that any Transfer that, if
effective, would result in the interests in the Subsidiary REIT or any Sub-Sub
REIT being beneficially owned (as provided in Section 856(a) of the Code) by
fewer than 100 Persons (determined without reference to any rules of
attribution) shall be void ab initio as to the Transfer of any interest in the
Subsidiary REIT or any Sub-Sub REIT which would be otherwise beneficially owned
(as provided in Section 856(a) of the Code) by the transferee and that the
intended transferee shall acquire no rights in such interest.

 

(iv)                              The provisions of Sections 2.6(b)(i) and
(ii) shall not apply if either (A) there is not at least one Non-U.S. Member or
(B) the Venture has received a Qualifying Opinion (from counsel reasonably
acceptable to MWP and PGGM PRE Fund) that there has been a change in applicable
U.S. law that eliminates the material adverse tax consequence relating to the
receipt by a Non-U.S. Member of Real Estate Proceeds.

 

ARTICLE 3

 

MEMBERS AND CAPITAL CONTRIBUTIONS

 

3.1                               Members; Capital Contributions.  The name,
address and Capital Account of each Member for each Project as of the date of
this Agreement shall be as set forth on Exhibit A.  Except as otherwise provided
in Section 3.3 or unless otherwise agreed by the Members, no Member shall have
any right or obligation to fund any additional Capital Contributions to the
Venture.

 

3.2                               Capital Calls.  The Manager from time to time
may call for payment of additional Capital Contributions in accordance with
Section 3.3.  Each such call for contributions of capital from the Members shall
be made in accordance with their respective Percentage Interests for the
applicable Project (it being understood that, to the extent such Capital Call is
related to Argenta or West Village, BH MP shall not make a Capital Contribution
under this Article 3 and to the extent such Capital Call is related to
Stonegate, MWP shall not make a Capital Contribution under this Article 3). 
Except as provided in Section 3.3 or otherwise agreed by each Member with an
interest in the applicable Project, no Member shall be required to make any
Capital Contribution to the Venture.

 

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3.3                               Additional Capital Contributions.

 

(a)                                 If at any time, and from time to time,
additional cash in excess of Net Cash Flow and other funds available to the
Venture is required by the Venture (i) in order to pay any Operating Expenses
(which shall be allocated to the Projects by the Manager in good faith), or
(ii) in respect of any Project, including in order to pay the costs of
maintenance, repairs, capital improvements, replacements or other expenses
necessary to comply with lease or other contractual obligations of the
Subsidiary REIT (or any subsidiary thereof that owns any Project) and to keep
each Project in good condition and repair, then the Manager may make a Capital
Call for additional capital from the Members in proportion to their respective
Percentage Interests for such Project in an amount believed in good faith by the
Manager to be the amount needed to fund the cash needs of the Venture with
respect to such Project, and in such event shall provide the Members with not
less than thirty-five (35) days’ advance notice of the date on which such
contributions are required to be made; provided, however, that if the Manager
determines in its reasonable discretion that such additional Capital
Contributions are required prior to the expiration of such advance notice
period, then the Manager may, at its election, make a loan to the Venture (a
“Member Loan”) of the aggregate amount that each Member was requested to
contribute to the Venture pursuant to this Section 3.3, which Member Loan shall
accrue interest in accordance with Section 3.4(b) and, if not repaid pursuant to
Section 3.3(b), be repaid in accordance with Sections 3.4(b) and 5.1; provided,
further, that BH MP shall not make any additional Capital Contribution to the
extent the Capital Call is related to Argenta or West Village and MWP shall not
make any additional Capital Contribution to the extent the Capital Call is
related to Stonegate.  The Manager shall provide prompt written notice to the
Members upon the Manager making any such Member Loan or upon BH Waterford making
any such additional Capital Contribution to the Venture.

 

(b)                                 If the Manager makes a Member Loan as set
forth in Section 3.3(a) above, the Manager shall cause such Member Loan to be
repaid (including principal and any unpaid accrued interest) promptly upon the
other Member(s) making the requested additional Capital Contributions to which
such Member Loan relates.  If such other Member(s) does not make the requested
additional Capital Contribution by the later of (i) five (5) Business Days after
the Manager has provided written notice that BH Waterford has made its
corresponding Capital Contribution and (ii) the expiration of the thirty-five
(35) day period referred to in Section 3.3(a) and thereafter becomes a
Non-Funding Member, the Manager shall cause the portion of such Member Loan
representing its requested additional Capital Contribution (together with any
unpaid accrued interest thereon) to be treated as such additional Capital
Contribution, and cause the portion of such Member Loan representing the
requested Capital Contribution of the Non-Funding Member(s) (together with any
unpaid accrued interest thereon) to be treated as (i) Substitute Capital
pursuant to Section 3.4(c), or (ii) a Member Loan, such election to be made
within thirty (30) days of the occurrence of the Funding Event with respect to
such Non-Funding Member by delivering notice of such election to each Member. 
In the event that the Manager does not make such an election within thirty (30)
days after the date a Member becomes a Non-Funding Member pursuant to the prior
sentence, the Manager shall be deemed to have elected to treat such amount as a
Member Loan.

 

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3.4                               Failure to Make Capital Contributions.

 

(a)                                 If, for any reason, a Member (the
“Non-Funding Member”) (i) does not confirm in writing to the Manager its intent
to make an additional Capital Contribution pursuant to Section 3.3 within thirty
(30) days after the related Capital Call, or (ii) does not make its additional
Capital Contribution within the later of (x) thirty-five (35) days after the
related Capital Call (provided the condition described in the final sentence of
Section 3.3(a) has been satisfied, if applicable) and (y) five (5) Business Days
after such Member has received written notice that BH Waterford has funded its
portion of the requested Capital Contribution (each of the events described in
clauses (i) and (ii), a “Funding Event”), the Member who has made, or is
prepared to make, its contribution of such capital (the “Funding Member”) may,
at its election (unless the Funding Member has already made a Member Loan, in
which case Section 3.3(b) shall govern rather than this sentence), and within
thirty (30) days of such Funding Event make its Capital Contribution to the
Venture pursuant to Section 3.3 and (A) make a Member Loan to the Venture in
accordance with Section 3.4(b), or (B) contribute additional Substitute Capital
to the Subsidiary REIT in accordance with Section 3.4(c).

 

(b)                                 Upon the occurrence of a Funding Event, the
Funding Member may make a Member Loan to the Venture in the amount that the
Non-Funding Member was requested to contribute to the Venture pursuant to
Section 3.3.  Each Member Loan shall be repaid by the Venture on a priority
basis from available Net Cash Flow that would otherwise be distributed to the
Non-Funding Member, including Net Cash Flow resulting from any sale or
disposition of interests in the Subsidiary REIT, any Sub-Sub REIT or any other
asset of the Venture.  The Capital Account of such Funding Member shall not be
credited with the amount of any Member Loan made by such Funding Member to the
Venture, and the repayment of a Member Loan by the Venture shall not constitute
a return of Capital Contributions or otherwise reduce the Capital Account of
such Funding Member.  Each Member Loan shall bear interest on the unpaid
principal amount thereof from time to time outstanding from the date advanced
until repaid, at six percent (6%) per annum plus the Prime Rate (compounded
annually), and all payments made thereon shall be applied first toward payment
of unpaid accrued interest and then (if anything remains) toward payment of
principal.

 

(c)                                  Upon the occurrence of a Funding Event, the
Funding Member may contribute, or cause one or more of its Affiliates to
contribute, the amount (the “Substitute Capital”) that the Non-Funding Member
was requested to contribute to the Venture pursuant to Section 3.3.  Unless
otherwise agreed by the Non-Funding Member, the Funding Member (or one or more
of its Affiliates) shall contribute the Substitute Capital to the Subsidiary
REIT.  In consideration of the contribution of the Substitute Capital, the
Subsidiary REIT shall issue Shares to the Funding Member (or one or more of its
Affiliates) contributing the Substitute Capital based on the value of the
outstanding Shares of the Subsidiary REIT attributable to the Project(s) to
which the underlying Funding Event relates as determined in accordance with this
Section 3.4(c).  The number of Shares to be issued by the Subsidiary REIT in
consideration of the contribution of Substitute Capital shall equal the amount
of such Substitute Capital divided by the value of a Share of the Subsidiary
REIT, which value shall be determined by the net asset value of the Subsidiary
REIT, based upon the valuation of such Project specified in this
Section 3.4(c) and the Subsidiary REIT’s interest in the Sub-Sub REIT holding
such Project and taking into account the fair value of any other assets and the
liabilities of the Subsidiary REIT

 

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(including the other Projects) and the number of Shares of the Subsidiary REIT
outstanding immediately prior to the contribution of the Substitute Capital. 
The value of each Project shall be determined based on a valuation (or an update
of the most recent valuation) that has been prepared within the three months
preceding the contribution of the Substitute Capital to the Subsidiary REIT and
made by an independent third-party appraiser at the cost of the Venture;
provided, however, that if there has been any event that in the reasonable
judgment of the Manager has had a material effect (whether beneficial or
adverse) on such Project since the date of such valuation, a new valuation or an
update of the most recent valuation shall be obtained for the valuation of such
Project.

 

(d)                                 If the Manager fails to make any required
Capital Contribution within the thirty-five (35) day period contemplated in
Section 3.3(a) above, the related Capital Call shall be deemed to have been
withdrawn, the Manager shall deliver prompt written notice to each Member of
such withdrawal, and any Capital Contributions of other Members with respect
thereto shall be returned promptly to such other Members.

 

3.5                               Return of Capital Contributions.  Except as
otherwise expressly provided herein, (i) the Capital Contributions of a Member
will be returned to that Member only in the manner and to the extent provided in
this Article 3 and in Articles 5, 10 and 11, (ii) except to the extent provided
in this Article 3 and in Articles 5, 10 and 11, no Member shall have any right
to demand or receive the return of any Capital Contribution to the Venture, and
(iii) subject to Section 9.2, no Member shall have the right or, subject to
Sections 9.2 and 11.3(a)(ii), the obligation to receive a distribution of
property other than cash.  No Member shall be entitled to interest on any
Capital Contribution or Capital Account notwithstanding any disproportion
therein as between the Members.  No Member shall be liable for the return of any
portion of the Capital Contributions of the Members, and the return of such
Capital Contributions shall be made solely from, and to the extent of, available
Venture assets.  No Member shall be entitled to withdraw from the Venture.

 

3.6                               Capital Account.  The Venture has established
and shall maintain throughout the life of the Venture for each Member a separate
capital account (“Capital Account”) in accordance with Section 704(b) of the
Code.  Such Capital Account shall be increased by (i) the amount of the Capital
Contributions made by such Member to the Venture pursuant to this Agreement, and
(ii) all items of income and gain allocated to such Member pursuant to
Section 4.1; and such Capital Account shall be decreased by (A) the amount of
cash and property distributed to such Member pursuant to this Agreement and
(B) all items of loss and deduction allocated to such Member pursuant to
Section 4.1.  Any other Venture item which is required or authorized under
Section 704(b) of the Code to be reflected in the Capital Accounts shall be so
reflected.

 

3.7                               Transfer of Capital Account.  The original
Capital Account established for each transferee shall be in the same amount as
the Capital Account or portion thereof of the Member for such Project which such
transferee succeeds, at the time such transferee is admitted to the Venture. 
The Capital Account of any Member whose Percentage Interest with respect to a
Project shall be increased by means of the Transfer to it of all or part of the
Interest of another Member with respect to such Project shall be appropriately
adjusted to reflect such Transfer.  Any reference in this Agreement to a Capital
Contribution of, or distribution to, a then-Member

 

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shall include a Capital Contribution or distribution, as the case may be,
previously made by or to any prior Member on account of the Interest of such
then-Member.

 

3.8                               Tax Matters Partner.  BH Waterford shall
initially be the Venture’s Tax Matters Partner, with all of the powers that
accompany such status (except as otherwise provided in this Agreement).  If BH
Waterford is removed as the Manager pursuant to Section 6.9 or otherwise ceases
to be a Member, the remaining Members shall promptly appoint a successor Tax
Matters Partner, which may be either Member.  BH Waterford or any successor Tax
Matters Partner shall cause each Member to be a “notice partner” (as defined in
Section 6231(a)(8) of the Code) with respect to the Venture.  Promptly following
the written request of the Tax Matters Partner, the Venture shall, to the
fullest extent permitted by law, reimburse and indemnify the Tax Matters Partner
for all reasonable expenses, including, without limitation, reasonable legal and
accounting fees, claims, liabilities, losses and damages incurred by the Tax
Matters Partner in connection with any administrative or judicial proceeding
with respect to the tax liability of the Members.  The provisions of this
Section 3.8 shall survive the termination of the Venture and shall remain
binding on the Members for as long a period of time as is necessary to resolve
with the Internal Revenue Service (the “IRS”) any and all matters regarding the
U.S. federal income taxation of the Venture or the Members.

 

3.9                               Liability for Venture’s Obligations.  Except
as otherwise provided by the Act, the debts, obligations and liabilities of the
Venture, whether arising in contract, tort or otherwise, shall be solely the
debts, obligations and liabilities of the Venture, and the Members shall not be
obligated personally for any such debt, obligation or liability solely by reason
of being a Member of the Venture.  Each Member shall be obligated to make
payment of its contributions of capital as and when due hereunder and other
payments as provided in this Agreement.

 

ARTICLE 4

 

ALLOCATIONS

 

4.1                               Allocation of Profits and Losses.

 

(a)                                 For each period for which Profits or Losses
are determined, the Manager shall determine the amount of Profits or Losses
attributable to each Project.  The Manager shall make such determination in the
Manager’s reasonable discretion based on such information and factors as the
Manager may from time to time determine to be relevant, including the
designations by the Subsidiary REIT of its distributions to the Venture, the
source and intended use of any reserves maintained by the Venture, and a
reasonable apportionment of Venture expenditures for administrative costs. 
Except as otherwise provided in this Section 4.1, Profits and Losses attributed
to each Project shall be allocated among the Members in proportion to the
Project Net Capital of each Member for such Project.

 

(b)                                 Notwithstanding anything to the contrary in
this Agreement, Profits and Losses shall be allocated as though this Agreement
contained (and there is hereby incorporated herein by reference) a qualified
income offset provision which complies with Treas. Reg.
§ 1.704-1(b)(2)(ii)(d) and minimum gain chargeback and partner minimum gain
chargeback provisions which comply with the requirements of Treas. Reg. §
1.704-2.

 

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(c)                                  In the event that any amounts paid or
payable to any Member or any Affiliate which the Venture deducted or intended to
deduct are disallowed as deductions for U.S. federal income tax purposes (or it
is determined that such amounts are no longer allowable as deductions), (i) the
amounts thus disallowed or no longer allowable will be allocated to the Member
which received them (or whose Affiliate received them) as income, and
(ii) notwithstanding any provision herein to the contrary, the balance of the
redetermined income or loss of the Venture for the taxable year in question
shall, to the extent permitted by law, be allocated among the Members to obtain
the same allocation of Venture income or loss (after giving effect to the income
allocated pursuant to clause (i) hereof) as would have been obtained for such
taxable year if the amounts thus disallowed or no longer allowable had been
proper deductions by the Venture.

 

4.2                               Tax Allocations.

 

(a)                                 Items of taxable income, gain, loss and
deduction shall be determined in accordance with Section 703 of the Code, and
except as otherwise provided in this Section 4.2, the Members’ distributive
shares of such items for purposes of Section 702 of the Code shall be determined
according to their respective shares of Profits or Losses (or items thereof) to
which such items relate.

 

(b)                                 In accordance with Section 704(c) of the
Code and the regulations thereunder, income, gain, loss, and deduction with
respect to any property contributed to the capital of the Venture shall, solely
for tax purposes, be allocated among the Members so as to take account of any
variation between the adjusted basis of such property to the Venture for U.S.
federal income tax purposes and its fair market value as of the date of
contribution.  In the event the book value of any Venture property is adjusted
pursuant to the Venture’s maintenance of Capital Accounts, subsequent
allocations of income, gain, loss, and deduction with respect to such asset
shall take account of any variation between the adjusted basis of such asset for
federal income tax purposes and its book value for Capital Account purposes in
the same manner as under Section 704(c) of the Code and the regulations
thereunder.  Any elections or other decisions relating to such allocations shall
be made by the Manager in any manner that reasonably reflects the purpose and
intention of this Agreement.

 

(c)                                  Allocations pursuant to this Section 4.2
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 Capital Account
or share of Profits, Losses or distributions pursuant to any provision of this
Agreement.

 

ARTICLE 5

 

DISTRIBUTIONS AND EXPENSES

 

5.1                               Distributions of Net Cash Flow.  The Net Cash
Flow of the Venture, as determined by the Manager, shall be distributed to the
Members on a monthly basis no later than fifteen (15) days following the end of
each month; provided that if a Member has not made a required Capital
Contribution and there exists a Member Loan in connection therewith, any
distribution otherwise payable to such Member under this Section 5.1 shall
instead be applied to

 

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such Member Loan (including unpaid accrued interest thereon).  For each monthly
period, the Manager shall determine the portion of Net Cash Flow that is
attributable to each Project.  The Manager shall attribute Net Cash Flow to each
Project in the Manager’s reasonable discretion based on such information and
factors as the Manager may from time to time determine to be relevant, including
the designations by the Subsidiary REIT of its distributions to the Venture, the
source and intended use of any reserves maintained by the Venture or any
subsidiary thereof, and a reasonable apportionment of Venture expenditures for
administrative costs.  Net Cash Flow attributed to each Project shall be
distributed to the Members in proportion to the Project Net Capital of each
Member for such Project; provided, however, that the initial $[880] of Net Cash
Flow of the Venture in each calendar month (which shall increase to the initial
$[2640] of Net Cash Flow of the Venture in each calendar month commencing on
[April 1, 2014]) shall be distributed as a fee to the Manager before any other
Net Cash Flow is distributed to any other Member and, upon the sale or
disposition of interests in the Subsidiary REIT or any Sub-Sub REIT that has
made a valid REIT election pursuant to Section 13.5(c), comprising all of the
interests of the Venture in Argenta or West Village, the first $[54,306] of Net
Cash Flow resulting therefrom shall be distributed to the Manager before any
other Net Cash Flow is distributed to any other Member, of which $[20,493] shall
be held by the Manager for use in connection with the redemption of the Shares
of the Subsidiary REIT upon its final disposition or liquidation.  Upon the sale
or disposition of interests in the Subsidiary REIT or any Sub-Sub REIT that has
made a valid REIT election pursuant to Section 13.5(c), comprising all of the
interests of the Venture in Stonegate, the first $[20,493] resulting therefrom
shall be distributed to and held by the Manager for use in connection with the
redemption of the Shares of the Subsidiary REIT upon its final disposition or
liquidation.  The Net Cash Flow resulting from any sale or disposition of
interests in the Subsidiary REIT, any Sub-Sub REIT or any other asset of the
Venture, or any refinancing, shall be distributed to the Members as soon as
reasonably practicable (but in any case within fifteen (15) days) after receipt
of such amounts, except in connection with (i) a reinvestment by the Venture of
any such amounts as set forth in any Subsequent Operating Plan or as otherwise
approved by the Advisory Committee, (ii) a like-kind exchange of any Project or
any of its assets pursuant to Section 1031 of the Code, (iii) a holdback of any
such amounts in escrow required by the terms of a purchase and sale agreement
entered into with a buyer that is not the Manager or its Affiliate or (iv) any
other event that would, in the Manager’s reasonable discretion after obtaining
the Consent of the Advisory Committee, make it impracticable to distribute such
amounts at such time.

 

5.2                               Tax Provisions.  In the event the Venture is
subject to any tax or other obligation that is attributable to the Interest of
one Member, but not all the Members, such tax or other obligation shall be
specially allocated to, and charged against the Capital Account of, such Member,
and the amounts otherwise distributable to such Member pursuant to this
Agreement shall be reduced by such amount but shall nevertheless be deemed to be
a distribution of such amount to such Member for all purposes of this Agreement.

 

5.3                               Priority.  Notwithstanding any other provision
of this Agreement, it is specifically acknowledged and agreed by each Member
that the Venture’s failure to pay any distribution pursuant to Section 5.1 to
such Member shall not give such Member creditor status with regard to such
unpaid amount; but rather such Member shall be treated only as a Member of
whatever class such Person is a Member, and not as a creditor with respect to
such unpaid amount, of the Venture.  This Section 5.3 is, as permitted by
Section 18-606 of the Act, intended to override the

 

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provisions of Section 18-606 of the Act relating to a member’s status and
remedies as a creditor, to the extent that such provisions would be applicable
in the absence of this Section 5.3.

 

5.4                               Operating Expenses.  The Venture shall bear
all other costs and expenses of the Venture’s activities and operations,
including without limitation the following: (i) Taxes of the Venture, fees and
expenses of professional advisors to the Venture, premiums for insurance
(including, without limitation, error and omissions, directors and officers and
other forms of liability insurance (other than the cost of liability insurance
for the Manager, its Affiliates and any of their respective officers, directors,
partners, members, shareholders and employees)) protecting the Venture, the
Manager and other Indemnified Persons and litigation costs of the Venture;
(ii) administrative expenses related to the Venture, including without
limitation, fees and expenses of accountants, lawyers and other professionals
incurred in connection with the Venture’s annual audit, financial reporting,
legal opinions and preparation of Tax Returns; (iii) the Venture’s proportionate
share of all fees, costs and expenses incurred in holding, appraising,
financing, selling or otherwise disposing of or otherwise dealing with the
Subsidiary REIT and the Projects (or the Venture’s interest therein);
(iv) indemnification expenses incurred pursuant to Section 7.2; and (v) all
other customary fees, costs and expenses of the Venture (collectively,
“Operating Expenses”).  The Manager may make one or more Capital Calls in
accordance with Article 3 in order to enable the Venture to pay any Operating
Expenses.

 

ARTICLE 6

 

MANAGEMENT RIGHTS, DUTIES, AND POWERS OF THE
MANAGER; TRANSACTIONS INVOLVING
THE MANAGER OR ITS AFFILIATES;
ADDITIONAL OR SUCCESSOR MANAGER

 

6.1                               Management of the Venture.

 

(a)                                 Right, Power and Authority of Manager. 
Except as provided in this Agreement, the Manager shall have the right, power
and authority to manage and control the day-to-day affairs of the Venture. 
Subject to Section 6.3 and except for any other provision of this Agreement that
requires the Consent of the Advisory Committee or the Members, any action taken
by the Manager on behalf of the Venture shall constitute the act of, and serve
to bind, the Venture, and no Member (in such capacity) shall have any vote on
any matter or the ability to bind the Venture.  In no event shall any Person
dealing with the Manager with respect to the conduct of the affairs of the
Venture be obligated to ascertain that the terms of this Agreement have been
complied with or be obligated to inquire into the necessity or expediency of any
action of the Manager.  The Manager shall be required to devote only such time
to the business of the Venture as is reasonably necessary to perform its
obligations under this Agreement.

 

(b)                                 Reliance on Officers of the Manager.  It is
understood and agreed that each officer of the Manager may act for and in the
name of the Manager under this Agreement.  In dealing with any officer of the
Manager acting for or on behalf of the Venture, no Person shall be required to
inquire into, and Persons dealing with the Venture are entitled to rely
conclusively on, the right, power and authority of any officer of the Manager to
bind the Venture.

 

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(c)                                  Limitations on the Manager. 
Notwithstanding anything herein to the contrary, the Manager and its Affiliates
shall not have authority or be entitled to (i) perform any act expressly
requiring the Consent of the Advisory Committee (including any Major Decision),
or any Member(s) as provided in Section 2.6(b), 3.1, 3.2, 3.4(c), 6.6, 6.8,
10.11, 14.3, 14.20 or 14.21, without first obtaining such Consent or without
such Consent being “deemed” to be given pursuant to Section 6.3(b); or
(ii) avoid the Manager’s ultimate responsibility under this Agreement by
delegation of authority, provided that this clause (ii) shall not prohibit
delegation of any of its duties or obligations hereunder as long as the Manager
retains ultimate responsibility for such duties and obligations; provided,
further, that the Manager shall retain ultimate responsibility for the
delegation of any of its duties or obligations to the Management Company (or
another Affiliate of BH Waterford) in connection with the performance of
property management, leasing and related services for the Projects.

 

(d)                                 No Obligation Other Than As Set Forth
Herein.  The Manager and its Affiliates shall not be obligated to do or perform
any act or thing in connection with the business of the Venture not expressly
set forth in this Agreement.

 

6.2                               Operating Plan.

 

(a)                                 The operating plans for each Project
covering the fiscal year ended December 31, 2011 are attached hereto as
Exhibit C, and the operations of each Project through the end of the fiscal year
ended December 31, 2011 shall be conducted in all material respects in
accordance with each such operating plan, except for any action or expenditure
the Manager deems reasonably necessary or appropriate in the event of an
emergency situation affecting such Project, as determined by the Manager in its
reasonable discretion, provided that prompt notice thereof is given to the
Members.

 

(b)                                 On or before December 1, 2011 and at least
sixty (60) days before the end of each fiscal year of the Venture ending on or
after December 31, 2012, the Manager shall prepare, or cause to be prepared, and
submit to the Advisory Committee for its review an initial draft operating plan
(a “Subsequent Operating Plan”) for each Project for the next succeeding fiscal
year of the Venture.  Each Subsequent Operating Plan for a Project shall contain
all material pertinent leasing, financing, capital improvements and
expenditures, operational and disposition information together with a detailed
budget of projected operating and capital expenses and revenues, insurance
coverage (including coverage types and policy limits) and any other information
deemed appropriate by the Manager for the applicable fiscal year.  Each
Authorized Representative may make comments on and suggestions for each
Subsequent Operating Plan, and if accepted by the Manager in its reasonable
discretion, such comments and suggestions shall be incorporated into a revised
Subsequent Operating Plan for such Project and the Manager shall cause the
operations of such Project for the applicable fiscal year to be conducted in all
material respects in accordance with such Subsequent Operating Plan.  If the
Manager does not accept, in whole or in part, the comments and suggestions of
each of the Authorized Representatives with respect to a Subsequent Operating
Plan and, as a result, the projected operating and capital expenses contemplated
by the Subsequent Operating Plan proposed to be adopted by the Manager exceeds
five percent (5%) of the aggregate operating and capital expenses proposed by
any Authorized Representative, then the Manager shall cause the operations of
the applicable Project to be conducted in all material respects in accordance
with

 

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the operating plan for the immediately preceding fiscal year (the “Prior
Operating Plan”); provided, however, that, (i) the Manager may increase each
item of operating and capital expenses in the Prior Operating Plan by up to five
percent (5%), and (ii) in the event of an emergency situation affecting such
Project, as determined by the Manager in its reasonable discretion, the Manager
may take, or cause to be taken, such action in respect of such emergency
situation as the Manager deems reasonably necessary or appropriate; provided
that the Manager promptly advises the Members of such emergency situation and
such action taken or caused to be taken.

 

6.3                               Major Decisions.

 

(a)                                 Notwithstanding anything to the contrary
contained in this Agreement (except as permitted in accordance with
Section 6.2), the Manager shall have no authority on behalf of the Venture to
take any action, make any decision, expend any sum or undertake or suffer any
obligation if to do so would constitute a Major Decision, unless such Major
Decision is approved in advance in writing by the Advisory Committee or “deemed”
to be approved in accordance with Section 6.3(b).  As used herein, “Major
Decision” means any decision of the Venture to do or take any of the following
actions, whether directly or indirectly through, or with respect to, the
Venture, the Subsidiary REIT or any subsidiary thereof (regardless of whether so
specified):

 

(i)                                     selling or otherwise disposing of all or
any part of a Project (including without limitation, the sale of the Venture’s
interest therein), or causing the Subsidiary REIT or any Sub-Sub REIT to sell or
otherwise dispose of all or any part of a Project, or Transferring any material
interest therein;

 

(ii)                                  selling or causing the sale of any
additional interests in the Venture, the Subsidiary REIT or any Sub-Sub REIT
(other than, in the case of the Subsidiary REIT or a Sub-Sub REIT, such number
of Shares as the Manager may reasonably determine to be necessary or appropriate
to permit the Subsidiary REIT or such Sub-Sub REIT to qualify or maintain its
status as a REIT);

 

(iii)                               incurring, materially restructuring or
materially modifying any indebtedness of the Venture, the Subsidiary REIT or any
Sub-Sub REIT in excess of $100,000 or causing the Venture, the Subsidiary REIT
or any Sub-Sub REIT to become liable as an endorser, guarantor, surety or
otherwise for any debt, obligation or undertaking of any other Person in excess
of $100,000 other than in accordance with the operating plan of the related
Project for the fiscal year ended December 31, 2011 or the applicable Subsequent
Operating Plan, as the case may be, except for (A) indebtedness of the Venture,
the Subsidiary REIT or any Sub-Sub REIT arising in the ordinary course of
business for trade payables, wages, taxes or otherwise for goods or services
rendered or provided to the Venture, the Subsidiary REIT or any such Sub-Sub
REIT, and (B) endorsements of the Venture, the Subsidiary REIT or any Sub-Sub
REIT for deposit or collection of checks, drafts and similar instruments
received by the Venture, the Subsidiary REIT or any such Sub-Sub REIT in the
ordinary course of business;

 

(iv)                              causing or permitting the Venture or the
Subsidiary REIT or any Sub-Sub REIT to mortgage, pledge or hypothecate a Project
(except pursuant to leases entered

 

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into in the ordinary course of business) to secure any indebtedness for borrowed
money of the Venture, the Subsidiary REIT or any Sub-Sub REIT other than in
accordance with the applicable operating plan for such Project for the fiscal
year ended December 31, 2011 or the applicable Subsequent Operating Plan, as the
case may be;

 

(v)                                 making any tax election or decision
affecting the tax treatment of any or all of the Members in connection with its
or their participation in the Venture other than as contemplated by Section 3.8;

 

(vi)                              determining that the Subsidiary REIT or any
Sub-Sub REIT shall no longer qualify and operate as a REIT;

 

(vii)                           Transferring any interest in the Venture to any
Person or admitting any Person as a Member of the Venture except in accordance
with Article 9;

 

(viii)                        approving an independent registered public
accounting firm other than Deloitte & Touche LLP to act as auditors pursuant to
Section 13.3 or Ernst & Young LLP to review or prepare Tax Returns pursuant to
Section 13.8;

 

(ix)                              approving or disapproving any transaction or
conflict of interest requiring the Consent of the Advisory Committee pursuant to
Section 6.4(b) or (d);

 

(x)                                 to the fullest extent permitted by law,
dissolving or liquidating, in whole or in part, making an assignment for the
benefit of any creditor, filing or otherwise initiating on behalf of the
Venture, the Subsidiary REIT or any subsidiary thereof a petition in bankruptcy,
or applying to any tribunal for the appointment of a custodian, receiver or any
trustee for it or for a substantial part of its property, commencing any
proceeding under any bankruptcy, insolvency, reorganization, arrangement,
readjustment of debt, dissolution or liquidation law or statute of any
jurisdiction, whether now or hereinafter in effect, consenting or acquiescing in
the filing of (or invoking or causing any Person to file) any such petition,
application or proceeding, or taking possession by a custodian, receiver,
liquidator, assignee, trustee, sequestrator (or other similar official) of the
Venture, the Subsidiary REIT or any subsidiary thereof or any substantial part
of its property, or admitting its inability to pay its debts generally as they
become due or authorizing any of the foregoing to be done or taken on behalf of
the Venture, the Subsidiary REIT or any subsidiary thereof, or consenting to or
acquiescing in (A) the filing or other initiation of an involuntary petition for
relief against the Venture, the Subsidiary REIT or any subsidiary thereof under
any Chapter of Title 11 of the United States Code, or (B) the appointment of any
trustee, receiver, conservator, assignee, sequestrator, custodian, liquidator
(or other similar official) for the Venture, the Subsidiary REIT or any
subsidiary thereof of all or substantially all of its assets; or

 

(xi)                              consolidating or merging with or into any
other Entity, or purchasing or otherwise acquiring all or substantially all of
the assets or any stock or shares of any class of any Entity, or redeeming or
reacquiring any Interests, or otherwise engaging in any recapitalization, joint
venture or other business combination.  For the avoidance of doubt, this
Section 6.3(a)(xi) applies to actions of the Manager on behalf of the Venture
and does not restrict

 

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BH Multifamily REIT, Behringer Holdings or any of their respective Affiliates
(other than the Venture and its subsidiaries) in any respect.

 

(b)                                 In connection with any proposed Consent to a
Major Decision, the Manager shall provide the Authorized Representatives with
such information as they may reasonably request and as shall be reasonably
available to the Manager (or, in the case of Section 6.3(a)(v), the affected
Member(s)) to make a prudent judgment whether to approve or disapprove the
proposed action.  The Manager shall give the Advisory Committee not less than
five (5) Business Days’ advance written notice of, and request its Consent to,
each proposed Major Decision.  Should a Member’s Authorized Representative fail
to respond to a Consent request with respect to a Major Decision within five
(5) Business Days from when such notice is given, the Manager shall issue a
second conspicuously marked notice to the applicable Authorized Representative
seeking Consent to the proposed Major Decision.  Should the Authorized
Representative of such Member fail to respond to the second Consent request with
respect to the Major Decision within five (5) Business Days from when such
notice is given, such Authorized Representative shall conclusively be deemed to
have granted its Consent to such Major Decision (other than a Major Decision
identified in Section 6.3(a)(i), (ii), (vi), (x) or (xi) which shall require the
affirmative Consent of the Advisory Committee) and shall waive any right to
withdraw such Consent or otherwise object to such Major Decision, provided that
the notice must indicate that it will become effective at the expiration of such
second, five (5) Business Day period in order to become effective in such
manner.

 

(c)                                  If the Advisory Committee determines (which
determination shall require the approval of the BH Representative and the MP
Representative in the case of Stonegate and the BH Representative and the MWP
Representative in the case of Argenta and West Village) to cause a Sub-Sub REIT
to sell or otherwise dispose of a Project (rather than through a sale of the
Venture’s interest in the Subsidiary REIT or the Subsidiary REIT’s interest in a
Sub-Sub REIT as set forth in Section 2.6(b)) pursuant to Section 6.3(a), the
Manager shall cause the Subsidiary REIT and the applicable Sub-Sub REIT to be
liquidated, and the Sub-Sub REIT’s interest in the Project distributed in-kind
to the Venture, which shall then sell or otherwise dispose of such Project in
the manner approved by the Advisory Committee.  Notwithstanding any provision of
this Agreement to the contrary, a Member may Transfer all or a portion of its
Interest to an Affiliate in connection with the transactions contemplated by
this Section 6.3(c).

 

6.4                               Business with Affiliates; Other Activities.

 

(a)                                 The Venture, directly or through the
Subsidiary REIT, has invested in the Projects, notwithstanding that BH
Multifamily REIT or its Affiliate may have held a material (or lesser) interest
in the Projects or that the Projects have been developed by Behringer Holdings
or any of its Affiliates.

 

(b)                                 Subject to obtaining the Consent of the
Advisory Committee, the Venture, directly or through the Subsidiary REIT (and
any other Person to which any of the foregoing are related or in which any of
the foregoing are interested), may, as necessary or appropriate, engage in any
transaction with or employ or retain Behringer Holdings or any of its Affiliates
(including BH Multifamily REIT and its Affiliates) to provide services
(including, without limitation, administration, accounting, construction
management, data processing, development,

 

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engineering, environmental, financing, insurance brokerage, management and
servicing, leasing, legal, market research, mortgage financing, property
management or other similar services) that would otherwise be performed for the
Venture or the Subsidiary REIT by third parties on terms (including, without
limitation, the consideration to be paid) that are determined by the Manager to
be fair and reasonable to the Venture or the Subsidiary REIT, as the case may
be, and such Persons may receive from the Venture (and any such other Person)
reasonable compensation (including, without limitation, salary, salary related
employment costs and expenses of the employees who provide such services and
other overhead expenses allocable thereto, as determined by the Manager based on
the time expended by the employees who render such services or on a
project-by-project basis) in addition to that expressly provided for in this
Agreement.  It is expressly acknowledged and agreed that the Manager, without
obtaining the Consent of the Advisory Committee pursuant to Section 6.3, may
cause the Subsidiary REIT (or any subsidiary thereof that owns a Project) to
engage the Management Company (or another Affiliate of Behringer Holdings), to
perform property management, leasing and related services for a Project for a
fee equal to the lesser of (i) 3.75% of the gross revenues from such Project and
(ii) the amount that BH Multifamily REIT or any of its subsidiaries otherwise
pays to the Management Company (or such other Affiliate) for property
management, leasing and related services.

 

(c)                                  Nothing herein contained shall prevent or
prohibit Behringer Holdings, any of its Affiliates, or any of their respective
trustees, officers, directors, members, partners, employees or shareholders from
acquiring, developing, investing in, managing, leasing or otherwise dealing in
real property of any kind or nature for its own account or that of any of its
Affiliates or third parties or from entering into, engaging in or conducting any
other activity or performing for a fee any service (including, without
limitation, engaging in any business dealing with real property of any type or
location, acting as a director, officer or employee of any corporation, as a
trustee of any trust, as a general partner of any partnership, as a member or
manager of any limited liability company or as an official of any other Entity,
or receiving compensation for services to, or participating in profits derived
from, the investments of any such corporation, trust, partnership, limited
liability company or other Entity, regardless of whether such activities are
competitive with the Venture or any Project).  The fact that Behringer Holdings
or its Affiliates may encounter opportunities to purchase, otherwise acquire,
lease, sell or otherwise dispose of real or personal property and may take
advantage of such opportunities themselves or introduce such opportunities to
other Persons in which it has or has not any interest, shall not subject
Behringer Holdings or its Affiliates to liability to the Venture or any of the
Members (or any of the direct or indirect partners or members of the Members) on
account of the lost opportunity.

 

(d)                                 Except for matters otherwise specifically
authorized in this Agreement, any material transaction, and any other matter
that involves a material conflict of interest between Behringer Holdings or any
of its Affiliates, on the one hand, and the Venture or the Subsidiary REIT (or
any subsidiary thereof), on the other hand, shall be subject to the prior
Consent of the Advisory Committee.

 

6.5                               Maintenance of Domestic Status.  The Manager
hereby agrees that, notwithstanding anything herein to the contrary, unless
caused, consented to or induced by MWP and PGGM PRE Fund or any Affiliate
thereof, either directly or through BH MP, neither the

 

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Manager nor any of its Affiliates will (a) voluntarily take any action that, to
the knowledge of the Manager, would result in a Domestic Status Loss, or
(b) permit to occur any action that is within its reasonable control to prevent
and that, to the knowledge of the Manager, would result in a Domestic Status
Loss.  The provisions of this Section 6.5 shall not apply if there is not at
least one Non-U.S. Member.

 

6.6                               Tax Status.  Each Member agrees to take
commercially reasonable actions to assist the other Members in achieving the
most favorable tax treatment for such other Members (and the owners of such
Members); provided that, no Member shall be required to take or permit any
action which (a) creates any risk of material adverse economic or tax
consequences for such Member (or the owners of such Member), unless the
requesting Member agrees to reimburse each such Person that may be subject to
such consequences for all adverse economic and tax consequences, or (b) is
contrary to law.  Any tax election to be made on behalf of the Venture that
would, or could reasonably be expected to, have a material adverse effect on a
Member shall require the prior written Consent of such Member.

 

6.7                               Liability for Venture’s Obligations.  The
debts, obligations and liabilities of the Venture, whether arising in contract,
tort or otherwise, shall be solely the debts, obligations and liabilities of the
Venture, and neither the Members nor the Manager shall be obligated personally
for any such debt, obligation or liability of the Venture by reason of being the
Members or the Manager of the Venture.

 

6.8                               Additional or Successor Manager.  The Manager
may delegate its rights and powers as a manager under this Agreement and the
Act, and may admit to the Venture as a successor Manager, any of its Affiliates,
Behringer Holdings or any of its Affiliates without the Consent of any Member,
provided that the Manager arranges for such Person(s) to be bound by the
provisions of this Agreement by having such Person(s) execute such documents as
may be reasonably required to make such Person(s) party to this Agreement as an
additional or successor Manager(s).  In the event that any such Person is
admitted as an additional Manager, the Manager and such additional Manager shall
share in the rights and powers, as well as any duties and obligations, under
this Agreement and the Act in such manner and to such extent as the Manager and
such additional Manager may agree.  In the event that any such Person is
admitted as a successor Manager, the Manager shall thereupon cease to have any
rights, powers, duties or obligations under this Agreement and the Act, and such
Person, as the successor Manager, shall assume all such rights, powers, duties
and obligations previously held by the Manager.  Except as provided in this
Section 6.8, the Manager may not admit any Person as an additional or successor
Manager without the Consent of the Members.

 

6.9                               Removal of Manager for Cause.  Notwithstanding
anything herein to the contrary, either MWP or BH MP shall have the right to
elect to remove the Manager (a) for Cause, or (b) in the event neither BH
Waterford nor any of its Affiliates is a Member.  Upon the occurrence of any
event constituting Cause for its removal, the Manager shall deliver written
notice of such event to MWP and BH MP promptly upon (and in any event within
five (5) Business Days after) the occurrence of such event.  Each of MWP and BH
MP shall exercise their right to remove the Manager, if at all, by delivering to
the Manager and each Member written notice of such election at any time after
the occurrence of the event constituting Cause (or upon neither BH Waterford nor
any of its Affiliates being a Member), but not later than twenty (20) Business
Days after the

 

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delivery of the notice of Cause from the Manager.  In the event MWP or BH MP
shall exercise the right to remove the Manager, MWP and BH MP shall promptly
(but in no event later than ten (10) Business Days after the removal of the
Manager) appoint a mutually acceptable successor Manager of the Venture.  Upon
the removal of the Manager the Venture shall file an amendment to its
Certificate evidencing the removal of the Manager as manager of the Venture and
changing the name of the Venture to delete any references to “Behringer
Harvard”.

 

ARTICLE 7

 

LIMITATIONS ON LIABILITY AND INDEMNIFICATION

 

7.1                               Limitation of Liability.  To the maximum
extent permitted under the Act in effect from time to time, neither the Members,
the Manager, the Authorized Representatives nor any other Indemnified Person
shall be liable to the Venture or to any other Member for (a) any act or
omission performed or failed to be performed by it, or for any losses, claims,
costs, damages or liabilities arising from any such act or omission, except to
the extent such loss, claim, cost, damage or liability results from such
Indemnified Person’s gross negligence, willful misconduct, fraud or a material
breach of this Agreement, (b) any tax liability imposed on the Venture or
(c) any losses due to the negligence (gross or ordinary), dishonesty or bad
faith of any agents of the Venture, as long as such Persons are selected and
monitored with reasonable care.  Without limiting the generality of the
foregoing, each Indemnified Person shall, in the performance of his, her or its
duties, be fully protected in relying in good faith upon the records of the
Venture and upon information, opinions, reports or statements presented to such
Indemnified Person by the Manager or by any other Person as to matters such
Indemnified Person reasonably believes are within such other Person’s
professional or expert competence and who has been selected with reasonable care
by or on behalf of the Venture.  Any repeal or modification of this Section 7.1
shall not adversely affect any right or protection of a Person existing at the
time of such repeal or modification.

 

7.2                               Indemnification.

 

(a)                                 Advancement of Expenses.  In the event that
the Members, the Manager, their respective Affiliates or any directors,
officers, shareholders, partners, members, employees, trustees, representatives
or agents of any of them or the Authorized Representatives (each, an
“Indemnified Person” and collectively, the “Indemnified Persons”) becomes
involved in any capacity in any threatened, pending or completed action,
proceeding or suit, whether civil, criminal, administrative or investigative, by
reason of the fact that it, he or she was a member, manager, officer, employee,
Authorized Representative, representative or agent of the Venture, any Member,
the Manager or otherwise authorized to act hereunder or in connection herewith
or otherwise failed to act in connection with the business or affairs of the
Venture or one of its direct or indirect subsidiaries or otherwise is or was
serving at the Venture’s or one of the Venture’s direct or indirect subsidiary’s
request as a director, trustee, officer, partner, employee or agent of another
Entity, the Venture will periodically reimburse such Indemnified Person for its
reasonable legal and other expenses (including, without limitation, the costs of
any investigation and preparation) incurred in connection with such involvement,
provided that such Indemnified Person shall promptly repay to the Venture the
amount of any such reimbursed expenses paid to it if it is ultimately determined
by a court having appropriate jurisdiction in a

 

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decision that is not subject to appeal, that such Indemnified Person is not
entitled to be indemnified by the Venture under this Section 7.2. 
Notwithstanding the foregoing, in no event shall the Venture advance any such
funds to an Indemnified Person during the pendency of any claim made or action
brought (a) by the Venture, the Manager or a Member against the Indemnified
Person with respect to the underlying matter or (b) in which such Indemnified
Person was the plaintiff, but if it is ultimately determined by a court having
appropriate jurisdiction in a decision that is not subject to appeal that such
Indemnified Person is entitled to be indemnified by the Venture under this
Section 7.2, the Venture shall make such payments as may be required to such
Indemnified Person by this Section 7.2.

 

(b)                                 Indemnification.  To the maximum extent
permitted under the Act in effect from time to time, the Venture shall
indemnify, defend and hold harmless any Indemnified Person against any losses,
claims, costs, damages or liabilities to which such Indemnified Person may
become subject in connection with the business or affairs of the Venture or one
of its direct or indirect subsidiaries or serving at the Venture’s or one of the
Venture’s direct or indirect subsidiary’s request as a director, trustee,
officer, partner, employee or agent of another Entity, except to the extent that
any such loss, claim, cost, damage or liability results from the gross
negligence, willful misconduct, fraud or a material breach of this Agreement of
such Indemnified Person.  If for any reason (other than the gross negligence,
willful misconduct, fraud or material breach of this Agreement of such
Indemnified Person) the foregoing indemnification is unavailable to such
Indemnified Person, or is insufficient to hold it harmless, then the Venture
shall contribute to the amount paid or payable to the Indemnified Person as a
result of such loss, claim, cost, damage or liability in such proportion as is
appropriate to reflect not only the relative benefits received by the Venture on
the one hand and such Indemnified Person on the other hand but also the relative
fault of the Venture and such Indemnified Person, as well as any relevant
equitable considerations.

 

(c)                                  Successors.  The reimbursement, indemnity
and contribution obligations of the Venture under this Section 7.2 shall be in
addition to any liability which the Venture may otherwise have and shall be
binding upon and inure to the benefit of any successors, assigns, heirs and
personal representatives of the Venture, the Members, the Manager and any other
Indemnified Person.  The foregoing provisions shall survive any termination of
this Agreement and any amendment to such provisions shall not reduce the
Venture’s indemnity obligation with respect to any act or omission occurring
prior to the date of such amendment.

 

(d)                                 Exclusivity.  The indemnification provided
by this Section 7.2 shall not be deemed to be exclusive of any other rights to
which the Indemnified Person may be entitled under any agreement or as a matter
of law, or otherwise, both as to action in an Indemnified Person’s official
capacity and to action in another capacity, and shall continue as to an
Indemnified Person who has ceased to have an official capacity for acts or
omissions during such official capacity or otherwise when acting at the request
of the Manager and shall inure to the benefit of the heirs, successors and
administrators of such Indemnified Person.

 

(e)                                  Limitation.  Notwithstanding any of the
foregoing to the contrary, the provisions of this Section 7.2 shall not be
construed as to provide for the indemnification of any Indemnified Person for
any liability (including, without limitation, liability under U.S. federal
securities laws which, under certain circumstances, impose liability on Persons
that act in good

 

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faith), to the extent (but only to the extent) that such indemnification would
be in violation of applicable law, but shall be construed so as to effectuate
the provisions of this Section 7.2 to the fullest extent permitted by law.

 

(f)                                   Reliance.  An Indemnified Person may rely
upon and shall be protected in acting or refraining from action upon any
resolution, certificate, statement, instrument, opinion, report, notice,
request, consent, order or other document believed by it to be genuine and to
have been signed or presented by the proper party or parties.

 

(g)                                  Consultation.  An Indemnified Person may
consult with counsel, accountants and other experts reasonably selected by it,
and any opinion of an independent counsel, accountant or expert retained with
reasonable care shall be full and complete protection in respect of any action
taken or suffered or omitted by the Indemnified Person hereunder in good faith
and in accordance with such opinion.

 

ARTICLE 8

 

MEETINGS OF THE ADVISORY COMMITTEE

 

8.1                               Advisory Committee.  The Members shall form a
committee (the “Advisory Committee”) to oversee their investments in the
Venture.  The Advisory Committee shall have three (3) members, one (1) of whom
shall be appointed by MWP (the “MWP Representative”), one (1) of whom shall be
appointed by BH MP (the “MP Representative”) and one (1) of whom shall be
appointed by BH Waterford (the “BH Representative” and, together with the MWP
Representative and the MP Representative, the “Authorized Representatives”). 
The initial MWP Representative shall be Howard Edelman, the initial MP
Representative shall be Ross Odland, and the initial BH Representative shall be
Mark Alfieri.  Each Consent, approval and decision of a Member pursuant to this
Agreement shall be made by its Authorized Representative.  Each Authorized
Representative shall be entitled to one (1) vote on every matter presented to
the Advisory Committee for its Consent or approval.  Any Consent or other action
of the Advisory Committee, to the extent related to Stonegate, shall require the
affirmative vote (or a “deemed” vote in accordance with Section 6.3(b)) of the
BH Representative and the MP Representative to be deemed the Consent or other
action of the Advisory Committee.  Any Consent or other action of the Advisory
Committee, to the extent related to Argenta or West Village, shall require the
affirmative vote (or a “deemed” vote in accordance with Section 6.3(b)) of the
BH Representative and the MWP Representative to be deemed the Consent or other
action of the Advisory Committee.

 

MWP, BH MP and BH Waterford may replace the Authorized Representative designated
by such Person by delivering written notice to the Venture and the other Members
of the removal of such Authorized Representative and designating a new
Authorized Representative.  The Manager, the Members and the Authorized
Representatives may rely absolutely on the vote, Consent, approval, disapproval
or execution and delivery of any instrument by an Authorized Representative as
having been fully authorized and approved by the Person so designating such
individual as its Authorized Representative.

 

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Notwithstanding anything to the contrary in this Agreement, (a) the MP
Representative shall not be entitled to vote on, and BH MP shall have no rights
with respect to, any matter to the extent related to Argenta or West Village and
(b) the MWP Representative shall not be entitled to vote on, and MWP shall have
no rights with respect to, any matter to the extent related to Stonegate.

 

8.2                               Meetings of the Advisory Committee.

 

(a)                                 The Advisory Committee shall hold an annual
meeting within a reasonable period of time after the close of each fiscal year
of the Venture, the exact date of which and the time and place of which shall be
determined by the Manager, but shall not, without the Consent of the Advisory
Committee, be later than five (5) months after the close of the Venture’s fiscal
year.  In addition to the annual meeting of the Advisory Committee, the Manager
may call a meeting of the Advisory Committee from time to time in its sole
discretion, and shall call a meeting of the Advisory Committee if so requested
by an Authorized Representative, at the principal place of business of the
Manager on such date as the Manager together with the Authorized Representatives
may mutually agree on, such agreement not to be unreasonably withheld.  In the
event of any change in the date, time or place of such meeting, the Manager
shall promptly give reasonable notice to the Authorized Representatives.  Unless
otherwise agreed by the Manager and the Authorized Representatives, all meetings
of the Advisory Committee shall be held in the United States or by means of
telephone conference or similar communications equipment by means of which all
Persons participating the meeting can hear and speak to each other.

 

(b)                                 A quorum for the transaction of any business
of the Advisory Committee related to Stonegate shall require that the BH
Representative and MP Representative be represented at the meeting.  A quorum
for the transaction of any business of the Advisory Committee related to Argenta
or West Village shall require that the BH Representative and the MWP
Representative be represented at the meeting.  Any action required or permitted
to be taken at any meeting of the Advisory Committee may be taken without a
meeting if the Authorized Representatives required for such action pursuant to
Section 8.1 grant their Consent thereto in writing, and the writing or writings
are promptly provided to each Authorized Representative and filed with the
minutes of the proceedings of the Advisory Committee.  The Authorized
Representatives may participate in a meeting of the Advisory Committee by means
of telephone conference or similar communications equipment by means of which
all Persons participating the meeting can hear and speak to each other, and such
participation in a meeting shall constitute presence in person at such meeting.

 

8.3                               Dispute Resolution Procedure.  Any dispute
between the Members or the Authorized Representatives may, but is not required
to, be submitted for resolution in accordance with the procedures set forth in
Sections 8.3(a) and (b).  For the avoidance of doubt, the provisions of
Section 9.2 of this Agreement may be invoked by BH Waterford or BH MP with
respect to matters related to Stonegate, or BH Waterford or MWP with respect to
matters related to Argenta or West Village, after the occurrence and during the
continuation of any Major Dispute, notwithstanding that such Member did not
first submit such dispute to the provisions of this Section 8.3.

 

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(a)                                 Negotiation.  With respect to any dispute
between the Members or the Authorized Representatives, the Authorized
Representatives may attempt in good faith to resolve any dispute through
negotiation.  In the event that the Authorized Representatives are unable to
resolve a dispute in an amount of time that a Member deems reasonable under the
circumstances but in any event within ten (10) Business Days after such dispute
first arose, then such Member may, by written notice (a “Dispute Notice”) to the
other Member(s), require that such dispute be referred to executives of the
Members (the “Senior Executives”) who are at a more senior level than the
Authorized Representatives and who shall have authority to resolve or settle the
dispute on behalf of the respective Members whom they represent.  Within ten
(10) Business Days after receipt of a Dispute Notice, the Senior Executives
shall hold a meeting between themselves and any Persons whom either of the
Senior Executives deems appropriate.  Such meeting may be by telephonic
communication, provided the parties can clearly hear and speak to each other. 
In the event that the Senior Executives are unable to resolve the dispute during
such meeting or, if mutually agreed by the Senior Executives, any succeeding
meeting(s), and in any event, if the dispute has not been resolved in accordance
with this Section 8.3(a) within thirty (30) Business Days after the dispute
first arose, any Member may seek mediation in accordance with Section 8.3(b).

 

(b)                                 Mediation.  If a dispute between the Members
or the Authorized Representatives has not been timely resolved by the Senior
Executives through negotiations pursuant to Section 8.3(a), a Member may submit
such dispute to mediation under the Conflict Prevention and Resolution Mediation
Procedure of CPR then in effect.  The Members shall select a mediator from the
Conflict Prevention and Resolution Panel of Distinguished Neutrals of CPR within
ten (10) Business Days after such dispute has been submitted to mediation.  All
discussions and negotiations pursuant to such mediation will be confidential and
will be treated as compromise and settlement negotiations for purposes of the
applicable rules of evidence and any additional confidentiality protections
afforded by agreement of the Members or applicable law.  Each Member agrees to
act in good faith and use reasonable efforts during such mediation to reach a
settlement of such dispute.

 

ARTICLE 9

 

TRANSFER OF MEMBERS’ INTERESTS IN THE VENTURE;
BUY/SELL

 

9.1                               Transfers of a Member’s Interest.

 

(a)                                 Except as provided in Section 6.3(c), no
Member may Transfer all or any portion of its Interest or have any transferee
admitted as a substituted Member in respect of such Interest or any portion
thereof without the prior written Consent of the Manager, which Consent may be
withheld in the sole discretion of the Manager.  Notwithstanding the foregoing,
a Member may Transfer all or any part of its Interest pursuant to Section 9.2,
and any such transferee shall succeed to all the rights and assume all the
obligations of the Member with respect to such Interest, without the prior
Consent of the Manager, provided that the requirements of Section 9.1(b) are
satisfied.  In the event a Member desires to secure permission to Transfer its
Interest or any portion thereof, it shall notify the Manager in the manner
described in Section 14.1 hereof and shall deliver such information to the
Manager as it may request,

 

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including, if requested, evidence reasonably satisfactory to the Manager with
respect to (i) compliance with applicable federal and state securities laws and
(ii) any other appropriate laws or regulations.  No Transfer may be made if it
would violate applicable federal or state securities laws or other laws or
regulations.

 

(b)                                 In the event any Member desires to Transfer
all or any portion of its Interest in the Venture (and the Manager Consents
thereto, unless such Consent is not required pursuant to Section 9.1(a)) the
Transferring Member shall arrange for its transferee to be bound by the
provisions of this Agreement by having such transferee execute such documents as
shall be reasonably required by the Manager to make the transferee a party to
this Agreement and by delivering the same to the Manager together with such
other information that may be reasonably requested by counsel to the Manager. 
The transferee of all or any portion of the Interest of a Member shall become a
substituted Member as to the Interest (or portion thereof) thus Transferred upon
the written Consent of the Manager, which Consent may be granted or withheld in
the sole discretion of the Manager, except as otherwise provided in
Section 9.1(a) when such Consent is not required.  Any such substituted Member
shall succeed to all of the rights and assume all of the obligations of the
Member to the extent of the portion of the Interest in the Venture which has
been Transferred to such substituted Member.  A transferee of all of any portion
of the Interest of a Member who is not a substituted Member shall have the right
to receive allocations of income, gain, loss and deduction and distributions of
Net Cash Flow and other distributions pursuant to this Agreement, but shall have
no other rights hereunder, and neither the transferor nor the transferee shall
have the right to vote with respect to any Interest so Transferred.  The
effective date of any Transfer under Section 9.1 (a) or (b) shall be the date on
which the transferee executes and delivers to the Manager the documents required
by the Manager, and the Manager grants its Consent in accordance with
Section 9.1(a) or (b), as the case may be.

 

(c)                                  Anything contained in Sections 9.1(a) or
(b) to the contrary notwithstanding, no Transfer of an Interest or any portion
shall be effective if it would result in (i) the Venture being classified as an
association (or publicly traded partnership) taxable as a corporation for U.S.
federal or state income tax purposes, or (ii) the occurrence of a Domestic
Status Loss, and any such Transfer shall be effected in such manner as may be
necessary to maintain the classification of the Venture as a partnership for
U.S. federal and state income tax purposes and to avoid the occurrence of a
Domestic Status Loss.

 

(d)                                 Notwithstanding anything to the contrary in
this Agreement, no Interest in the Venture, or any portion thereof, shall be
issued in a transaction that is (or transactions that are) registered or
required to be registered under the Securities Act of 1933, as amended, and any
Transfer of an Interest or any portion thereof must be made in a transaction
that is exempt from registration or qualification under the Securities Act of
1933, as amended, and applicable state securities law.

 

(e)                                  No admission (or purported admission) of a
Member and no Transfer (or purported Transfer) of all or part of a Member’s
Interest (or any interest or right or attribute therein) in the Venture shall be
effective, and no Person shall otherwise become a Member, if the Venture would
or may have more than one hundred (100) members, treating as a member for this

 

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purpose each Person indirectly owning an Interest (or any interest therein) in
the Venture through a partnership, a grantor trust or an S corporation.

 

9.2                               Buy/Sell Arrangement.  The Members shall be
entitled to initiate the buy/sell rights set forth in this Section 9.2 with
respect to the Interests of such Members attributable to a Project at any time
after the occurrence and during the continuance of a Major Dispute that has
continued for a period of not less than fifteen (15) days with respect to such
Project.  BH Waterford and BH MP shall be entitled to initiate such buy/sell
rights with respect to Stonegate in connection with a Major Dispute relating to
the Venture, the Subsidiary REIT or such Project.  BH Waterford and MWP shall be
entitled to initiate such buy/sell rights with respect to Argenta or West
Village in connection with a Major Dispute relating to the Venture, the
Subsidiary REIT or such Project.  The fifteen (15) day period set forth above
shall commence upon written notice by one Member to the other Member stating
there has been a Major Dispute and briefly describing the same.  The Manager
shall use commercially reasonable efforts to keep any non-participating Member
reasonably apprised with respect to the status of any buy/sell procedures
initiated pursuant to this Section 9.2.  For purposes of this Section 9.2,
references to a “Member” or the “Members” shall be to the Members involved in
the underlying Major Dispute and references to the “Project” shall be to the
Project that is the subject of such Major Dispute.

 

(a)                                 Either Member (an “Offeror”) may serve upon
the other Member (an “Offeree”) a notice (an “Offering Notice”) which shall
contain the following:

 

(i)                                     a statement of intent to rely on this
Section 9.2; and

 

(ii)                                  a statement of the aggregate dollar amount
that the Offeror would be willing to pay in cash (the “Offer Price”) for all of
the interest of the Offeree in the Project (expressed in terms of Shares of the
applicable Sub-Sub REIT) (the interest of the Offeree or the Offeror, as the
case may be, the “Buy/Sell Interest”) which the Offeree would hold if the
Venture and the Subsidiary REIT were liquidated and such Shares were distributed
in-kind to the Members, as specified in the Offering Notice.

 

(b)                                 Within thirty (30) days after receipt of the
Offering Notice by the Offeree (the “Option Period”), the Offeree shall notify
the Offeror whether the Offeree elects:

 

(i)                                     to sell its Buy/Sell Interest to the
Offeror for a price equal to the Offer Price; or

 

(ii)                                  to purchase the Buy/Sell Interest of the
Offeror for a price (the “Alternative Offer Price”) that is in proportion to the
Offer Price (based upon the relative interests of the Members in the Project).

 

(c)                                  If the Offeree does not notify the Offeror
of its election to purchase or sell prior to the expiration of the Option
Period, the Offeree shall for all purposes be conclusively deemed to have
elected to sell its Buy/Sell Interest to the Offeror for the Offer Price
indicated in Section 9.2(a)(ii).

 

(d)                                 (i)                                     The
Member obligated to purchase the Buy/Sell Interest under Section 9.2(b) or
(c) (the “Purchaser”) shall, within (A) five (5) Business Days after (x) in the

 

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case of the Offeree, its election to purchase pursuant to Section 9.2(b)(ii) and
(y) in the case of the Offeror, Offeree’s election to sell pursuant to
Section 9.2(b)(i) or its deemed election to sell pursuant to Section 9.2(c); or
(B) if an election to extend the closing has been made pursuant to
Section 9.2(e), five (5) Business Days after the election to proceed with the
purchase made during the one hundred fifty (150) day period provided for
therein, deposit in cash an amount in escrow, which amount while in escrow shall
be invested in Permitted Temporary Investments as directed by the Purchaser
(such amount, together with any interest earned thereon, being the “Earnest
Money Deposit”), equal to ten percent (10%) of the Offer Price or Alternative
Offer Price, as the case may be, for the Buy/Sell Interest being purchased (such
Offer Price or Alternative Offer Price, as applicable, being the “Purchase
Price”), with an independent third party (the “Escrow Agent”) reasonably
satisfactory to the Member obligated to sell its Buy/Sell Interest under
Section 9.2(b) or (c) (the “Seller”).  The Earnest Money Deposit shall be
applied against the Purchase Price at the closing referenced below, or shall be
paid to the Seller as liquidated damages in the event of a default by the
Purchaser in accordance with this Section 9.2(d)(i); provided, however, that the
Seller shall not be entitled to receive the Earnest Money Deposit of the
defaulted Purchaser, if any, as liquidated damages if it elects to become the
Substituted Purchaser in accordance with this Section 9.2(d).  In the event the
Purchaser fails to deposit timely such Earnest Money Deposit as provided above
or fails or refuses to close on the purchase and sale of its Buy/Sell Interest
on the Closing Date (such Purchaser being then referred to as the “Defaulting
Purchaser”), then within fifteen (15) days thereafter, unless the Defaulting
Purchaser has earlier cured such default by depositing the required Earnest
Money Deposit as provided above or has proven to the reasonable satisfaction of
the Seller that the Defaulting Purchaser is ready, willing and able to close
such purchase and sale, the Seller shall have the option of substituting itself
as the Purchaser of the Buy/Sell Interest of the Defaulting Purchaser (such
Seller being then referred to as the “Substituted Purchaser”) under this
Section 9.2(d) at a purchase price (the “Substituted Purchase Price”) equal to
ninety percent (90%) of the Purchase Price multiplied by the ratio of the
Defaulting Purchaser’s interest in the Project to the Substituted Purchaser’s
interest in the Project.  In the event that the Seller elects to become the
Substituted Purchaser in accordance with the preceding sentence, the Seller
shall, within fifteen (15) days after the Seller obtains the right to become the
Substituted Purchaser, give written notice to the Defaulting Purchaser of its
intention to do so, which notice shall specify the Substituted Purchase Price
and whether or not the Substituted Purchaser elects to extend the closing
pursuant to Section 9.2(e).  Within five (5) Business Days after (x) the giving
of such notice or (y) if an election to extend the closing is made pursuant to
Section 9.2(e), the giving of notice of election to proceed with the purchase
made during the one hundred fifty (150) day period provided for therein, the
Substituted Purchaser shall deposit an Earnest Money Deposit equal to ten
percent (10%) of the Substituted Purchase Price in escrow with an Escrow Agent
selected by the Substituted Purchaser, whereupon, for purposes of Sections
9.2(d)(ii), (iii), (iv) and (v) and Section 9.2(e) below, the Substituted
Purchaser shall become the Purchaser, the Defaulting Purchaser shall become the
Seller and the Substituted Purchase Price shall become the Purchase Price. 
Alternatively, after the default by the Defaulting Purchaser and its failure to
cure such default within fifteen (15) days thereafter, the Seller may elect to
decline its option to become the Substituted Purchaser and obtain and retain, as
liquidated damages for the Defaulting Purchaser’s default under this
Section 9.2(d), the amount of the Earnest Money Deposit deposited by the
Defaulting Purchaser (or the amount that should have been deposited by the
Defaulting Purchaser as the Earnest Money Deposit but was not).

 

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(ii)                                  On or before the date on which the
Purchaser (whether it be the Offeree, the Offeror or the Substituted Purchaser)
is required to make the Earnest Money Deposit referenced in Section 9.2(d)(i),
the Purchaser shall fix a closing date (the “Closing Date”) not later than
thirty (30) days (or as soon thereafter as practicable) following (i) the date
of election or deemed election to purchase by the Purchaser (including because
the Offeree elects to sell), or (ii) if an election to extend the closing has
been made pursuant to Section 9.2(e), the date of election to proceed with the
purchase made during the one hundred fifty (150) day period provided for
therein.  Immediately prior to the Closing Date, if the applicable Sub-Sub REIT
has made a valid election to be treated as an association taxable as a
corporation pursuant to Section 13.5(c), the Venture and the Subsidiary REIT
shall each make a distribution in-kind of the Shares of the Sub-Sub REIT
representing the interest of the Venture and the Subsidiary REIT in the Project
to the Members in accordance with their respective interests in the Project so
that the purchase and sale of the Buy/Sell Interest can be consummated by the
Transfer of Shares of the applicable Sub-Sub REIT directly owned by the Members;
provided, however, that if the purchase and sale contemplated hereby occurs
after the applicable Sub-Sub REIT has made a valid election to be treated as an
association taxable as a corporation, but prior to the filing of a valid REIT
election for such Sub-Sub REIT, the Purchaser shall cause such REIT election to
be filed in accordance with Section 13.5(c).  For purposes of the distribution
in-kind, the distributed Shares shall have a value per Share equal to the
Purchase Price divided by the number of Shares to be distributed to the Seller. 
If the applicable Sub-Sub REIT has not made a valid election to be treated as an
association taxable as a corporation pursuant to Section 13.5(c), the purchase
and sale of the Buy/Sell Interest shall be effected by the Purchaser’s
Percentage Interest and Project Net Capital with respect to the applicable
Project being increased to reflect the Purchaser’s acquisition of such Buy/Sell
Interest and the Seller’s Percentage Interest and Project Net Capital with
respect to the applicable Project becoming zero (0).  The closing of the
purchase of any Buy/Sell Interest pursuant to this Section 9.2 shall take place
on the Closing Date at a location reasonably designated by the Purchaser.  The
Purchaser may assign its rights to purchase the Buy/Sell Interest of the Seller
hereunder to any third party, including one or more of its Affiliates; provided
that the Purchaser shall remain liable for any such obligation to purchase.

 

(iii)                               At the closing on the Closing Date, the
Purchaser shall pay the Seller, in cash, the amount determined under
Section 9.2(d)(i), as the Purchase Price for the Buy/Sell Interest of the Seller
(with the Purchaser’s Earnest Money Deposit being credited against such amount
at the closing) and the Seller shall execute and deliver to the Purchaser or its
designee stock powers, bills of sale, instruments of assignment, and other
instruments as the Purchaser may reasonably require, to give it or its designee
good and indefeasible title to all of the Seller’s right, title and interest in
and to all of its Buy/Sell Interest.  The Venture shall pay all closing costs;
provided, however, that the Purchaser and the Seller shall pay their own
respective legal costs and expenses in connection with the preparation of the
closing documentation.  In addition, on the Closing Date, the Purchaser shall
cause the Seller to be released from any liability accruing from and after the
Closing Date in respect of the Venture and the Project (including any financing
arrangements entered into by the Venture or with respect to the Project) or
shall indemnify the Seller with respect to such liability.

 

(iv)                              The Purchase Price to be paid pursuant to this
Section 9.2(d) in respect of the applicable Buy/Sell Interest being sold shall
be reduced proportionately on a per Share basis for any distributions made by
the Venture after the determination of the Offer Price

 

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and prior to the Transfer of the applicable Buy/Sell Interest to the extent such
distributions comprise sale, disposition or refinancing proceeds with respect to
the applicable Project.

 

(v)                                 A sale of its Buy/Sell Interest shall not
relieve the Seller from any obligations or liabilities arising under or in
connection with this Agreement prior to the closing of the sale of its Buy/Sell
Interest, including, without limitation, any obligation to repay a Member Loan
in accordance with Section 3.4(b).

 

(e)                                  (i)                                     On
or prior to (A) in the case of the Offeree, the expiration of the Option Period,
(B) in the case of the Offeror, five (5) Business Days after the Offeree elects
(or is deemed to have elected) to sell its Buy/Sell Interest and (C) in the case
of the Substituted Purchaser, five (5) Business Days after giving notice of its
election to become the Substituted Purchaser, the Purchaser may notify the
Seller of its election to extend the time it has to close by one hundred fifty
(150) days after the giving of such extension notice.  During such one hundred
fifty (150) day period, the Purchaser may seek a third party to form a joint
venture or other joint ownership arrangement (the “Purchaser Venture”) with the
Purchaser for the acquisition and ownership of the Buy/Sell Interest of the
Seller.  In the event that the Purchaser elects to proceed with the purchase of
the Buy/Sell Interest of the Seller, whether alone or through a Purchaser
Venture, the Purchaser shall provide notice of such election to the Seller on or
prior to the expiration of the one hundred fifty (150) day period.  In such
event, the Purchaser, the Substituted Purchaser or the Purchaser Venture, as the
case may be, shall become the “Purchaser,” the other Member shall become the
“Seller” and the provisions of Section 9.2(d), to the extent not inconsistent
with this Section 9.2(e)(i), shall apply.  If the Purchaser does not find a
third party with whom to form a joint venture or other joint ownership
arrangement or otherwise elects not to proceed with the purchase of the Buy/Sell
Interest of the Seller, the provisions of Section 9.2(e)(ii) shall apply.

 

(ii)                                  If, within the one hundred fifty (150) day
period referred to in clause (i) above, the Purchaser (A) does not find a third
party with whom to form a joint venture or other joint arrangement and otherwise
elects not to proceed with the purchase, (B) affirmatively elects not to proceed
with the purchase and provides notice of such election to the Seller, or
(C) does not notify the other Member in writing that the Purchaser will proceed
with the purchase, then, subject to Section 2.6(b), the Seller shall have the
opportunity to elect (such election to be made within thirty (30) days after the
expiration of such one hundred fifty (150) day period or the Purchaser’s earlier
notice that it will not proceed with the purchase) to purchase, or to have its
Affiliate or another designee (collectively, the “Alternative Purchaser”)
purchase the Project in accordance with the following procedures.  In the event
that the Alternative Purchaser ultimately does not elect to purchase the
Buy/Sell Interest of the Purchaser, the Alternative Purchaser shall not be
obligated to purchase the Buy/Sell Interest of the Purchaser.

 

(1)                                 The Alternative Purchaser and the Purchaser
shall attempt to mutually agree on a fair market value of the Project through
negotiation for a period of ten (10) days (the “Negotiation Deadline”)
commencing upon the Purchaser’s election or deemed election (including as a
result of the failure to find a Purchaser Venture) not to proceed with the
purchase.  If the Alternative Purchaser and the Purchaser do not agree upon the
fair market value of the Project

 

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prior to the expiration of the Negotiation Deadline, then either the Alternative
Purchaser or the Purchaser may deliver to the other a written notice of
arbitration (the “Arbitration Notice”), pursuant to which the fair market value
(the “Mark to Market Price”) of the Project shall be determined by “baseball
style” arbitration in accordance with the provisions in paragraphs (2) through
(8) of this Section 9.2(e)(ii).

 

(2)                                 The Alternative Purchaser and the Purchaser
shall each use reasonable efforts to agree, within ten (10) days after the
delivery of an Arbitration Notice, upon the appointment of one arbitrator to
agree on a Mark to Market Price of the Project.  If an agreement on a single
arbitrator is not reached within such ten (10) day period, then the Alternative
Purchaser and the Purchaser shall each appoint one arbitrator within ten
(10) days after the expiration of such previous ten (10) day period and shall
specify the name and address of their respective arbitrators to the other party
prior to the expiration of such ten (10) day period; provided that, if one party
fails to specify the name and address of its selected arbitrator within such ten
(10) day period, then the other party shall give such failing party written
notice, and if within three (3) Business Days after such written notice the
failing party still has not specified an arbitrator, then the arbitrator
selected by the other party shall act as the sole arbitrator as if both parties
had agreed to the appointment of such arbitrator as provided above.

 

(3)                                 If two arbitrators have been selected, then
such arbitrators shall then appoint a third arbitrator within ten (10) days
after their appointment.  If the first two arbitrators are unable to agree upon
a third arbitrator within such ten (10) day period, then the third arbitrator
shall be appointed as soon as reasonably practicable thereafter by a court of
competent jurisdiction residing in the county in which the Project is situated,
subject to the qualification requirements set forth in paragraph (7) of this
Section 9.2(e)(ii).  In the event of the failure, refusal or inability of any
arbitrator to act, a new arbitrator shall be appointed as a replacement, which
appointment shall be made in the same manner as set forth above for the
appointment of such resigning arbitrator.  Immediately after the selection of
the final arbitrator, the three arbitrators shall meet and, within fifteen (15)
days after the completion of the selection of the arbitrators shall, or, if
there is only one arbitrator, within fifteen (15) days after its selection, such
arbitrator shall endeavor to determine the Mark to Market Price for the Project.

 

(4)                                 Within ten (10) days after the selection of
the sole arbitrator or all arbitrators, as the case may be, the Alternative
Purchaser and the Purchaser shall submit to the arbitrator(s) such party’s
proposed Mark to Market Price for the Project as well as all other economic
terms relevant to the determination of the Mark to Market Price for the Project,
together with reasonable evidence supporting such proposed Mark to Market Price
for the Project.  The arbitrator(s) shall select either the proposed Mark to
Market Price submitted by the Alternative Purchaser with respect to the Project
or the proposed Mark to Market Price submitted by the Purchaser with respect to
the Project, whichever proposal the arbitrator(s) deem to be the most nearly
correct according to the definitions, terms

 

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and requirements set forth in this Agreement and the information submitted to
the arbitrator(s) by the parties, with no compromise.  The power of the
arbitrator(s) shall be exercised by the concurrence of at least two arbitrators,
except that if only one arbitrator is selected, the decision of such arbitrator
shall govern.  The proposed Mark to Market Price selected by the
arbitrator(s) with respect to the Project shall be the “Mark to Market Price”
for the Project.  The determination of the arbitrator(s) shall be final and
non-appealable, shall be binding on both the Purchaser and the Alternative
Purchaser, and may be enforced in any court of competent jurisdiction.

 

(5)                                 The price (the “Buy/Sell Market Price”) to
be paid for the Buy/Sell Interest of the Purchaser shall be equal to the amount
that the Purchaser would receive for its interest in the Project expressed in
terms of Shares (assuming that each Venture and the Subsidiary REIT were
liquidated and the Shares representing the interest of the Venture and the
Subsidiary REIT in the Project were distributed in-kind to the Members).  Within
ten (10) days after the decision of the arbitrator(s) determining the Mark to
Market Price for the Project, the Alternative Purchaser shall deliver written
notice to the Purchaser stating whether the Alternative Purchaser elects to
purchase the Buy/Sell Interest of the Purchaser at the Buy/Sell Market Price. 
In the event that the Alternative Purchaser elects to purchase the Buy/Sell
Interest of the Purchaser, the Alternative Purchaser and the Purchaser shall
close on such purchase at the Buy/Sell Market Price payable in cash within
thirty (30) days after such election by the Alternative Purchaser.  The
provisions of Section 9.2(d) shall, to the extent not inconsistent with
Section 9.2(e)(ii), apply to such purchase.  In the event that the Alternative
Purchaser does not elect to purchase the Buy/Sell Interest of the Purchaser,
either Member may, at its election, re-initiate the Buy/Sell procedure in
accordance with this Section 9.2 but otherwise shall not be obligated to
purchase the other party’s Buy/Sell Interest.

 

(6)                                 The arbitrator(s) shall have the authority
to request additional facts or evidence from each of the parties and, if such
arbitrator(s) so require, a hearing to present the same.  In the event of such a
hearing, rules of evidence applicable to state court judicial proceedings in
civil district courts in Dallas, Texas shall govern; provided that, evidence
will be admitted or excluded in the sole discretion of the arbitrator(s).  The
arbitrator(s) shall resolve the controversy and shall execute and acknowledge
his or their decision, together with a brief statement describing the rationale
for such decision, in writing and simultaneously deliver a copy thereof to each
of the parties personally or by registered or certified mail, return receipt
requested.  If the arbitrators fail to reach an agreement during such fifteen
(15) day period (as may be extended in accordance with the next sentence), then
they shall be discharged, and new arbitration proceedings shall commence, with
new arbitrators being appointed in the same manner as set forth above.  By
agreement in writing, the Alternative Purchaser and the Purchaser may extend the
time to reach agreement either before or after the expiration thereof up to a
maximum of thirty (30) additional days.  The period within which the
arbitrator(s) must act is not jurisdictional.

 

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(7)                                 Each arbitrator shall (x) be an independent
appraiser licensed under the laws of the state in which the Project is situated,
and (y) have been actively and continuously engaged in appraising multifamily
rental communities as a member of the Appraisal Institute in the county in which
the Project is situated, for not less than the previous five (5) years.  The
arbitrator(s) selected by the Alternative Purchaser and the other Member shall
be instructed that they are neutral arbitrators and shall not have any ex parte
communication with the appointing party and may not be appraisers that consulted
with the Alternative Purchaser or the other Member in negotiations regarding the
Mark to Market Price of the Project prior to the submission of the Mark to
Market Price proposals to arbitration.  In addition, the sole arbitrator or
third arbitrator, as the case may be, shall be an independent appraiser having
no relationship representing the Alternative Purchaser, the other Member or
their respective Affiliates during the immediately preceding three hundred
sixty-five (365) day period prior to selection.

 

(8)                                 Each party to the arbitration proceeding
shall bear its own costs and the costs of the arbitrator it appoints.  The cost
of the third arbitrator (or the single arbitrator if only one arbitrator is
required) shall be split equally between the Alternative Purchaser and the
Purchaser.

 

9.3                               Basis Election.  The Venture will file an
election under Section 754 of the Code, or has filed such an election that has
not been revoked, in accordance with procedures set forth in the applicable
Treasury regulations.  Each Member shall provide the Venture with all
information necessary to give effect to any election under Section 754 of the
Code.

 

9.4                               Void Transfer.  In no event shall any
Interest, or any portion, thereof, be Transferred to a minor or an incompetent
or in violation of any state or Federal law or in violation of this Article 9. 
Any such attempted Transfer shall be void and ineffectual and shall not bind the
Venture or any Member.

 

ARTICLE 10

 

EXCESS INTEREST PROVISIONS

 

10.1                        Definitions.  For purposes of this Article 10, the
following terms shall have the following meanings:

 

“Beneficial Ownership” shall mean ownership of Interests by a Person who would
be treated as an owner of such Interests either directly or constructively
through the application of Section 544 of the Code, as modified by
Section 856(h)(1)(B) of the Code.  The terms “Beneficial Owner,” “Beneficially
Owns,” “Beneficially Own” and “Beneficially Owned” shall have correlative
meanings.

 

“Charitable Beneficiary” shall mean an organization or organizations described
in Sections 170(b)(1)(A) and 170(c) of the Code and identified by the Venture as
the beneficiary or beneficiaries of the Excess Interest Trust.

 

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“Excess Interest Trust” shall mean the trust created pursuant to Section 10.14.

 

“Excess Interest Trustee” shall mean a Person, who shall be unaffiliated with
the Venture, any Purported Beneficial Transferee and any Purported Record
Transferee, identified by the Venture as the trustee of the Excess Interest
Trust.

 

“Excess Interests” shall have the meaning given to it in Section 10.3(a).

 

“Existing Holder” shall mean (a) each of MWP (and its limited partner), BH MP
and BH Waterford and (b) any Person to whom an Existing Holder Transfers,
subject to the limitations provided in this Agreement, Beneficial Ownership of
Interests causing such transferee to Beneficially Own Interests in excess of the
Ownership Limit.

 

“Existing Holder Limit” (a) for the Members shall mean, initially, forty-five
percent (45%) in the case of MWP (and its limited partner) and BH MP and
fifty-five percent (55%) in the case of BH Waterford of the Interests, and,
after any adjustment pursuant to Section 10.9, shall mean such percentage of the
outstanding Interests, as the case may be, as so adjusted, and (b) for any
Existing Holder who becomes an Existing Holder by virtue of clause (b) of the
definition thereof, shall mean, initially, the percentage of the outstanding
Interests Beneficially Owned by such Existing Holder at the time that such
Existing Holder becomes an Existing Holder, but in no event shall such
percentage be greater than the Existing Holder Limit for the Existing Holder who
Transferred Beneficial Ownership of such Interests or, in the case of more than
one transferor, in no event shall such percentage be greater than the smallest
Existing Holder Limit of any transferring Existing Holder, and, after any
adjustment pursuant to Section 10.9, shall mean such percentage of the
outstanding Interests as so adjusted.

 

“Market Price” shall mean the market price of such class of Interests on the
relevant date as determined in good faith by the Manager.

 

“Ownership Limit” shall initially mean nine and eight-tenths percent (9.8%) in
number of the Interests or value of the outstanding Interests, and after any
adjustment as set forth in Section 10.10, shall mean such greater percentage of
the outstanding Interests as so adjusted.  The number and value of the
outstanding Interests of the Venture shall be determined by the Manager in good
faith, which determination shall be conclusive for all purposes hereof.

 

“Person” shall mean an individual, corporation, partnership, estate, trust
(including, without limitation, a trust qualified under Section 401(a) or
501(c)(17) of the Code), portion of a trust permanently set aside for or to be
used exclusively for the purposes described in Section 642(c) of the Code,
association, private foundation within the meaning of Section 509(a) of the
Code, joint stock company or other Entity.

 

“Prohibited Owner Event” has the meaning provided in Section 10.3(c).

 

“Purported Beneficial Transferee” shall mean, with respect to any purported
Transfer which results in Excess Interests, the beneficial holder of the
Interests, if such Transfer had been valid under Section 10.2.

 

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“Purported Record Transferee” shall mean, with respect to any purported Transfer
which results in Excess Interests, the record holder of the Interests, if such
Transfer had been valid under Section 10.2.

 

“Redemption Price” has the meaning provided in Section 10.18.

 

“Restriction Termination Date” shall mean the first day on which the Venture
determines that it is no longer in the best interests of the Subsidiary REIT to
attempt to, or continue to, qualify as a REIT.

 

10.2                        Ownership Limitation.

 

(a)                                 Except as provided in Section 10.12, until
the Restriction Termination Date, no Person (other than an Existing Holder)
shall Beneficially Own Interests in excess of the Ownership Limit and no
Existing Holder shall Beneficially Own Interests in excess of the Existing
Holder Limit for such Existing Holder.

 

(b)                                 Except as provided in Section 10.12, until
the Restriction Termination Date, any Transfer that, if effective, would result
in any Person (other than an Existing Holder) Beneficially Owning Interests in
excess of the Ownership Limit shall be void ab initio as to the Transfer of the
Interests which would otherwise be Beneficially Owned by such Person in excess
of the Ownership Limit; and the intended transferee shall acquire no rights in
such Interests.

 

(c)                                  Except as provided in Sections 10.9 and
10.12, until the Restriction Termination Date, any Transfer that, if effective,
would result in any Existing Holder Beneficially Owning Interests in excess of
the applicable Existing Holder Limit shall be void ab initio as to the Transfer
of the Interests which would be otherwise Beneficially Owned by such Existing
Holder in excess of the applicable Existing Holder Limit; and such Existing
Holder shall acquire no rights in such Interests.

 

(d)                                 Until the Restriction Termination Date, any
Transfer that, if effective, would result in the Venture (treating the Venture
as if it otherwise qualified as a REIT solely for this purpose) being “closely
held” within the meaning of Section 856(h) of the Code shall be void ab initio
as to the Transfer of the Interests which would cause the Venture (treating the
Venture as if it otherwise qualified as a REIT solely for this purpose) to be
“closely held” within the meaning of Section 856(h) of the Code; and the
intended transferee shall acquire no rights in such Interests.

 

(e)                                  Until the Restriction Termination Date, any
Transfer that, if effective, would result in the Venture (treating the Venture
as if it otherwise qualified as a REIT solely for this purpose) otherwise
failing to qualify as a REIT shall be void ab initio as to the Transfer of
Interests that would result in the Venture (treating the Venture as if it
otherwise qualified as a REIT solely for this purpose) failing to qualify as a
REIT; and the intended transferee shall acquire no rights in such Interests.

 

(f)                                   Until the Restriction Termination Date,
any Transfer that would result in the Venture (treating the Venture as if it
otherwise qualified as a REIT solely for this purpose) not maintaining its
status as a Domestically-Controlled REIT shall be void ab initio as to the

 

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Transfer of Interests which would result in the Venture (treating the Venture as
if it otherwise qualified as a REIT solely for this purpose) failing to maintain
its status as a Domestically-Controlled REIT; and the intended transferee shall
acquire no rights in such Interests.

 

10.3                        Excess Interests.

 

(a)                                 If, notwithstanding the other provisions
contained in this Article 10, at any time, until the Restriction Termination
Date, there is a purported Transfer or other change in the capital structure of
the Venture such that any Person would Beneficially Own Interests in excess of
the applicable Ownership Limit or Existing Holder Limit (as applicable), then,
except as otherwise provided in Sections 10.9 and 10.12, the Interests
Beneficially Owned in excess of such Ownership Limit or Existing Holder Limit
(rounded up to the nearest whole Interest) shall constitute “Excess Interests”
and shall be treated as provided in this Article 10.  Such designation and
treatment shall be effective as of the close of business on the Business Day
prior to the date of the purported Transfer or change in capital structure.

 

(b)                                 If, notwithstanding the other provisions
contained in this Article 10, at any time, until the Restriction Termination
Date, there is a purported Transfer or other change in the capital structure of
the Venture (as a result of a direct or indirect Transfer or otherwise) which,
if effective, would cause the Venture (treating the Venture as if it otherwise
qualified as a REIT solely for this purpose) to (i) become “closely held” within
the meaning of Section 856(h) of the Code, (ii) fail to qualify as a
Domestically-Controlled REIT or (iii) otherwise fail to qualify as a REIT, then
the Interests that are the subject of such Transfer or other event which would
cause the Venture to fail such requirement shall constitute “Excess Interests”
and shall be treated as provided in this Article 10.  Such designation and
treatment shall be effective as of the close of business on the Business Day
prior to the date of the purported Transfer or change in capital structure.

 

(c)                                  If, at any time prior to the Restriction
Termination Date, notwithstanding the other provisions contained in this
Article 10, there is an event (a “Prohibited Owner Event”) which would result in
the disqualification of the Venture as a REIT under the Code (treating the
Venture as if it otherwise qualified as a REIT solely for this purpose) by
virtue of actual, Beneficial or constructive ownership of Interests, then
Interests which result in such disqualification shall be automatically exchanged
for an equal number of Excess Interests to the extent necessary to avoid such
disqualification.  Such exchange shall be effective as of the close of business
on the Business Day prior to the date of the Prohibited Owner Event.  In
determining which Interests are exchanged, Interests owned directly or
indirectly by any Person who caused the Prohibited Owner Event to occur shall be
exchanged before any Interests not so held are exchanged.  If similarly situated
Persons exist, such exchange shall be pro rata.  If the Venture is still so
disqualified as a REIT (treating the Venture as if it otherwise qualified as a
REIT solely for this purpose), Interests owned directly or indirectly by Persons
who did not cause the Prohibited Owner Event to occur shall be chosen by random
lot and exchanged for Excess Interests until the Venture is no longer so
disqualified as a REIT (treating the Venture as if it otherwise qualified as a
REIT solely for this purpose).

 

10.4                        Prevention of Transfer.  If the Venture or its
designee shall at any time determine in good faith that a Transfer has taken
place in violation of Section 10.2 or that a Person intends

 

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to acquire or has attempted to acquire beneficial ownership (determined without
reference to any rules of attribution) or Beneficial Ownership of any Interests
in violation of Section 10.2, the Venture or its designee shall take such action
as it deems advisable to refuse to give effect to or to prevent such Transfer,
including, without limitation, refusing to give effect to such Transfer on the
books of the Venture or instituting proceedings to enjoin such Transfer;
provided, however, that any Transfers or attempted Transfers in violation of
Section 10.2(b), (c), (d), (e) or (f) shall automatically result in the
designation and treatment described in Section 10.3, irrespective of any action
(or non-action) by the Venture.

 

10.5                        Notice.  Any Person who acquires or attempts to
acquire Interests in violation of Section 10.2, or any Person who is a
transferee such that Excess Interests result under Section 10.3, shall
immediately give written notice or, in the event of a proposed or attempted
Transfer, shall give at least fifteen (15) days prior written notice to the
Venture of such event and shall provide to the Venture such other information as
the Venture may request in order to determine the effect, if any, of such
Transfer or attempted Transfer on the Subsidiary REIT’s status as a REIT.

 

10.6                        Information for the Venture.  Until the Restriction
Termination Date:

 

(a)                                 Every Beneficial Owner of more than one-half
(½) of one percent (1%) of the number or value of outstanding Interests shall,
within thirty (30) days after January 1 of each year, give written notice to the
Venture stating the name and address of such Beneficial Owner, the number of
Interests Beneficially Owned, and a description of how such Interests are held. 
Each such Beneficial Owner shall provide to the Venture such additional
information as the Venture may reasonably request in order to determine the
effect, if any, of such Beneficial Ownership on the Subsidiary REIT’s status as
a REIT.

 

(b)                                 Each Person who is a Beneficial Owner of
Interests and each Person who is holding Interests for a Beneficial Owner shall
provide to the Venture in writing such information with respect to direct,
indirect and constructive ownership of Interests as the Venture deems reasonably
necessary to comply with the provisions of the Code applicable to a real estate
investment trust, to determine the Subsidiary REIT’s status as a REIT, to comply
with the requirements of any taxing authority or governmental agency or to
determine any such compliance.

 

10.7                        Other Action by Venture.  Nothing contained in this
Article 10 shall limit the authority of the Venture to take such other action as
it deems necessary or advisable to protect the Venture, the Subsidiary REIT and
the interests of their respective members by preservation of the Subsidiary
REIT’s status as a REIT.

 

10.8                        Ambiguities.  In the case of an ambiguity in the
application of any of the provisions of this Article 10, including, without
limitation, any definition contained in Section 10.1, the Venture shall have the
power to interpret and determine the application of the provisions of this
Article 10 with respect to any situation based on the facts known to the
Venture.

 

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10.9                        Modification of Existing Holder Limits.  The
Existing Holder Limits may be modified as follows:

 

(a)                                 Subject to the limitations provided in
Section 10.11, the Venture may grant options which result in Beneficial
Ownership of Interests by an Existing Holder pursuant to an option plan approved
by the Venture.  Any such grant shall increase the Existing Holder Limit for the
affected Existing Holder to the maximum extent possible under Section 10.11 to
permit the Beneficial Ownership of the Interests issuable upon the exercise of
such option.

 

(b)                                 The Venture shall reduce the Existing Holder
Limit for any Existing Holder after any Transfer permitted in this Article 10 by
such Existing Holder by the percentage of the outstanding Interests so
Transferred or after the lapse (without exercise) of an option described in
paragraph (a) of this Section 10.9 by the percentage of the Interests that the
option, if exercised, would have represented, but in either case no Existing
Holder Limit shall be reduced to a percentage which is less than the Ownership
Limit.

 

10.10                 Increase or Decrease in Ownership Limit.  Subject to the
limitations provided in Section 10.11, the Venture may from time to time
increase or decrease the Ownership Limit; provided, however, that any decrease
may only be made prospectively as to subsequent holders (other than a decrease
as a result of a retroactive change in existing law that would require a
decrease to retain the Subsidiary REIT’s status as a REIT, in which case such
decrease shall be effective immediately).

 

10.11                 Limitations on Changes in Existing Holder and Ownership
Limits.

 

(a)                                 Neither the Ownership Limit nor any Existing
Holder Limit may be increased (nor may any additional Existing Holder Limit be
created) if, after giving effect to such increase (or creation), five (5) or
fewer Beneficial Owners of Interests (including, without limitation, all of the
then Existing Holders) could Beneficially Own, in the aggregate, more than
forty-nine and nine-tenths percent (49.9%) in number or value of the outstanding
Interests.

 

(b)                                 Prior to the modification of any Existing
Holder Limit or Ownership Limit pursuant to Sections 10.9 or 10.10, the Venture
may require such opinions of counsel, affidavits, undertakings or agreements as
it may deem necessary or advisable in order to determine or ensure the
Subsidiary REIT’s status as a REIT.

 

(c)                                  No Existing Holder Limit shall be reduced
to a percentage which is less than the Ownership Limit.

 

(d)                                 The Existing Holder Limit for MWP shall not
be increased above forty-nine and nine-tenths percent (49.9%) without the prior
Consent of MWP.

 

10.12                 Waivers by Venture.  The Venture, upon receipt of a ruling
from the IRS or an opinion of counsel or other evidence satisfactory to the
Manager and upon at least fifteen (15) days written notice from a transferee
prior to the proposed Transfer which, if consummated, would result in the
intended transferee owning Interests in excess of the Ownership Limit or the
Existing Holder Limit, as the case may be, and upon such other conditions as the
Venture may

 

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direct, may waive the Ownership Limit or the Existing Holder Limit, as the case
may be, with respect to such transferee.

 

10.13                 Severability.  If any provision of this Article 10 or any
application of any such provision is determined to be void, invalid or
unenforceable by any court having jurisdiction over the issue, the validity and
enforceability of the remaining provisions shall be affected only to the extent
necessary to comply with the determination of such court.

 

10.14                 Trust for Excess Interests.  Upon any purported Transfer
that results in Excess Interests pursuant to Section 10.3, such Excess Interests
shall be deemed to have been transferred to the Excess Interest Trustee, as
trustee of the Excess Interest Trust for the exclusive benefit of the Charitable
Beneficiary.  Excess Interests so held in trust shall be issued and outstanding
Interests of the Venture.  The Purported Beneficial Transferee shall have no
rights in such Excess Interests except as provided in Section 10.17.

 

10.15                 Distributions on Excess Interests.  Any distributions
(whether as dividends, distributions upon liquidation, dissolution or winding up
or otherwise) on Excess Interests shall be paid to the Excess Interest Trust for
the benefit of the Charitable Beneficiary.  Upon liquidation, dissolution or
winding up of the Venture, the Purported Record Transferee shall receive the
lesser of (a) the amount of any distribution made upon liquidation, dissolution
or winding up or (b) the price paid by the Purported Record Transferee for the
Interests, or if the Purported Record Transferee did not give value for the
Interests, the Market Price of the Interests on the day of the event causing the
Interests to be held in trust.  Any such dividend paid or distribution paid to
the Purported Record Transferee in excess of the amount provided in the
preceding sentence prior to the discovery by the Venture that the Interests with
respect to which the dividend or distribution was made had been exchanged for
Excess Interests shall be repaid by the Purported Record Transferee to the
Excess Interest Trust for the benefit of the Charitable Beneficiary.

 

10.16                 Voting of Excess Interests.  The Excess Interest Trustee
shall be entitled to vote the Excess Interests for the benefit of the Charitable
Beneficiary on any matter.  Subject to Delaware law, any vote taken by a
Purported Record Transferee prior to the discovery by the Venture that the
Excess Interests were held in trust shall be rescinded ab initio.  The owner of
the Excess Interests shall be deemed to have given an irrevocable proxy to the
Excess Interest Trustee to vote the Excess Interests for the benefit of the
Charitable Beneficiary.

 

10.17                 Non-Transferability of Excess Interests.  Excess Interests
shall be transferable only as provided in this Section 10.17. At the direction
of the Venture, the Excess Interest Trustee shall Transfer the Interests held in
the Excess Interest Trust to a Person whose ownership of the Interests will not
violate the Ownership Limit or Existing Holder Limit and for whom such Transfer
would not be wholly or partially void pursuant to Section 10.2.  Such Transfer
shall be made within sixty (60) days after the latest of (x) the date of the
Transfer which resulted in such Excess Interests and (y) the date the Venture
determines in good faith that a Transfer resulting in Excess Interests has
occurred, if the Venture does not receive a notice of such Transfer pursuant to
Section 10.5.  If such a Transfer is made, the interest of the Charitable
Beneficiary shall terminate and proceeds of the sale shall be payable to the
Purported Record Transferee and to the Charitable Beneficiary. The Purported
Record Transferee shall receive the lesser of the price

 

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paid by the Purported Record Transferee for the Interests or, if the Purported
Record Transferee did not give value for the Interests, the Market Price of the
Interests on the day of the event causing the Interests to be held in trust, and
the price received by the Excess Interest Trust from the sale or other
disposition of the Interests.  Any proceeds in excess of the amount payable to
the Purported Record Transferee shall be paid to the Charitable Beneficiary. 
Prior to any Transfer of any Excess Interests by the Excess Interest Trustee,
the Venture must have waived in writing its purchase rights under
Section 10.18.  It is expressly understood that the Purported Record Transferee
may enforce the provisions of this Section 10.17 against the Charitable
Beneficiary.

 

If any of the foregoing restrictions on Transfer of Excess Interests is
determined to be void, invalid or unenforceable by any court of competent
jurisdiction, then the Purported Record Transferee may be deemed, at the option
of the Venture, to have acted as an agent of the Venture in acquiring such
Excess Interests and to hold such Excess Interests on behalf of the Venture.

 

10.18                 Call by the Venture on Excess Interests.  Excess Interests
shall be deemed to have been offered for sale to the Venture, or its designee,
at a price per Interest equal to the lesser of the price per Interest in the
transaction that created such Excess Interests (or, in the case of a devise,
gift or other transaction in which no value was given for such Excess Interests,
the Market Price at the time of such devise, gift or other transaction) and the
Market Price of the Interests to which such Excess Interests relates on the date
the Venture, or its designee, accepts such offer (the “Redemption Price”).  The
Venture shall have the right to accept such offer for a period of ninety (90)
days after the later of (x) the date of the Transfer which resulted in such
Excess Interests and (y) the date the Manager determines in good faith that a
Transfer resulting in Excess Interests has occurred, if the Venture does not
receive a notice of such Transfer pursuant to Section 10.5 but in no event later
than a permitted Transfer pursuant to and in compliance with the terms of
Section 10.17.  Unless the Manager determines that it is in the interests of the
Venture to make earlier payments of all of the amount determined as the
Redemption Price per Interest in accordance with the preceding sentence, the
Redemption Price may be payable at the option of the Venture at any time up to
but not later than one (1) year after the date the Venture accepts the offer to
purchase the Excess Interests.  In no event shall the Venture have an obligation
to pay interest to the Purported Record Transferee.

 

ARTICLE 11

 

DISSOLUTION OF VENTURE

11.1                        Bankruptcy of Member.

 

(a)                                 The Bankruptcy, insolvency, termination,
dissolution, liquidation or other cessation or assignment for the benefit of
creditors by any Member (the occurrence of the foregoing with respect to any
Person, a “Bankruptcy Event”), or, except as otherwise permitted in accordance
with Article 9, the withdrawal of any Member, shall dissolve the Venture, unless
within ninety (90) days after notice is given to the other Members of the
occurrence of such event, the remaining Members elect to continue the business
of the Venture.  The Member suffering a Bankruptcy Event (or its legal
representative) or withdrawing from the Venture, except as otherwise permitted
in accordance with Article 9, is hereby deemed to Consent to the

 

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continuation of the business of the Venture.  In the event of a Bankruptcy Event
with respect to BH Waterford or a withdrawal of BH Waterford as the Manager of
the Venture, the Venture shall file an amendment to the Venture’s Certificate
removing BH Waterford as the manager of the Venture and changing the name of the
Venture to remove any references to “Behringer Harvard”.

 

(b)                                 For purposes of this Agreement, the
“Bankruptcy” of a Member shall be deemed to have occurred upon the happening of
any of the following: (i) the filing of an application by the Member for, or a
consent to or acquiescence in, the appointment of a trustee of its assets,
(ii) the filing by the Member of a voluntary petition for relief as a debtor
under the United States Bankruptcy Code or the filing of a pleading in any court
of record admitting in writing its inability to pay its debts as they come due,
(iii) the making by the Member of a general assignment for the benefit of
creditors or (iv) the expiration of sixty (60) days following the entry of an
order, judgment or decree by any court of competent jurisdiction adjudicating
the Member a bankrupt or appointing a trustee of its assets.

 

11.2                        Other Events of Dissolution.  The happening of any
one of the following events shall cause a dissolution of the Venture:

 

(i)                                     The reduction to cash or cash
equivalents of all Venture assets;

 

(ii)                                  The agreement in writing to dissolution by
the Members; or

 

(iii)                               The termination of the term of the Venture
pursuant to Section 2.4 of this Agreement.

 

Each Member waives the right to cause a dissolution of the Venture in any other
way.  Dissolution of the Venture shall be effective on the day on which the
event occurs which gives rise to the dissolution, but the Venture shall not
terminate until the assets of the Venture shall have been distributed as
provided herein and a certificate of cancellation of the Certificate has been
filed with the Secretary of State of the State of Delaware.

 

11.3                        Distribution Upon Liquidation.

 

(a)                                 Upon dissolution of the Venture, unless the
business of the Venture is continued as provided above, the Manager (or, in the
event that the dissolution is caused by a Bankruptcy Event with respect to the
Manager, such Person, other than the Manager, as the Members shall designate as
liquidator of the Venture) shall act as “Liquidator”.  The Liquidator shall wind
up the affairs of the Venture, shall sell such of the assets of the Venture as
it deems necessary or appropriate in accordance with Section 2.6(b), and (i) any
resulting gain or loss from each sale plus (ii) the fair market value of such
property which has not been sold shall be determined and income, gain, loss or
deduction inherent in such property (which has not been reflected in the Capital
Accounts previously) shall be allocated among the Members as provided in
Section 4.1 and, after paying all debts and liabilities of the Venture,
including all costs of dissolution, shall distribute any remaining Venture
property along with any cash received from the sale of the property as follows:

 

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(i)                                     The Liquidator may set up any reserve it
deems reasonably necessary for any contingent liabilities or obligations of the
Venture arising out of or in connection with the Venture.  Such reserve may be
paid over by the Liquidator to a bank or trust company to act as escrow agent. 
Any such escrow agent shall hold such reserves for payment of any of the
aforementioned contingencies, and, at the expiration of such period as the
Liquidator shall designate, distribute the balance thereafter remaining in the
manner hereinafter provided.

 

(ii)                                  Cash and all other assets of the Venture
not sold pursuant to this Section 11.3 will be distributed among the Members in
the same manner as Net Cash Flow in accordance with Section 5.1.

 

(b)                                 The Members shall continue to share income,
loss and other tax items during the period of such Liquidation in the same
proportions as before dissolution.  Subject to Section 2.6(b) the Liquidator
shall determine whether to sell any Venture property, and, if so, whether at a
public or private sale, for what price, and on what terms. If the Liquidator
determines to sell or otherwise dispose of any Venture property or any interest
therein, the Liquidator shall not be required to do so promptly but shall do so
in an orderly and commercially reasonable manner so as to avoid a distress sale.

 

(c)                                  The obligation of any Member to the Venture
or any other Member that shall have accrued and be unsatisfied as of the date of
dissolution or termination of the Venture shall survive such dissolution or
termination.

 

(d)                                 Each Member shall look solely to the assets
of the Venture for all distributions with respect to the Venture, its Capital
Account and its share of income, loss and other tax items, and shall have no
recourse therefor (upon dissolution or otherwise) against the Manager, any other
Member, the Liquidator or any of their Affiliates.

 

11.4                        Procedural and Other Matters.

 

(a)                                 Upon dissolution of the Venture and until
the filing of a certificate of cancellation, the Liquidator may, in the name of,
and for and on behalf of, the Venture, prosecute and defend suits, whether
civil, criminal or administrative, gradually settle and close the business of
the Venture, dispose of and convey the property of the Venture, discharge or
make reasonable provision for the liabilities of the Venture and distribute to
the Members any remaining assets of the Venture, in accordance with this
Article 11 and all without affecting the liability of the Members or the Manager
and without imposing liability on the Liquidator.

 

(b)                                 The Certificate may be canceled upon the
dissolution and the completion of winding-up of the Venture by any Person
authorized to cause such cancellation in connection with such dissolution and
winding-up.

 

ARTICLE 12

 

REPRESENTATIONS AND WARRANTIES

 

12.1                        Representations and Warranties of the Members.  Each
of the Members hereby represents and warrants to the other Member as follows:

 

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(a)                                 Such Member is a corporation or other Entity
duly formed and validly existing under the laws of the jurisdiction of its
organization with all requisite power and authority to own its assets and to
carry on its business as now being conducted.  Such Member has all requisite
power and authority to enter into this Agreement and to carry out the
transactions contemplated hereby.

 

(b)                                 The execution and delivery of this Agreement
and the consummation of the transactions contemplated hereby have been duly
authorized by all necessary action on the part of such Member.  This Agreement
has been executed and delivered by a duly authorized officer of such Member or
the general partner of such Member and constitutes the valid and binding
obligation of such Member, enforceable against such Member in accordance with
the terms hereof, subject, as to enforcement, to bankruptcy, insolvency,
reorganization and other laws of general applicability relating to or affecting
creditor’s rights and to general principles of equity.

 

(c)                                  The execution, delivery and performance by
such Member of this Agreement does not and will not (i) violate any decree or
judgment of any court of governmental authority that may be applicable to such
Member; (ii) violate any law (or regulation promulgated under any law);
(iii) violate or conflict with, or result in a breach of, or constitute a
default (or an event with or without notice or lapse of time or both would
constitute a default) under any contract or agreement to which such Member is a
party; or (iv) violate or conflict with any provision of the organizational
documents of such Member.

 

(d)                                 No broker, finder, agent or other third
party has been employed by or on behalf of such Member (or any partner, member,
shareholder or advisor thereof) in connection with the negotiation or
consummation of this Agreement or any of the transactions contemplated hereby,
and no such party has any claim for any commission, finder’s fee or similar
amount payable as a result of any engagement of such party by or on behalf of
such Member.

 

(e)                                  Such Member has acquired its Interest in
the Venture for investment purposes and has not acquired its Interest in the
Venture for the purpose of selling its Interest in the Venture, or causing the
Venture to sell its assets, to customers in the ordinary course of a trade or
business.

 

(f)                                   (i) To the best of such Member’s
knowledge, (A) all amounts contributed and to be contributed, if any, to the
Venture by such Member were not and will not be directly or indirectly derived
from activities that contravene federal, state or international laws,
regulations or executive or other orders, including, without limitation,
anti-money laundering laws, regulations or executive or other orders; and
(B) none of (1) such Member, (2) any Affiliate of such Member, (3) any Person
having a greater than ten percent (10%) beneficial interest in such Member, or
(4) any Person for whom such Member is acting as agent or nominee in connection
with its investment in the Venture is a Prohibited Member; and (ii) such Member
will provide (A) prompt notice to the Manager if, at any time, any of the
representations and warranties in the foregoing clause (i) are untrue at any
time, and (B) any information reasonably requested by the Manager in connection
with the same.  Such Member acknowledges and agrees that the Venture or the
Manager may be required by applicable laws, regulations or executive or other
orders, including the USA PATRIOT Act and regulations and executive orders
administered by the U.S.

 

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Treasury Department’s Office of Foreign Assets Control, to take certain actions,
including, without limitation, requiring a withdrawal of such Member, and
“freezing the account” of such Member by, among other things, prohibiting
further investments by such Member, prohibiting distributions to be made to such
Member, and reporting any such actions and disclosing such Member’s identity to
the U.S. Treasury Department’s Office of Foreign Assets Control, and otherwise
to comply with applicable laws, regulations and executive or other orders
related to the USA PATRIOT Act and other anti-money laundering laws.

 

ARTICLE 13

 

BOOKS AND RECORDS; REPORTS TO MEMBERS

 

13.1                        Books.  The Manager shall maintain or cause to be
maintained separate, full and accurate books and records of the Venture, and
each Member or any authorized representative of any Member shall have the right
to freely inspect, examine and copy the same and to meet with employees of the
Manager responsible for preparing the same at reasonable times during business
hours and upon reasonable notice.  In addition, the Manager agrees to provide
each Member, its representatives and an independent accounting firm (if any)
designated by such Member reasonable access to all such books and records,
during which such Member or such accounting firm may conduct an audit of the
Venture.  The cost of any such audit shall be borne by the requesting Member
unless an error is discovered which has had the effect of reducing or increasing
such Member’s distributions from the Venture by an amount equal to or greater
than five percent (5%), in which case the Venture shall bear the cost of the
audit.  The Manager will keep the financial and other relevant records of the
Venture, the Subsidiary REIT and any subsidiary thereof, as determined in the
reasonable discretion of the Manager, for seven (7) years after the date of the
dissolution of the Venture.

 

13.2                        Monthly and Quarterly Reports.  Subject to the
following sentence, the Manager shall cause to be prepared and distributed to
the Members a monthly report with respect to the Venture within twenty (20) days
after the last day of each month prepared in accordance with U.S. GAAP (except
as set forth in the footnotes thereto and except for year-end adjustments made
after the dates of such monthly reports), consistently applied, including (i) a
balance sheet, (ii) a profit and loss statement, (iii) a statement showing cash
distributions for such fiscal quarter and for the year to date, (iv) a statement
showing computation of related-party fees and Member distributions for such
month and for the year to date, (v) a report briefly describing any significant
variances from the applicable budget line item in the operating plan of the
Venture for each Project for the applicable Subsequent Operating Plan and
(vi) the other reports identified on Exhibit D, and within ten (10) days after
the last day of each month, the requested electronic downloads in the format
described in Exhibit E to the extent available.  During the months following the
end of each fiscal quarter of the Venture (January, April, July and October) the
Manager shall cause to be prepared and delivered, by the twentieth (20th) day of
such month, the financial statements set forth in clauses (i) through (iv) of
this Section 13.2 for the prior fiscal quarter.  In lieu of the financial
statements set forth in clauses (i) through (iv) of this Section 13.2, the
Manager may cause to be prepared and distributed to each of the Members combined
financial statements of the Venture and each other venture in which such Member
(or its Affiliate) has invested with such other Member (or its Affiliate),
prepared in accordance with U.S. GAAP (except as set forth in the footnotes
thereto and except for year-end adjustments

 

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made after the dates of such monthly reports), consistently applied, including
(A) a combined balance sheet, (B) a combined profit and loss statement, (C) a
combined statement showing cash distributions for such fiscal quarter and year
to date, and (D) a combined statement of related party fees and distributions to
each Member (or its Affiliate) for such fiscal quarter and for the year to date.

 

13.3        Annual Reports.  Subject to the following sentence, the Manager
shall engage Deloitte & Touche LLP or such other nationally recognized
independent registered public accounting firm selected by the Manager with the
Consent of the Advisory Committee to examine and audit the Venture’s books and
records.  Subject to the following sentence, within ninety (90) days after the
end of each fiscal year, the Manager shall cause to be distributed to the
Members financial statements with respect to the Venture, which shall include
the items set forth in clauses (i) through (v) of Section 13.2 with respect to
such fiscal year and which shall be prepared in accordance with U.S. GAAP
(except as set forth in the footnotes thereto), consistently applied, and shall
be audited by the Venture’s independent registered public accounting firm.  In
lieu of the financial statements set forth in clauses (i) through (iv) of
Section 13.2, the Manager may cause to be distributed to each Member with
respect to such fiscal year combined financial statements, prepared in
accordance with U.S. GAAP (except as set forth in the footnotes thereto),
consistently applied, and audited by the Venture’s independent registered public
accounting firm, which include the items set forth in clauses (A) through (D) of
Section 13.2.

 

13.4        Electronic Data Transmission.  The Manager shall comply with the
procedures established pursuant to Exhibit E to facilitate the automatic and
electronic transmission of data to MWP.  The Manager shall implement and use
Yardi or such other property management software chosen by the Manager,
providing electronic delivery of data on a monthly basis as set forth in Section
13.2 and making such reasonable accommodations consistent with the foregoing as
may be necessary to support data transmission requests of MWP.

 

13.5        Accountants; Tax Returns.

 

(a)           The Manager shall engage Ernst & Young LLP or such other
nationally recognized independent registered public accounting firm selected by
the Manager and approved by the Advisory Committee to review, or to sign as
preparer, all federal, state and local Tax Returns that the Venture is required
to file.  The Manager will cause to be furnished to each Member within one
hundred twenty (120) days after the end of each fiscal year a Schedule K-1 or
such other statement as is required by the IRS that sets forth such Member’s
share of the income, gain, loss, deduction and other relevant fiscal items of
the Venture for such fiscal year. Each Member shall be entitled to receive, upon
request, copies of all federal, state and local income Tax Returns and
information returns, if any, that the Venture is required to file.

 

(b)           The Venture shall cause the Subsidiary REIT and each Sub-Sub REIT
to prepare and timely file all applicable Tax Returns and amendments thereto
required to be filed by such Persons.  Each Member shall have a reasonable
opportunity to review prior to filing all such Tax Returns and amendments
thereto.

 

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(c)           Effective on or before January 31, 2013, Manager shall cause each
of Behringer Harvard West Village Project Owner, LLC, Behringer Harvard
Stonegate, LLC and Behringer Harvard Argenta, LLC (each, a “Waterford SPE”) to
file a valid election pursuant to Treasury Regulations Section 301.7701-3(c) to
be treated as an association taxable as a corporation for U.S. federal income
tax purposes.  Manager shall cause each Waterford SPE to file, on its Tax Return
for the taxable year beginning on the first day such Waterford SPE is treated as
an association taxable as a corporation, an election pursuant to Section
856(c)(1) of the Code to be treated as a REIT.

 

(d)           The Manager shall cause the Venture to be treated as a partnership
for federal income tax purposes that is not a “publicly traded partnership”
within the meaning of Section 7704 of the Code and will not elect to be
classified as a corporation for U.S. federal income tax purposes.  The Manager
shall cause the manager of the Subsidiary REIT and each Sub-Sub REIT to use
commercially reasonable efforts to prevent the Subsidiary REIT and each Sub-Sub
REIT (upon such Sub-Sub REIT making a valid election to be treated as an
association taxable as a corporation pursuant to Section 13.5(c)) from engaging
in any “prohibited transaction” within the meaning of Section 857(b)(6) of the
Code.

 

13.6        Accounting and Fiscal Year.  The Venture books and records shall be
kept on the accrual basis.  The fiscal year of the Venture shall end on December
31.

 

13.7        Property Management Reports.  The Manager shall provide promptly to
each Member copies of any report delivered by the Management Company (or another
Affiliate of the Manager) pursuant to the property management, leasing and
related services agreement contemplated by Section 6.4(b), along with electronic
downloads of such data to the extent available.

 

13.8        Additional Information.  The Manager shall cause the Venture or the
Management Company (or another Affiliate of the Manager) to provide promptly any
additional information that any Member may reasonably request so that it may
fully understand the financial performance of the Venture.

 

13.9        Cooperation with Project Valuation.  The Manager shall reasonably
assist and cooperate with any Member that elects, at its sole cost and expense,
to retain an independent third-party appraiser to perform a valuation (or an
update of a prior valuation) of a Project.  The Manager shall cause the Venture
and its representatives, agents and advisors to reasonably assist and cooperate
with the Member and its appraiser in connection with any information requests,
including answering queries and providing copies of any documents and other
Venture-related materials that are necessary for the appraiser to perform its
valuation.  Any Member that elects to obtain a valuation (or an update of a
prior valuation) of a Project at its own cost shall be under no obligation to
provide copies of such valuation or update to the Venture, the Manager or any
other Member, except that such Member may elect to provide such valuation to the
Manager upon the Manager’s reasonable request in connection with any valuation
required pursuant to Section 3.4.

 

13.10      Dissemination of Books, Records, Notices and Reports. 
Notwithstanding anything to the contrary in this Agreement, (a) the Manager
shall not provide to BH MP or any of its authorized representatives (including
any Authorized Representative designated by BH

 

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MP), and BH MP shall have no rights in or to, any books, records, reports,
financial statements, notices, operating plans or any other data or information
related to Argenta or West Village and (b) the Manager shall not provide to MWP
or any of its authorized representatives (including any Authorized
Representative designated by MWP), and MWP shall have no rights in or to, any
books, records, reports, financial statements, notices, operating plans or any
other data or information related to Stonegate.

 

ARTICLE 14

 

MISCELLANEOUS

 

14.1        Notices.  All notices and demands under this Agreement shall be in
writing and may be either delivered personally (which shall include deliveries
by courier), by telefax, telex or other wire transmission or by email (with
request for assurance of receipt in a manner appropriate with respect to
communications of that type, provided that a confirmation copy is concurrently
sent by an internationally recognized express courier for overnight delivery, if
possible) or mailed, postage prepaid, by registered air mail, return receipt
requested:

 

If to MWP, addressed as follows:

 

Heitman Capital Management LLC

191 North Wacker Drive

Suite 2500

Chicago, Illinois 60606

Attention:  Thomas McCarthy and Howard Edelman

Facsimile:  (312) 541-6789

Email:  thomas.mccarthy@heitman.com and howard.edelman@heitman.com

 

with a copy to:

 

Mayer Brown LLP

71 S. Wacker Drive

Suite 3200

Chicago, Illinois 60606

Attention:  John W. Noell, Jr.

Facsimile:  (312) 701-7711

Email:  jnoell@mayerbrown.com

 

If to BH MP, addressed as follows:

 

Behringer Harvard Master Partnership I LP

15601 Dallas Parkway, Suite 600

Addison, Texas 75001

Attention:  Daniel J. Rosenberg

Facsimile:  (214) 655-1610

Email:  drosenberg@behringerharvard.com

 

with a copy to:

 

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Stichting Depositary PGGM Private Real Estate Fund,

acting in its capacity as depositary of and for the

account and risk of

PGGM Private Real Estate Fund

c/o PGGM Vermogensbeheer B.V.

Kroostweg-Noord 149

P.O. Box 117

3700 AC Zeist

The Netherlands

Attention:  Werner Sohier

Facsimile:  011.31.30.277 4724

Email:  werner.sohier@pggm.nl

 

and a copy to:

 

Stichting Depositary PGGM Private Real Estate Fund,

acting in its capacity as depositary of and for the account

and risk of PGGM Private Real Estate Fund

c/o PGGM Vermogensbeheer B.V.

Kroostweg-Noord 149

P.O. Box 117

3700 AC Zeist

The Netherlands

Attention:  Reinoud Soons

Facsimile:  011.31.30.277 1780

Email:  reinoud.soons@pggm.nl

 

If to BH Waterford (whether as Manager or a Member), addressed as follows:

 

Behringer Harvard Waterford, LLC

15601 Dallas Parkway, Suite 600

Addison, Texas 75001

Attention:  Daniel J. Rosenberg

Facsimile:  (214) 655-1610

Email:  drosenberg@behringerharvard.com

 

Unless delivered personally or by telefax, telex or other wire transmission or
by email as above (which shall be deemed delivered on the next Business Day
following the date of such personal delivery or transmission or email, provided
that such day is a Business Day in the recipient’s jurisdiction, or otherwise on
the following Business Day in such jurisdiction), any notice shall be deemed to
have been given when received by its addressee.  Any party hereto may designate
a different address to which notices and demands shall thereafter be directed by
written notice given in the same manner and directed to the other parties at
their offices hereinabove set forth.

 

14.2        Execution in Counterparts.  This Agreement may be executed in
several counterparts, each of which shall be deemed an original but all of which
shall constitute one and the some instrument.  In addition, this Agreement may
contain more than one counterpart of the

 

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signature page, and this Agreement may be executed by the affixing of the
signature (or one of the several signatures) of the Manager and each of the
Members to any of such counterpart signature pages; all of such counterpart
signature pages shall be read as though one, and they shall have the same force
and effect as though all of the signers had signed a single signature page.

 

14.3        Amendments.  This Agreement may be amended only with the unanimous
written Consent of the Manager and the Members.  Any waiver of any provision of
this Agreement shall require the Consent of the party from whom such waiver is
sought.

 

14.4        Additional Documents.  The Manager may cause to be filed with any
governmental agency any Applications for Authority and, where applicable,
certificates of cancellation or certificates or statements of dissolution as may
be required or permitted by the laws of the State of Delaware and any other
jurisdiction where the Venture is organized or doing business.

 

14.5        Validity.  If any provision of this Agreement or the application of
such provision to any Person or circumstance shall be held invalid, the
remainder of this Agreement or the application of such provision to Persons or
circumstances other than those with respect to which it is held invalid, shall
not be affected thereby and shall continue to be binding and in force.

 

14.6        Governing Law.  This Agreement and the rights of the parties
hereunder shall be governed by and interpreted in accordance with the internal
laws of the State of Delaware. Except as otherwise provided herein, the rights
and obligations of the Manager and the Members and the administration and
termination of the Venture shall be governed by the Act.

 

14.7        Waiver.  The waiver by any party hereto of the breach of any term,
covenant, agreement or condition herein contained shall not be deemed a waiver
of any subsequent breach of the same or any other term, covenant, agreement or
condition herein, nor shall any custom, practice or course of dealings arising
among the parties hereto in the administration hereof be construed as a waiver
or diminution of the right of any party hereto to insist upon the strict
performance by any other party hereto of the terms, covenants, agreements and
conditions herein contained.

 

14.8        Consent and Approval.  Whenever under this Agreement the Consent of
any Member is required or permitted, such Consent may be evidenced by a written
consent signed by an authorized representative of such Member.

 

14.9        Waiver of Partition.  The Members hereby agree that the assets of
the Venture are not and will not be suitable for partition.  Accordingly, each
of the Members hereby irrevocably waives any and all rights (if any) that it may
have to maintain any action for partition of any of the assets of the Venture.

 

14.10      Binding Effect.  Except as herein otherwise provided, this Agreement
shall be binding upon and inure to the benefit of the parties, their legal
representatives, heirs, administrators, executors, successors and permitted
assigns.

 

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14.11      Entire Agreement.  This Agreement constitutes the entire agreement
among the parties with respect to the formation and operation of the Venture; it
supersedes any prior agreements or understandings among them and it may not be
modified or amended in any manner other than pursuant to Section 14.3.

 

14.12      Captions.  Captions and headings contained in this Agreement are
inserted only as a matter of convenience and in no way define, limit or extend
the scope of this Agreement or any provision hereof.

 

14.13      No Strict Construction.  The language used in this Agreement is that
chosen by the parties hereto to express their mutual understanding and
agreement, and no rule of strict construction shall be applied against any
Person in interpreting this Agreement.

 

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

 

14.15      Recourse to the Manager.  ANYTHING CONTAINED HEREIN TO THE CONTRARY
NOTWITHSTANDING, NO PERSONAL LIABILITY OR PERSONAL DEFICIENCY JUDGMENT SHALL BE
ASSERTED OR ENFORCED AGAINST ANY MEMBERS OF THE MANAGER, AGAINST THE DIRECTORS,
TRUSTEES, OFFICERS, EMPLOYEES, AGENTS, MEMBERS, SHAREHOLDERS OR PRINCIPALS OF
THE MANAGER OR ITS MEMBERS, OR AGAINST THE ASSETS OF ANY SUCH PARTIES, FOR
PAYMENT OF ANY AMOUNT HEREUNDER OR FOR OBSERVANCE OR PERFORMANCE OF ANY OF THE
OBLIGATIONS OF THE MANAGER OR THE VENTURE.

 

14.16      Recourse to the Members.  ANYTHING CONTAINED HEREIN TO THE CONTRARY
NOTWITHSTANDING, NO PERSONAL LIABILITY OR PERSONAL DEFICIENCY JUDGMENT SHALL BE
ASSERTED OR ENFORCED AGAINST ANY DIRECT OR INDIRECT MEMBERS, PARTNERS OR
SHAREHOLDERS OF EITHER MEMBER, AGAINST THE DIRECTORS, TRUSTEES, OFFICERS,
EMPLOYEES, AGENTS, MEMBERS, SHAREHOLDERS OR PRINCIPALS OF EITHER MEMBER OR ANY
SUCH DIRECT OR INDIRECT MEMBERS, PARTNERS OR SHAREHOLDERS OF A MEMBER, OR
AGAINST THE ASSETS OF ANY SUCH PARTIES, FOR PAYMENT OF ANY AMOUNT HEREUNDER OR
FOR OBSERVANCE OR PERFORMANCE OF ANY OF THE OBLIGATIONS OF SUCH MEMBER OR THE
VENTURE.

 

14.17      Remedies Not Exclusive.  Any remedies herein contained for breaches
of obligations hereunder shall not be deemed to be exclusive and shall not
impair the right of any party to exercise any other right or remedy, whether for
damages, injunction or otherwise.

 

14.18      Use of Behringer Harvard Trade Name.  If any third parties other than
BH Multifamily REIT or any of its Affiliates acquires the Interest of Manager,
or if the property management agreement between the Subsidiary REIT (or any
subsidiary thereof) and the Management Company (or any other Affiliate of
Behringer Holdings) is terminated for any reason, then the remaining Member
shall cause the Venture (and the Subsidiary REIT (and any

 

56

--------------------------------------------------------------------------------

 

subsidiary thereof)) to cease to use the name “Behringer Harvard” within thirty
(30) days after such event, unless BH Multifamily REIT or Behringer Holdings, as
the case may be, agrees in writing to allow the continued use of such name
beyond such thirty (30) day period.

 

14.19      Waiver of Jury Trial.  TO THE EXTENT PERMITTED BY APPLICABLE LAW, THE
PARTIES HEREBY IRREVOCABLY WAIVE ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL
PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS
CONTEMPLATED HEREBY.

 

14.20      Confidentiality.

 

(a)           The provisions of this Agreement and of any other agreement
relating to the Venture, the Subsidiary REIT or the Projects to which the
Venture or any Member is a party and all other business, financial or other
information relating directly to the business or affairs of the Venture or the
Subsidiary REIT or the relative or absolute rights or interests of any of the
Members (collectively, the “Information”) that has not been publicly disclosed
with the Consent of all of the Members is confidential and proprietary
information of the Venture, the disclosure of which could cause irreparable harm
to the Venture and the Members. Accordingly, each Member represents that it has
not, and agrees that it will not and that it will use its commercially
reasonable efforts to prevent its shareholders, directors, trustees, officers,
agents, advisors (including any appraiser selected by or on behalf of it, or by
or on behalf of any appraiser selected by it), current and prospective investors
and their advisors, current and prospective financial partners, prospective
lenders, and Affiliates (“Member Representatives”) from, disclosing to any
Person (except to the extent, if any, it is required by applicable law or as
required under the Code to make disclosure to a court or governmental authority
or as required under the Code or as required by applicable securities laws) any
Information or confirm any statement made by any other Person regarding
Information unless all of the Members consent thereto or until the Venture has
publicly disclosed, with the Consent of the Members, the Information and has
notified each Member that it has done so.  Each Member agrees to be responsible
for any breach of this Section 14.20 by its Member Representatives. 
Notwithstanding any contrary provision in this Section 14.20, the Information
shall exclude, and the Members and Member Representatives may disclose, any
information or documentation that (i) is readily ascertainable to the public,
(ii) was known to a Member prior to the execution of this Agreement, (iii) is
deemed advisable by a Member to disclose to its officers, directors, members,
managers, employees, agents, consultants, members of professional firms serving
it or potential lenders, investors, consultants and brokers and others who need
to know such information or review such documentation for the purpose of
assisting a Member in connection with the transactions contemplated by this
Agreement so long as such Persons are informed by such Member of the
confidential nature of such information and are directed by such Member to treat
such information confidentially, (iv) is required to be disclosed by applicable
law, or (v) is deemed advisable by a Member or its counsel to be disclosed in
connection with financial reporting, securities disclosures or other legal, tax
or financial requirements or guidelines applicable to such Member or any
Affiliate thereof, including any disclosures to the Securities and Exchange
Commission.

 

(b)           The covenants and agreements contained in this Section 14.20 will
(i) terminate with respect to a Member twelve (12) months after such Member
ceases to be a

 

57

--------------------------------------------------------------------------------

 

Member or hold any interest in the Venture and (ii) survive the termination of
the Venture for twelve (12) months.

 

(c)           Notwithstanding any contrary provision in this Section 14.20, any
Member may, without breach of the covenants set forth in this Section 14.20 and
without notice to or Consent of the Manager, disclose any Information to any
potential transferee of all or part of an Interest or in connection with any
proposed or actual Transfer of any interest in the direct or indirect beneficial
owners of any of the Members permitted by this Agreement if such transferee
executes and delivers to the Venture a written confidentiality agreement in
which it agrees (i) to use such Information solely for the purpose of evaluating
the purchase of an Interest or beneficial interest in a Member and (ii) to be
bound by the terms and provisions of this Section 14.20 on the same basis and in
the same manner as would apply if it were a Member of the Venture who had signed
this Agreement.  The Members may also disclose such Information as is reasonably
necessary for it (or its Affiliates) to perform any of its (or any of its
Affiliates’) duties or obligations hereunder; provided that, in the case of an
Affiliate, such Affiliate has agreed to be bound by the terms and provisions of
this Section 14.20 on the same basis and in the same manner as would apply if it
were a Member of the Venture who had signed this Agreement. The parties agree
that, if this Section 14.20 is breached, the remedy at law may be inadequate,
and therefore, in addition to any other remedy to which a party may be entitled,
the non-breaching party shall be entitled to seek an injunction or injunctions
to prevent breaches of this Section 14.20 and/or to seek to compel specific
performance of this Section 14.20.

 

(d)           Notwithstanding any contrary provision in this Section 14.20, the
Members (and each employee, representative or other agent of the Members) may
disclose to any and all Persons, without limitation of any kind, the tax
treatment and tax structure of the transactions contemplated herein; provided
that, no Member (and no employee, representative or other agent thereof) shall
disclose any information that is not necessary to understanding the tax
treatment and tax structure of the transactions contemplated herein (including
the identity of the Members, any information that could reasonably allow a
Person to determine the identity of the Members, or any other information to the
extent that such disclosure could result in a violation of any federal or state
securities law).

 

(e)           Notwithstanding any contrary provision in this Section 14.20, (i)
each Member may disclose to its direct and indirect interest holders and their
trustees the terms and conditions of this Agreement (including providing copies
of this Agreement) and such other matters as may be required by its subscription
documents, side letters or other organizational documents or by applicable law,
and (ii) each Member may disclose Information to its attorneys, accountants and
other professional advisors.

 

14.21      Public Disclosure.  The Manager shall not make (or permit any of its
Affiliates or Behringer Holdings or any of its Affiliates to make), nor shall
the Members make (or permit any of their respective Affiliates to make) any
public disclosure relating to the subject matter of this Agreement (whether by
way of the issuance of a press release, public announcement or otherwise)
without the prior written Consent of the other parties, which Consent may not be
unreasonably conditioned, delayed or withheld so long as such public disclosure
is otherwise in compliance with this Agreement; provided that, without the
Consent of the other parties, any such Person may make (i) any public disclosure
it reasonably believes is required by applicable

 

58

--------------------------------------------------------------------------------

 

law, rule or regulation (in which event such Person shall use reasonable efforts
to advise the other parties prior to the making of such disclosure); (ii) such
disclosure as may be reasonably necessary to enforce any provision of this
Agreement; or (iii) any disclosure to any Person permitted pursuant to Section
14.20.  Subject to the preceding sentence, if (x) the Manager (or any of its
Affiliates), or (y) any Member (or any of its Affiliates or Behringer Holdings
or any of its Affiliates) desires to make public disclosure relating to the
subject matter of this Agreement, such Person shall provide to the other parties
a draft of the proposed disclosure for its review and comment and shall
otherwise cooperate with the other parties with respect to such proposed
disclosure.  The other parties may make any comments or suggested changes to
such disclosure within three (3) Business Days after its receipt of the proposed
disclosure. The Person seeking approval of such disclosure shall consider and
use reasonable efforts to address or otherwise take into account the comments or
suggested changes on such disclosure made by the other parties and shall submit
a revised draft of the proposed disclosure, if applicable, to the other parties,
and the other parties shall not unreasonably condition, delay or withhold their
Consent to such disclosure; provided that, if the other parties have not
provided any comments or suggested changes within such three (3) Business Day
period, the other parties will be deemed to have granted their Consent to the
disclosure as proposed to it.  No disclosure permitted by Section 14.20 shall be
deemed a public disclosure relating to the subject matter of this Agreement
(whether by way of the issuance of a press release, public announcement or
otherwise) for purposes of this Section 14.21.

 

[INTENTIONALLY LEFT BLANK]

 

*  *  *  *  *

 

59

--------------------------------------------------------------------------------

 

IN WITNESS WHEREOF, this Agreement has been executed by each of the parties
hereto as of the date of this Agreement set forth above.

 

Manager:

BEHRINGER HARVARD WATERFORD PLACE, LLC, a Delaware limited liability company

 

 

 

 

 

By:

 

 

 

Name:

Ross P. Odland

 

 

Title:

Senior Vice President — Portfolio Management

 

 

 

BEHRINGER HARVARD MASTER PARTNERSHIP I LP, a Delaware limited partnership

 

 

 

By:

Behringer Harvard Institutional GP LP, a Texas limited partnership, its general
partner

 

 

 

By:

Harvard Property Trust, LLC, a Delaware limited liability company, its general
partner

 

 

 

By:

 

 

 

Name:

Ross P. Odland

 

 

Title:

Vice President

 

 

 

 

 

BEHRINGER HARVARD WATERFORD PLACE, LLC, a Delaware limited liability company

 

 

 

 

 

By:

 

 

 

Name:

Ross P. Odland

 

 

Title:

Senior Vice President — Portfolio Management

 

60

--------------------------------------------------------------------------------

 

EXHIBIT A

 

MEMBERS; ADDRESSES; CAPITAL ACCOUNTS; PERCENTAGE INTERESTS

 

 

 

Capital
Account as of
[      ], 2011

 

 

 

Members

 

Argenta

 

Stonegate

 

West Village

 

Percentage
Interests

 

Milky Way Partners, L.P.
c/o Heitman Capital Management LLC
191 North Wacker Drive, Suite 2500
Chicago, Illinois 60606

 

$

[                   ]

 

—

 

$

[                   ]

 

[•]

%*

 

 

 

 

 

 

 

 

 

 

Behringer Harvard Master Partnership I LP
15601 Dallas Parkway, Suite 600
Addison, Texas 75001

 

—

 

$

[                   ]

 

—

 

[•]

%**

 

 

 

 

 

 

 

 

 

 

Behringer Harvard Waterford Place, LLC
15601 Dallas Parkway, Suite 600
Addison, Texas 75001

 

$

[                   ]

 

$

[                   ]

 

$

[                  ]

 

55

%

 

 

 

 

 

 

 

 

 

 

Total:

 

$

[                   ]

 

$

[                  ]

 

$

[                    ]

 

100

%

 

--------------------------------------------------------------------------------

*                This Percentage Interest represents an indirect limited
liability company membership interest of 45% in each of Argenta and West
Village.

**          This Percentage Interest represents an indirect limited liability
company membership interest of 45% in Stonegate.

 

A-1

--------------------------------------------------------------------------------

 

EXHIBIT B-1

 

LEGAL DESCRIPTION OF ARGENTA

 

B-1-1

--------------------------------------------------------------------------------

 

EXHIBIT B-2

 

LEGAL DESCRIPTION OF STONEGATE

 

B-2-1

--------------------------------------------------------------------------------

 

EXHIBIT B-3

 

LEGAL DESCRIPTION OF WEST VILLAGE

 

B-3-1

--------------------------------------------------------------------------------

 

EXHIBIT C

 

OPERATING PLAN FOR FISCAL YEAR ENDED DECEMBER 31, 2011

 

ARGENTA

 

C-1

--------------------------------------------------------------------------------

 

OPERATING PLAN FOR FISCAL YEAR ENDED DECEMBER 31, 2011

 

STONEGATE

 

C-2

--------------------------------------------------------------------------------

 

OPERATING PLAN FOR FISCAL YEAR ENDED DECEMBER 31, 2011

 

WEST VILLAGE

 

C-3

--------------------------------------------------------------------------------

 

EXHIBIT D

 

MONTHLY REPORTS

 

1

 

Trial Balance

2

 

General Ledger

3

 

Management Fee Calculation and Support (YTD and for the month)

4

 

Income Register (if applicable)

5

 

Bank Statement, Reconciliation(s) and Support

6

 

Escalation Report (CAM/Tax Recovery) (if applicable)

7

 

Reforecast (Quarterly, as available)

8

 

Leasing Status Report

9

 

Aging A/R Support Schedule(s)

10

 

Pre-Paid Rent Support Schedule

11

 

A/P Support Schedule(s)

12

 

Security Deposit Summary

13

 

Detailed Rent Roll

14

 

Market Survey (Monthly or Quarterly)

15

 

Bad Debt Expense / Allowance Support Schedule (Quarterly)

16

 

Real Estate Tax Support Schedule (Prepaid/Accrued/Exp)

17

 

Insurance Support Schedule (Prepaid/Accrued/Exp)

18

 

Loan statements / schedules (if applicable)

19

 

Status of Capital Improvements Schedule

20

 

Tenant Work Order (if applicable)

21

 

Legal Action Report (if applicable)

22

 

Expense Distribution Report (if applicable)

23

 

Member Capital Account Balance

 

D-1

--------------------------------------------------------------------------------

 

EXHIBIT E

 

ELECTRONIC DATA TRANSMISSION

 

At the end of each calendar month the Manager shall cause the Venture to
transmit data to MWP in compliance with the following requirements.  The Manager
agrees to provide written notice to MWP in the event of any modifications to
this process.

 

1.              The Manager will transmit data to MWP using the SSH protocol
(used to provide a secure connection between two computers; once the connection
is established, data passed over this connection is done so in encrypted
format).

 

2.              The Manager will provide a public IP address to MWP that will
serve as the transmitting address.

 

a.              The address provided will be static.

b.              The Manager agrees to notify MWP at least thirty (30) days in
advance of any change to this address.

 

3.              An email address will be provided to MWP.

 

a.              This address will be used for electronic system generated
communications from the Manager to MWP.

b.              If the Manager decides to modify the email address, MWP will be
notified no later than ten (10) Business Days prior to the update.

 

4.              Data will be submitted in .csv format.

 

#

 

Field

 

Type

 

Length

 

Contents

 

 

 

 

 

 

 

 

 

1

 

Type

 

String

 

1

 

Enter J

 

 

 

 

 

 

 

 

 

2

 

Transaction Number

 

Integer

 

8

 

Control number of the transaction in the original (exporting) database

 

 

 

 

 

 

 

 

 

3

 

Person Code

 

String

 

8

 

Leave blank

 

 

 

 

 

 

 

 

 

4

 

Name

 

String

 

40

 

Leave blank

 

 

 

 

 

 

 

 

 

5

 

Date

 

String

 

10

 

Charge date, cash received date, invoice date, check date, journal entry date
(mm/dd/yyyy)

 

E-1

--------------------------------------------------------------------------------

 

6

 

Post month

 

String

 

7

 

This is the month that the transaction updates the account totals (mm/yyyy)

 

 

 

 

 

 

 

 

 

7

 

Reference

 

String

 

24

 

Enter PROPERTY MANAGER NAME import

 

 

 

 

 

 

 

 

 

8

 

Remark

 

String

 

120

 

Leave blank

 

 

 

 

 

 

 

 

 

9

 

Property Code

 

String

 

8

 

Heitman property code

 

 

 

 

 

 

 

 

 

10

 

Amount

 

Currency

 

15

 

USD amount

 

 

 

 

 

 

 

 

 

11

 

Account Code

 

String

 

9

 

Heitman GL account

 

 

 

 

 

 

 

 

 

12

 

Accrual

 

String

 

9

 

Leave blank

 

 

 

 

 

 

 

 

 

13

 

Offset

 

String

 

9

 

Leave blank

 

 

 

 

 

 

 

 

 

14

 

Booknum/Checknum

 

String

 

14

 

Enter 1000

 

 

 

 

 

 

 

 

 

15

 

Description

 

String

 

36

 

Trans code & description based on type:

Check: Trans code (usually the check#) & Payee

Invoice: Trans code & vendor

Charge: Trans code & tenant

Receipt: Trans code & tenant

Journal: Trans code & JE description

Other: Trans code & description

 

E-2

--------------------------------------------------------------------------------

 

APPENDIX 4.3(f-2)

 

FORM OF AMENDED AND RESTATED VENTURE AGREEMENT

FOR VENTURES OTHER THAN WATERFORD VENTURE

 

Appendix 4.3(f-2) - Page 1

--------------------------------------------------------------------------------

 

 

AMENDED AND RESTATED

 

LIMITED LIABILITY COMPANY AGREEMENT

 

OF

 

BEHRINGER HARVARD REDWOOD VENTURE, LLC

 

(a Delaware Limited Liability Company)

 

 

Dated as of                   , 2011

 

THE INTERESTS (THE “INTERESTS”) OF BEHRINGER HARVARD REDWOOD VENTURE, LLC HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
“SECURITIES ACT”), THE SECURITIES LAWS OF ANY STATE OR ANY OTHER APPLICABLE U.S.
OR NON-U.S. SECURITIES LAWS, IN EACH CASE IN RELIANCE UPON EXEMPTIONS FROM THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND SUCH LAWS.  THE INTERESTS
MAY BE ACQUIRED FOR INVESTMENT ONLY, AND NEITHER THE INTERESTS NOR ANY
PART THEREOF MAY BE OFFERED FOR SALE, PLEDGED, HYPOTHECATED, SOLD, ASSIGNED OR
TRANSFERRED AT ANY TIME EXCEPT IN COMPLIANCE WITH (I) THE SECURITIES ACT, ANY
APPLICABLE STATE SECURITIES LAWS AND ANY OTHER APPLICABLE SECURITIES LAWS, AND
(II) THE TERMS AND CONDITIONS OF THIS LIMITED LIABILITY COMPANY AGREEMENT.  THE
INTERESTS WILL NOT BE TRANSFERRED OF RECORD EXCEPT IN COMPLIANCE WITH SUCH LAWS
AND THIS LIMITED LIABILITY COMPANY AGREEMENT. THEREFORE, PURCHASERS OF THE
INTERESTS WILL BE REQUIRED TO BEAR THE RISK OF THEIR INVESTMENT FOR AN
INDEFINITE PERIOD OF TIME.

 

--------------------------------------------------------------------------------

 

TABLE OF CONTENTS

 

 

 

Page

 

 

 

ARTICLE 1

DEFINITIONS

2

ARTICLE 2

THE VENTURE

9

2.1

Formation of Venture

9

2.2

Venture Name and Principal Office

9

2.3

Office of and Agent for Service of Process

9

2.4

Term of the Venture

9

2.5

Title to Assets

9

2.6

Purpose and Powers

9

ARTICLE 3

MEMBERS AND CAPITAL CONTRIBUTIONS

12

3.1

Members; Capital Contributions

12

3.2

Capital Calls

12

3.3

Additional Capital Contributions

12

3.4

Failure to Make Capital Contributions

13

3.5

Return of Capital Contributions

15

3.6

Capital Account

15

3.7

Transfer of Capital Account

15

3.8

Tax Matters Partner

15

3.9

Liability for Venture’s Obligations

16

ARTICLE 4

ALLOCATIONS

16

4.1

Allocation of Profits and Losses

16

4.2

Tax Allocations

16

ARTICLE 5

DISTRIBUTIONS AND EXPENSES

17

5.1

Distributions of Net Cash Flow

17

5.2

Tax Provisions

17

5.3

Priority

18

5.4

Operating Expenses

18

ARTICLE 6

MANAGEMENT RIGHTS, DUTIES, AND POWERS OF THE MANAGER; TRANSACTIONS INVOLVING THE
MANAGER OR ITS AFFILIATES; ADDITIONAL OR SUCCESSOR MANAGER

18

6.1

Management of the Venture

18

6.2

Operating Plan

19

 

i

--------------------------------------------------------------------------------

 

TABLE OF CONTENTS

(continued)

 

6.3

Major Decisions

20

6.4

Business with Affiliates; Other Activities

22

6.5

Maintenance of Domestic Status

23

6.6

Tax Status

24

6.7

Liability for Venture’s Obligations

24

6.8

Additional or Successor Manager

24

6.9

Removal of Manager for Cause

24

ARTICLE 7

LIMITATIONS ON LIABILITY AND INDEMNIFICATION

25

7.1

Limitation of Liability

25

7.2

Indemnification

25

ARTICLE 8

MEETINGS OF THE ADVISORY COMMITTEE

27

8.1

Advisory Committee

27

8.2

Meetings of the Advisory Committee

27

8.3

Dispute Resolution Procedure

28

ARTICLE 9

TRANSFER OF MEMBERS’ INTERESTS IN THE VENTURE; BUY/SELL

29

9.1

Transfers of a Member’s Interest

29

9.2

Buy/Sell Arrangement

30

9.3

Basis Election

37

9.4

Void Transfer

37

ARTICLE 10

EXCESS INTEREST PROVISIONS

37

10.1

Definitions

37

10.2

Ownership Limitation

39

10.3

Excess Interests

40

10.4

Prevention of Transfer

40

10.5

Notice

41

10.6

Information for the Venture

41

10.7

Other Action by Venture

41

10.8

Ambiguities

41

10.9

Modification of Existing Holder Limits

41

 

ii

--------------------------------------------------------------------------------

 

TABLE OF CONTENTS

(continued)

 

10.10

Increase or Decrease in Ownership Limit

42

10.11

Limitations on Changes in Existing Holder and Ownership Limits

42

10.12

Waivers by Venture

42

10.13

Severability

42

10.14

Trust for Excess Interests

43

10.15

Distributions on Excess Interests

43

10.16

Voting of Excess Interests

43

10.17

Non-Transferability of Excess Interests

43

10.18

Call by the Venture on Excess Interests

44

ARTICLE 11

DISSOLUTION OF VENTURE

44

11.1

Bankruptcy of Member

44

11.2

Other Events of Dissolution

45

11.3

Distribution Upon Liquidation

45

11.4

Procedural and Other Matters

46

ARTICLE 12

REPRESENTATIONS AND WARRANTIES

46

12.1

Representations and Warranties of the Members

46

ARTICLE 13

BOOKS AND RECORDS; REPORTS TO MEMBERS

48

13.1

Books

48

13.2

Monthly and Quarterly Reports

48

13.3

Annual Reports

49

13.4

Electronic Data Transmission

49

13.5

Accountants; Tax Returns

49

13.6

Accounting and Fiscal Year

50

13.7

Property Management Reports

50

13.8

Additional Information

50

13.9

Cooperation with Project Valuation

50

ARTICLE 14

MISCELLANEOUS

50

14.1

Notices

50

14.2

Execution in Counterparts

51

14.3

Amendments

51

 

iii

--------------------------------------------------------------------------------

 

TABLE OF CONTENTS

(continued)

 

14.4

Additional Documents

51

14.5

Validity

52

14.6

Governing Law

52

14.7

Waiver

52

14.8

Consent and Approval

52

14.9

Waiver of Partition

52

14.10

Binding Effect

52

14.11

Entire Agreement

52

14.12

Captions

52

14.13

No Strict Construction

52

14.14

Identification

52

14.15

Recourse to the Manager

53

14.16

Recourse to the Members

53

14.17

Remedies Not Exclusive

53

14.18

Use of Behringer Harvard Trade Name

53

14.19

Waiver of Jury Trial

53

14.20

Confidentiality

53

14.21

Public Disclosure

55

 

iv

--------------------------------------------------------------------------------

 

EXHIBITS

A

Members; Addresses; Capital Accounts; Percentage Interests

B

Legal Description of Project

C

Operating Plan for Fiscal Year Ended December 31, 2011

D

Monthly Reports

E

Electronic Data Transmission

 

v

--------------------------------------------------------------------------------

 

AMENDED AND RESTATED

 

LIMITED LIABILITY COMPANY AGREEMENT

 

OF

 

BEHRINGER HARVARD REDWOOD VENTURE, LLC

 

THIS AMENDED AND RESTATED LIMITED LIABILITY COMPANY AGREEMENT of BEHRINGER
HARVARD REDWOOD VENTURE, LLC is made and entered into as of [            ], 2011
by and between Behringer Harvard Redwood, LLC (“BH Redwood”), a Delaware limited
liability company that is an indirect wholly owned subsidiary of Behringer
Harvard Multifamily REIT I, Inc. (“BH Multifamily REIT”), a Maryland
corporation, with its principal office at 15601 Dallas Parkway, Suite 600,
Addison, Texas 75001, and Milky Way Partners, L.P. (“MWP”), a Delaware limited
partnership with its principal office at 191 North Wacker Drive, Suite 2500,
Chicago, Illinois 60606.

 

W I T N E S S E T H

 

WHEREAS, BH Redwood and Behringer Harvard Master Partnership I LP (“BH MP”), a
Delaware limited partnership, formed the Venture for the purpose of jointly
owning, operating and managing the real property located at 4055 Redwood Avenue,
Marina del Rey, California 90066, the legal description for which is set forth
in Exhibit B hereof and which is known as the Forty55 Lofts (the “Project”);

 

WHEREAS, BH Redwood and BH MP entered into a certain Limited Liability Company
Agreement of Behringer Harvard Redwood Venture, LLC (the “Venture”), dated as of
August 27, 2009 (the “Original Agreement”), to establish their respective rights
and duties relating to the Venture on the terms provided therein;

 

WHEREAS, effective as of the date hereof, BH MP has transferred its Interest to
MWP and desires to withdraw as a Member of the Venture, on the terms and subject
to the conditions of that certain Membership Interest Purchase and Sale
Agreement, dated as of November 29, 2011, between BH MP and MWP (the “Purchase
Agreement”);

 

WHEREAS, MWP desires to be admitted to the Venture as a Member and, pursuant to
the terms and conditions of the Purchase Agreement, the Manager has agreed to
admit MWP as a Member pursuant to Section 8.1 of the Original Agreement; and

 

WHEREAS, the Members desire to amend and restate the Original Agreement in its
entirety as hereinafter set forth.

 

NOW, THEREFORE, in consideration of the premises and the mutual covenants of the
parties hereto, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereby agree as
follows:

 

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ARTICLE 1

 

DEFINITIONS

 

Capitalized terms used in this Agreement (including, without limitation,
Exhibits, Schedules and amendments) have the meanings set forth below or in the
Section of this Agreement referred to below, except as otherwise expressly
indicated or limited by the context in which they appear in this Agreement.  All
terms defined in this Agreement in the singular have the same meanings when used
in the plural and vice versa.  Accounting terms used but not otherwise defined
shall have the meanings given to them under U.S. GAAP.  References to Sections,
Articles and Exhibits and Schedules refer to the sections and articles of, and
the exhibits and schedules to, this Agreement, unless the context requires
otherwise.

 

“Act” means the Limited Liability Company Act of the State of Delaware, Del.
Code Ann. tit. 6, §§ 18-101 et seq., as it may be amended from time to time, and
any successor to such statute.

 

“Advisory Committee” has the meaning ascribed thereto in Section 8.1.

 

“Affiliate” means, when used with respect to a specified Person, (i) any Person
that, directly or indirectly through one or more intermediaries, controls, is
controlled by or is under common control with the specified Person or (ii) any
Person that is an officer, general partner or trustee of, or serves in a similar
capacity with respect to, the specified Person or of which the specified Person
serves in a similar capacity.  For this purpose, the term “control” (including,
without limitation, the terms “controlling,” “controlled by” and “under common
control with”) means the possession, direct or indirect, of the power to direct
or cause the direction of the management and policies of a Person, whether
through the ownership of voting securities, by contract or otherwise, which
shall conclusively be deemed to exist where one Person directly or indirectly is
the beneficial owner of fifty and one-tenths percent (50.1%) or more of any
class of voting equity securities or other voting ownership interests of another
Person.

 

“Affiliated Entity” means, with respect to the Manager, an Entity that is an
Affiliate of the Manager.  For the avoidance of doubt, an Affiliated Entity does
not include any individual that is an Affiliate of the Manager.

 

“Agreement” means this Amended and Restated Limited Liability Company Agreement,
as amended, modified, supplemented or restated from time to time.

 

“Alternative Offer Price” has the meaning ascribed thereto in
Section 9.2(b)(ii).

 

“Alternative Purchaser” has the meaning ascribed thereto in Section 9.2(e)(ii).

 

“Arbitration Notice” has the meaning ascribed thereto in Section 9.2(e)(ii)(A).

 

“Authorized Representatives” has the meaning ascribed thereto in Section 8.1.

 

“Bankruptcy” has the meaning ascribed thereto in Section 11.1(b).

 

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“Bankruptcy Event” has the meaning ascribed thereto in Section 11.1(a).

 

“Behringer Holdings” means Behringer Harvard Holdings, LLC, a Delaware limited
liability company.

 

“Best Efforts” has the meaning ascribed thereto in Section 2.6(b)(ii).

 

“BH MP” has the meaning ascribed thereto in the recitals to this Agreement.

 

“BH Multifamily REIT” has the meaning ascribed thereto in the preamble to this
Agreement.

 

“BH Redwood” has the meaning ascribed thereto in the preamble to this Agreement.

 

“BH Representatives” has the meaning ascribed thereto in Section 8.1.

 

“Business Day” means a day other than a Saturday, Sunday or other day on which
commercial banks in New York City are authorized or required by applicable law
to close.

 

“Buy/Sell Interest” has the meaning ascribed thereto in Section 9.2(a)(ii).

 

“Buy/Sell Market Price” has the meaning ascribed thereto in
Section 9.2(e)(ii)(E).

 

“Capital Account” has the meaning ascribed thereto in Section 3.6.

 

“Capital Call” means a call for capital to be contributed to the Venture in
accordance with Section 3.3.

 

“Capital Contribution” means any initial capital contribution made pursuant to
the Original Agreement or any capital contribution made by a Member (or its
predecessor) to the Venture in accordance with Section 3.3 hereof.

 

“Cause” means (i) a material breach of this Agreement by the Manager involving
fraud; or (ii) the conviction of, or the entry of a guilty plea or plea of no
contest with respect to, a felony involving fraud, embezzlement or dishonesty by
BH Multifamily REIT or any Affiliate of BH Multifamily REIT.

 

“Certificate” means the Certificate of Formation of the Venture, as originally
filed with the office of the Secretary of State of the State of Delaware on
August 27, 2009, as amended, supplemented or otherwise modified from time to
time as herein provided or as provided in the Original Agreement.

 

“Closing Date” has the meaning ascribed thereto in Section 9.2(d)(ii).

 

“Code” means the Internal Revenue Code of 1986, as amended from time to time (or
any corresponding provisions of succeeding law); any reference to any section of
the Code shall include any corresponding provision of succeeding laws.
Notwithstanding the foregoing, any change in the Code which causes the
Subsidiary REIT not to be a Domestically-Controlled REIT shall not be included
in the definition of “Code” hereunder, it being understood that MWP will

 

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bear the risk of such change; provided that the Manager will use commercially
reasonable efforts to minimize the financial impact to MWP of any such change at
the expense of MWP; provided further that the same does not adversely affect the
Manager’s tax status.

 

“Consent” means the vote, approval or consent, as the case may be, of a Person
to do the act or thing for which the vote, approval or consent is solicited, or
the act of voting or granting such approval or consent, as the context may
require.

 

“CPR” means The International Institute for Conflict Prevention and Resolution,
an international organization for public and private dispute resolution.

 

“Defaulting Purchaser” has the meaning ascribed thereto in Section 9.2(d)(i).

 

“Dispute Notice” has the meaning ascribed thereto in Section 8.3(a).

 

“Domestic Status Loss” means a disqualification of the Subsidiary REIT as a
“domestically-controlled qualified investment entity” within the meaning of
Section 897(h)(4)(B) of the Code.

 

“Domestically-Controlled REIT” means a REIT that is a “domestically-controlled
qualified investment entity” for purposes of Section 897(h)(4)(B) of the Code.

 

“Earnest Money Deposit” has the meaning ascribed thereto in Section 9.2(d)(i).

 

“Entity” means a partnership, corporation, business trust, limited liability
company, proprietorship, joint stock company, trust, estate, unincorporated
association, joint venture, pension fund, governmental entity, cooperative
association or other foreign or domestic entity or enterprise.

 

“Escrow Agent” has the meaning ascribed thereto in Section 9.2(d)(i).

 

“Funding Event” has the meaning ascribed thereto in Section 3.4(a).

 

“Funding Member” has the meaning ascribed thereto in Section 3.4(a).

 

“Indemnified Person” and “Indemnified Persons” have the meanings ascribed
thereto in Section 7.2(a).

 

“Information” has the meaning ascribed thereto in Section 14.20(a).

 

“Interest” means, as to a Member, the ownership interest of such Member in the
Venture at any particular time, including the right of such Member to any and
all benefits to which such Member may be entitled as provided in this Agreement,
together with the obligations of such Member to comply with all the terms and
provisions of this Agreement.

 

“IRS” has the meaning ascribed thereto in Section 3.8.

 

“Liquidation” means (i) when used with reference to the Venture, the date upon
which the Venture ceases to be a going concern, and (ii) when used with
reference to any Member, the

 

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earlier of (A) the date upon which there is a Liquidation of the Venture or
(B) the date upon which such Member’s entire Interest in the Venture is
terminated other than by Transfer to a Person other than the Venture.

 

“Liquidator” has the meaning ascribed thereto in Section 11.3(a).

 

“Major Decision” has the meaning ascribed thereto in Section 6.3(a).

 

“Major Dispute” means any disagreement of the Members in respect of (i) the
establishment of sale objectives and parameters for the Project (it being
understood that such parameters shall be consistent with the provisions of this
Agreement, including Section 2.6(b)); (ii) the sale or other disposition of the
Project or any other property owned, directly or indirectly, by the Venture in
excess of $100,000 (it being understood that such sale or other disposition
shall be consistent with the provisions of this Agreement, including
Section 2.6(b)); (iii) incurring, materially restructuring or materially
modifying any indebtedness of the Venture or the Subsidiary REIT in excess of
$100,000 or causing or the Venture or Subsidiary REIT to become liable as an
endorser, guarantor, surety or otherwise, except as otherwise contemplated under
Section 6.3(a)(iii); (iv) a mortgage, pledge or hypothecation of the Project to
secure indebtedness of the Subsidiary REIT, except as otherwise contemplated
under Section 6.3(a)(iv); or (v) selling any additional interests in the Venture
or the Subsidiary REIT.

 

“Management Company” means Behringer Harvard Multifamily Management Services,
LLC, a Texas limited liability company.

 

“Manager” means BH Redwood, or any permitted successor or delegee of BH Redwood
in accordance with this Agreement, in such Person’s capacity as the manager of
the Venture.

 

“Mark to Market Price” has the meaning ascribed thereto in
Section 9.2(e)(ii)(A).

 

“Member” means MWP or BH Redwood, or any permitted successor or assign of either
of them that is admitted as a Member in accordance with this Agreement, in such
Person’s capacity as a member of the Venture.

 

“Member Loan” has the meaning ascribed thereto in Section 3.3(a).

 

“Member Representatives” has the meaning ascribed thereto in Section 14.20(a).

 

“MWP” has the meaning ascribed thereto in the preamble to this Agreement.

 

“MWP Representatives” has the meaning ascribed there in Section 8.1.

 

“Negotiation Deadline” has the meaning ascribed thereto in
Section 9.2(e)(ii)(A).

 

“Net Cash Flow,” for any period, means all cash receipts to the Venture from any
source during such period (other than from Capital Contributions), plus releases
from reserves, minus all cash expenditures by the Venture during such period
(but only to the extent not made from Capital Contributions), including costs,
expenses, fees and additions to reserves determined by the Manager in its sole
discretion.

 

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“Non-Funding Member” has the meaning ascribed thereto in Section 3.4(a).

 

“Non-U.S. Member” means a direct or indirect (through another partnership or
limited liability company) Member of the Venture that is not a U.S. Person and
for whom the direct or indirect receipt of Real Estate Proceeds would have a
material adverse tax consequence on such Member.  For the avoidance of doubt,
MWP is a Non-U.S. Member.

 

“Offer Price” has the meaning ascribed thereto in Section 9.2(a)(ii).

 

“Offeree” has the meaning ascribed thereto in Section 9.2(a).

 

“Offering Notice” has the meaning ascribed thereto in Section 9.2(a).

 

“Offeror” has the meaning ascribed thereto in Section 9.2(a).

 

“Operating Expenses” has the meaning ascribed thereto in Section 5.4.

 

“Option Period” has the meaning ascribed thereto in Section 9.2(b).

 

“Original Agreement” has the meaning ascribed thereto in the recitals to this
Agreement.

 

“Percentage Interest” means, as to any Member, its percentage ownership interest
in the Venture as set forth in Exhibit A, as the same may be amended from time
to time.

 

“Permitted Temporary Investments” means investments in (i) U.S. government and
agency obligations with maturities of not more than one (1) year and one (1) day
from the date of acquisition, (ii) commercial paper with maturities of not more
than six (6) months and one (1) day from the date of acquisition and having a
rating assigned to such commercial paper by Standard & Poor’s Ratings Services
or Moody’s Investors Service, Inc. (or, if neither such organization shall rate
such commercial paper at such time, by any nationally recognized rating
organization in the United States of America) equal to one of the two highest
commercial paper ratings assigned by such organization, it being understood that
as of the date hereof such ratings by Standard and Poor’s Rating Services are
“P1” and “P2” and such ratings by Moody’s Investors Service, Inc. are “A1” and
“A2,” (iii) interest bearing deposits in U.S. banks with an unrestricted surplus
of at least $250 million, maturing within one (1) year and (iv) money market
mutual funds with assets of not less than $500 million, substantially all of
which assets are believed by the Manager to consist of items described in the
foregoing clause (i), (ii) or (iii).

 

“Person” means an individual or Entity.

 

“Prime Rate” means the highest prime rate (or base rate) reported in the Money
Rates column or section of The Wall Street Journal published on the second
Business Day of each month as having been the rate in effect for corporate loans
at large United States money center commercial banks (whether or not such rate
has actually been charged by any such bank) as of the first Business Day of such
month for which such rate is published.  The Prime Rate shall change monthly and
shall be effective for the entire calendar month.  If The Wall Street Journal
ceases publication of the Prime Rate, the “Prime Rate” shall mean the prime rate
(or base rate) announced by JPMorgan Chase & Co., New York, New York or its
successors (whether or not

 

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such rate has actually been charged by such bank).  If such bank discontinues
the practice of announcing the Prime Rate, the “Prime Rate” shall mean the
highest rate charged by such bank on short-term, unsecured loans to its most
creditworthy large corporate borrowers.

 

“Prior Operating Plan” has the meaning ascribed thereto in Section 6.2(b).

 

“Profits” or “Losses” means, for each period taken into account under Article 4,
an amount equal to the Venture’s taxable income or taxable loss for such period,
determined in accordance with U.S. federal income tax principles, adjusted to
the extent the Manager determines that such adjustment is necessary to comply
with the requirements of Section 704(b) of the Code.

 

“Prohibited Member” means any Person who is (i) a “designated national,”
“specially designated national,” “specially designated terrorist,” “specially
designated global terrorist,” “foreign terrorist organization,” or “blocked
person” within the definitions set forth in the regulations of the United States
Treasury Department’s Office of Foreign Assets Control; (ii) acting on behalf
of, or a Person owned or controlled by, any government against whom the United
States maintains economic sanctions or embargoes under the regulations of the
United States Treasury Department, including, but not limited to, the
“Government of Sudan,” the “Government of Iran” and the “Government of Cuba”;
(iii) within the scope of Executive Order 13224—Blocking Property and
Prohibiting Transactions with Persons who Commit, Threaten to Commit, or Support
Terrorism, effective September 24, 2001; (iv) subject to additional restrictions
imposed by the following statutes (or regulations and executive orders issued
thereunder): the Trading with the Enemy Act, the Iraq Sanctions Act, the
National Emergencies Act, the Antiterrorism and Effective Death Penalty Act of
1996, the International Emergency Economic Powers Act, the United Nations
Participation Act, the International Security and Development Cooperation Act,
the Nuclear Proliferation Prevention Act of 1994, the Foreign Narcotics Kingpin
Designation Act, the Iran and Libya Sanctions Act of 1996, the Cuban Democracy
Act, the Cuban Liberty and Democratic Solidarity Act, and the Foreign
Operations, Export Financing, and Related Programs Appropriations Act;
(v) designated or blocked, associated or involved in terrorism, subject to
restrictions under laws, regulations or executive orders similar to, or any
other law, regulation or executive order of similar import as, those set forth
above under the preceding clauses (i) through (iv), if and to the extent such
laws, regulations or executive orders are in effect; or (vi) as any of the laws,
regulations or executive or other orders in the preceding clauses (i) through
(v) may be amended, supplemented, adjusted, modified, reviewed or interpreted
from time to time.

 

“Project” has the meaning ascribed thereto in the recitals to this Agreement.

 

“Purchase Agreement” has the meaning ascribed thereto in the recitals to this
Agreement.

 

“Purchase Price” has the meaning ascribed thereto in Section 9.2(d)(i).

 

“Purchaser” has the meaning ascribed thereto in Section 9.2(d)(i).

 

“Purchaser Venture” has the meaning ascribed thereto in Section 9.2(e)(i).

 

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“Qualifying Opinion” means a written opinion of outside, reputable tax counsel
licensed to practice law in the United States and acting reasonably.

 

“Real Estate Proceeds” means proceeds from the direct sale of the Project (as
opposed to proceeds from the sale of interests in the Subsidiary REIT).

 

“REIT” means a real estate investment trust under the Code.

 

“REIT Disposition Requirement” has the meaning ascribed thereto in
Section 2.6(b)(i).

 

“Seller” has the meaning ascribed thereto in Section 9.2(d)(i).

 

“Senior Executives” has the meaning ascribed thereto in Section 8.3(a).

 

“Shares” means the shares of beneficial interests (including, for the avoidance
of doubt, membership interests) in the Subsidiary REIT.

 

“Subsequent Operating Plan” has the meaning ascribed thereto in Section 6.2(b).

 

“Subsidiary REIT” means Behringer Harvard Redwood REIT, LLC, a subsidiary of the
Venture.

 

“Substitute Capital” has the meaning ascribed thereto in Section 3.4(c).

 

“Substituted Purchase Price” has the meaning ascribed thereto in
Section 9.2(d)(i).

 

“Substituted Purchaser” has the meaning ascribed thereto in Section 9.2(d)(i).

 

“Tax Matters Partner” has the meaning ascribed thereto in Section 6231(a)(7) of
the Code.

 

“Taxes” means all taxes, charges, fees, duties, levies or other assessments,
including without limitation, income, gross receipts, net proceeds, ad valorem,
turnover, real and personal property (tangible and intangible), sales, use,
franchise, excise, value added, stamp, leasing, lease, user, transfer, fuel,
excess profits, occupational and interest equalization, windfall profits,
severance and employees’ income withholding and Social Security taxes, which are
imposed by the United States, or any state, local or foreign government or
subdivision or agency thereof, and such term shall include any interest,
penalties or additions to tax attributable to such Taxes.

 

“Tax Return” means any report, return or other information required to be
supplied to a taxing authority in connection with Taxes.

 

“Transfer” means to give, sell, assign, pledge, hypothecate, devise, bequeath or
otherwise dispose of, transfer or permit to be transferred, during life or at
death.  The term “Transfer,” when used as a noun, means any Transfer
transaction.

 

“U.S. GAAP” means U.S. generally accepted accounting principles at the time in
effect.

 

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“U.S. Person” means a “U.S. Person” as such term is defined in
Section 7701(a)(30) of the Code.

 

“Venture” has the meaning ascribed thereto in the recitals to this Agreement.

 

ARTICLE 2

 

THE VENTURE

 

2.1                               Formation of Venture.  The Venture has been
formed as a limited liability company pursuant to the provisions of the Act, and
the rights and liabilities of the Members shall be as provided in the Act except
as herein otherwise expressly provided.

 

2.2                               Venture Name and Principal Office.  The name
of the Venture shall be “Behringer Harvard Redwood Venture, LLC” or such other
name as the Manager may determine.  The principal place of business and the
principal administrative office of the Venture shall be 15601 Dallas Parkway,
Suite 600, Addison, Texas 75001.  The Venture may change such office and may
have such additional offices as the Manager may determine.

 

2.3                               Office of and Agent for Service of Process. 
The registered office of the Venture in the State of Delaware shall be 2711
Centerville Road, Suite 400, Wilmington, Delaware 19808 and the Venture’s agent
for service of process on the Venture in the State of Delaware shall be
Corporation Service Company.  The Venture may change, at any time and from time
to time, the location of such registered office and/or such registered agent
upon written notice of the change to the Members.

 

2.4                               Term of the Venture.  The term of the Venture
commenced on the date the Certificate was first filed with the Secretary of
State of the State of Delaware.  Unless sooner terminated as hereinafter
provided or by operation of law, the term of the Venture shall continue until
December 31, 2057.

 

2.5                               Title to Assets.  Record title to all assets
acquired by the Venture shall be held in the name of the Venture, and no Member
shall have any property interest in such assets.

 

2.6                               Purpose and Powers.

 

(a)                                  The Venture has been organized for the
object and purpose of investing in the Project through the Subsidiary REIT,
owning, managing, supervising and disposing of such investment as provided in
this Agreement, sharing the profits and losses therefrom and engaging in such
activities necessary, incidental or ancillary thereto and in any other lawful
act or activity in furtherance of the foregoing for which limited liability
companies may be organized under the Act.  Notwithstanding any other provision
of this Agreement, the Venture, and the Manager on behalf of the Venture, may
execute, deliver and perform such agreements and documents as the Manager
determines are necessary or desirable for the formation, organization and
continuation of the Venture.  Any provision herein regarding the purpose and
powers of the Venture and the authorization of actions hereunder may be done
through the Subsidiary REIT (and any subsidiary thereof).  In furtherance of
this purpose, subject to the limitations and restrictions set forth elsewhere in
this Agreement, including, without limitation, Section 6.3 hereof, the Venture
shall

 

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have all powers necessary, suitable or convenient for the accomplishment of the
aforesaid purpose, as principal or agent, including, without limitation, all of
the powers that may be exercised by the Manager on behalf of and, except as
specifically provided herein, at the expense of, the Venture pursuant to this
Agreement or the Act, and further including, without limitation, the following:

 

(i)                                    to organize or cause to be organized the
Subsidiary REIT and any subsidiary thereof and to act as manager of the
Subsidiary REIT, and to exercise all of the powers, duties, rights and
responsibilities associated therewith;

 

(ii)                                 to borrow money, encumber assets and
otherwise incur recourse and non-recourse indebtedness (including, without
limitation, the issuance of guarantees of the payment or performance of
obligations by any Person) in connection with or in furtherance of the
acquisition or development or the financing or refinancing of the Project;

 

(iii)                             to improve, develop, redevelop, construct,
reconstruct, maintain, renovate, rehabilitate, reposition, manage, lease,
mortgage and otherwise deal with the assets and/or businesses of the Venture;

 

(iv)                              to lend money on a secured or unsecured basis
and, if applicable, in connection therewith take as collateral a mortgage or
pledge of any real or personal property and to extend or modify the terms of any
such financing;

 

(v)                                 to alter or restructure the Venture’s
investment in the Project at any time during the term of the Venture without any
precondition that the Manager make any distributions to the Members in
connection therewith;

 

(vi)                              to make additional investments in the Project
(including, without limitation, additional investments made to finance any
capital improvements, tenant improvements or other improvements or alterations
to any property constituting the Project or otherwise to protect the Venture’s
investment in the Project or to provide working capital for the Project);

 

(vii)                          to invest the Venture’s funds in Permitted
Temporary Investments;

 

(viii)                      to pay commissions, fees or other charges to Persons
that may be applicable in connection with any transactions entered into by or on
behalf of the Venture;

 

(ix)                              to open, maintain and close bank accounts and
draw checks and other orders for the payment of moneys;

 

(x)                                 to engage outside accountants, custodians,
appraisers, attorneys, property managers, leasing brokers and any and all other
third-party agents and assistants, both professional and nonprofessional, and to
compensate them in such reasonable degree and manner as the Manager may deem
necessary or advisable;

 

(xi)                              subject to Section 2.6(b), to enter into, make
and perform all contracts, agreements and other undertakings as may be necessary
or advisable or incidental to

 

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carrying out its purpose, including, without limitation, such agreements as the
Manager deems necessary or appropriate for the operation, management, financing,
sale or other disposition of the Project or as otherwise contemplated by this
Agreement;

 

(xii)                           to sue and be sued, to prosecute, arbitrate,
settle or compromise all claims of or against third parties, to compromise,
arbitrate, settle or accept judgment with respect to claims of or against the
Venture and to execute all documents and make all representations, admissions
and waivers in connection therewith;

 

(xiii)                        to make any and all elections and filings for
federal, state, local and foreign tax purposes, including, without limitation,
any consent dividend on IRS Form 972;

 

(xiv)                       to purchase, and otherwise enter into contracts of,
insurance (including, without limitation, property and casualty insurance,
terrorism insurance, and liability insurance in respect of any liabilities for
which the Venture, the Manager or any other Indemnified Person would otherwise
be entitled to indemnification under this Agreement);

 

(xv)                          to enter into and perform the terms of any credit
facility as borrower or guarantor and cause the Subsidiary REIT to enter into
and perform the terms of any credit facility as borrower, including, without
limitation, repaying borrowings under any credit facility on behalf of the
Venture; and

 

(xvi)                       to do such other things and engage in such other
activities as the Manager may deem necessary, convenient or advisable with
respect to the conduct of the business of the Venture, and have and exercise all
of the powers and rights conferred upon limited liability companies formed
pursuant to the Act.

 

(b)                                 (i)                                    
Subject to Section 6.3(c), the interest in the Project owned by the Venture may
only be sold, exchanged or otherwise disposed of (A) by selling, exchanging or
otherwise disposing of for cash the Venture’s Shares in the Subsidiary REIT, or
(B) in connection with a like-kind exchange of the Project pursuant to
Section 1031 of the Code that does not result in the recognition of any taxable
gain to the Subsidiary REIT, an involuntary conversion of the Project pursuant
to Section 1033 of the Code that does not result in the recognition of any
taxable gain to the Subsidiary REIT, or any other disposition or transfer that
pursuant to a nonrecognition provision in the Code does not result in the
recognition of any taxable gain to the Subsidiary REIT; provided that, in a
transaction within the description of the foregoing clause (B) the Members agree
on the asset or assets to be acquired as a result of such transaction (the “REIT
Disposition Requirement”).

 

(ii)                                  The Manager shall use “Best Efforts” to
cause the Subsidiary REIT to satisfy the requirements for taxation as a
Domestically-Controlled REIT; provided, however, that the Manager and its
Affiliates shall not be required to engage in any transaction with, or on behalf
of, the Venture or contribute additional capital to the Venture in connection
with such obligation.  For purposes of the foregoing sentence, the Manager’s
“Best Efforts” means that (A) no Capital Contribution shall be accepted and no
redemption of interests in the Venture shall be allowed if as a result thereof
more than forty-nine percent (49%) of the interests in the Subsidiary REIT would
be held, directly or indirectly (including, without limitation, through the
Venture)

 

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by Persons that are not U.S. Persons, and (B) no Transfer of less than all of
the Venture’s interest in the Subsidiary REIT shall be permitted if such
Transfer would result in the Subsidiary REIT no longer qualifying as a
Domestically-Controlled REIT.  In satisfying the requirements of this
Section 2.6(b)(ii), in the absence of actual knowledge to the contrary, the
Manager shall be entitled to rely upon the most recent written representations
of the direct or indirect partners or members and prospective partners or
members of the Venture regarding the extent to which they are, or are owned by,
U.S. Persons.

 

(iii)                               The Manager shall cause the limited
liability company agreement, charter or other governing document of the
Subsidiary REIT to provide that any Transfer that, if effective, would result in
the interests in the Subsidiary REIT being beneficially owned (as provided in
Section 856(a) of the Code) by fewer than 100 Persons (determined without
reference to any rules of attribution) shall be void ab initio as to the
Transfer of any interest in the Subsidiary REIT which would be otherwise
beneficially owned (as provided in Section 856(a) of the Code) by the transferee
and that the intended transferee shall acquire no rights in such interest.

 

(iv)                              The provisions of Sections 2.6(b)(i) and
(ii) shall not apply if either (A) there is not at least one Non-U.S. Member or
(B) the Venture has received a Qualifying Opinion (from counsel reasonably
acceptable to MWP) that there has been a change in applicable U.S. law that
eliminates the material adverse tax consequence relating to the receipt by a
Non-U.S. Member of Real Estate Proceeds.

 

ARTICLE 3

 

MEMBERS AND CAPITAL CONTRIBUTIONS

 

3.1                               Members; Capital Contributions.  The name,
address and Capital Account of each Member as of the date of this Agreement
shall be as set forth on Exhibit A.  Except as otherwise provided in Section 3.3
or unless otherwise agreed by the Members, no Member shall have any right or
obligation to fund any additional Capital Contributions to the Venture.

 

3.2                               Capital Calls.  The Manager from time to time
may call for payment of additional Capital Contributions in accordance with
Section 3.3.  Each such call for contributions of capital from the Members shall
be made in accordance with their respective Percentage Interests. Except as
provided in Section 3.3 or otherwise agreed by each Member, no Member shall be
required to make any Capital Contribution to the Venture.

 

3.3                               Additional Capital Contributions.

 

(a)                                 If at any time, and from time to time,
additional cash in excess of Net Cash Flow and other funds available to the
Venture is required by the Venture (i) in order to pay any Operating Expenses,
or (ii) in respect of the Project, including in order to pay the costs of
maintenance, repairs, capital improvements, replacements or other expenses
necessary to comply with lease or other contractual obligations of the
Subsidiary REIT (or any subsidiary thereof that owns the Project) and to keep
the Project in good condition and repair, then the Manager may make a Capital
Call for additional capital from the Members in proportion to their respective

 

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Percentage Interests in an amount believed in good faith by the Manager to be
the amount needed to fund the cash needs of the Venture, and in such event shall
provide the Members with not less than thirty-five (35) days’ advance notice of
the date on which such contributions are required to be made; provided, however,
that if the Manager determines in its reasonable discretion that such additional
Capital Contributions are required prior to the expiration of such advance
notice period, then the Manager may, at its election, make a loan to the Venture
(a “Member Loan”) of the aggregate amount that each Member was requested to
contribute to the Venture pursuant to this Section 3.3, which Member Loan shall
accrue interest in accordance with Section 3.4(b) and, if not repaid pursuant to
Section 3.3(b), be repaid in accordance with Sections 3.4(b) and 5.1.  The
Manager shall provide prompt written notice to the Members upon the Manager
making any such Member Loan or upon BH Redwood making any such additional
Capital Contribution to the Venture.

 

(b)                                 If the Manager makes a Member Loan as set
forth in Section 3.3(a) above, the Manager shall cause such Member Loan to be
repaid (including principal and any unpaid accrued interest) promptly upon the
other Member(s) making the requested additional Capital Contributions to which
such Member Loan relates.  If such other Member(s) does not make the requested
additional Capital Contribution by the later of (i) five (5) Business Days after
the Manager has provided written notice that BH Redwood has made its
corresponding Capital Contribution and (ii) the expiration of the thirty-five
(35) day period referred to in Section 3.3(a) and thereafter becomes a
Non-Funding Member, the Manager shall cause (i) such Member Loan to remain a
Member Loan, or (ii) the portion of such Member Loan representing its requested
additional Capital Contribution (together with any unpaid accrued interest
thereon) to be treated as such additional Capital Contribution, and cause the
portion of such Member Loan representing the requested Capital Contribution of
the Non-Funding Member(s) (together with any unpaid accrued interest thereon) to
be treated as Substitute Capital pursuant to Section 3.4(c), such election to be
made within thirty (30) days of the occurrence of the Funding Event with respect
to such Non-Funding Member by delivering notice of such election to each
Member.  In the event that the Manager does not make such an election within
thirty (30) days after the date a Member becomes a Non-Funding Member pursuant
to the prior sentence, the Manager shall be deemed to have elected to treat such
amount as a Member Loan.

 

3.4                               Failure to Make Capital Contributions.

 

(a)                                 If, for any reason, a Member (the
“Non-Funding Member”) (i) does not confirm in writing to the Manager its intent
to make an additional Capital Contribution pursuant to Section 3.3 within thirty
(30) days after the related Capital Call, or (ii) does not make its additional
Capital Contribution within the later of (x) thirty-five (35) days after the
related Capital Call (provided the condition described in the final sentence of
Section 3.3(a) has been satisfied, if applicable) and (y) five (5) Business Days
after such Member has received written notice that BH Redwood has funded its
portion of the requested Capital Contribution (each of the events described in
clauses (i) and (ii), a “Funding Event”), the Member who has made, or is
prepared to make, its contribution of such capital (the “Funding Member”) may,
at its election (unless the Funding Member has already made a Member Loan, in
which case Section 3.3(b) shall govern rather than this sentence), and within
thirty (30) days of such Funding Event (A) make a Member Loan to the Venture in
accordance with Section 3.4(b), or (B) make its Capital

 

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Contribution to the Venture pursuant to Section 3.3 and contribute additional
Substitute Capital to the Subsidiary REIT in accordance with Section 3.4(c).

 

(b)                                 Upon the occurrence of a Funding Event, the
Funding Member may make a Member Loan to the Venture of the aggregate amount
that each Member was requested to contribute to the Venture pursuant to
Section 3.3.  Each Member Loan shall be repaid by the Venture on a priority
basis from available Net Cash Flow, including Net Cash Flow resulting from any
sale or disposition of interests in the Subsidiary REIT or any other asset of
the Venture.  The Capital Account of the Funding Member shall not be credited
with the amount of any Member Loan made by the Funding Member to the Venture,
and the repayment of a Member Loan by the Venture shall not constitute a return
of Capital Contributions or otherwise reduce the Capital Account of the Funding
Member.  Each Member Loan shall bear interest on the unpaid principal amount
thereof from time to time outstanding from the date advanced until repaid, at
six percent (6%) per annum plus the Prime Rate (compounded annually), and all
payments made thereon shall be applied first toward payment of unpaid accrued
interest and then (if anything remains) toward payment of principal.

 

(c)                                  Upon the occurrence of a Funding Event, the
Funding Member may contribute, or cause one or more of its Affiliates to
contribute, the amount (the “Substitute Capital”) that the Non-Funding Member
was requested to contribute to the Venture pursuant to Section 3.3.  Unless
otherwise agreed by the Non-Funding Member, the Funding Member (or one or more
of its Affiliates) shall contribute the Substitute Capital to the Subsidiary
REIT.  In consideration of the contribution of the Substitute Capital, the
Subsidiary REIT shall issue Shares to the Funding Member (or one or more of its
Affiliates) contributing the Substitute Capital based on the value of the
outstanding Shares of the Subsidiary REIT determined in accordance with this
Section 3.4(c).  The number of Shares to be issued by the Subsidiary REIT in
consideration of the contribution of Substitute Capital shall equal the amount
of such Substitute Capital divided by the value of a Share, which value shall be
determined by the net asset value of the Subsidiary REIT, based upon the
valuation of the Project specified in this Section 3.4(c) and the Subsidiary
REIT’s interest in the Project and taking into account the fair value of any
other assets and the liabilities of the Subsidiary REIT and the number of Shares
outstanding immediately prior to the contribution of the Substitute Capital. 
The value of the Project shall be determined based on a valuation (or an update
of the most recent valuation) that has been prepared within the three months
preceding the contribution of the Substitute Capital to the Subsidiary REIT and
made by an independent third-party appraiser at the cost of the Venture;
provided, however, that if there has been any event that in the reasonable
judgment of the Manager has had a material effect (whether beneficial or
adverse) on the Project since the date of such valuation, a new valuation or an
update of the most recent valuation shall be obtained for the valuation of the
Project.

 

(d)                                 If the Manager fails to make any required
Capital Contribution within the thirty-five (35) day period contemplated in
Section 3.3(a) above, the related Capital Call shall be deemed to have been
withdrawn, the Manager shall deliver prompt written notice to MWP of such
withdrawal, and any Capital Contributions of MWP with respect thereto shall be
returned promptly to MWP.

 

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3.5                               Return of Capital Contributions.  Except as
otherwise expressly provided herein, (i) the Capital Contributions of a Member
will be returned to that Member only in the manner and to the extent provided in
this Article 3 and in Articles 5, 10 and 11, (ii) except to the extent provided
in this Article 3 and in Articles 5, 10 and 11, no Member shall have any right
to demand or receive the return of any Capital Contribution to the Venture, and
(iii) subject to Section 9.2, no Member shall have the right or, subject to
Sections 9.2 and 11.3(a)(ii), the obligation to receive a distribution of
property other than cash.  No Member shall be entitled to interest on any
Capital Contribution or Capital Account notwithstanding any disproportion
therein as between the Members.  No Member shall be liable for the return of any
portion of the Capital Contributions of the Members, and the return of such
Capital Contributions shall be made solely from, and to the extent of, available
Venture assets.  No Member shall be entitled to withdraw from the Venture.

 

3.6                               Capital Account.  The Venture has established
and shall maintain throughout the life of the Venture for each Member a separate
capital account (“Capital Account”) in accordance with Section 704(b) of the
Code.  Such Capital Account shall be increased by (i) the amount of the Capital
Contributions made by such Member to the Venture pursuant to this Agreement, and
(ii) all items of income and gain allocated to such Member pursuant to
Section 4.1; and such Capital Account shall be decreased by (A) the amount of
cash and property distributed to such Member pursuant to this Agreement and
(B) all items of loss and deduction allocated to such Member pursuant to
Section 4.1.  Any other Venture item which is required or authorized under
Section 704(b) of the Code to be reflected in the Capital Accounts shall be so
reflected.

 

3.7                               Transfer of Capital Account.  The original
Capital Account established for each transferee shall be in the same amount as
the Capital Account or portion thereof of the Member which such transferee
succeeds, at the time such transferee is admitted to the Venture.  The Capital
Account of any Member whose Percentage Interest shall be increased by means of
the Transfer to it of all or part of the Interest of another Member shall be
appropriately adjusted to reflect such Transfer.  Any reference in this
Agreement to a Capital Contribution of, or distribution to, a then-Member shall
include a Capital Contribution or distribution, as the case may be, previously
made by or to any prior Member on account of the Interest of such then-Member.

 

3.8                               Tax Matters Partner.  BH Redwood shall
initially be the Venture’s Tax Matters Partner, with all of the powers that
accompany such status (except as otherwise provided in this Agreement).  If BH
Redwood is removed as the Manager pursuant to Section 6.9 or otherwise ceases to
be a Member, MWP shall promptly appoint a successor Tax Matters Partner, which
may be MWP.  BH Redwood or any successor Tax Matters Partner shall cause MWP to
be a “notice partner” (as defined in Section 6231(a)(8) of the Code) with
respect to the Venture.  Promptly following the written request of the Tax
Matters Partner, the Venture shall, to the fullest extent permitted by law,
reimburse and indemnify the Tax Matters Partner for all reasonable expenses,
including, without limitation, reasonable legal and accounting fees, claims,
liabilities, losses and damages incurred by the Tax Matters Partner in
connection with any administrative or judicial proceeding with respect to the
tax liability of the Members.  The provisions of this Section 3.8 shall survive
the termination of the Venture and shall remain binding on the Members for as
long a period of time as is necessary to resolve with the Internal

 

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Revenue Service (the “IRS”) any and all matters regarding the U.S. federal
income taxation of the Venture or the Members.

 

3.9                               Liability for Venture’s Obligations.  Except
as otherwise provided by the Act, the debts, obligations and liabilities of the
Venture, whether arising in contract, tort or otherwise, shall be solely the
debts, obligations and liabilities of the Venture, and the Members shall not be
obligated personally for any such debt, obligation or liability solely by reason
of being a Member of the Venture.  Each Member shall be obligated to make
payment of its contributions of capital as and when due hereunder and other
payments as provided in this Agreement.

 

ARTICLE 4

 

ALLOCATIONS

 

4.1                               Allocation of Profits and Losses.

 

(a)                                 Except as otherwise provided in this
Section 4.1, Profits and Losses shall be allocated among the Members in
accordance with their respective Percentage Interests.

 

(b)                                 Notwithstanding anything to the contrary in
this Agreement, Profits and Losses shall be allocated as though this Agreement
contained (and there is hereby incorporated herein by reference) a qualified
income offset provision which complies with Treas. Reg.
§ 1.704-1(b)(2)(ii)(d) and minimum gain chargeback and partner minimum gain
chargeback provisions which comply with the requirements of Treas. Reg. §
1.704-2.

 

(c)                                  In the event that any amounts paid or
payable to any Member or any Affiliate which the Venture deducted or intended to
deduct are disallowed as deductions for U.S. federal income tax purposes (or it
is determined that such amounts are no longer allowable as deductions), (i) the
amounts thus disallowed or no longer allowable will be allocated to the Member
which received them (or whose Affiliate received them) as income, and
(ii) notwithstanding any provision herein to the contrary, the balance of the
redetermined income or loss of the Venture for the taxable year in question
shall, to the extent permitted by law, be allocated among the Members to obtain
the same allocation of Venture income or loss (after giving effect to the income
allocated pursuant to clause (i) hereof) as would have been obtained for such
taxable year if the amounts thus disallowed or no longer allowable had been
proper deductions by the Venture.

 

4.2                               Tax Allocations.

 

(a)                                 Items of taxable income, gain, loss and
deduction shall be determined in accordance with Section 703 of the Code, and
except as otherwise provided in this Section 4.2, the Members’ distributive
shares of such items for purposes of Section 702 of the Code shall be determined
according to their respective shares of Profits or Losses (or items thereof) to
which such items relate.

 

(b)                                 In accordance with Section 704(c) of the
Code and the regulations thereunder, income, gain, loss, and deduction with
respect to any property contributed to the capital of the Venture shall, solely
for tax purposes, be allocated among the Members so as to

 

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take account of any variation between the adjusted basis of such property to the
Venture for U.S. federal income tax purposes and its fair market value as of the
date of contribution.  In the event the book value of any Venture property is
adjusted pursuant to the Venture’s maintenance of Capital Accounts, subsequent
allocations of income, gain, loss, and deduction with respect to such asset
shall take account of any variation between the adjusted basis of such asset for
federal income tax purposes and its book value for Capital Account purposes in
the same manner as under Section 704(c) of the Code and the regulations
thereunder.  Any elections or other decisions relating to such allocations shall
be made by the Manager in any manner that reasonably reflects the purpose and
intention of this Agreement.

 

(c)                                  Allocations pursuant to this Section 4.2
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 Capital Account
or share of Profits, Losses or distributions pursuant to any provision of this
Agreement.

 

ARTICLE 5

 

DISTRIBUTIONS AND EXPENSES

 

5.1                               Distributions of Net Cash Flow.  The Net Cash
Flow of the Venture, as determined by the Manager, shall first be used repay any
outstanding Member Loans (if applicable, pro rata and pari passu among the
Member Loans based on the outstanding principal and accrued unpaid interest
thereon) in accordance with Section 3.4.  Any Net Cash Flow of the Venture
remaining following the repayment of any outstanding Member Loans, including any
accrued unpaid interest thereon, shall be distributed to the Members on a
monthly basis in accordance with their respective Percentage Interests no later
than fifteen (15) days following the end of each month; provided, however, that
the initial $880 of Net Cash Flow of the Venture in each calendar month shall be
distributed as a fee to the Manager before any other Net Cash Flow is
distributed to any other Member.  The Net Cash Flow resulting from any sale or
disposition of interests in the Subsidiary REIT or any other asset of the
Venture, or any refinancing, shall be distributed to the Members as soon as
reasonably practicable (but in any case within fifteen (15) days) after receipt
of such amounts, except in connection with (i) a reinvestment by the Venture of
any such amounts as set forth in any Subsequent Operating Plan or as otherwise
approved by the Advisory Committee, (ii) a like-kind exchange of the Project or
any of its assets pursuant to Section 1031 of the Code, (iii) a holdback of any
such amounts in escrow required by the terms of a purchase and sale agreement
entered into with a buyer that is not the Manager or its Affiliate or (iv) any
other event that would, in the Manager’s reasonable discretion after obtaining
the Consent of the Advisory Committee, make it impracticable to distribute such
amounts at such time.

 

5.2                               Tax Provisions.  In the event the Venture is
subject to any tax or other obligation that is attributable to the Interest of
one Member, but not all the Members, such tax or other obligation shall be
specially allocated to, and charged against the Capital Account of, such Member,
and the amounts otherwise distributable to such Member pursuant to this
Agreement shall be reduced by such amount but shall nevertheless be deemed to be
a distribution of such amount to such Member for all purposes of this Agreement.

 

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5.3                               Priority.  Notwithstanding any other provision
of this Agreement, it is specifically acknowledged and agreed by each Member
that the Venture’s failure to pay any distribution pursuant to Section 5.1 to
such Member shall not give such Member creditor status with regard to such
unpaid amount; but rather, such Member shall be treated only as a Member of
whatever class such Person is a Member, and not as a creditor with respect to
such unpaid amount, of the Venture.  This Section 5.3 is, as permitted by
Section 18-606 of the Act, intended to override the provisions of Section 18-606
of the Act relating to a member’s status and remedies as a creditor, to the
extent that such provisions would be applicable in the absence of this
Section 5.3.

 

5.4                               Operating Expenses.  The Venture shall bear
all other costs and expenses of the Venture’s activities and operations,
including without limitation the following: (i) Taxes of the Venture, fees and
expenses of professional advisors to the Venture, premiums for insurance
(including, without limitation, error and omissions, directors and officers and
other forms of liability insurance (other than the cost of liability insurance
for the Manager, its Affiliates and any of their respective officers, directors,
partners, members, shareholders and employees)) protecting the Venture, the
Manager and other Indemnified Persons and litigation costs of the Venture;
(ii) administrative expenses related to the Venture, including without
limitation, fees and expenses of accountants, lawyers and other professionals
incurred in connection with the Venture’s annual audit, financial reporting,
legal opinions and preparation of Tax Returns; (iii) the Venture’s proportionate
share of all fees, costs and expenses incurred in holding, appraising,
financing, selling or otherwise disposing of or otherwise dealing with the
Subsidiary REIT and the Project (or the Venture’s interest therein);
(iv) indemnification expenses incurred pursuant to Section 7.2; and (v) all
other customary fees, costs and expenses of the Venture (collectively,
“Operating Expenses”).  The Manager may make one or more Capital Calls in
accordance with Article 3 in order to enable the Venture to pay any Operating
Expenses.

 

ARTICLE 6

 

MANAGEMENT RIGHTS, DUTIES, AND POWERS OF THE
MANAGER; TRANSACTIONS INVOLVING
THE MANAGER OR ITS AFFILIATES;
ADDITIONAL OR SUCCESSOR MANAGER

 

6.1                               Management of the Venture.

 

(a)                                 Right, Power and Authority of Manager. 
Except as provided in this Agreement, the Manager shall have the right, power
and authority to manage and control the day-to-day affairs of the Venture. 
Subject to Section 6.3 and except for any other provision of this Agreement that
requires the Consent of the Advisory Committee or the Members, any action taken
by the Manager on behalf of the Venture shall constitute the act of, and serve
to bind, the Venture, and no Member (in such capacity) shall have any vote on
any matter or the ability to bind the Venture.  In no event shall any Person
dealing with the Manager with respect to the conduct of the affairs of the
Venture be obligated to ascertain that the terms of this Agreement have been
complied with or be obligated to inquire into the necessity or expediency of any
action of the Manager.  The Manager shall be required to devote only such time
to the business of the Venture as is reasonably necessary to perform its
obligations under this Agreement.

 

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(b)                                 Reliance on Officers of the Manager.  It is
understood and agreed that each officer of the Manager may act for and in the
name of the Manager under this Agreement.  In dealing with any officer of the
Manager acting for or on behalf of the Venture, no Person shall be required to
inquire into, and Persons dealing with the Venture are entitled to rely
conclusively on, the right, power and authority of any officer of the Manager to
bind the Venture.

 

(c)                                  Limitations on the Manager. 
Notwithstanding anything herein to the contrary, the Manager and its Affiliates
shall not have authority or be entitled to (i) perform any act expressly
requiring the Consent of the Advisory Committee (including any Major Decision)
or any Member(s) as provided in Section 2.6(b), 3.1, 3.2, 3.4(c), 6.6, 6.8,
10.11, 14.3, 14.20 or 14.21 without first obtaining such Consent or without such
Consent being “deemed” to be given pursuant to Section 6.3(b); or (ii) avoid the
Manager’s ultimate responsibility under this Agreement by delegation of
authority, provided that this clause (ii) shall not prohibit delegation of any
of its duties or obligations hereunder as long as the Manager retains ultimate
responsibility for such duties and obligations; provided, further, that the
Manager shall retain ultimate responsibility for the delegation of any of its
duties or obligations to the Management Company (or another Affiliate of BH
Redwood) in connection with the performance of property management, leasing and
related services for the Project.

 

(d)                                 No Obligation Other Than As Set Forth
Herein.  The Manager and its Affiliates shall not be obligated to do or perform
any act or thing in connection with the business of the Venture not expressly
set forth in this Agreement.

 

6.2                               Operating Plan. 
(a)                                        The operating plan for the Project
covering the fiscal year ended December 31, 2011 is attached hereto as
Exhibit C, and the operations of the Project through the end of the fiscal year
ended December 31, 2011 shall be conducted in all material respects in
accordance with such operating plan, except for any action or expenditure the
Manager deems reasonably necessary or appropriate in the event of an emergency
situation affecting the Project, as determined by the Manager in its reasonable
discretion, provided that prompt notice thereof is given to the Members.

 

(b)                                 On or before December 1, 2011 and at least
sixty (60) days before the end of each fiscal year of the Venture ending on or
after December 31, 2012, the Manager shall prepare, or cause to be prepared, and
submit to the Advisory Committee for its review an initial draft operating plan
(a “Subsequent Operating Plan”) for the Project for the next succeeding fiscal
year of the Venture.  Each Subsequent Operating Plan for the Project shall
contain all material pertinent leasing, financing, capital improvements and
expenditures, operational and disposition information together with a detailed
budget of projected operating and capital expenses and revenues, insurance
coverage (including coverage types and policy limits) and any other information
deemed appropriate by the Manager for the applicable fiscal year.  The
Authorized Representatives may make comments on and suggestions for the
Subsequent Operating Plan, and if accepted by the Manager in its reasonable
discretion, such comments and suggestions shall be incorporated into a revised
Subsequent Operating Plan for such Project and the Manager shall cause the
operations of the Project for the applicable fiscal year to be conducted in all
material respects in accordance with such Subsequent Operating Plan.  If the
Manager does not accept, in whole or in part, the comments and suggestions of
each of the Authorized Representatives with respect to a Subsequent Operating
Plan and, as a result, the

 

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projected operating and capital expenses contemplated by the Subsequent
Operating Plan proposed to be adopted by the Manager exceeds five percent (5%)
of the aggregate operating and capital expenses proposed by any Authorized
Representative, then the Manager shall cause the operations of the Project to be
conducted in all material respects in accordance with the operating plan for the
immediately preceding fiscal year (the “Prior Operating Plan”); provided,
however, that, (i) the Manager may increase each item of operating and capital
expenses in the Prior Operating Plan by up to five percent (5%), and (ii) in the
event of an emergency situation affecting the Project, as determined by the
Manager in its reasonable discretion, the Manager may take, or cause to be
taken, such action in respect of such emergency situation as the Manager deems
reasonably necessary or appropriate; provided that, the Manager promptly advises
the Members of such emergency situation and such action taken or caused to be
taken.

 

6.3                               Major Decisions.

 

(a)                                 Notwithstanding anything to the contrary
contained in this Agreement (except as permitted in accordance with
Section 6.2), the Manager shall have no authority on behalf of the Venture to
take any action, make any decision, expend any sum or undertake or suffer any
obligation if to do so would constitute a Major Decision, unless such Major
Decision is approved in advance in writing by the Advisory Committee or “deemed”
to be approved in accordance with Section 6.3(b).  As used herein, “Major
Decision” means any decision of the Venture to do or take any of the following
actions, whether directly or indirectly through, or with respect to, the
Venture, the Subsidiary REIT or any subsidiary thereof (regardless of whether so
specified):

 

(i)                                     selling or otherwise disposing of all or
any part of the Project (including without limitation, the sale of the Venture’s
interest therein), or causing the Subsidiary REIT to sell or otherwise dispose
of all or any part of the Project, or Transferring any material interest
therein;

 

(ii)                                  selling or causing the sale of any
additional interests in the Venture or the Subsidiary REIT (other than, in the
case of the Subsidiary REIT, such number of Shares as the Manager may reasonably
determine to be necessary or appropriate to permit the Subsidiary REIT to
qualify or maintain its status as a REIT);

 

(iii)                               incurring, materially restructuring or
materially modifying any indebtedness of the Venture or the Subsidiary REIT in
excess of $100,000 or causing the Venture or the Subsidiary REIT to become
liable as an endorser, guarantor, surety or otherwise for any debt, obligation
or undertaking of any other Person in excess of $100,000 other than in
accordance with the operating plan of the Venture for the fiscal year ended
December 31, 2011 or the applicable Subsequent Operating Plan, as the case may
be, except for (A) indebtedness of the Venture or the Subsidiary REIT arising in
the ordinary course of business for trade payables, wages, taxes or otherwise
for goods or services rendered or provided to the Venture or the Subsidiary
REIT, and (B) endorsements of the Venture or the Subsidiary REIT for deposit or
collection of checks, drafts and similar instruments received by the Venture or
the Subsidiary REIT in the ordinary course of business;

 

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(iv)                              causing or permitting the Venture or the
Subsidiary REIT to mortgage, pledge or hypothecate the Project (except pursuant
to leases entered into in the ordinary course of business) to secure any
indebtedness for borrowed money of the Venture other than in accordance with the
operating plan of the Venture for the fiscal year ended December 31, 2011 or the
applicable Subsequent Operating Plan, as the case may be;

 

(v)                                 making any tax election or decision
affecting the tax treatment of any or all of the Members in connection with its
or their participation in the Venture other than as contemplated by Section 3.8;

 

(vi)                              determining that the Subsidiary REIT shall no
longer qualify and operate as a REIT;

 

(vii)                           Transferring any interest in the Venture to any
Person or admitting any Person as a Member of the Venture except in accordance
with Article 9;

 

(viii)                        approving an independent registered public
accounting firm other than Deloitte & Touche LLP to act as auditors pursuant to
Section 13.3 or Ernst & Young LLP to review or prepare Tax Returns pursuant to
Section 13.5;

 

(ix)                              approving or disapproving any transaction or
conflict of interest requiring the Consent of the Advisory Committee pursuant to
Section 6.4(b) or (d);

 

(x)                                 to the fullest extent permitted by law,
dissolving or liquidating, in whole or in part, making an assignment for the
benefit of any creditor, filing or otherwise initiating on behalf of the
Venture, the Subsidiary REIT or any subsidiary thereof a petition in bankruptcy,
or applying to any tribunal for the appointment of a custodian, receiver or any
trustee for it or for a substantial part of its property, commencing any
proceeding under any bankruptcy, insolvency, reorganization, arrangement,
readjustment of debt, dissolution or liquidation law or statute of any
jurisdiction, whether now or hereinafter in effect, consenting or acquiescing in
the filing of (or invoking or causing any Person to file) any such petition,
application or proceeding, or taking possession by a custodian, receiver,
liquidator, assignee, trustee, sequestrator (or other similar official) of the
Venture, the Subsidiary REIT or any subsidiary thereof or any substantial part
of its property, or admitting its inability to pay its debts generally as they
become due or authorizing any of the foregoing to be done or taken on behalf of
the Venture, the Subsidiary REIT or any subsidiary thereof, or consenting to or
acquiescing in (A) the filing or other initiation of an involuntary petition for
relief against the Venture, the Subsidiary REIT or any subsidiary thereof under
any Chapter of Title 11 of the United States Code, or (B) the appointment of any
trustee, receiver, conservator, assignee, sequestrator, custodian, liquidator
(or other similar official) for the Venture, the Subsidiary REIT or any
subsidiary thereof of all or substantially all of its assets; or

 

(xi)                              consolidating or merging with or into any
other Entity, or purchasing or otherwise acquiring all or substantially all of
the assets or any stock or shares of any class of any Entity, or redeeming or
reacquiring any Interests, or otherwise engaging in any recapitalization, joint
venture or other business combination.  For the avoidance of doubt, this
Section 6.3(a)(xi) applies to actions of the Manager on behalf of the Venture
and does not restrict

 

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BH Multifamily REIT, Behringer Holdings or any of their respective Affiliates
(other than the Venture and its subsidiaries) in any respect.

 

(b)                                 In connection with any proposed Consent to a
Major Decision, the Manager shall provide the Authorized Representatives with
such information as they may reasonably request and as shall be reasonably
available to the Manager (or, in the case of Section 6.3(a)(v), the affected
Member(s)) to make a prudent judgment whether to approve or disapprove the
proposed action.  The Manager shall give the Advisory Committee not less than
five (5) Business Days’ advance written notice of, and request its Consent to,
each proposed Major Decision.  Should a Member’s Authorized Representatives fail
to respond to a Consent request with respect to a Major Decision within five
(5) Business Days from when such notice is given, the Manager shall issue a
second conspicuously marked notice to the applicable Authorized Representatives
seeking Consent to the proposed Major Decision.  Should the Authorized
Representatives of such Member fail to respond to the second Consent request
with respect to the Major Decision within five (5) Business Days from when such
notice is given, such Authorized Representatives shall conclusively be deemed to
have granted their Consent to such Major Decision (other than a Major Decision
identified in Section 6.3(a)(i), (ii), (vi), (x) or (xi) which shall require the
affirmative Consent of the Advisory Committee) and shall waive any right to
withdraw such Consent or otherwise object to such Major Decision, provided that
the notice must indicate that it will become effective at the expiration of such
second five (5) Business Day period in order to become effective in such manner.

 

(c)                                  If the Advisory Committee determines to
cause the Subsidiary REIT to sell or otherwise dispose of the Project (rather
than through a sale of the Venture’s interest in the Subsidiary REIT) pursuant
to Section 6.3(a), the Manager shall cause the Subsidiary REIT to be liquidated,
and the Subsidiary REIT’s interest in the Project shall be distributed in-kind
to the Venture, which shall then sell or otherwise dispose of the Project in the
manner approved by the Advisory Committee.  Notwithstanding any provision of
this Agreement to the contrary, a Member may Transfer all or a portion of its
Interest to an Affiliate in connection with the transactions contemplated by
this Section 6.3(c).

 

6.4                               Business with Affiliates; Other Activities.

 

(a)                                 The Venture, directly or through the
Subsidiary REIT, has invested in the Project, notwithstanding that BH
Multifamily REIT or its Affiliate may have held a material (or lesser) interest
in the Project or that the Project has been developed by Behringer Holdings or
any of its Affiliates.

 

(b)                                 Subject to obtaining the Consent of the
Advisory Committee, the Venture, directly or through the Subsidiary REIT (and
any other Person to which any of the foregoing are related or in which any of
the foregoing are interested), may, as necessary or appropriate, engage in any
transaction with or employ or retain Behringer Holdings or any of its Affiliates
(including BH Multifamily REIT and its Affiliates) to provide services
(including, without limitation, administration, accounting, construction
management, data processing, development, engineering, environmental, financing,
insurance brokerage, management and servicing, leasing, legal, market research,
mortgage financing, property management or other similar services) that would
otherwise be performed for the Venture or the Subsidiary REIT by third parties
on terms

 

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(including, without limitation, the consideration to be paid) that are
determined by the Manager to be fair and reasonable to the Venture or the
Subsidiary REIT, as the case may be, and such Persons may receive from the
Venture (and any such other Person) reasonable compensation (including, without
limitation, salary, salary related employment costs and expenses of the
employees who provide such services and other overhead expenses allocable
thereto, as determined by the Manager based on the time expended by the
employees who render such services or on a project-by-project basis) in addition
to that expressly provided for in this Agreement.  It is expressly acknowledged
and agreed that the Manager, without obtaining the Consent of the Advisory
Committee pursuant to Section 6.3, may cause the Subsidiary REIT (or any
subsidiary thereof that owns the Project) to engage the Management Company (or
another Affiliate of Behringer Holdings), to perform property management,
leasing and related services for the Project for a fee equal to the lesser of
(i) 3.75% of the gross revenues from the Project and (ii) the amount that BH
Multifamily REIT or any of its subsidiaries otherwise pays to the Management
Company (or such other Affiliate) for property management, leasing and related
services.

 

(c)                                  Nothing herein contained shall prevent or
prohibit Behringer Holdings, any of its Affiliates, or any of their respective
trustees, officers, directors, members, partners, employees or shareholders from
acquiring, developing, investing in, managing, leasing or otherwise dealing in
real property of any kind or nature for its own account or that of any of its
Affiliates or third parties or from entering into, engaging in or conducting any
other activity or performing for a fee any service (including, without
limitation, engaging in any business dealing with real property of any type or
location, acting as a director, officer or employee of any corporation, as a
trustee of any trust, as a general partner of any partnership, as a member or
manager of any limited liability company or as an official of any other Entity,
or receiving compensation for services to, or participating in profits derived
from, the investments of any such corporation, trust, partnership, limited
liability company or other Entity, regardless of whether such activities are
competitive with the Venture or the Project).  The fact that Behringer Holdings
or its Affiliates may encounter opportunities to purchase, otherwise acquire,
lease, sell or otherwise dispose of real or personal property and may take
advantage of such opportunities themselves or introduce such opportunities to
other Persons in which it has or has not any interest, shall not subject
Behringer Holdings or its Affiliates to liability to the Venture or any of the
Members (or any of the direct or indirect partners or members of the Members) on
account of the lost opportunity.

 

(d)                                 Except for matters otherwise specifically
authorized in this Agreement, any material transaction, and any other matter
that involves a material conflict of interest between Behringer Holdings or any
of its Affiliates, on the one hand, and the Venture or the Subsidiary REIT (or
any subsidiary thereof), on the other hand, shall be subject to the prior
Consent of the Advisory Committee.

 

6.5                               Maintenance of Domestic Status.  The Manager
hereby agrees that, notwithstanding anything herein to the contrary, unless
caused, consented to or induced by MWP, neither the Manager nor any of its
Affiliates will (a) voluntarily take any action that, to the knowledge of the
Manager, would result in a Domestic Status Loss, or (b) permit to occur any
action that is within its reasonable control to prevent and that, to the
knowledge of the

 

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Manager, would result in a Domestic Status Loss.  The provisions of this
Section 6.5 shall not apply if there is not at least one Non-U.S. Member.

 

6.6                               Tax Status.  Each Member agrees to take
commercially reasonable actions to assist the other Member in achieving the most
favorable tax treatment for such other Member (and the owners of such Member);
provided that, no Member shall be required to take or permit any action which
(a) creates any risk of material adverse economic or tax consequences for such
Member (or the owners of such Member), unless the requesting Member agrees to
reimburse each such Person that may be subject to such consequences for all
adverse economic and tax consequences, or (b) is contrary to law.  Any tax
election to be made on behalf of the Venture that would, or could reasonably be
expected to, have a material adverse effect on MWP shall require the prior
written Consent of MWP.

 

6.7                               Liability for Venture’s Obligations.  The
debts, obligations and liabilities of the Venture, whether arising in contract,
tort or otherwise, shall be solely the debts, obligations and liabilities of the
Venture, and neither the Members nor the Manager shall be obligated personally
for any such debt, obligation or liability of the Venture by reason of being the
Members or the Manager of the Venture.

 

6.8                               Additional or Successor Manager.  The Manager
may delegate its rights and powers as a manager under this Agreement and the
Act, and may admit to the Venture as a successor Manager, any of its Affiliates,
Behringer Holdings or any of its Affiliates without the Consent of any Member,
provided that the Manager arranges for such Person(s) to be bound by the
provisions of this Agreement by having such Person(s) execute such documents as
may be reasonably required to make such Person(s) party to this Agreement as an
additional or successor Manager(s).  In the event that any such Person is
admitted as an additional Manager, the Manager and such additional Manager shall
share in the rights and powers, as well as any duties and obligations, under
this Agreement and the Act in such manner and to such extent as the Manager and
such additional Manager may agree.  In the event that any such Person is
admitted as a successor Manager, the Manager shall thereupon cease to have any
rights, powers, duties or obligations under this Agreement and the Act, and such
Person, as the successor Manager, shall assume all such rights, powers, duties
and obligations previously held by the Manager.  Except as provided in this
Section 6.8, the Manager may not admit any Person as an additional or successor
Manager without the Consent of the Members.

 

6.9                               Removal of Manager for Cause.  Notwithstanding
anything herein to the contrary, MWP shall have the sole right to elect to
remove the Manager (a) for Cause, or (b) in the event neither BH Redwood nor any
of its Affiliates is a Member.  Upon the occurrence of any event constituting
Cause for its removal, the Manager shall deliver written notice of such event to
MWP promptly upon (and in any event within five (5) Business Days after) the
occurrence of such event.  MWP shall exercise its right to remove the Manager,
if at all, by delivering to the Manager written notice of such election at any
time after the occurrence of the event constituting Cause (or upon neither BH
Redwood nor any of its Affiliates being a Member), but not later than twenty
(20) Business Days after the delivery of the notice of Cause from the Manager. 
In the event MWP shall exercise the right to remove the Manager, MWP shall
promptly (but in no event later than ten (10) Business Days after the removal of
the Manager) appoint a successor Manager of the Venture.  Upon the removal of
the Manager the Venture shall file an amendment

 

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to its Certificate evidencing the removal of the Manager as manager of the
Venture and changing the name of the Venture to delete any references to
“Behringer Harvard”.

 

ARTICLE 7

 

LIMITATIONS ON LIABILITY AND INDEMNIFICATION

 

7.1                               Limitation of Liability.  To the maximum
extent permitted under the Act in effect from time to time, neither the Members,
the Manager, the Authorized Representatives nor any other Indemnified Person
shall be liable to the Venture or to any other Member for (a) any act or
omission performed or failed to be performed by it, or for any losses, claims,
costs, damages or liabilities arising from any such act or omission, except to
the extent such loss, claim, cost, damage or liability results from such
Indemnified Person’s gross negligence, willful misconduct, fraud or a material
breach of this Agreement, (b) any tax liability imposed on the Venture or
(c) any losses due to the negligence (gross or ordinary), dishonesty or bad
faith of any agents of the Venture, as long as such Persons are selected and
monitored with reasonable care.  Without limiting the generality of the
foregoing, each Indemnified Person shall, in the performance of his, her or its
duties, be fully protected in relying in good faith upon the records of the
Venture and upon information, opinions, reports or statements presented to such
Indemnified Person by the Manager or by any other Person as to matters such
Indemnified Person reasonably believes are within such other Person’s
professional or expert competence and who has been selected with reasonable care
by or on behalf of the Venture.  Any repeal or modification of this Section 7.1
shall not adversely affect any right or protection of a Person existing at the
time of such repeal or modification.

 

7.2                               Indemnification.

 

(a)                                 Advancement of Expenses.  In the event that
the Members, the Manager, their respective Affiliates or any directors,
officers, shareholders, partners, members, employees, trustees, representatives
or agents of any of them or the Authorized Representatives (each, an
“Indemnified Person” and collectively, the “Indemnified Persons”) becomes
involved in any capacity in any threatened, pending or completed action,
proceeding or suit, whether civil, criminal, administrative or investigative, by
reason of the fact that it, he or she was a member, manager, officer, employee,
Authorized Representative, representative or agent of the Venture, any Member,
the Manager or otherwise authorized to act hereunder or in connection herewith
or otherwise failed to act in connection with the business or affairs of the
Venture or one of its direct or indirect subsidiaries or otherwise is or was
serving at the Venture’s or one of the Venture’s direct or indirect subsidiary’s
request as a director, trustee, officer, partner, employee or agent of another
Entity, the Venture will periodically reimburse such Indemnified Person for its
reasonable legal and other expenses (including, without limitation, the costs of
any investigation and preparation) incurred in connection with such involvement,
provided that such Indemnified Person shall promptly repay to the Venture the
amount of any such reimbursed expenses paid to it if it is ultimately determined
by a court having appropriate jurisdiction in a decision that is not subject to
appeal, that such Indemnified Person is not entitled to be indemnified by the
Venture under this Section 7.2.  Notwithstanding the foregoing, in no event
shall the Venture advance any such funds to an Indemnified Person during the
pendency of any claim made or action brought (a) by the Venture, the Manager or
a Member against the

 

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Indemnified Person with respect to the underlying matter or (b) in which such
Indemnified Person was the plaintiff, but if it is ultimately determined by a
court having appropriate jurisdiction in a decision that is not subject to
appeal that such Indemnified Person is entitled to be indemnified by the Venture
under this Section 7.2, the Venture shall make such payments as may be required
to such Indemnified Person by this Section 7.2.

 

(b)                                 Indemnification.  To the maximum extent
permitted under the Act in effect from time to time, the Venture shall
indemnify, defend and hold harmless any Indemnified Person against any losses,
claims, costs, damages or liabilities to which such Indemnified Person may
become subject in connection with the business or affairs of the Venture or one
of its direct or indirect subsidiaries or serving at the Venture’s or one of the
Venture’s direct or indirect subsidiary’s request as a director, trustee,
officer, partner, employee or agent of another Entity, except to the extent that
any such loss, claim, cost, damage or liability results from the gross
negligence, willful misconduct, fraud or a material breach of this Agreement of
such Indemnified Person.  If for any reason (other than the gross negligence,
willful misconduct, fraud or material breach of this Agreement of such
Indemnified Person) the foregoing indemnification is unavailable to such
Indemnified Person, or is insufficient to hold it harmless, then the Venture
shall contribute to the amount paid or payable to the Indemnified Person as a
result of such loss, claim, cost, damage or liability in such proportion as is
appropriate to reflect not only the relative benefits received by the Venture on
the one hand and such Indemnified Person on the other hand but also the relative
fault of the Venture and such Indemnified Person, as well as any relevant
equitable considerations.

 

(c)                                  Successors.  The reimbursement, indemnity
and contribution obligations of the Venture under this Section 7.2 shall be in
addition to any liability which the Venture may otherwise have and shall be
binding upon and inure to the benefit of any successors, assigns, heirs and
personal representatives of the Venture, the Members, the Manager and any other
Indemnified Person.  The foregoing provisions shall survive any termination of
this Agreement and any amendment to such provisions shall not reduce the
Venture’s indemnity obligation with respect to any act or omission occurring
prior to the date of such amendment.

 

(d)                                 Exclusivity.  The indemnification provided
by this Section 7.2 shall not be deemed to be exclusive of any other rights to
which the Indemnified Person may be entitled under any agreement or as a matter
of law, or otherwise, both as to action in an Indemnified Person’s official
capacity and to action in another capacity, and shall continue as to an
Indemnified Person who has ceased to have an official capacity for acts or
omissions during such official capacity or otherwise when acting at the request
of the Manager and shall inure to the benefit of the heirs, successors and
administrators of such Indemnified Person.

 

(e)                                  Limitation.  Notwithstanding any of the
foregoing to the contrary, the provisions of this Section 7.2 shall not be
construed as to provide for the indemnification of any Indemnified Person for
any liability (including, without limitation, liability under U.S. federal
securities laws which, under certain circumstances, impose liability on Persons
that act in good faith), to the extent (but only to the extent) that such
indemnification would be in violation of applicable law, but shall be construed
so as to effectuate the provisions of this Section 7.2 to the fullest extent
permitted by law.

 

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(f)                                   Reliance.  An Indemnified Person may rely
upon and shall be protected in acting or refraining from action upon any
resolution, certificate, statement, instrument, opinion, report, notice,
request, consent, order or other document believed by it to be genuine and to
have been signed or presented by the proper party or parties.

 

(g)                                  Consultation.  An Indemnified Person may
consult with counsel, accountants and other experts reasonably selected by it,
and any opinion of an independent counsel, accountant or expert retained with
reasonable care shall be full and complete protection in respect of any action
taken or suffered or omitted by the Indemnified Person hereunder in good faith
and in accordance with such opinion.

 

ARTICLE 8

 

MEETINGS OF THE ADVISORY COMMITTEE

 

8.1                               Advisory Committee.  The Members shall form a
committee (the “Advisory Committee”) to oversee their investments in the
Venture.  The Advisory Committee shall have four (4) members, two (2) of whom
shall be appointed by MWP (the “MWP Representatives”) and two (2) of whom shall
be appointed by BH Redwood (the “BH Representatives” and, together with the MWP
Representatives, the “Authorized Representatives”).  The initial MWP
Representatives shall be Howard Edelman and Christian Perez, and the initial BH
Representatives shall be Ross Odland and Mark Alfieri.  Each Consent, approval
and decision of a Member pursuant to this Agreement shall be made by its
Authorized Representatives.  Each Authorized Representative shall be entitled to
one (1) vote on every matter presented to the Advisory Committee for its Consent
or approval.  Any Consent or other action of the Advisory Committee shall
require the affirmative vote (or a “deemed” vote in accordance with
Section 6.3(b)) of a majority of at least three (3) of the Authorized
Representatives to be deemed the Consent or other action of the Advisory
Committee.  MWP or BH Redwood may replace an Authorized Representative
designated by such Person by delivering written notice to the Venture and the
other Members of the removal of such Authorized Representative and designating a
new Authorized Representative.  The Manager, the Members and the Authorized
Representatives may rely absolutely on the vote, Consent, approval, disapproval
or execution and delivery of any instrument by an Authorized Representative as
having been fully authorized and approved by the Person so designating such
individual as its Authorized Representative.

 

8.2                               Meetings of the Advisory Committee.

 

(a)                                 The Advisory Committee shall hold an annual
meeting within a reasonable period of time after the close of each fiscal year
of the Venture, the exact date of which and the time and place of which shall be
determined by the Manager, but shall not, without the Consent of the Advisory
Committee, be later than five (5) months after the close of the Venture’s fiscal
year.  In addition to the annual meeting of the Advisory Committee, the Manager
may call a meeting of the Advisory Committee from time to time in its sole
discretion, and shall call a meeting of the Advisory Committee if so requested
by an Authorized Representative, at the principal place of business of the
Manager on such date as the Manager together with the Authorized Representatives
may mutually agree on, such agreement not to be unreasonably withheld.  In the
event of any change in the date, time or place of such meeting, the Manager

 

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shall promptly give reasonable notice to the Authorized Representatives.  Unless
otherwise agreed by the Manager and the Authorized Representatives, all meetings
of the Advisory Committee shall be held in the United States or by means of
telephone conference or similar communications equipment by means of which all
Persons participating in the meeting can hear and speak to each other.

 

(b)                                 A quorum for the transaction of any business
of the Advisory Committee shall require that at least three (3) Authorized
Representatives be represented at the meeting.  Any action required or permitted
to be taken at any meeting of the Advisory Committee may be taken without a
meeting if at least three (3) of the Authorized Representatives grant their
Consent thereto in writing, and the writing or writings are filed with the
minutes of the proceedings of the Advisory Committee.  The Authorized
Representatives may participate in a meeting of the Advisory Committee by means
of telephone conference or similar communications equipment by means of which
all Persons participating in the meeting can hear and speak to each other, and
such participation in a meeting shall constitute presence in person at such
meeting.

 

8.3                               Dispute Resolution Procedure.  Any dispute
between the Members or the Authorized Representatives may, but is not required
to, be submitted for resolution in accordance with the procedures set forth in
Sections 8.3(a) and (b).  For the avoidance of doubt, the provisions of
Section 9.2 of this Agreement may be invoked by any Member after the occurrence
and during the continuation of any Major Dispute, notwithstanding that such
Member did not first submit such dispute to the provisions of this Section 8.3.

 

(a)                                 Negotiation.  With respect to any dispute
between the Members or the Authorized Representatives, the Authorized
Representatives may attempt in good faith to resolve any dispute through
negotiation.  In the event that the Authorized Representatives are unable to
resolve a dispute in an amount of time that a Member deems reasonable under the
circumstances but in any event within ten (10) Business Days after such dispute
first arose, then such Member may, by written notice (a “Dispute Notice”) to the
other Member(s), require that such dispute be referred to executives of the
Members (the “Senior Executives”) who are at a more senior level than the
Authorized Representatives and who shall have authority to resolve or settle the
dispute on behalf of the respective Members whom they represent.  Within ten
(10) Business Days after receipt of a Dispute Notice, the Senior Executives
shall hold a meeting between themselves and any Persons whom either of the
Senior Executives deems appropriate.  Such meeting may be by telephonic
communication, provided the parties can clearly hear and speak to each other. 
In the event that the Senior Executives are unable to resolve the dispute during
such meeting or, if mutually agreed by the Senior Executives, any succeeding
meeting(s), and in any event, if the dispute has not been resolved in accordance
with this Section 8.3(a) within thirty (30) Business Days after the dispute
first arose, either Member may seek mediation in accordance with Section 8.3(b).

 

(b)                                 Mediation.  If a dispute between the Members
or the Authorized Representatives has not been timely resolved by the Senior
Executives through negotiations pursuant to Section 8.3(a), a Member may submit
such dispute to mediation under the Conflict Prevention and Resolution Mediation
Procedure of CPR then in effect.  The Members shall select a mediator from the
Conflict Prevention and Resolution Panel of Distinguished Neutrals of

 

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CPR within ten (10) Business Days after such dispute has been submitted to
mediation.  All discussions and negotiations pursuant to such mediation will be
confidential and will be treated as compromise and settlement negotiations for
purposes of the applicable rules of evidence and any additional confidentiality
protections afforded by agreement of the Members or applicable law.  Each Member
agrees to act in good faith and use reasonable efforts during such mediation to
reach a settlement of such dispute.

 

ARTICLE 9

 

TRANSFER OF MEMBERS’ INTERESTS IN THE VENTURE;
BUY/SELL

 

9.1                               Transfers of a Member’s Interest.

 

(a)                                 Except as provided in Section 6.3(c), no
Member may Transfer all or any portion of its Interest or have any transferee
admitted as a substituted Member in respect of such Interest or any portion
thereof without the prior written Consent of the Manager, which Consent may be
withheld in the sole discretion of the Manager.  In the event a Member desires
to secure permission to Transfer its Interest or any portion thereof, it shall
notify the Manager in the manner described in Section 14.1 hereof and shall
deliver such information to the Manager as it may request, including, if
requested, evidence reasonably satisfactory to the Manager with respect to
(i) compliance with applicable federal and state securities laws and (ii) any
other appropriate laws or regulations.  No Transfer may be made if it would
violate applicable federal or state securities laws or other laws or
regulations.

 

(b)                                 In the event any Member desires to Transfer
all or any portion of its Interest in the Venture (and the Manager Consents
thereto, unless such Consent is not required pursuant to Section 9.1(a)) the
Transferring Member shall arrange for its transferee to be bound by the
provisions of this Agreement by having such transferee execute such documents as
shall be reasonably required by the Manager to make the transferee a party to
this Agreement and by delivering the same to the Manager together with such
other information that may be reasonably requested by counsel to the Manager. 
The transferee of all or any portion of the Interest of a Member shall become a
substituted Member as to the Interest (or portion thereof) thus Transferred upon
the written Consent of the Manager, which Consent may be granted or withheld in
the sole discretion of the Manager, except as otherwise provided in
Section 9.1(a) when such Consent is not required.  Any such substituted Member
shall succeed to all of the rights and assume all of the obligations of the
Member to the extent of the portion of the Interest in the Venture which has
been Transferred to such substituted Member.  A transferee of all of any portion
of the Interest of a Member who is not a substituted Member shall have the right
to receive allocations of income, gain, loss and deduction and distributions of
Net Cash Flow and other distributions pursuant to this Agreement, but shall have
no other rights hereunder, and neither the transferor nor the transferee shall
have the right to vote with respect to any Interest so Transferred.  The
effective date of any Transfer under Section 9.1 (a) or (b) shall be the date on
which the transferee executes and delivers to the Manager the documents required
by the Manager, and the Manager grants its Consent in accordance with
Section 9.1(a) or (b), as the case may be.

 

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(c)                                  Anything contained in Sections 9.1(a) or
(b) to the contrary notwithstanding, no Transfer of an Interest or any portion
shall be effective if it would result in (i) the Venture being classified as an
association (or publicly traded partnership) taxable as a corporation for U.S.
federal or state income tax purposes, or (ii) the occurrence of a Domestic
Status Loss, and any such Transfer shall be effected in such manner as may be
necessary to maintain the classification of the Venture as a partnership for
U.S. federal and state income tax purposes and to avoid the occurrence of a
Domestic Status Loss.

 

(d)                                 Notwithstanding anything to the contrary in
this Agreement, no Interest in the Venture, or any portion thereof, shall be
issued in a transaction that is (or transactions that are) registered or
required to be registered under the Securities Act of 1933, as amended, and any
Transfer of an Interest or any portion thereof must be made in a transaction
that is exempt from registration or qualification under the Securities Act of
1933, as amended, and applicable state securities law.

 

(e)                                  No admission (or purported admission) of a
Member and no Transfer (or purported Transfer) of all or part of a Member’s
Interest (or any interest or right or attribute therein) in the Venture shall be
effective, and no Person shall otherwise become a Member, if the Venture would
or may have more than one hundred (100) members, treating as a member for this
purpose each Person indirectly owning an Interest (or any interest therein) in
the Venture through a partnership, a grantor trust or an S corporation.

 

9.2                               Buy/Sell Arrangement.  Any time after the
occurrence and during the continuance of (i) a Major Dispute for a period of not
less than fifteen (15) days (such fifteen (15) day period to commence upon
written notice by a Member to the other Member), or (ii) an event triggering the
Subsidiary REIT’s “Excess Share” provisions pursuant to its limited liability
company agreement (or other governing instrument), then either Member shall be
entitled to initiate the buy/sell rights set forth in this Section 9.2.

 

(a)                                 Either Member (an “Offeror”) may serve upon
the other Member (an “Offeree”) a notice (an “Offering Notice”) which shall
contain the following:

 

(i)                                     a statement of intent to rely on this
Section 9.2; and

 

(ii)                                  a statement of the aggregate dollar amount
that the Offeror would be willing to pay in cash (the “Offer Price”) for all of
the interest in the Shares (the “Buy/Sell Interest”) which the Offeree would
hold if the Venture was liquidated and the Shares owned by the Venture were
distributed in-kind to the Members, as specified in the Offering Notice.

 

(b)                                 Within thirty (30) days after receipt of the
Offering Notice by the Offeree (the “Option Period”), the Offeree shall notify
the Offeror whether the Offeree elects:

 

(i)                                     to sell its Buy/Sell Interest to the
Offeror for a price equal to the Offer Price; or

 

(ii)                                  to purchase the Buy/Sell Interest of the
Offeror for a price (the “Alternative Offer Price”) that is in proportion to the
Offer Price (based upon the relative

 

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Percentage Interests of the Members), together with a statement of whether the
Offeree elects to purchase the Offeror’s Buy/Sell Interest in respect of the
Venture or the Shares.

 

(c)           If the Offeree does not notify the Offeror of its election to
purchase or sell prior to the expiration of the Option Period, the Offeree shall
for all purposes be conclusively deemed to have elected to sell its Buy/Sell
Interest to the Offeror for the Offer Price indicated in Section 9.2(a)(ii).

 

(d)           (i)            The Member obligated to purchase the Buy/Sell
Interest under Section 9.2(b) or (c) (the “Purchaser”) shall, within (A) five
(5) Business Days after (x) in the case of the Offeree, its election to purchase
pursuant to Section 9.2(b)(ii) and (y) in the case of the Offeror, Offeree’s
election to sell pursuant to Section 9.2(b)(i) or its deemed election to sell
pursuant to Section 9.2(c); or (B) if an election to extend the closing has been
made pursuant to Section 9.2(e), five (5) Business Days after the election to
proceed with the purchase made during the one hundred fifty (150) day period
provided for therein, deposit in cash an amount in escrow, which amount while in
escrow shall be invested in Permitted Temporary Investments as directed by the
Purchaser (such amount, together with any interest earned thereon, being the
“Earnest Money Deposit”), equal to ten percent (10%) of the Offer Price or
Alternative Offer Price, as the case may be (such Offer Price or Alternative
Offer Price, as applicable, being the “Purchase Price”), with an independent
third party (the “Escrow Agent”) reasonably satisfactory to the Member obligated
to sell its Buy/Sell Interest under Section 9.2(b) or (c) (the “Seller”).  The
Earnest Money Deposit shall be applied against the Purchase Price at the closing
referenced below, or shall be paid to the Seller as liquidated damages in the
event of a default by the Purchaser in accordance with this Section 9.2(d)(i);
provided, however, that the Seller shall not be entitled to receive the Earnest
Money Deposit of the defaulted Purchaser, if any, as liquidated damages if it
elects to become the Substituted Purchaser in accordance with this Section
9.2(d).  In the event the Purchaser fails to deposit timely such Earnest Money
Deposit as provided above or fails or refuses to close on the purchase and sale
of its Buy/Sell Interest on the Closing Date (such Purchaser being then referred
to as the “Defaulting Purchaser”), then within fifteen (15) days thereafter,
unless the Defaulting Purchaser has earlier cured such default by depositing the
required Earnest Money Deposit as provided above or has proven to the reasonable
satisfaction of the Seller that the Defaulting Purchaser is ready, willing and
able to close such purchase and sale, the Seller shall have the option of
substituting itself as the Purchaser of the Buy/Sell Interest of the Defaulting
Purchaser (such Seller being then referred to as the “Substituted Purchaser”)
under this Section 9.2(d) at a purchase price (the “Substituted Purchase Price”)
equal to ninety percent (90%) of the Purchase Price multiplied by the ratio of
the Defaulting Purchaser’s Percentage Interest to the Substituted Purchaser’s
Percentage Interest.  In the event that the Seller elects to become the
Substituted Purchaser in accordance with the preceding sentence, the Seller
shall, within fifteen (15) days after the Seller obtains the right to become the
Substituted Purchaser, give written notice to the Defaulting Purchaser of its
intention to do so, which notice shall specify the Substituted Purchase Price
and whether or not the Substituted Purchaser elects to extend the closing
pursuant to Section 9.2(e).  Within five (5) Business Days after (x) the giving
of such notice or (y) if an election to extend the closing is made pursuant to
Section 9.2(e), the giving of notice of election to proceed with the purchase
made during the one hundred fifty (150) day period provided for therein, the
Substituted Purchaser shall deposit an Earnest Money Deposit equal to ten
percent (10%) of the Substituted Purchase Price in escrow with an Escrow Agent
selected by the Substituted Purchaser, whereupon, for purposes of Sections

 

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9.2(d)(ii), (iii), (iv) and (v) and Section 9.2(e) below, the Substituted
Purchaser shall become the Purchaser, the Defaulting Purchaser shall become the
Seller and the Substituted Purchase Price shall become the Purchase Price. 
Alternatively, after the default by the Defaulting Purchaser and its failure to
cure such default within fifteen (15) days thereafter, the Seller may elect to
decline its option to become the Substituted Purchaser and obtain and retain, as
liquidated damages for the Defaulting Purchaser’s default under this Section
9.2(d), the amount of the Earnest Money Deposit deposited by the Defaulting
Purchaser (or the amount that should have been deposited by the Defaulting
Purchaser as the Earnest Money Deposit but was not).

 

(ii)           On or before the date on which the Purchaser (whether it be the
Offeree, the Offeror or the Substituted Purchaser) is required to make the
Earnest Money Deposit referenced in Section 9.2(d)(i), the Purchaser shall fix a
closing date (the “Closing Date”) not later than thirty (30) days (or as soon
thereafter as practicable) following (i) the date of election or deemed election
to purchase by the Purchaser (including because the Offeree elects to sell), or
(ii) if an election to extend the closing has been made pursuant to
Section 9.2(e), the date of election to proceed with the purchase made during
the one hundred fifty (150) day period provided for therein.  Immediately prior
to the Closing Date, the Venture shall make a distribution in-kind of the Shares
owned by the Venture to the Members in accordance with their respective
Percentage Interests so that the purchase and sale of the Buy/Sell Interest can
be consummated by the Transfer of Shares directly owned by the Members.  For
purposes of the distribution in-kind, the distributed Shares shall have a value
per Share equal to the Purchase Price divided by the number of Shares to be
distributed to the Seller.  The closing shall take place on the Closing Date at
a location reasonably designated by the Purchaser.  The Purchaser may assign its
rights to purchase the Buy/Sell Interest of the Seller hereunder to any third
party, including one or more of its Affiliates; provided that, the Purchaser
shall remain liable for any such obligation to purchase.

 

(iii)          At the closing on the Closing Date, the Purchaser shall pay the
Seller, in cash, the amount determined under Section 9.2(d)(i), as the Purchase
Price for the Buy/Sell Interest of the Seller (with the Purchaser’s Earnest
Money Deposit being credited against such amount at the closing) and the Seller
shall execute and deliver to the Purchaser or its designee stock powers, bills
of sale, instruments of assignment, and other instruments as the Purchaser may
reasonably require, to give it or its designee good and indefeasible title to
all of the Seller’s right, title and interest in and to all of its Buy/Sell
Interest.  The Venture shall pay all closing costs; provided, however, that the
Purchaser and the Seller shall pay their own respective legal costs and expenses
in connection with the preparation of the closing documentation.  In addition,
on the Closing Date, the Purchaser shall cause the Seller to be released from
any liability accruing from and after the Closing Date in respect of the Venture
and the Project (including any financing arrangements entered into by the
Venture or with respect to the Project) or shall indemnify the Seller with
respect to such liability.

 

(iv)          The Purchase Price to be paid pursuant to this Section 9.2(d) in
respect of the applicable Buy/Sell Interest being sold shall be reduced
proportionately on a per Share basis for any distributions made by the Venture
after the determination of the Offer Price and prior to the Transfer of the
applicable Buy/Sell Interest to the extent such distributions comprise sale,
disposition or refinancing proceeds.

 

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(v)           A sale of its Buy/Sell Interest shall not relieve the Seller from
any obligations or liabilities arising under or in connection with this
Agreement prior to the closing of the sale of its Buy/Sell Interest.

 

(e)           (i)            On or prior to (A) in the case of the Offeree, the
expiration of the Option Period, (B) in the case of the Offeror, five (5)
Business Days after the Offeree elects (or is deemed to have elected) to sell
its Buy/Sell Interest and (C) in the case of the Substituted Purchaser, five
(5) Business Days after giving notice of its election to become the Substituted
Purchaser, the Purchaser may notify the Seller of its election to extend the
time it has to close by one hundred fifty (150) days after the giving of such
extension notice.  During such one hundred fifty (150) day period, the Purchaser
may seek a third party to form a joint venture or other joint ownership
arrangement (the “Purchaser Venture”) with the Purchaser for the acquisition and
ownership of the Buy/Sell Interest of the Seller.  In the event that the
Purchaser elects to proceed with the purchase of the Buy/Sell Interest of the
Seller, whether alone or through a Purchaser Venture, the Purchaser shall
provide notice of such election to the Seller on or prior to the expiration of
the one hundred fifty (150) day period.  In such event, the Purchaser, the
Substituted Purchaser or the Purchaser Venture, as the case may be, shall become
the “Purchaser,” the other Member shall become the “Seller” and the provisions
of Section 9.2(d), to the extent not inconsistent with this Section 9.2(e)(i),
shall apply; provided that such Purchaser (including the Substituted Purchaser
or the Purchaser Venture, as the case may be), shall have five (5) Business Days
after its election to proceed with the purchase to deposit its Earnest Money
Deposit in escrow.  If the Purchaser does not find a third party with whom to
form a joint venture or other joint ownership arrangement or otherwise elects
not to proceed with the purchase of the Buy/Sell Interest of the Seller, the
provisions of Section 9.2(e)(ii) shall apply.

 

(ii)           If, within the one hundred fifty (150) day period referred to in
clause (i) above, the Purchaser (A) does not find a third party with whom to
form a joint venture or other joint arrangement and otherwise elects not to
proceed with the purchase, (B) affirmatively elects not to proceed with the
purchase and provides notice of such election to the Seller, or (C) does not
notify the other Member in writing that the Purchaser will proceed with the
purchase, then, subject to Section 2.6(b), the Seller shall have the opportunity
to elect (such election to be made within thirty (30) days after the expiration
of such one hundred fifty (150) day period or the Purchaser’s earlier notice
that it will not proceed with the purchase) to purchase, or to have its
Affiliate or another designee (collectively, the “Alternative Purchaser”)
purchase, or to seek to cause the sale of, the Project in accordance with the
following procedures.  In the event that the Alternative Purchaser ultimately
does not elect to purchase the Buy/Sell Interest of the Purchaser, the
Alternative Purchaser shall not be obligated to purchase the Buy/Sell Interest
of the Purchaser.

 

(A)          The Alternative Purchaser and the Purchaser shall attempt to
mutually agree on a fair market value of the Project through negotiation for a
period of ten (10) days (the “Negotiation Deadline”) commencing upon the
Purchaser’s election or deemed election (including as a result of the failure to
find a Purchaser Venture) not to proceed with the purchase.  If the Alternative
Purchaser and the Purchaser do not agree upon the fair market value of the
Project prior to the expiration of the Negotiation Deadline, then either the
Alternative Purchaser or the Purchaser may

 

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deliver to the other a written notice of arbitration (the “Arbitration Notice”),
pursuant to which the fair market value (the “Mark to Market Price”) of the
Project shall be determined by “baseball style” arbitration in accordance with
the provisions in paragraphs (B) through (H) of this Section 9.2(e)(ii).

 

(B)          The Alternative Purchaser and the Purchaser shall each use
reasonable efforts to agree, within ten (10) days after the delivery of an
Arbitration Notice, upon the appointment of one arbitrator to agree on a Mark to
Market Price of the Project.  If an agreement on a single arbitrator is not
reached within such ten (10) day period, then the Alternative Purchaser and the
Purchaser shall each appoint one arbitrator within ten (10) days after the
expiration of such previous ten (10) day period and shall specify the name and
address of their respective arbitrators to the other party prior to the
expiration of such ten (10) day period; provided that, if one party fails to
specify the name and address of its selected arbitrator within such ten (10) day
period, then the other party shall give such failing party written notice, and
if within three (3) Business Days after such written notice the failing party
still has not specified an arbitrator, then the arbitrator selected by the other
party shall act as the sole arbitrator as if both parties had agreed to the
appointment of such arbitrator as provided above.

 

(C)          If two arbitrators have been selected, then such arbitrators shall
then appoint a third arbitrator within ten (10) days after their appointment. 
If the first two arbitrators are unable to agree upon a third arbitrator within
such ten (10) day period, then the third arbitrator shall be appointed as soon
as reasonably practicable thereafter by a court of competent jurisdiction
residing in the county in which the Project is situated, subject to the
qualification requirements set forth in paragraph (G) of this Section
9.2(e)(ii).  In the event of the failure, refusal or inability of any arbitrator
to act, a new arbitrator shall be appointed as a replacement, which appointment
shall be made in the same manner as set forth above for the appointment of such
resigning arbitrator.  Immediately after the selection of the final arbitrator,
the three arbitrators shall meet and, within fifteen (15) days after the
completion of the selection of the arbitrators shall, or, if there is only one
arbitrator, within fifteen (15) days after its selection, such arbitrator shall,
endeavor to determine the Mark to Market Price for the Project.

 

(D)          Within ten (10) days after the selection of the sole arbitrator or
all arbitrators, as the case may be, the Alternative Purchaser and the Purchaser
shall submit to the arbitrator(s) such party’s proposed Mark to Market Price for
the Project as well as all other economic terms relevant to the determination of
the Mark to Market Price for the Project, together with reasonable evidence
supporting such proposed Mark to Market Price for the Project.  The
arbitrator(s) shall select either the proposed Mark to

 

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Market Price submitted by the Alternative Purchaser with respect to the Project
or the proposed Mark to Market Price submitted by the Purchaser with respect to
the Project, whichever proposal the arbitrator(s) deem to be the most nearly
correct according to the definitions, terms and requirements set forth in this
Agreement and the information submitted to the arbitrator(s) by the parties,
with no compromise.  The power of the arbitrator(s) shall be exercised by the
concurrence of at least two arbitrators, except that if only one arbitrator is
selected, the decision of such arbitrator shall govern.  The proposed Mark to
Market Price selected by the arbitrator(s) with respect to the Project shall be
the “Mark to Market Price” for the Project.  The determination of the
arbitrator(s) shall be final and non-appealable, shall be binding on both the
Purchaser and the Alternative Purchaser, and may be enforced in any court of
competent jurisdiction.

 

(E)           The price (the “Buy/Sell Market Price”) to be paid for the
Buy/Sell Interest of the Purchaser shall be equal to the amount that the
Purchaser would receive for its interest in the Shares (assuming that the
Venture was liquidated and the Shares owned by the Venture were distributed
in-kind to the Members).  Within ten (10) days after the decision of the
arbitrator(s) determining the Mark to Market Price for the Project, the
Alternative Purchaser shall deliver written notice to the Purchaser stating
whether the Alternative Purchaser elects (x) to purchase the Buy/Sell Interest
of the Purchaser at the Buy/Sell Market Price or (y) seek to obtain a
third-party purchaser, subject to Section 2.6(b), for all the Venture’s Shares
in the Subsidiary REIT.  In the event that the Alternative Purchaser elects to
purchase the Buy/Sell Interest of the Purchaser, the Alternative Purchaser and
the Purchaser shall close on such purchase at the Buy/Sell Market Price payable
in cash within thirty (30) days after such election by the Alternative
Purchaser.  The provisions of Section 9.2(d) shall, to the extent not
inconsistent with Section 9.2(e)(ii), apply to such purchase.  In the event that
the Alternative Purchaser elects to seek to obtain a third-party purchaser, the
Alternative Purchaser shall have one hundred fifty (150) days from such election
to obtain such third-party purchaser to purchase, subject to Section 2.6(b), all
of the Venture’s Shares in the Subsidiary REIT for a price equal to what Members
would have received assuming the Project were sold at the Mark to Market Price
for the Project, the Subsidiary REIT and, if applicable, any subsidiary thereof
owning an interest in the Project were liquidated, all of their other assets
sold, their debts and liabilities discharged, and any net proceeds remaining
were distributed to the Members in proportion to their respective Percentage
Interests in the Venture.  The Alternative Purchaser shall provide prompt
written notice advising the Purchaser of the identity of such third-party
purchaser, if any.  In the event that a third party is to purchase the Shares
owned by the Venture, the third-party purchaser shall purchase such Shares for
cash at the closing of such purchase, which shall occur within thirty (30) days
after the Alternative Purchaser’s written

 

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notification of the third-party purchaser’s identity.  In such event, the Mark
to Market Price for the Project shall be reduced for any distributions made by
the Venture to its Members after the determination of the Mark to Market Price
for the Project and the closing of such sale to the extent such distributions
comprise sale, disposition or refinancing proceeds.  Such sale shall not relieve
either Member from any obligations or liabilities arising under or in connection
with this Agreement prior to such sale, including, without limitation, any
obligation to repay a Member Loan in accordance with Section 3.4(b).  If, at the
end of such one hundred fifty (150) day period, the Alternative Purchaser has
not obtained a third-party purchaser, the Alternative Purchaser shall advise the
Purchaser of such fact, and the Alternative Purchaser may, within such one
hundred fifty (150) day period, elect to purchase the Purchaser’s Buy/Sell
Interest at the Buy/Sell Market Price, in which event such purchase price shall
be payable in cash at a closing to be held thirty (30) days after the end of
such one hundred fifty (150) day period, and the provisions of Section 9.2(d)
shall, to the extent not inconsistent with Section 9.2(e)(ii), apply to such
purchase under this Section 9.2(e).  In the event that the Alternative Purchaser
does not elect to purchase the Buy/Sell Interest of the Purchaser and does not
find a third-party purchaser for the Project, either Member may, at its
election, re-initiate the Buy/Sell procedure in accordance with this Section 9.2
but otherwise shall not be obligated to purchase the other party’s Buy/Sell
Interest.

 

(F)           The arbitrator(s) shall have the authority to request additional
facts or evidence from each of the parties and, if such arbitrator(s) so
require, a hearing to present the same.  In the event of such a hearing, rules
of evidence applicable to state court judicial proceedings in civil district
courts in Dallas, Texas shall govern; provided that, evidence will be admitted
or excluded in the sole discretion of the arbitrator(s).  The
arbitrator(s) shall resolve the controversy and shall execute and acknowledge
his or their decision, together with a brief statement describing the rationale
for such decision, in writing and simultaneously deliver a copy thereof to each
of the parties personally or by registered or certified mail, return receipt
requested.  If the arbitrators fail to reach an agreement during such fifteen
(15) day period (as may be extended in accordance with the next sentence), then
they shall be discharged, and new arbitration proceedings shall commence, with
new arbitrators being appointed in the same manner as set forth above.  By
agreement in writing, the Alternative Purchaser and the Purchaser may extend the
time to reach agreement either before or after the expiration thereof up to a
maximum of thirty (30) additional days.  The period within which the
arbitrator(s) must act is not jurisdictional.

 

(G)          Each arbitrator shall (x) be an independent appraiser licensed
under the laws of the state in which the Project is situated, and (y) have been
actively and continuously engaged in appraising multifamily

 

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rental communities as a member of the Appraisal Institute in the county in which
the Project is situated, for not less than the previous five (5) years.  The
arbitrator(s) selected by the Alternative Purchaser and the other Member shall
be instructed that they are neutral arbitrators and shall not have any ex parte
communication with the appointing party and may not be appraisers that consulted
with the Alternative Purchaser or the other Member in negotiations regarding the
Mark to Market Price of the Project prior to the submission of the Mark to
Market Price proposals to arbitration.  In addition, the sole arbitrator or
third arbitrator, as the case may be, shall be an independent appraiser having
no relationship representing the Alternative Purchaser, the other Member or
their respective Affiliates during the immediately preceding three hundred
sixty-five (365) day period prior to selection.

 

(H)          Each party to the arbitration proceeding shall bear its own costs
and the costs of the arbitrator it appoints.  The cost of the third arbitrator
(or the single arbitrator if only one arbitrator is required) shall be split
equally between the Alternative Purchaser and the Purchaser.

 

9.3          Basis Election.  The Venture will file an election under
Section 754 of the Code, or has filed such an election that has not been
revoked, in accordance with procedures set forth in the applicable Treasury
regulations.  Each Member shall provide the Venture with all information
necessary to give effect to any election under Section 754 of the Code.

 

9.4          Void Transfer.  In no event shall any Interest, or any portion
thereof, be Transferred to a minor or an incompetent or in violation of any
state or Federal law or in violation of this Article 9.  Any such attempted
Transfer shall be void and ineffectual and shall not bind the Venture or any
Member.

 

ARTICLE 10

 

EXCESS INTEREST PROVISIONS

 

10.1        Definitions.  For purposes of this Article 10, the following terms
shall have the following meanings:

 

“Beneficial Ownership” shall mean ownership of Interests by a Person who would
be treated as an owner of such Interests either directly or constructively
through the application of Section 544 of the Code, as modified by
Section 856(h)(1)(B) of the Code.  The terms “Beneficial Owner,” “Beneficially
Owns,” “Beneficially Own” and “Beneficially Owned” shall have correlative
meanings.

 

“Charitable Beneficiary” shall mean an organization or organizations described
in Sections 170(b)(1)(A) and 170(c) of the Code and identified by the Venture as
the beneficiary or beneficiaries of the Excess Interest Trust.

 

“Excess Interest Trust” shall mean the trust created pursuant to Section 10.14.

 

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“Excess Interest Trustee” shall mean a Person, who shall be unaffiliated with
the Venture, any Purported Beneficial Transferee and any Purported Record
Transferee, identified by the Venture as the trustee of the Excess Interest
Trust.

 

“Excess Interests” shall have the meaning given to it in Section 10.3(a).

 

“Existing Holder” shall mean (a) each of MWP (and its limited partner) and BH
Redwood and (b) any Person to whom an Existing Holder Transfers, subject to the
limitations provided in this Agreement, Beneficial Ownership of Interests
causing such transferee to Beneficially Own Interests in excess of the Ownership
Limit.

 

“Existing Holder Limit” (a) for the Members shall mean, initially, forty-five
percent (45%) in the case of MWP (and its limited partner) and fifty-five
percent (55%) in the case of BH Redwood of the Interests, and, after any
adjustment pursuant to Section 10.9, shall mean such percentage of the
outstanding Interests, as the case may be, as so adjusted, and (b) for any
Existing Holder who becomes an Existing Holder by virtue of clause (b) of the
definition thereof, shall mean, initially, the percentage of the outstanding
Interests Beneficially Owned by such Existing Holder at the time that such
Existing Holder becomes an Existing Holder, but in no event shall such
percentage be greater than the Existing Holder Limit for the Existing Holder who
Transferred Beneficial Ownership of such Interests or, in the case of more than
one transferor, in no event shall such percentage be greater than the smallest
Existing Holder Limit of any transferring Existing Holder, and, after any
adjustment pursuant to Section 10.9, shall mean such percentage of the
outstanding Interests as so adjusted.

 

“Market Price” shall mean the market price of such class of Interests on the
relevant date as determined in good faith by the Manager.

 

“Ownership Limit” shall initially mean nine and eight-tenths percent (9.8%) in
number of the Interests or value of the outstanding Interests, and after any
adjustment as set forth in Section 10.10, shall mean such greater percentage of
the outstanding Interests as so adjusted.  The number and value of the
outstanding Interests of the Venture shall be determined by the Manager in good
faith, which determination shall be conclusive for all purposes hereof.

 

“Person” shall mean an individual, corporation, partnership, estate, trust
(including, without limitation, a trust qualified under Section 401(a) or
501(c)(17) of the Code), portion of a trust permanently set aside for or to be
used exclusively for the purposes described in Section 642(c) of the Code,
association, private foundation within the meaning of Section 509(a) of the
Code, joint stock company or other Entity.

 

“Prohibited Owner Event” has the meaning provided in Section 10.3(c).

 

“Purported Beneficial Transferee” shall mean, with respect to any purported
Transfer which results in Excess Interests, the beneficial holder of the
Interests, if such Transfer had been valid under Section 10.2.

 

“Purported Record Transferee” shall mean, with respect to any purported Transfer
which results in Excess Interests, the record holder of the Interests, if such
Transfer had been valid under Section 10.2.

 

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“Redemption Price” has the meaning provided in Section 10.18.

 

“Restriction Termination Date” shall mean the first day on which the Venture
determines that it is no longer in the best interests of the Subsidiary REIT to
attempt to, or continue to, qualify as a REIT.

 

10.2        Ownership Limitation.

 

(a)           Except as provided in Section 10.12, until the Restriction
Termination Date, no Person (other than an Existing Holder) shall Beneficially
Own Interests in excess of the Ownership Limit and no Existing Holder shall
Beneficially Own Interests in excess of the Existing Holder Limit for such
Existing Holder.

 

(b)           Except as provided in Section 10.12, until the Restriction
Termination Date, any Transfer that, if effective, would result in any Person
(other than an Existing Holder) Beneficially Owning Interests in excess of the
Ownership Limit shall be void ab initio as to the Transfer of the Interests
which would otherwise be Beneficially Owned by such Person in excess of the
Ownership Limit; and the intended transferee shall acquire no rights in such
Interests.

 

(c)           Except as provided in Sections 10.9 and 10.12, until the
Restriction Termination Date, any Transfer that, if effective, would result in
any Existing Holder Beneficially Owning Interests in excess of the applicable
Existing Holder Limit shall be void ab initio as to the Transfer of the
Interests which would be otherwise Beneficially Owned by such Existing Holder in
excess of the applicable Existing Holder Limit; and such Existing Holder shall
acquire no rights in such Interests.

 

(d)           Until the Restriction Termination Date, any Transfer that, if
effective, would result in the Venture (treating the Venture as if it otherwise
qualified as a REIT solely for this purpose) being “closely held” within the
meaning of Section 856(h) of the Code shall be void ab initio as to the Transfer
of the Interests which would cause the Venture (treating the Venture as if it
otherwise qualified as a REIT solely for this purpose) to be “closely held”
within the meaning of Section 856(h) of the Code; and the intended transferee
shall acquire no rights in such Interests.

 

(e)           Until the Restriction Termination Date, any Transfer that, if
effective, would result in the Venture (treating the Venture as if it otherwise
qualified as a REIT solely for this purpose) otherwise failing to qualify as a
REIT shall be void ab initio as to the Transfer of Interests that would result
in the Venture (treating the Venture as if it otherwise qualified as a REIT
solely for this purpose) failing to qualify as a REIT; and the intended
transferee shall acquire no rights in such Interests.

 

(f)            Until the Restriction Termination Date, any Transfer that would
result in the Venture (treating the Venture as if it otherwise qualified as a
REIT solely for this purpose) not maintaining its status as a
Domestically-Controlled REIT shall be void ab initio as to the Transfer of
Interests which would result in the Venture (treating the Venture as if it
otherwise qualified as a REIT solely for this purpose) failing to maintain its
status as a Domestically-Controlled REIT; and the intended transferee shall
acquire no rights in such Interests.

 

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10.3        Excess Interests.

 

(a)           If, notwithstanding the other provisions contained in this
Article 10, at any time, until the Restriction Termination Date, there is a
purported Transfer or other change in the capital structure of the Venture such
that any Person would Beneficially Own Interests in excess of the applicable
Ownership Limit or Existing Holder Limit (as applicable), then, except as
otherwise provided in Sections 10.9 and 10.12, the Interests Beneficially Owned
in excess of such Ownership Limit or Existing Holder Limit (rounded up to the
nearest whole Interest) shall constitute “Excess Interests” and shall be treated
as provided in this Article 10.  Such designation and treatment shall be
effective as of the close of business on the Business Day prior to the date of
the purported Transfer or change in capital structure.

 

(b)           If, notwithstanding the other provisions contained in this
Article 10, at any time, until the Restriction Termination Date, there is a
purported Transfer or other change in the capital structure of the Venture (as a
result of a direct or indirect Transfer or otherwise) which, if effective, would
cause the Venture (treating the Venture as if it otherwise qualified as a REIT
solely for this purpose) to (i) become “closely held” within the meaning of
Section 856(h) of the Code, (ii) fail to qualify as a Domestically-Controlled
REIT or (iii) otherwise fail to qualify as a REIT, then the Interests that are
the subject of such Transfer or other event which would cause the Venture to
fail such requirement shall constitute “Excess Interests” and shall be treated
as provided in this Article 10.  Such designation and treatment shall be
effective as of the close of business on the Business Day prior to the date of
the purported Transfer or change in capital structure.

 

(c)           If, at any time prior to the Restriction Termination Date,
notwithstanding the other provisions contained in this Article 10, there is an
event (a “Prohibited Owner Event”) which would result in the disqualification of
the Venture as a REIT under the Code (treating the Venture as if it otherwise
qualified as a REIT solely for this purpose) by virtue of actual, Beneficial or
constructive ownership of Interests, then Interests which result in such
disqualification shall be automatically exchanged for an equal number of Excess
Interests to the extent necessary to avoid such disqualification.  Such exchange
shall be effective as of the close of business on the Business Day prior to the
date of the Prohibited Owner Event.  In determining which Interests are
exchanged, Interests owned directly or indirectly by any Person who caused the
Prohibited Owner Event to occur shall be exchanged before any Interests not so
held are exchanged.  If similarly situated Persons exist, such exchange shall be
pro rata.  If the Venture is still so disqualified as a REIT (treating the
Venture as if it otherwise qualified as a REIT solely for this
purpose), Interests owned directly or indirectly by Persons who did not cause
the Prohibited Owner Event to occur shall be chosen by random lot and exchanged
for Excess Interests until the Venture is no longer so disqualified as a REIT
(treating the Venture as if it otherwise qualified as a REIT solely for this
purpose).

 

10.4        Prevention of Transfer.  If the Venture or its designee shall at any
time determine in good faith that a Transfer has taken place in violation of
Section 10.2 or that a Person intends to acquire or has attempted to acquire
beneficial ownership (determined without reference to any rules of attribution)
or Beneficial Ownership of any Interests in violation of Section 10.2, the
Venture or its designee shall take such action as it deems advisable to refuse
to give effect to or to prevent such Transfer, including, without limitation,
refusing to give effect to such Transfer

 

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on the books of the Venture or instituting proceedings to enjoin such Transfer;
provided, however, that any Transfers or attempted Transfers in violation of
Section 10.2(b), (c), (d), (e) or (f) shall automatically result in the
designation and treatment described in Section 10.3, irrespective of any action
(or non-action) by the Venture.

 

10.5        Notice.  Any Person who acquires or attempts to acquire Interests in
violation of Section 10.2, or any Person who is a transferee such that Excess
Interests result under Section 10.3, shall immediately give written notice or,
in the event of a proposed or attempted Transfer, shall give at least fifteen
(15) days prior written notice to the Venture of such event and shall provide to
the Venture such other information as the Venture may request in order to
determine the effect, if any, of such Transfer or attempted Transfer on the
Subsidiary REIT’s status as a REIT.

 

10.6        Information for the Venture.  Until the Restriction Termination
Date:

 

(a)           Every Beneficial Owner of more than one-half (½) of one percent
(1%) of the number or value of outstanding Interests shall, within thirty (30)
days after January 1 of each year, give written notice to the Venture stating
the name and address of such Beneficial Owner, the number of Interests
Beneficially Owned, and a description of how such Interests are held.  Each such
Beneficial Owner shall provide to the Venture such additional information as the
Venture may reasonably request in order to determine the effect, if any, of such
Beneficial Ownership on the Subsidiary REIT’s status as a REIT.

 

(b)           Each Person who is a Beneficial Owner of Interests and each Person
who is holding Interests for a Beneficial Owner shall provide to the Venture in
writing such information with respect to direct, indirect and constructive
ownership of Interests as the Venture deems reasonably necessary to comply with
the provisions of the Code applicable to a real estate investment trust, to
determine the Subsidiary REIT’s status as a REIT, to comply with the
requirements of any taxing authority or governmental agency or to determine any
such compliance.

 

10.7        Other Action by Venture.  Nothing contained in this Article 10 shall
limit the authority of the Venture to take such other action as it deems
necessary or advisable to protect the Venture, the Subsidiary REIT and the
interests of their respective members by preservation of the Subsidiary REIT’s
status as a REIT.

 

10.8        Ambiguities.  In the case of an ambiguity in the application of any
of the provisions of this Article 10, including, without limitation, any
definition contained in Section 10.1, the Venture shall have the power to
interpret and determine the application of the provisions of this Article 10
with respect to any situation based on the facts known to the Venture.

 

10.9        Modification of Existing Holder Limits.  The Existing Holder Limits
may be modified as follows:

 

(a)           Subject to the limitations provided in Section 10.11, the Venture
may grant options which result in Beneficial Ownership of Interests by an
Existing Holder pursuant to an option plan approved by the Venture.  Any such
grant shall increase the Existing Holder Limit

 

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for the affected Existing Holder to the maximum extent possible under
Section 10.11 to permit the Beneficial Ownership of the Interests issuable upon
the exercise of such option.

 

(b)           The Venture shall reduce the Existing Holder Limit for any
Existing Holder after any Transfer permitted in this Article 10 by such Existing
Holder by the percentage of the outstanding Interests so Transferred or after
the lapse (without exercise) of an option described in paragraph (a) of this
Section 10.9 by the percentage of the Interests that the option, if exercised,
would have represented, but in either case no Existing Holder Limit shall be
reduced to a percentage which is less than the Ownership Limit.

 

10.10      Increase or Decrease in Ownership Limit.  Subject to the limitations
provided in Section 10.11, the Venture may from time to time increase or
decrease the Ownership Limit; provided, however, that any decrease may only be
made prospectively as to subsequent holders (other than a decrease as a result
of a retroactive change in existing law that would require a decrease to retain
the Subsidiary REIT’s status as a REIT, in which case such decrease shall be
effective immediately).

 

10.11      Limitations on Changes in Existing Holder and Ownership Limits.

 

(a)           Neither the Ownership Limit nor any Existing Holder Limit may be
increased (nor may any additional Existing Holder Limit be created) if, after
giving effect to such increase (or creation), five (5) or fewer Beneficial
Owners of Interests (including, without limitation, all of the then Existing
Holders) could Beneficially Own, in the aggregate, more than forty-nine and
nine-tenths percent (49.9%) in number or value of the outstanding Interests.

 

(b)           Prior to the modification of any Existing Holder Limit or
Ownership Limit pursuant to Section 10.9 or 10.10, the Venture may require such
opinions of counsel, affidavits, undertakings or agreements as it may deem
necessary or advisable in order to determine or ensure the Subsidiary REIT’s
status as a REIT.

 

(c)           No Existing Holder Limit shall be reduced to a percentage which is
less than the Ownership Limit.

 

(d)           The Existing Holder Limit for MWP shall not be increased above
forty-nine and nine-tenths percent (49.9%) without the prior Consent of MWP.

 

10.12      Waivers by Venture.  The Venture, upon receipt of a ruling from the
IRS or an opinion of counsel or other evidence satisfactory to the Manager and
upon at least fifteen (15) days written notice from a transferee prior to the
proposed Transfer which, if consummated, would result in the intended transferee
owning Interests in excess of the Ownership Limit or the Existing Holder Limit,
as the case may be, and upon such other conditions as the Venture may direct,
may waive the Ownership Limit or the Existing Holder Limit, as the case may be,
with respect to such transferee.

 

10.13      Severability.  If any provision of this Article 10 or any application
of any such provision is determined to be void, invalid or unenforceable by any
court having jurisdiction over the issue, the validity and enforceability of the
remaining provisions shall be affected only to the extent necessary to comply
with the determination of such court.

 

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10.14      Trust for Excess Interests.  Upon any purported Transfer that results
in Excess Interests pursuant to Section 10.3, such Excess Interests shall be
deemed to have been transferred to the Excess Interest Trustee, as trustee of
the Excess Interest Trust for the exclusive benefit of the Charitable
Beneficiary.  Excess Interests so held in trust shall be issued and outstanding
Interests of the Venture.  The Purported Beneficial Transferee shall have no
rights in such Excess Interests except as provided in Section 10.17.

 

10.15      Distributions on Excess Interests.  Any distributions (whether as
dividends, distributions upon liquidation, dissolution or winding up or
otherwise) on Excess Interests shall be paid to the Excess Interest Trust for
the benefit of the Charitable Beneficiary.  Upon liquidation, dissolution or
winding up of the Venture, the Purported Record Transferee shall receive the
lesser of (a) the amount of any distribution made upon liquidation, dissolution
or winding up or (b) the price paid by the Purported Record Transferee for the
Interests, or if the Purported Record Transferee did not give value for the
Interests, the Market Price of the Interests on the day of the event causing the
Interests to be held in trust.  Any such dividend paid or distribution paid to
the Purported Record Transferee in excess of the amount provided in the
preceding sentence prior to the discovery by the Venture that the Interests with
respect to which the dividend or distribution was made had been exchanged for
Excess Interests shall be repaid by the Purported Record Transferee to the
Excess Interest Trust for the benefit of the Charitable Beneficiary.

 

10.16      Voting of Excess Interests.  The Excess Interest Trustee shall be
entitled to vote the Excess Interests for the benefit of the Charitable
Beneficiary on any matter.  Subject to Delaware law, any vote taken by a
Purported Record Transferee prior to the discovery by the Venture that the
Excess Interests were held in trust shall be rescinded ab initio.  The owner of
the Excess Interests shall be deemed to have given an irrevocable proxy to the
Excess Interest Trustee to vote the Excess Interests for the benefit of the
Charitable Beneficiary.

 

10.17      Non-Transferability of Excess Interests.  Excess Interests shall be
transferable only as provided in this Section 10.17. At the direction of the
Venture, the Excess Interest Trustee shall Transfer the Interests held in the
Excess Interest Trust to a Person whose ownership of the Interests will not
violate the Ownership Limit or Existing Holder Limit and for whom such Transfer
would not be wholly or partially void pursuant to Section 10.2.  Such Transfer
shall be made within sixty (60) days after the latest of (x) the date of the
Transfer which resulted in such Excess Interests and (y) the date the Venture
determines in good faith that a Transfer resulting in Excess Interests has
occurred, if the Venture does not receive a notice of such Transfer pursuant to
Section 10.5.  If such a Transfer is made, the interest of the Charitable
Beneficiary shall terminate and proceeds of the sale shall be payable to the
Purported Record Transferee and to the Charitable Beneficiary. The Purported
Record Transferee shall receive the lesser of the price paid by the Purported
Record Transferee for the Interests or, if the Purported Record Transferee did
not give value for the Interests, the Market Price of the Interests on the day
of the event causing the Interests to be held in trust, and the price received
by the Excess Interest Trust from the sale or other disposition of the
Interests.  Any proceeds in excess of the amount payable to the Purported Record
Transferee shall be paid to the Charitable Beneficiary.  Prior to any Transfer
of any Excess Interests by the Excess Interest Trustee, the Venture must have
waived in writing its purchase rights under Section 10.18.  It is expressly
understood that the Purported

 

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Record Transferee may enforce the provisions of this Section 10.17 against the
Charitable Beneficiary.

 

If any of the foregoing restrictions on Transfer of Excess Interests is
determined to be void, invalid or unenforceable by any court of competent
jurisdiction, then the Purported Record Transferee may be deemed, at the option
of the Venture, to have acted as an agent of the Venture in acquiring such
Excess Interests and to hold such Excess Interests on behalf of the Venture.

 

10.18      Call by the Venture on Excess Interests.  Excess Interests shall be
deemed to have been offered for sale to the Venture, or its designee, at a price
per Interest equal to the lesser of the price per Interest in the transaction
that created such Excess Interests (or, in the case of a devise, gift or other
transaction in which no value was given for such Excess Interests, the Market
Price at the time of such devise, gift or other transaction) and the Market
Price of the Interests to which such Excess Interests relates on the date the
Venture, or its designee, accepts such offer (the “Redemption Price”).  The
Venture shall have the right to accept such offer for a period of ninety (90)
days after the later of (x) the date of the Transfer which resulted in such
Excess Interests and (y) the date the Manager determines in good faith that a
Transfer resulting in Excess Interests has occurred, if the Venture does not
receive a notice of such Transfer pursuant to Section 10.5 but in no event later
than a permitted Transfer pursuant to and in compliance with the terms of
Section 10.17.  Unless the Manager determines that it is in the interests of the
Venture to make earlier payments of all of the amount determined as the
Redemption Price per Interest in accordance with the preceding sentence, the
Redemption Price may be payable at the option of the Venture at any time up to
but not later than one (1) year after the date the Venture accepts the offer to
purchase the Excess Interests.  In no event shall the Venture have an obligation
to pay interest to the Purported Record Transferee.

 

ARTICLE 11

 

DISSOLUTION OF VENTURE

 

11.1        Bankruptcy of Member.

 

(a)           The Bankruptcy, insolvency, termination, dissolution, liquidation
or other cessation or assignment for the benefit of creditors by any Member (the
occurrence of the foregoing with respect to any Person, a “Bankruptcy Event”),
or, except as otherwise permitted in accordance with Article 9, the withdrawal
of any Member, shall dissolve the Venture, unless within ninety (90) days after
notice is given to the other Member of the occurrence of such event, the
remaining Member elects to continue the business of the Venture.  The Member
suffering a Bankruptcy Event (or its legal representative) or withdrawing from
the Venture, except as otherwise permitted in accordance with Article 9, is
hereby deemed to Consent to the continuation of the business of the Venture.  In
the event of a Bankruptcy Event with respect to BH Redwood or a withdrawal of BH
Redwood as the Manager of the Venture, the Venture shall file an amendment to
the Venture’s Certificate removing BH Redwood as the manager of the Venture and
changing the name of the Venture to remove any references to “Behringer
Harvard”.

 

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(b)           For purposes of this Agreement, the “Bankruptcy” of a Member shall
be deemed to have occurred upon the happening of any of the following: (i) the
filing of an application by the Member for, or a consent to or acquiescence in,
the appointment of a trustee of its assets, (ii) the filing by the Member of a
voluntary petition for relief as a debtor under the United States Bankruptcy
Code or the filing of a pleading in any court of record admitting in writing its
inability to pay its debts as they come due, (iii) the making by the Member of a
general assignment for the benefit of creditors or (iv) the expiration of sixty
(60) days following the entry of an order, judgment or decree by any court of
competent jurisdiction adjudicating the Member a bankrupt or appointing a
trustee of its assets.

 

11.2        Other Events of Dissolution.  The happening of any one of the
following events shall cause a dissolution of the Venture:

(i)            The reduction to cash or cash equivalents of all Venture assets;

 

(ii)           The agreement in writing to dissolution by the Members; or

 

(iii)          The termination of the term of the Venture pursuant to
Section 2.4 of this Agreement.

 

Each Member waives the right to cause a dissolution of the Venture in any other
way.  Dissolution of the Venture shall be effective on the day on which the
event occurs which gives rise to the dissolution, but the Venture shall not
terminate until the assets of the Venture shall have been distributed as
provided herein and a certificate of cancellation of the Certificate has been
filed with the Secretary of State of the State of Delaware.

 

11.3        Distribution Upon Liquidation.

 

(a)           Upon dissolution of the Venture, unless the business of the
Venture is continued as provided above, the Manager (or, in the event that the
dissolution is caused by a Bankruptcy Event with respect to the Manager, such
Person, other than the Manager, as the Members shall designate as liquidator of
the Venture) shall act as “Liquidator”.  The Liquidator shall wind up the
affairs of the Venture, shall sell such of the assets of the Venture as it deems
necessary or appropriate in accordance with Section 2.6(b), and (i) any
resulting gain or loss from each sale plus (ii) the fair market value of such
property which has not been sold shall be determined and income, gain, loss or
deduction inherent in such property (which has not been reflected in the Capital
Accounts previously) shall be allocated among the Members as provided in
Section 4.1 and, after paying all debts and liabilities of the Venture,
including all costs of dissolution, shall distribute any remaining Venture
property along with any cash received from the sale of the property as follows:

 

(i)            The Liquidator may set up any reserve it deems reasonably
necessary for any contingent liabilities or obligations of the Venture arising
out of or in connection with the Venture.  Such reserve may be paid over by the
Liquidator to a bank or trust company to act as escrow agent.  Any such escrow
agent shall hold such reserves for payment of any of the aforementioned
contingencies, and, at the expiration of such period as the Liquidator shall
designate, distribute the balance thereafter remaining in the manner hereinafter
provided.

 

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(ii)           Cash and all other assets of the Venture not sold pursuant to
this Section 11.3 will be distributed among the Members in the same manner as
Net Cash Flow in accordance with Section 5.1.

 

(b)           The Members shall continue to share income, loss and other tax
items during the period of such Liquidation in the same proportions as before
dissolution.  Subject to Section 2.6(b) the Liquidator shall determine whether
to sell any Venture property, and, if so, whether at a public or private sale,
for what price, and on what terms. If the Liquidator determines to sell or
otherwise dispose of any Venture property or any interest therein, the
Liquidator shall not be required to do so promptly but shall do so in an orderly
and commercially reasonable manner so as to avoid a distress sale.

 

(c)           The obligation of any Member to the Venture or any other Member
that shall have accrued and be unsatisfied as of the date of dissolution or
termination of the Venture shall survive such dissolution or termination.

 

(d)           Each Member shall look solely to the assets of the Venture for all
distributions with respect to the Venture, its Capital Account and its share of
income, loss and other tax items, and shall have no recourse therefor (upon
dissolution or otherwise) against the Manager, any other Member, the Liquidator
or any of their Affiliates.

 

11.4        Procedural and Other Matters.

 

(a)           Upon dissolution of the Venture and until the filing of a
certificate of cancellation, the Liquidator may, in the name of, and for and on
behalf of, the Venture, prosecute and defend suits, whether civil, criminal or
administrative, gradually settle and close the business of the Venture, dispose
of and convey the property of the Venture, discharge or make reasonable
provision for the liabilities of the Venture and distribute to the Members any
remaining assets of the Venture, in accordance with this Article 11 and all
without affecting the liability of the Members or the Manager and without
imposing liability on the Liquidator.

 

(b)           The Certificate may be canceled upon the dissolution and the
completion of winding-up of the Venture by any Person authorized to cause such
cancellation in connection with such dissolution and winding-up.

 

ARTICLE 12

 

REPRESENTATIONS AND WARRANTIES

 

12.1        Representations and Warranties of the Members.  Each of the Members
hereby represents and warrants to the other Member as follows:

 

(a)           Such Member is a corporation or other Entity duly formed and
validly existing under the laws of the jurisdiction of its organization with all
requisite power and authority to own its assets and to carry on its business as
now being conducted.  Such Member has all requisite power and authority to enter
into this Agreement and to carry out the transactions contemplated hereby.

 

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(b)           The execution and delivery of this Agreement and the consummation
of the transactions contemplated hereby have been duly authorized by all
necessary action on the part of such Member.  This Agreement has been executed
and delivered by a duly authorized officer of such Member or the general partner
of such Member and constitutes the valid and binding obligation of such Member,
enforceable against such Member in accordance with the terms hereof, subject, as
to enforcement, to bankruptcy, insolvency, reorganization and other laws of
general applicability relating to or affecting creditor’s rights and to general
principles of equity.

 

(c)           The execution, delivery and performance by such Member of this
Agreement does not and will not (i) violate any decree or judgment of any court
of governmental authority that may be applicable to such Member; (ii) violate
any law (or regulation promulgated under any law); (iii) violate or conflict
with, or result in a breach of, or constitute a default (or an event with or
without notice or lapse of time or both would constitute a default) under any
contract or agreement to which such Member is a party; or (iv) violate or
conflict with any provision of the organizational documents of such Member.

 

(d)           No broker, finder, agent or other third party has been employed by
or on behalf of such Member (or any partner, member, shareholder or advisor
thereof) in connection with the negotiation or consummation of this Agreement or
any of the transactions contemplated hereby, and no such party has any claim for
any commission, finder’s fee or similar amount payable as a result of any
engagement of such party by or on behalf of such Member.

 

(e)           Such Member has acquired its Interest in the Venture for
investment purposes and has not acquired its Interest in the Venture for the
purpose of selling its Interest in the Venture, or causing the Venture to sell
its assets, to customers in the ordinary course of a trade or business.

 

(f)            (i) To the best of such Member’s knowledge, (A) all amounts
contributed and to be contributed, if any, to the Venture by such Member were
not and will not be directly or indirectly derived from activities that
contravene federal, state or international laws, regulations or executive or
other orders, including, without limitation, anti-money laundering laws,
regulations or executive or other orders; and (B) none of (1) such Member,
(2) any Affiliate of such Member, (3) any Person having a greater than ten
percent (10%) beneficial interest in such Member, or (4) any Person for whom
such Member is acting as agent or nominee in connection with its investment in
the Venture is a Prohibited Member; and (ii) such Member will provide (A) prompt
notice to the Manager if, at any time, any of the representations and warranties
in the foregoing clause (i) are untrue at any time, and (B) any information
reasonably requested by the Manager in connection with the same.  Such Member
acknowledges and agrees that the Venture or the Manager may be required by
applicable laws, regulations or executive or other orders, including the USA
PATRIOT Act and regulations and executive orders administered by the U.S.
Treasury Department’s Office of Foreign Assets Control, to take certain actions,
including, without limitation, requiring a withdrawal of such Member, and
“freezing the account” of such Member by, among other things, prohibiting
further investments by such Member, prohibiting distributions to be made to such
Member, and reporting any such actions and disclosing such Member’s identity to
the U.S. Treasury Department’s Office of Foreign Assets Control, and

 

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otherwise to comply with applicable laws, regulations and executive or other
orders related to the USA PATRIOT Act and other anti-money laundering laws.

 

ARTICLE 13

 

BOOKS AND RECORDS; REPORTS TO MEMBERS

 

13.1        Books.  The Manager shall maintain or cause to be maintained
separate, full and accurate books and records of the Venture, and each Member or
any authorized representative of any Member shall have the right to freely
inspect, examine and copy the same and to meet with employees of the Manager
responsible for preparing the same at reasonable times during business hours and
upon reasonable notice.  In addition, the Manager agrees to provide each Member,
its representatives and an independent accounting firm (if any) designated by
such Member reasonable access to all such books and records, during which such
Member or such accounting firm may conduct an audit of the Venture.  The cost of
any such audit shall be borne by the requesting Member unless an error is
discovered which has had the effect of reducing or increasing such Member’s
distributions from the Venture by an amount equal to or greater than five
percent (5%), in which case the Venture shall bear the cost of the audit.  The
Manager will keep the financial and other relevant records of the Venture, the
Subsidiary REIT and any subsidiary thereof, as determined in the reasonable
discretion of the Manager, for seven (7) years after the date of the dissolution
of the Venture.

 

13.2        Monthly and Quarterly Reports.  Subject to the following sentence,
the Manager shall cause to be prepared and distributed to the Members a monthly
report with respect to the Venture within twenty (20) days after the last day of
each month prepared in accordance with U.S. GAAP (except as set forth in the
footnotes thereto and except for year-end adjustments made after the dates of
such monthly reports), consistently applied, including (i) a balance sheet,
(ii) a profit and loss statement, (iii) a statement showing cash distributions
for such fiscal quarter and for the year to date, (iv) a statement showing
computation of related-party fees and Member distributions for such month and
for the year to date, (v) a report briefly describing any significant variances
from the applicable budget line item in the operating plan of the Venture for
the applicable Subsequent Operating Plan and (vi) the other reports identified
on Exhibit D, and within ten (10) days after the last day of each month, the
requested electronic downloads in the format described in Exhibit E to the
extent available.  During the months following the end of each fiscal quarter of
the Venture (January, April, July and October) the Manager shall cause to be
prepared and delivered, by the twentieth (20th) day of such month, the financial
statements set forth in clauses (i) through (iv) of this Section 13.2 for the
prior fiscal quarter.  In lieu of the financial statements set forth in clauses
(i) through (iv) of this Section 13.2, the Manager may cause to be prepared and
distributed to each of the Members combined financial statements of the Venture
and each other venture in which such Member (or its Affiliate) has invested with
such other Member (or its Affiliate), prepared in accordance with U.S. GAAP
(except as set forth in the footnotes thereto and except for year-end
adjustments made after the dates of such monthly reports), consistently applied,
including (A) a combined balance sheet, (B) a combined profit and loss
statement, (C) a combined statement showing cash distributions for such fiscal
quarter and year to date, and (D) a combined statement of related party fees and
distributions to each Member (or its Affiliate) for such fiscal quarter and for
the year to date.

 

48

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13.3        Annual Reports.  Subject to the following sentence, the Manager
shall engage Deloitte & Touche LLP or such other nationally recognized
independent registered public accounting firm selected by the Manager with the
Consent of the Advisory Committee to examine and audit the Venture’s books and
records.  Subject to the following sentence, within ninety (90) days after the
end of each fiscal year, the Manager shall cause to be distributed to the
Members financial statements with respect to the Venture, which shall include
the items set forth in clauses (i) through (v) of Section 13.2 with respect to
such fiscal year and which shall be prepared in accordance with U.S. GAAP
(except as set forth in the footnotes thereto), consistently applied, and shall
be audited by the Venture’s independent registered public accounting firm.  In
lieu of the financial statements set forth in clauses (i) through (iv) of
Section 13.2, the Manager may cause to be distributed to each Member with
respect to such fiscal year combined financial statements, prepared in
accordance with U.S. GAAP (except as set forth in the footnotes thereto),
consistently applied, and audited by the Venture’s independent registered public
accounting firm, which include the items set forth in clauses (A) through (D) of
Section 13.2.

 

13.4        Electronic Data Transmission.  The Manager shall comply with the
procedures established pursuant to Exhibit E to facilitate the automatic and
electronic transmission of data to MWP.  The Manager shall implement and use
Yardi or such other property management software chosen by the Manager,
providing electronic delivery of data on a monthly basis as set forth in Section
13.2 and making such reasonable accommodations consistent with the foregoing as
may be necessary to support data transmission requests of MWP.

 

13.5        Accountants; Tax Returns.

 

(a)           The Manager shall engage Ernst & Young LLP or such other
nationally recognized independent registered public accounting firm selected by
the Manager and approved by the Advisory Committee to review, or to sign as
preparer, all federal, state and local Tax Returns that the Venture is required
to file.  The Manager will cause to be furnished to each Member within one
hundred twenty (120) days after the end of each fiscal year a Schedule K-1 or
such other statement as is required by the IRS that sets forth such Member’s
share of the income, gain, loss, deduction and other relevant fiscal items of
the Venture for such fiscal year.  Each Member shall be entitled to receive,
upon request, copies of all federal, state and local income Tax Returns and
information returns, if any, that the Venture is required to file.

 

(b)           The Venture shall cause the Subsidiary REIT to prepare and timely
file all Tax Returns and amendments thereto required to be filed by the
Subsidiary REIT.  MWP shall have a reasonable opportunity to review prior to
filing all such Tax Returns and amendments thereto.

 

(c)           The Manager shall cause the Venture to be treated as a partnership
for federal income tax purposes that is not a “publicly traded partnership”
within the meaning of Section 7704 of the Code and will not elect to be
classified as a corporation for U.S. federal income tax purposes.  The Manager
shall cause the manager of the Subsidiary REIT to use commercially reasonable
efforts to prevent the Subsidiary REIT from engaging in any “prohibited
transaction” within the meaning of Section 857(b)(6) of the Code.

 

49

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13.6        Accounting and Fiscal Year.  The Venture books and records shall be
kept on the accrual basis.  The fiscal year of the Venture shall end on
December 31.

 

13.7        Property Management Reports.  The Manager shall provide promptly to
each Member copies of any report delivered by the Management Company (or another
Affiliate of the Manager) pursuant to the property management, leasing and
related services agreement contemplated by Section 6.4(b), along with electronic
downloads of such data to the extent available.

 

13.8        Additional Information.  The Manager shall cause the Venture or the
Management Company (or another Affiliate of the Manager) to provide promptly any
additional information that any Member may reasonably request so that it may
fully understand the financial performance of the Venture.

 

13.9        Cooperation with Project Valuation.  The Manager shall reasonably
assist and cooperate with any Member that elects, at its sole cost and expense,
to retain an independent third-party appraiser to perform a valuation (or an
update of a prior valuation) of the Project.  The Manager shall cause the
Venture and its representatives, agents and advisors to reasonably assist and
cooperate with the Member and its appraiser in connection with any information
requests, including answering queries and providing copies of any documents and
other Venture-related materials that are necessary for the appraiser to perform
its valuation.  Any Member that elects to obtain a valuation (or an update of a
prior valuation) of the Project at its own cost shall be under no obligation to
provide copies of such valuation or update to the Venture, the Manager or any
other Member, except that MWP may elect to provide such valuation to the Manager
upon the Manager’s reasonable request in connection with any valuation required
pursuant to Section 3.4.

 

ARTICLE 14

 

MISCELLANEOUS

 

14.1        Notices.  All notices and demands under this Agreement shall be in
writing and may be either delivered personally (which shall include deliveries
by courier), by telefax, telex or other wire transmission or by email (with
request for assurance of receipt in a manner appropriate with respect to
communications of that type, provided that a confirmation copy is concurrently
sent by an internationally recognized express courier for overnight delivery, if
possible) or mailed, postage prepaid, by registered air mail, return receipt
requested:

 

If to MWP, addressed as follows:

 

Heitman Capital Management LLC

191 North Wacker Drive

Suite 2500

Chicago, Illinois 60606

Attention:  Thomas McCarthy and Howard Edelman

Facsimile:  (312) 541-6789

Email:  thomas.mccarthy@heitman.com and howard.edelman@heitman.com

 

50

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with a copy to:

 

Mayer Brown LLP

71 S. Wacker Drive

Suite 3200

Chicago, Illinois 60606

Attention:  John W. Noell, Jr.

Facsimile:  (312) 701-7711

Email:  jnoell@mayerbrown.com

 

If to BH Redwood (whether as Manager or a Member), addressed as follows:

 

Behringer Harvard Redwood, LLC

15601 Dallas Parkway, Suite 600

Addison, Texas 75001

Attention: Daniel J. Rosenberg

Facsimile: (214) 655-1610

Email:  drosenberg@behringerharvard.com

 

Unless delivered personally or by telefax, telex or other wire transmission or
by email as above (which shall be deemed delivered on the next Business Day
following the date of such personal delivery or transmission or email, provided
that such day is a Business Day in the recipient’s jurisdiction, or otherwise on
the following Business Day in such jurisdiction), any notice shall be deemed to
have been given when received by its addressee.  Any party hereto may designate
a different address to which notices and demands shall thereafter be directed by
written notice given in the same manner and directed to the other parties at
their offices hereinabove set forth.

 

14.2        Execution in Counterparts.  This Agreement may be executed in
several counterparts, each of which shall be deemed an original but all of which
shall constitute one and the some instrument.  In addition, this Agreement may
contain more than one counterpart of the signature page, and this Agreement may
be executed by the affixing of the signature (or one of the several signatures)
of the Manager and each of the Members to any of such counterpart signature
pages; all of such counterpart signature pages shall be read as though one, and
they shall have the same force and effect as though all of the signers had
signed a single signature page.

 

14.3        Amendments.  This Agreement may be amended only with the unanimous
written Consent of the Manager and the Members.  Any waiver of any provision of
this Agreement shall require the Consent of the party from whom such waiver is
sought.

 

14.4        Additional Documents.  The Manager may cause to be filed with any
governmental agency any Applications for Authority and, where applicable,
certificates of cancellation or certificates or statements of dissolution as may
be required or permitted by the laws of the State of Delaware and any other
jurisdiction where the Venture is organized or doing business.

 

51

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14.5        Validity.  If any provision of this Agreement or the application of
such provision to any Person or circumstance shall be held invalid, the
remainder of this Agreement or the application of such provision to Persons or
circumstances other than those with respect to which it is held invalid, shall
not be affected thereby and shall continue to be binding and in force.

 

14.6        Governing Law.  This Agreement and the rights of the parties
hereunder shall be governed by and interpreted in accordance with the internal
laws of the State of Delaware. Except as otherwise provided herein, the rights
and obligations of the Manager and the Members and the administration and
termination of the Venture shall be governed by the Act.

 

14.7        Waiver.  The waiver by any party hereto of the breach of any term,
covenant, agreement or condition herein contained shall not be deemed a waiver
of any subsequent breach of the same or any other term, covenant, agreement or
condition herein, nor shall any custom, practice or course of dealings arising
among the parties hereto in the administration hereof be construed as a waiver
or diminution of the right of any party hereto to insist upon the strict
performance by any other party hereto of the terms, covenants, agreements and
conditions herein contained.

 

14.8        Consent and Approval.  Whenever under this Agreement the Consent of
any Member is required or permitted, such Consent may be evidenced by a written
consent signed by an authorized representative of such Member.

 

14.9        Waiver of Partition.  The Members hereby agree that the assets of
the Venture are not and will not be suitable for partition.  Accordingly, each
of the Members hereby irrevocably waives any and all rights (if any) that it may
have to maintain any action for partition of any of the assets of the Venture.

 

14.10      Binding Effect.  Except as herein otherwise provided, this Agreement
shall be binding upon and inure to the benefit of the parties, their legal
representatives, heirs, administrators, executors, successors and permitted
assigns.

 

14.11      Entire Agreement.  This Agreement constitutes the entire agreement
among the parties with respect to the formation and operation of the Venture; it
supersedes any prior agreements or understandings among them and it may not be
modified or amended in any manner other than pursuant to Section 14.3.

 

14.12      Captions.  Captions and headings contained in this Agreement are
inserted only as a matter of convenience and in no way define, limit or extend
the scope of this Agreement or any provision hereof.

 

14.13      No Strict Construction.  The language used in this Agreement is that
chosen by the parties hereto to express their mutual understanding and
agreement, and no rule of strict construction shall be applied against any
Person in interpreting this Agreement.

 

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

 

52

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14.15      Recourse to the Manager.  ANYTHING CONTAINED HEREIN TO THE CONTRARY
NOTWITHSTANDING, NO PERSONAL LIABILITY OR PERSONAL DEFICIENCY JUDGMENT SHALL BE
ASSERTED OR ENFORCED AGAINST ANY MEMBERS OF THE MANAGER, AGAINST THE DIRECTORS,
TRUSTEES, OFFICERS, EMPLOYEES, AGENTS, MEMBERS, SHAREHOLDERS OR PRINCIPALS OF
THE MANAGER OR ITS MEMBERS, OR AGAINST THE ASSETS OF ANY SUCH PARTIES, FOR
PAYMENT OF ANY AMOUNT HEREUNDER OR FOR OBSERVANCE OR PERFORMANCE OF ANY OF THE
OBLIGATIONS OF THE MANAGER OR THE VENTURE.

 

14.16      Recourse to the Members.  ANYTHING CONTAINED HEREIN TO THE CONTRARY
NOTWITHSTANDING, NO PERSONAL LIABILITY OR PERSONAL DEFICIENCY JUDGMENT SHALL BE
ASSERTED OR ENFORCED AGAINST ANY DIRECT OR INDIRECT MEMBERS, PARTNERS OR
SHAREHOLDERS OF EITHER MEMBER, AGAINST THE DIRECTORS, TRUSTEES, OFFICERS,
EMPLOYEES, AGENTS, MEMBERS, SHAREHOLDERS OR PRINCIPALS OF EITHER MEMBER OR ANY
SUCH DIRECT OR INDIRECT MEMBERS, PARTNERS OR SHAREHOLDERS OF A MEMBER, OR
AGAINST THE ASSETS OF ANY SUCH PARTIES, FOR PAYMENT OF ANY AMOUNT HEREUNDER OR
FOR OBSERVANCE OR PERFORMANCE OF ANY OF THE OBLIGATIONS OF SUCH MEMBER OR THE
VENTURE.

 

14.17      Remedies Not Exclusive.  Any remedies herein contained for breaches
of obligations hereunder shall not be deemed to be exclusive and shall not
impair the right of any party to exercise any other right or remedy, whether for
damages, injunction or otherwise.

 

14.18      Use of Behringer Harvard Trade Name.  If any third parties other than
BH Multifamily REIT or any of its Affiliates acquires the Interest of Manager,
or if the property management agreement between the Subsidiary REIT (or any
subsidiary thereof) and the Management Company (or any other Affiliate of
Behringer Holdings) is terminated for any reason, then the remaining Member
shall cause the Venture (and the Subsidiary REIT (and any subsidiary thereof))
to cease to use the name “Behringer Harvard” within thirty (30) days after such
event, unless BH Multifamily REIT or Behringer Holdings, as the case may be,
agrees in writing to allow the continued use of such name beyond such thirty
(30) day period.

 

14.19      Waiver of Jury Trial.  TO THE EXTENT PERMITTED BY APPLICABLE LAW, THE
PARTIES HEREBY IRREVOCABLY WAIVE ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL
PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS
CONTEMPLATED HEREBY.

 

14.20      Confidentiality.

 

(a)           The provisions of this Agreement and of any other agreement
relating to the Venture, the Subsidiary REIT or the Project to which the Venture
or any Member is a party and all other business, financial or other information
relating directly to the business or affairs of the Venture or the Subsidiary
REIT or the relative or absolute rights or interests of any of the Members
(collectively, the “Information”) that has not been publicly disclosed with the
Consent of all of the Members is confidential and proprietary information of the
Venture, the disclosure

 

53

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of which could cause irreparable harm to the Venture and the Members. 
Accordingly, each Member represents that it has not, and agrees that it will not
and that it will use its commercially reasonable efforts to prevent its
shareholders, directors, trustees, officers, agents, advisors (including any
appraiser selected by or on behalf of it, or by or on behalf of any appraiser
selected by it), current and prospective investors and their advisors, current
and prospective financial partners, prospective lenders, and Affiliates (“Member
Representatives”) from, disclosing to any Person (except to the extent, if any,
it is required by applicable law or as required under the Code to make
disclosure to a court or governmental authority or as required under the Code or
as required by applicable securities laws) any Information or confirm any
statement made by any other Person regarding Information unless all of the
Members consent thereto or until the Venture has publicly disclosed, with the
Consent of the Members, the Information and has notified each Member that it has
done so.  Each Member agrees to be responsible for any breach of this
Section 14.20 by its Member Representatives.  Notwithstanding any contrary
provision in this Section 14.20, the Information shall exclude, and the Members
and Member Representatives may disclose, any information or documentation that
(i) is readily ascertainable to the public, (ii) was known to a Member prior to
the execution of this Agreement, (iii) is deemed advisable by a Member to
disclose to its officers, directors, members, managers, employees, agents,
consultants, members of professional firms serving it or potential lenders,
investors, consultants and brokers and others who need to know such information
or review such documentation for the purpose of assisting a Member in connection
with the transactions contemplated by this Agreement so long as such Persons are
informed by such Member of the confidential nature of such information and are
directed by such Member to treat such information confidentially, (iv) is
required to be disclosed by applicable law, or (v) is deemed advisable by a
Member or its counsel to be disclosed in connection with financial reporting,
securities disclosures or other legal, tax or financial requirements or
guidelines applicable to such Member or any Affiliate thereof, including any
disclosures to the Securities and Exchange Commission.

 

(b)           The covenants and agreements contained in this Section 14.20 will
(i) terminate with respect to a Member twelve (12) months after such Member
ceases to be a Member or hold any interest in the Venture and (ii) survive the
termination of the Venture for twelve (12) months.

 

(c)           Notwithstanding any contrary provision in this Section 14.20, any
Member may, without breach of the covenants set forth in this Section 14.20 and
without notice to or Consent of the Manager, disclose any Information to any
potential transferee of all or part of an Interest or in connection with any
proposed or actual Transfer of any interest in the direct or indirect beneficial
owners of any of the Members permitted by this Agreement if such transferee
executes and delivers to the Venture a written confidentiality agreement in
which it agrees (i) to use such Information solely for the purpose of evaluating
the purchase of an Interest or beneficial interest in a Member and (ii) to be
bound by the terms and provisions of this Section 14.20 on the same basis and in
the same manner as would apply if it were a Member of the Venture who had signed
this Agreement.  The Members may also disclose such Information as is reasonably
necessary for it (or its Affiliates) to perform any of its (or any of its
Affiliates’) duties or obligations hereunder; provided that, in the case of an
Affiliate, such Affiliate has agreed to be bound by the terms and provisions of
this Section 14.20 on the same basis and in the same manner as would apply if it
were a Member of the Venture who had signed this Agreement. 

 

54

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The parties agree that, if this Section 14.20 is breached, the remedy at law may
be inadequate, and therefore, in addition to any other remedy to which a party
may be entitled, the non-breaching party shall be entitled to seek an injunction
or injunctions to prevent breaches of this Section 14.20 and/or to seek to
compel specific performance of this Section 14.20.

 

(d)           Notwithstanding any contrary provision in this Section 14.20, the
Members (and each employee, representative or other agent of the Members) may
disclose to any and all Persons, without limitation of any kind, the tax
treatment and tax structure of the transactions contemplated herein; provided
that, no Member (and no employee, representative or other agent thereof) shall
disclose any information that is not necessary to understanding the tax
treatment and tax structure of the transactions contemplated herein (including
the identity of the Members, any information that could reasonably allow a
Person to determine the identity of the Members, or any other information to the
extent that such disclosure could result in a violation of any federal or state
securities law).

 

(e)           Notwithstanding any contrary provision in this Section 14.20,
(i) each Member may disclose to its direct and indirect interest holders and
their trustees the terms and conditions of this Agreement (including providing
copies of this Agreement) and such other matters as may be required by its
subscription documents, side letters or other organizational documents or by
applicable law, and (ii) each Member may disclose Information to its attorneys,
accountants and other professional advisors.

 

14.21      Public Disclosure.  The Manager shall not make (or permit any of its
Affiliates or Behringer Holdings or any of its Affiliates to make), nor shall
the Members make (or permit any of their respective Affiliates to make) any
public disclosure relating to the subject matter of this Agreement (whether by
way of the issuance of a press release, public announcement or otherwise)
without the prior written Consent of the other parties, which Consent may not be
unreasonably conditioned, delayed or withheld so long as such public disclosure
is otherwise in compliance with this Agreement; provided that, without the
Consent of the other parties, any such Person may make (i) any public disclosure
it reasonably believes is required by applicable law, rule or regulation (in
which event such Person shall use reasonable efforts to advise the other parties
prior to the making of such disclosure); (ii) such disclosure as may be
reasonably necessary to enforce any provision of this Agreement; or (iii) any
disclosure to any Person permitted pursuant to Section 14.20.  Subject to the
preceding sentence, if (x) the Manager (or any of its Affiliates), or (y) any
Member (or any of its Affiliates or Behringer Holdings or any of its Affiliates)
desires to make public disclosure relating to the subject matter of this
Agreement, such Person shall provide to the other parties a draft of the
proposed disclosure for its review and comment and shall otherwise cooperate
with the other parties with respect to such proposed disclosure.  The other
parties may make any comments or suggested changes to such disclosure within
three (3) Business Days after its receipt of the proposed disclosure. The Person
seeking approval of such disclosure shall consider and use reasonable efforts to
address or otherwise take into account the comments or suggested changes on such
disclosure made by the other parties and shall submit a revised draft of the
proposed disclosure, if applicable, to the other parties, and the other parties
shall not unreasonably condition, delay or withhold their Consent to such
disclosure; provided that, if the other parties have not provided any comments
or suggested changes within such three (3) Business Day period, the other
parties will be deemed to have granted their Consent to the disclosure as
proposed to it.  No disclosure permitted by Section 

 

55

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14.20 shall be deemed a public disclosure relating to the subject matter of this
Agreement (whether by way of the issuance of a press release, public
announcement or otherwise) for purposes of this Section 14.21.

 

[INTENTIONALLY LEFT BLANK]

 

*  *  *  *  *

 

56

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IN WITNESS WHEREOF, this Agreement has been executed by each of the parties
hereto as of the date of this Agreement set forth above.

 

 

Manager:

BEHRINGER HARVARD REDWOOD, LLC, a Delaware limited liability company

 

 

 

 

 

 

 

By:

 

 

 

Name: Mark T. Alfieri

 

 

Title: Chief Operating Officer

 

 

 

Members:

BEHRINGER HARVARD REDWOOD, LLC, a Delaware limited liability company

 

 

 

 

 

 

 

By:

 

 

 

Name:

Mark T. Alfieri

 

 

Title:

Chief Operating Officer

 

57

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Members:

MILKY WAY PARTNERS, L.P., a Delaware limited partnership

 

 

 

 

By:

Milky Way Partners LLC, a Delaware limited liability company, its general
partner

 

 

 

 

By:

Heitman Capital Management LLC, an Iowa limited liability company, its sole
member

 

 

 

 

By:

 

 

 

Name:

Howard Edelman

 

 

Title:

Executive Vice President

 

58

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EXHIBIT A

 

MEMBERS; ADDRESSES; CAPITAL ACCOUNTS; PERCENTAGE INTERESTS

 

Members

 

Capital
Account as of
October 31, 2011

 

Percentage
Interests

 

Milky Way Partners, L.P.
c/o Heitman Capital Management LLC
191 North Wacker Drive, Suite 2500
Chicago, Illinois 60606

 

$

10,058,323.92

 

45

%

 

 

 

 

 

 

Behringer Harvard Redwood, LLC
15601 Dallas Parkway, Suite 600
Addison, Texas 75001

 

$

12,293,506.97

 

55

%

 

 

 

 

 

 

Total:

 

$

22,351,830.89

 

100

%

 

A-1

--------------------------------------------------------------------------------

 

EXHIBIT B

 

LEGAL DESCRIPTION OF THE PROJECT

 

B-1

--------------------------------------------------------------------------------

 

EXHIBIT C

 

OPERATING PLAN FOR FISCAL YEAR ENDED DECEMBER 31, 2011

 

C-1

--------------------------------------------------------------------------------

 

EXHIBIT D

 

MONTHLY REPORTS

 

1

 

Trial Balance

2

 

General Ledger

3

 

Management Fee Calculation and Support (YTD and for the month)

4

 

Income Register (if applicable)

5

 

Bank Statement, Reconciliation(s) and Support

6

 

Escalation Report (CAM/Tax Recovery) (if applicable)

7

 

Reforecast (Quarterly, as available)

8

 

Leasing Status Report

9

 

Aging A/R Support Schedule(s)

10

 

Pre-Paid Rent Support Schedule

11

 

A/P Support Schedule(s)

12

 

Security Deposit Summary

13

 

Detailed Rent Roll

14

 

Market Survey (Monthly or Quarterly)

15

 

Bad Debt Expense / Allowance Support Schedule (Quarterly)

16

 

Real Estate Tax Support Schedule (Prepaid/Accrued/Exp)

17

 

Insurance Support Schedule (Prepaid/Accrued/Exp)

18

 

Loan statements / schedules (if applicable)

19

 

Status of Capital Improvements Schedule

20

 

Tenant Work Order (if applicable)

21

 

Legal Action Report (if applicable)

22

 

Expense Distribution Report (if applicable)

23

 

Member Capital Account Balance

 

D-1

--------------------------------------------------------------------------------

 

EXHIBIT E

 

ELECTRONIC DATA TRANSMISSION

 

At the end of each calendar month the Manager shall cause the Venture to
transmit data to MWP in compliance with the following requirements.  The Manager
agrees to provide written notice to MWP in the event of any modifications to
this process.

 

1.              The Manager will transmit data to MWP using the SSH protocol
(used to provide a secure connection between two computers; once the connection
is established, data passed over this connection is done so in encrypted
format).

 

2.              The Manager will provide a public IP address to MWP that will
serve as the transmitting address.

 

a.              The address provided will be static.

b.              The Manager agrees to notify MWP at least thirty (30) days in
advance of any change to this address.

 

3.              An email address will be provided to MWP.

 

a.              This address will be used for electronic system generated
communications from the Manager to MWP.

b.              If the Manager decides to modify the email address, MWP will be
notified no later than ten (10) Business Days prior to the update.

 

4.              Data will be submitted in .csv format.

 

#

 

Field

 

Type

 

Length

 

Contents

 

 

 

 

 

 

 

 

 

1

 

Type

 

String

 

1

 

Enter J

 

 

 

 

 

 

 

 

 

2

 

Transaction Number

 

Integer

 

8

 

Control number of the transaction in the original (exporting) database

 

 

 

 

 

 

 

 

 

3

 

Person Code

 

String

 

8

 

Leave blank

 

 

 

 

 

 

 

 

 

4

 

Name

 

String

 

40

 

Leave blank

 

 

 

 

 

 

 

 

 

5

 

Date

 

String

 

10

 

Charge date, cash received date, invoice date, check date, journal entry date
(mm/dd/yyyy)

 

E-1

--------------------------------------------------------------------------------

 

6

 

Post month

 

String

 

7

 

This is the month that the transaction updates the account totals (mm/yyyy)

 

 

 

 

 

 

 

 

 

7

 

Reference

 

String

 

24

 

Enter PROPERTY MANAGER NAME import

 

 

 

 

 

 

 

 

 

8

 

Remark

 

String

 

120

 

Leave blank

 

 

 

 

 

 

 

 

 

9

 

Property Code

 

String

 

8

 

Heitman property code

 

 

 

 

 

 

 

 

 

10

 

Amount

 

Currency

 

15

 

USD amount

 

 

 

 

 

 

 

 

 

11

 

Account Code

 

String

 

9

 

Heitman GL account

 

 

 

 

 

 

 

 

 

12

 

Accrual

 

String

 

9

 

Leave blank

 

 

 

 

 

 

 

 

 

13

 

Offset

 

String

 

9

 

Leave blank

 

 

 

 

 

 

 

 

 

14

 

Booknum/Checknum

 

String

 

14

 

Enter 1000

 

 

 

 

 

 

 

 

 

15

 

Description

 

String

 

36

 

Trans code & description based on type:

Check: Trans code (usually the check#) & Payee

Invoice: Trans code & vendor

Charge: Trans code & tenant

Receipt: Trans code & tenant

Journal: Trans code & JE description

Other: Trans code & description

 

E-2

--------------------------------------------------------------------------------

 

APPENDIX 5.1

 

Proration Method

 

Initially capitalized terms not defined in this Appendix 5.1 shall have the
meaning given such terms in the Agreement.

 

1.                                      Proration.  At the Closing, the Adjusted
Working Capital (as such term is defined below) of each Venture as of 12:01 a.m.
on the day of the Closing shall be prorated and adjusted between Buyer and
Seller.  If the Adjusted Working Capital of such Venture is a negative number,
Buyer shall receive a credit at Closing equal to such Adjusted Working Capital
multiplied by the applicable Percentage Interest; provided that with respect to
Waterford Venture, Adjusted Working Capital shall be determined and allocated
separately with respect to Argenta, and multiplied by 40% of the Argenta Title
Holder’s accounting books.  If the Adjusted Working Capital of such Venture is
positive, Seller shall receive a credit at Closing equal to such Adjusted
Working Capital multiplied by the applicable Percentage Interest, or in the case
of Argenta, 40% of the Argenta Title Holder’s accounting books.

 

2.                                      Adjusted Working Capital.  “Adjusted
Working Capital” means for each Venture the aggregate Current Assets of the
applicable Venture and the Companies directly or indirectly owned by such
Venture, less the aggregate Current Liabilities of such entities, as follows:

 

2.1                               “Current Assets” shall include the following:

 

2.1.1                     Cash, cash equivalents, investments, restricted cash,
escrows, deposits, and reserves held by lenders, utility companies,
municipalities or others; plus

 

2.1.2                     Billed accounts receivable (but excluding any accounts
receivable more than 30 days past due); plus

 

2.1.3                     Prepaid operating expenses, excluding (a) capitalized
leasing costs, (b) capitalized legal costs, (c) capitalized leasing commissions,
and (d) other deferred assets; plus

 

2.1.4                     Estimated utility amounts owed by residents but not
yet billed; plus

 

2.1.5                     Estimated insurance claim receivables (but without
duplicating any item included under Section 2.1.2); plus

 

2.1.6                     With respect to NoHo Title Holder, if the 2011 CRA
Payment has not yet been received, a prorated portion of such receivable for the
period from and including the Closing Date through June 30, 2012.  As used
herein, the “2011 CRA Payment” means the annual Community Redevelopment
Authority affordable housing payment payable to NoHo Title Holder for the fiscal
year commencing July 1, 2011 and ending June 30, 2012.  Buyer and Seller
acknowledge and agree that the prorated portion of the 2011 CRA Payment
attributable to the period from July 1, 2011 through the day preceding the
Closing Date shall not be included in Current Assets.

 

2.2                               “Current Liabilities” shall include the
following:

 

2.2.1                     The principal balance of each Loan and all accrued but
unpaid interest;

 

2.2.2                     Accounts payable to tenants under Leases, including
tenant deposits of every kind and nature;

 

Appendix 5.1 - Page 1

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2.2.3                     Accounts payable to others (including, without
limitation, real estate Taxes and assessments and any sales taxes shown in the
Disclosure Schedule to the extent unpaid);

 

2.2.4                     Liens against the Property of such Venture which have
not been released or insured or bonded over (not including liens or security
interests securing the Loans);

 

2.2.5                     Amounts payable to BH or any of its Affiliates as
bills paid but not reimbursed;

 

2.2.6                     With respect to NoHo Title Holder, if the 2011 CRA
Payment has been received, a prorated portion of such payment for the period
from and including the Closing Date through June 30, 2012, but only to the
extent that such prorated portion has been distributed and is not included as a
Current Asset under Section 2.1.1; and

 

2.2.5                     Other accrued liabilities then due and payable.

 

3.                                      Accrual Method.  In calculating Current
Assets and Current Liabilities for the purpose of determining Adjusted Working
Capital, the accrual method shall be utilized, including accruals for rent and
other tenant income, real and personal property Taxes and assessments, insurance
expense or returned premiums, if any, business license Taxes, and security
deposits.

 

4.                                      Pre-Closing Estimate and Reconciliation
after Closing.  Not later than three Business Days prior to Closing, the parties
shall estimate prorations utilizing the 2010 calendar year financial statements
and the most recent monthly financial statements for the Companies, as of
October 31, 2011, and such additional information as the parties have been able
with their diligent efforts to obtain, in accordance with the principles set
forth in this Appendix 5.1.  The prorations shall be subject to correction and
adjustment after the Closing, including adjustment to reflect changes from
October 31, 2011 to 12:01 a.m. on the day of the Closing, which the parties
shall use Commercially Reasonable Efforts to complete no later than April 1,
2012, based upon actual data as of the date of Closing.

 

5.                                      Reimbursement for Certain Amounts
Related to the Cyan Venture.  In addition to the prorations and credits under
Paragraphs 1-3 above, at Closing Buyer shall reimburse Seller for certain
capital contributions and transaction costs made or paid by Seller to the Cyan
Venture in the amount of $15,752.00 and to the Argenta Venture in the amount of
$1,205,487.38.

 

Appendix 5.1 - Page 2

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APPENDIX 6.2-6.3

 

Disclosure Schedule

 

Pending or threatened litigation or other claims in connection with relevant
properties:

 

Property

 

Disclosure

 

1. 7166 at Belmar

 

None.

 

2. Acacia

 

None.

 

3. Argenta

 

A guard railing must be installed at this property. The estimated cost to
install the railing is approximately $100,000.00.

 

4. Cyan/PDX

 

None.

 

5. The Gallery at NoHo Commons

 

The Seller received a notice in August 2011 that the Department of Housing and
Urban Development (HUD) was initiating a compliance review of the property. HUD
began its inspection of apartment units on September 19, 2011. On September 20,
2011, the Seller was told by its counsel that the review was ongoing, and that
the Seller should not expect to hear anything back from HUD for 4 to 6 months
following the visit September 20, 2011. Based on its counsel’s advice, the
Seller does not at this time anticipate any negative consequences of this
compliance review.

 

6. The Lofts at Park Crest

 

None.

 

 

--------------------------------------------------------------------------------

 

MF REIT I (HEITMAN TRANSACTION)

Open Closed Property Claims

9/30/2011

 

REIT

 

Branch-
Case

 

Status

 

Loss
Date

 

Report
Date

 

Closed
Date

 

RVP

 

State

 

MF Name

 

Cause Code Description

 

Total
Paid

 

Total
Reserve

 

Total
Incurred

 

MF REIT I

 

22610006297

 

C

 

11/19/2010

 

11/30/2010

 

1/24/2011

 

Alfieri

 

OR

 

CYAN

 

 

 

$

2,269

 

$

0

 

$

2,269

 

MF REIT I

 

064930

 

O

 

7/13/2011

 

 

 

 

 

Jones

 

CO

 

7166 BELMAR

 

HAIL DAMAGE

 

$

0

 

$

1,507,843

 

$

1,507,843

 

MF REIT I

 

064880

 

O

 

8/23/2011

 

 

 

 

 

Thompson

 

VA

 

LOFTS AT PARK CREST

 

EARTHQUAKE

 

$

0

 

$

0

 

$

0

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

TOTAL

 

$

671,104

 

$

1,532,843

 

$

2,203,947

 

 

Appendix 6.3(j) - Page 2

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APPENDIX 9.8

 

Notice Addresses

 

Seller:

with a copy to:

BEHRINGER HARVARD
MULTIFAMILY OP I LP
c/o Harvard Property Trust, LLC
15601 Dallas Parkway, Suite 600
Addison, TX 75001
Attention: Ross Odland
Phone: (469) 341-2880
Fax: (214) 655-1610
e-mail:

Miller, Egan, Molter & Nelson LLP
4514 Cole Ave., Suite 1200
Dallas, TX 75205
Attention: Walter D. Miller
Phone: (214) 628-9502
Fax: (214) 628-9505
e-mail:
walt.miller@MillerEgan.com

rodland@behringerharvard.com

with a copy to:

 

BEHRINGER HARVARD
MULTIFAMILY OP I LP
c/o Harvard Property Trust, LLC
15601 Dallas Parkway, Suite 600
Addison, TX 75001
Attention: Daniel J. Rosenberg
Facsimile: (214) 655-1610
Email:
drosenberg@behringerharvard.com

 

 

Buyer:

with a copy to:

c/o Heitman Capital Management
191 N. Wacker Dr.
Suite 2500
Chicago, Illinois 60606
Attn: Howard J. Edelman
Phone: (312) 855-6547
Fax: (312) 541-6738
e-mail:
howard.edleman@heitman.com

 

John W. Noell, Jr, Esq.
Mayer Brown LLP
71 South Wacker Drive
Chicago, Illinois 60606
Phone: (312) 701-7182
Fax: (312) 706-8716
e-mail: jnoell@mayerbrown.com

 

 

BH:

with a copy to:

Same as Seller

Same as Seller

 

 

Escrow Agent:

Title Company:

 

 

Chicago Title Insurance Company
2001 Bryan Street, 17th Floor
Dallas, TX 75201
Attn: Ed Stout
Phone: (214) 965-1693
Fax: (214) 965-1623
e-mail: Ed.Stout@CTT.com

Chicago Title Insurance Company
2001 Bryan Street, 17th Floor
Dallas, TX 75201
Attn: Ed Stout
Phone: (214) 965-1693
Fax: (214) 965-1623
e-mail: Ed.Stout@CTT.com

 

Appendix 9.8

--------------------------------------------------------------------------------

 

All notices shall be either (a) sent by overnight delivery using a nationally
recognized overnight courier, in which case notice shall be deemed delivered one
Business Day after deposit with such courier, (b) sent by certified or regular
U.S. mail, postage prepaid, in which case notice shall be deemed delivered two
Business Days after deposit in such mails, (c) sent by facsimile, in which case
notice shall be deemed delivered upon the mechanical confirmation of delivery,
(d) sent by personal delivery, in which case notice shall be deemed delivered
upon receipt or refusal of delivery, or (e) sent by e-mail, with a copy sent by
one of the other methods provided above, in which case notice shall be deemed
delivered upon electronic confirmation of receipt of such e-mail.  A party’s
address may be changed by written notice to the other party; provided, however,
that no notice of a change of address shall be effective until actual receipt of
such notice.  Copies of notices are for informational purposes only, and a
failure to give or receive copies of any notice shall not be deemed a failure to
give notice.  Notices given by counsel to Buyer, Seller or BH shall be deemed
given by such party.

 

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