Exhibit 10.3

 

THE LIMITED LIABILITY COMPANY INTERESTS EVIDENCED BY THIS AGREEMENT HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 OR UNDER THE SECURITIES LAWS OF
ANY STATE OR FOREIGN JURISDICTION AND, TO THE EXTENT SUCH INTERESTS CONSTITUTE
SECURITIES UNDER SUCH ACT, MAY NOT BE SOLD OR TRANSFERRED WITHOUT COMPLIANCE
WITH APPLICABLE FEDERAL, STATE OR FOREIGN SECURITIES LAWS. IN ADDITION, TRANSFER
OR OTHER DISPOSITION OF THE LIMITED LIABILITY COMPANY INTERESTS IS RESTRICTED AS
PROVIDED IN THIS AGREEMENT.

 

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

 

LIMITED LIABILITY COMPANY AGREEMENT

 

OF

 

BEHRINGER HARVARD MARGATE, LLC

 

DATED SEPTEMBER 29, 2011

 

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

 

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

 

TABLE OF CONTENTS

 

 

 

Page

 

 

 

ARTICLE I

DEFINED TERMS

1

1.1

Defined Terms

1

1.2

Other References

14

ARTICLE II

ORGANIZATION

14

2.1

Formation

14

2.2

Name and Principal Place of Business

14

2.3

Term

14

2.4

Registered Agent and Registered Office

14

2.5

Purpose

14

ARTICLE III

MEMBERS

18

3.1

Admission of Members

18

3.2

Limitation on Liability

18

ARTICLE IV

CAPITAL

19

4.1

Initial Capital Contributions

19

4.2

Additional Capital Contributions

21

4.3

Capital Accounts

23

4.4

No Further Capital Contributions

24

4.5

Assumed Loan

24

ARTICLE V

INTERESTS IN THE COMPANY

25

5.1

Contribution and Promote Percentage Adjustments

25

5.2

Return of Capital

25

5.3

Ownership

25

5.4

Waiver of Partition; Nature of Interests in the Company

25

ARTICLE VI

ALLOCATIONS AND DISTRIBUTIONS

26

6.1

Allocations

26

6.2

Allocations and Compliance with Section 704(b)

26

6.3

Distributions from Operations

27

6.4

Distributions from Capital Transactions

28

6.5

Special Distributions

29

6.6

Distributions in Liquidation

30

6.7

Tax Matters

30

 

i

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TABLE OF CONTENTS

(continued)

 

 

 

Page

 

 

 

6.8

Tax Matters Partner

30

6.9

Section 704(c)

30

6.10

Withholding

31

ARTICLE VII

MANAGEMENT

31

7.1

Managing Member and Major Decisions

31

7.2

Duties of Managing Member

38

7.3

Management of the Property; Fees

42

7.4

Duties and Conflicts

43

7.5

Company Expenses

44

7.6

Venture Coordinator

45

7.7

Enforcement of Affiliate Agreements

45

ARTICLE VIII

BOOKS, RECORDS, REPORTS AND PROPERTY PLAN

45

8.1

Books and Records

45

8.2

Accounting and Fiscal Year

46

8.3

Reports

46

8.4

The Company Accountant

48

8.5

Reserves

48

8.6

The Budget and Operating Plan

48

8.7

Accounts

49

8.8

REIT Matters

49

ARTICLE IX

TRANSFER OF INTERESTS

49

9.1

No Transfer

49

9.2

Permitted Transfers

49

9.3

Transferees

51

9.4

Section 754 Election

51

9.5

Other Transfers

51

ARTICLE X

EXCULPATION AND INDEMNIFICATION

53

10.1

Exculpation

53

10.2

Indemnification

54

ARTICLE XI

DISSOLUTION AND TERMINATION

55

11.1

Dissolution

55

11.2

Termination

56

 

ii

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TABLE OF CONTENTS

(continued)

 

 

 

Page

 

 

 

11.3

Liquidating Member

57

11.4

Claims of the Members

57

ARTICLE XII

DEFAULT BY MEMBER

57

12.1

Events of Default

57

12.2

Effect of Event of Default

58

ARTICLE XIII

MISCELLANEOUS

58

13.1

Representations and Warranties of the Members

58

13.2

Further Assurances

60

13.3

Notices

60

13.4

Governing Law

61

13.5

Captions

61

13.6

Pronouns and Interpretation

61

13.7

Successors and Assigns

61

13.8

Extension Not a Waiver

61

13.9

Creditors Not Benefited

61

13.10

Recalculation of Interest

61

13.11

Severability

62

13.12

Entire Agreement

62

13.13

Publicity and Press Releases

62

13.14

Confidentiality

63

13.15

Venue

64

13.16

Waiver of Jury Trial

64

13.17

Cooperation

64

13.18

Counterparts

65

13.19

Attorneys’ Fees

65

13.20

Effectiveness

65

ARTICLE XIV

PATRIOT ACT

65

14.1

Compliance with International Trade Control Laws and OFAC Regulations

65

14.2

Member’s Funds

65

14.3

Member Compliance with Patriot Act

66

14.4

Cooperation with Other Members

66

 

iii

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TABLE OF CONTENTS

(continued)

 

 

 

Page

 

 

 

14.5

Actions Taken Pursuant to Anti-Money Laundering Laws

66

ARTICLE XV

BUY-SELL PROCEDURE

66

15.1

General Provisions

66

15.2

Termination of Other Agreements

68

15.3

Power of Attorney

68

ARTICLE XVI

RIGHT OF BH TO TRIGGER SALE OF THE PROPERTY; ROFO

69

16.1

ROFO on the Sale of the Property

69

16.2

Termination of Other Agreements

71

16.3

Power of Attorney

71

 

 

 

Appendix A  FORM OF PROPERTY AMENDMENT

 

Appendix B  INITIAL APPROVED BUDGET AND BUSINESS PLAN

 

 

iv

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LIMITED LIABILITY COMPANY AGREEMENT OF
BEHRINGER HARVARD MARGATE, LLC

 

THIS LIMITED LIABILITY COMPANY AGREEMENT of BEHRINGER HARVARD MARGATE, LLC dated
September    , 2011 (as amended, restated, replaced, supplemented or otherwise
modified from time to time, this “Agreement”), is made by, between and among
BEHRINGER HARVARD MARGATE HOLDING, LLC, a Delaware limited liability company
(together with its successors and permitted assigns, “BH”), and MARGATE PEAK,
LLC, a Colorado limited liability company (together with its successors and
permitted assigns, “MP”).

 

WHEREAS, the Company (as hereinafter defined) was formed pursuant to a
Certificate of Formation signed by Mary Ann Brzoska as authorized person (the
“Certificate of Formation”), filed with the Secretary of State of Delaware on
June 14, 2011.

 

NOW, THEREFORE, the parties hereto hereby agree as follows:

 

ARTICLE I
DEFINED TERMS

 

1.1           Defined Terms. As used in this Agreement, the following terms have
the meanings set forth below:

 

“Acceptable Transfer Terms” has the meaning set forth in Section 9.5(a).

 

“Additional Capital Contribution” has the meaning set forth in Section 4.2(a).

 

“Adjusted Capital Account Deficit” means, with respect to any Member for any
taxable year or other period, the deficit balance, if any, in such Member’s
Capital Account as of the end of such year or other period, after giving effect
to the following adjustments:

 

(a)           credit to such Capital Account any amounts that such Member is
obligated to restore or is deemed obligated to restore as described in the
penultimate sentence of Treasury Regulation Section 1.704-2(g)(1) and in
Treasury Regulation Section 1.704-2(i)(5); and

 

(b)           debit to such Capital Account the items described in Treasury
Regulation Sections 1.704-1(b)(2)(ii)(d)(4), (5) and (6).

 

“Adjustment Date” means the close of business on the last day of any fiscal year
of the Company and any other date as of which Profits and Losses are allocable
under this Agreement.

 

“Affiliate” or “Affiliated” means, with respect to any Person, (a) any other
Person directly or indirectly Controlling, Controlled by, or under common
Control with such Person and (b) for the avoidance of doubt, all MP Persons are
Affiliates of MP.

 

“Agreement” has the meaning set forth in the introductory paragraph hereof.

 

“Anti-Money Laundering Laws” shall mean those Laws, regulations and sanctions,
state and federal, criminal and civil, that (a) limit the use of and/or seek the
forfeiture of proceeds from illegal transactions; (b) limit commercial
transactions with designated countries or

 

1

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individuals believed to be terrorists, narcotics dealers or otherwise engaged in
activities contrary to the interests of the United States; (c) require
identification and documentation of the parties with whom a Financial
Institution conducts business; or (d) are designed to disrupt the flow of funds
to terrorist organizations. Such Laws, regulations and sanctions shall be deemed
to include the Patriot Act, the Bank Secrecy Act, the Trading with the Enemy
Act, 50 U.S.C. App. Section 1 et seq., the International Emergency Economic
Powers Act, 50 U.S.C. Section 1701 et seq., and the sanction regulations
promulgated pursuant thereto by the OFAC, as well as Laws relating to prevention
and detection of money laundering in 18 U.S.C. Sections 1956 and 1957.

 

“Approve,” “Approved,” or “Approval” means a proposed decision, action, report,
budget, election or any other matter that has been proposed by a Member or the
Managing Member and which has received the written approval or consent of the
other Member or Managing Member, as applicable.

 

“Asset Management Fee” has the meaning set forth in Section 7.3(b).

 

“Assumed Loans” has the meaning set forth in Section 4.5(a) and, for the
avoidance of doubt, collectively means (a) that certain loan in the original
principal amount of $12,555,000 as evidenced by a Multifamily Note-CME dated
December 15, 2009 executed by Advenir@Margate, LLC and payable to CBRE Capital
Markets, Inc., as assigned to Lender, and (b) that certain loan in the original
principal amount of $2,995,000 as evidenced by a Multifamily Note-CME dated
April 19, 2011 executed by Advenir@Margate, LLC and payable to CBRE Capital
Markets, Inc., as assigned to Lender, in each case as such loans have been
amended and assumed by the Company..

 

“Bankruptcy” the “Bankruptcy” of a Person shall be deemed to have occurred upon
the happening of any of the following: (i) the filing of an application by such
Person for, or a consent to, the appointment of a trustee of its assets,
(ii) the filing by such Person 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 such Person of a general assignment for the benefit of
creditors, (iv) the filing against a Person of an involuntary petition or
application for relief in bankruptcy which is not dismissed within ninety (90)
days, or (v) the expiration of sixty (60) days following the entry of an order,
judgment or decree by any court of competent jurisdiction adjudicating such
Person a bankrupt or appointing a receiver, liquidator, assignee, trustee,
conservator, custodian, sequester or other similar official, over such Person’s
assets (or consenting thereto by any member of the MP Member Group). This
definition of Bankruptcy shall apply for purposes of this Agreement instead of
the definition of bankruptcy in Section 18-101 and Section 18-304 of the
Delaware Act.

 

“Bankruptcy Event” means a Bankruptcy of MP, an MP Person, or the Property
Manager, application for relief or answer seeking or acquiescing in any
reorganization, liquidation, dissolution or similar relief by MP, an MP Person
or Property Manager under any present or future federal, state or other statute,
law, code or regulation relating to bankruptcy, insolvency or other relief for
debtors, or seeking or consenting to or requesting the appointment of a
receiver, liquidator, assignee, trustee, conservator, custodian, sequester or
other similar official, over any of MP, an MP Person or Property Manager or the
making by MP, an MP Person or Property Manager of any general assignment for the
benefit of creditors, or the admission in writing by

 

2

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MP, an MP Person or Property Manager of its inability to pay its debts as they
become due, and the taking of any action by MP, an MP Person or Property Manager
in preparation of furtherance of any of the foregoing.

 

“BH” has the meaning set forth in the introductory paragraph hereof.

 

“BH Reserved Tax Elections” has the meaning set forth in Section 7.1(a)(xxxi).

 

“Book Basis” means, with respect to any asset of the Company, the adjusted basis
of such asset for federal income tax purposes; provided, however, that (a) if
any asset is contributed to the Company, the initial Book Basis of such asset
shall equal its fair market value on the date of contribution as determined by
the Managing Member, and (b) the Book Basis of all Company assets shall be
adjusted to equal their respective gross fair market values, as determined by
the Managing Member, as of the following times: (i) the acquisition of an
additional Interest by any new or existing Member in exchange for more than a
de minimis Capital Contribution; (ii) the distribution by the Company to a
Member of more than a de minimis amount of property as consideration for all or
any part of an Interest; (iii) in connection with the liquidation of the Company
within the meaning of Treasury Regulation Section 1.704-1(b)(2)(ii)(g); and
(iv) in any other circumstances permitted by the Code or Treasury Regulations;
provided, however, that adjustments pursuant to clauses (i), (ii) and (iv) above
shall be made only if the Managing Member with the Approval of BH determines
that such adjustments are necessary or appropriate to reflect the relative
economic interests of the Members in the Company. The Book Basis of all assets
of the Company shall be adjusted by the depreciation, amortization, or other
cost recovery deduction allowable under federal income tax law, except that, in
accordance with Section 6.9 below, if the Book Basis of an asset differs from
its adjusted basis for federal income tax purposes, the Book Basis shall be
adjusted by depreciation or amortization as provided in Treasury Regulation
Section 1.704-1(b)(2)(iv)(g), and any other adjustment to the basis of such
assets other than depreciation or amortization.

 

“Budget” means the initial and each subsequent annual budget prepared by or on
behalf of the Managing Member covering the Company’s anticipated operating costs
and capital expenditures (including any construction costs), as Approved by BH
and in effect from time to time pursuant to the terms hereof, as the same may be
amended, supplemented or otherwise modified from time to time in accordance with
the terms hereof.

 

“Business Day” means any day other than Saturday, Sunday, any day that is a
legal holiday in the State of Texas or Florida, or any other day on which
banking institutions in Texas or Florida are authorized to close.

 

“Buy-Sell Offer” shall have the meaning set forth in Section 15.1.

 

“Buy-Sell Offer Price” shall have the meaning set forth in Section 15.1(a).

 

“Capital Account” means the separate account maintained for each Member under
Section 4.3.

 

“Capital Contribution” means, with respect to any Member, the aggregate amount
of all Initial Capital Contributions and any Additional Capital Contributions
made (or deemed made)

 

3

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

 

by such Member to the Company pursuant to this Agreement, in each case as the
same may be adjusted from time to time in accordance with the provisions hereof.

 

“Capital Transaction” means any insurance award, condemnation, sale of all or
any portion of the Company Property or interest therein, sale of easements,
rights of way or similar interest in the Company Property, any financing or
refinancing of indebtedness secured by part or all of the Company Property, and
any similar items, and any other transaction undertaken as part of or which
results in the dissolution of the Company.

 

“Certificate of Formation” has the meaning set forth in the recital paragraphs
to this Agreement.

 

“Change in Control” means the occurrence of any of the following:

 

(i)            The failure of at least two (2) MP Persons to be a manager of MP
and to actively and consistently participate in the management of MP;

 

(ii)           The failure at least two (2) MP Persons, together, to both own a
Controlling Interest in MP and actively Control MP;

 

(iii)          MP is dissolved, terminated, liquidated, merged, consolidated or
reorganized into or with another Person;

 

(iv)          More than one MP Person sells all or substantially all of its real
estate related assets or investments to any Person other than as part of a
permitted Transfer;

 

(v)           The failure of at least one MP Person to devote a substantial
amount of his business time and attention to the affairs of MP, which failure is
not remedied within a fifteen-day cure period after written demand from BH;

 

(vi)          The occurrence of a Bankruptcy Event involving MP; or

 

(vii)         The occurrence of a Bankruptcy Event involving an MP Person;
provided, however, that a Bankruptcy Event involving an MP Person shall be
deemed not to constitute a Change in Control if such Bankruptcy Event
(A) involves one (and only one) MP Person, (B) does not otherwise result in a
Change in Control as defined in the foregoing clauses (i)-(vi) of this
definition, and (C) does not adversely affect the management or operation of MP
or the Property.

 

“Closing Date” means the date of the “Closing” under the Purchase Agreement.

 

“Code” means the Internal Revenue Code of 1986, as amended.

 

“Company” means the limited liability company continued and governed by the
terms of this Agreement.

 

“Company Accountant” has the meaning set forth in Section 8.4.

 

4

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

 

“Company Minimum Gain” means “partnership minimum gain” as defined in Treasury
Regulation Section 1.704-2(d).

 

“Company Property” means, either individually or collectively as the context
requires or otherwise indicates, any asset or other property (real, personal or
mixed) owned by the Company from time to time including, initially, the
Property.

 

“Confidential Information” has the meaning set forth in Section 13.14(a).

 

“Contributing Party” has the meaning set forth in Section 4.2(b).

 

“Contribution Percentage” means, with regard to each Member at any time, the
proportion which such Member’s aggregate Capital Contributions to the Company
bears to the total of all Capital Contributions to the Company, as adjusted
pursuant to Section 4.2(d), which shall initially be in the percentages set
forth below opposite its name below:

 

Member

 

Contribution Percentage

 

 

 

 

 

BH

 

92.5

%

 

 

 

 

MP

 

7.5

%

 

“Control” means, when used with respect to any Person, the power to direct the
management and policies of such Person, directly or indirectly, whether through
the ownership of voting securities or other beneficial interests, by contract or
otherwise, and the terms “Controlling,” “Controlled by” and “under common
Control with” shall have the meanings correlative therewith.

 

“Controlling Interest” means, when used with respect to an entity (i) ownership,
directly or indirectly, of fifty one percent (51%) or more of the ownership
interests in such entity, or (ii) the possession, directly or indirectly, of the
power to control, direct or cause the direction of the management, policies,
business and affairs of such entity, including without limitation, decisions
regarding the sale and financing of the assets of such entity.

 

“Deadlock Event” means the failure of MP and BH to reach agreement with regard
to a Major Decision which continues for a period of at least thirty (30)
calendar days following notice from either MP or BH to the other party.

 

“Delaware Act” means the Delaware Limited Liability Company Act, as amended from
time to time.

 

“Deposit” has the meaning set forth in Section 4.1(a).

 

“Election” shall have the meaning set forth in Section 15.1(c).

 

“Event of Default” has the meaning set forth in Section 12.1.

 

“Exchanging Member” has the meaning set forth in Section 13.16.

 

“Failed Contribution” has the meaning set forth in Section 4.1(e).

 

5

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“Financial Institution” has the meaning set forth in Section 13.1(a)(vii).

 

“First Tier Promote Percentage” means fifteen percent (15%), subject to
adjustment as provided in Section 4.2(d).

 

“For Cause Event” has the meaning set forth in Section 7.2(e).

 

“GAAP” means United States generally accepted accounting principles consistently
applied.

 

“Indemnitees” has the meaning set forth in Section 10.2.

 

“Initial Approved Budget and Operating Plan” has the meaning set forth in
Section 8.6.

 

“Initial Capital Contribution” means, with respect to any Member, any capital
contribution made by such Member pursuant to Section 4.1 hereof.

 

“Interest” means, with respect to any Member at any time, the limited liability
company interest of such Member in the Company at such time, including the right
of such Member to any and all of the benefits to which such Member may be
entitled as provided in this Agreement, together with the obligations of such
Member to comply with all of the terms and provisions of this Agreement.

 

“IRR” means the annual percentage rate, compounded monthly, which, when utilized
to calculate the present value of the distributions of Net Cash Flow and Net
Capital Proceeds to a Member, causes such present value of distributions to
equal the present value of total Capital Contributions (other than Priority
Capital Contributions) made to the Company by such Member. A specified IRR shall
be deemed to have been attained as of any date that the sum of the present
values of all amounts distributed to a Member pursuant to Sections 6.3 and 6.4
(other than Sections 6.3(a) and 6.4(a)) for all periods, as of the time of
determination, when discounted to their present values as of the Closing Date by
using a discount rate equal to such specified IRR and assuming that such amounts
were distributed or deemed distributed as of the end of the applicable month to
which such amounts relate, equals the sum of the separate present values of all
amounts taken into account in determining such Member’s total Capital
Contributions (other than Priority Capital Contributions) when discounted to
their present values as of the Closing Date, using a discount rate equal to the
specified IRR, and assuming that all such amounts were contributed or deemed
contributed as of the time such amounts are received by the Company or otherwise
taken into account pursuant to the definition of Capital Contributions. For
purposes of the foregoing, present value shall be determined using monthly
compounding periods.

 

“Law” or “Laws” means any and all statutes (including provisions of state
constitutions to the extent directly enforceable against non-governmental
Persons), ordinances, rules, regulations, and judicial decisions, rulings,
orders and decrees of general application of the United States or any state, or
of any authority, agency, court or political subdivision of the United States or
any state.

 

“Leasing Guidelines” means the leasing guidelines for the Property then in
effect, as Approved by BH.

 

6

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

 

“Lender” means Federal Home Loan Mortgage Corporation, a/k/a Freddie Mac.

 

“Liquidating Member” means the Member designated as such by the Managing Member
but subject to the Approval of BH; provided, however, that any Member that is
then in default hereunder or that causes the dissolution of the Company under
Section 11.1(a)(iii) shall not serve as the Liquidating Member (in which event
the Liquidating Member shall be the non-defaulting Member), and provided further
that in the event of a dissolution under Section 11.1(a)(iii), the Liquidating
Member shall be the bankruptcy trustee or debtor-in-possession of the bankruptcy
estate of such last Member.

 

“Loan Documents” means the documents from time to time evidencing, securing or
otherwise entered into by the Company in connection with the assumption of
Assumed Loans; provided, however, that in the event that the Assumed Loans are
refinanced, Loan Documents means the documents from time to time evidencing,
securing or otherwise entered into by the Company in connection with a loan or
financing extended by a third party lender.

 

“Loan Fees” has the meaning set forth in Section 4.1(a).

 

“Loss” means, for each taxable year or other period, an amount equal to the
Company’s items of taxable deduction and loss for such year or other period,
determined in accordance with Section 703(a) of the Code (including all items of
loss or deduction required to be stated separately under Section 703(a)(1) of
the Code), with the following adjustments:

 

(a)           any expenditures of the Company described in
Section 705(a)(2)(B) of the Code or treated as Section 705(a)(2)(B) expenditures
under Treasury Regulation Section 1.704-1(b)(2)(iv)(i), and not otherwise taken
into account in computing Loss, will be considered an item of Loss;

 

(b)           loss resulting from any disposition of Company Property with
respect to which gain or loss is recognized for federal income tax purposes will
be computed by reference to the Book Basis of such property, notwithstanding
that the adjusted tax basis of such property may differ from its Book Basis;

 

(c)           with respect to an asset in which the Book Basis of such asset
differs from its adjusted basis for federal income tax purposes, in lieu of
depreciation, amortization and other cost recovery deductions taken into account
in computing taxable income or loss, there will be taken into account
depreciation for the taxable year or other period as determined in accordance
with Treasury Regulation Section 1.704-1(b)(2)(iv)(g);

 

(d)           any items of deduction and loss specially allocated pursuant to
Section 6.2 shall not be considered in determining Loss; and

 

(e)           any decrease to the Book Basis of Company assets pursuant to
Treasury Regulation Section 1.704-1(b)(2)(iv)(e) or (f) shall constitute an item
of Loss.

 

“Major Decision” has the meaning set forth in Section 7.1(a).

 

7

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

 

“Majority-In-Interest” means, as to the class or group of Members referred to,
required or to be determined, such of those Members of that class or group
having more than 50% of the Contribution Percentages of the Members in such
class or group.

 

“Management Agreements” means the collective reference to the Oversight
Agreement and the Property Amendment thereto in the form attached hereto as
Appendix A, and the Property Management Contract.

 

“Managing Member” means MP, and its successors and permitted assigns.

 

“Material Damage or Loss” is a violation, breach or default which causes losses
or damages in excess of $200,000.00.

 

“Member” means one or more of BH, MP or any other Person who is admitted as a
member of the Company in accordance with this Agreement and applicable Law.

 

“Member Minimum Gain” means the Company’s “partner nonrecourse debt minimum
gain” as defined in Treasury Regulation Section 1.704-2(i)(2).

 

“Member Non-recourse Deductions” means “partner nonrecourse deductions” as
defined in Treasury Regulations §§ 1.704-2(i)(1) and 1.704-2(i)(2).

 

“Missed Contribution” has the meaning set forth in Section 4.2(d).

 

“MP” has the meaning set forth in the introductory paragraph hereof.

 

“MP Member Group” means the collective reference to MP and all MP Persons.

 

“MP Person” means Luke C. Simpson, Donald A. Simpson and Nick A. Simpson.

 

“Necessary Expense” has the meaning set forth in Section 7.2(b)(iii).

 

“Net Cash Flow” means, for any period, the excess of (i) Operating Revenues for
such period, over (ii) Operating Expenses for such period.

 

“Net Capital Proceeds” means, for any period of determination, the excess of
(a) the sum of the net gross proceeds received by the Company during such period
from Capital Transactions, including all receipts or net proceeds of the Company
from or related to (i) any sale or other disposition of all or any portion of
the Company Property, (ii) any condemnation of or casualty loss with regard to
all or any portion of the Company Property (including any and all insurance
awards with regard thereto), (iii) any financing, refinancing, monetization or
securitization of the Company Property or any interest therein, and (iv) any and
all other Capital Transactions, including, without limitation, (A) distributions
and other amounts received directly or indirectly from any entity in which the
Company owns an interest which is attributable to a Capital Transaction, and
(B) net proceeds or receipts received by the Company incident to the dissolution
and liquidation of the Company, but specifically excluding revenues from
operations; over (b) the sum of the total cash expenditures of the Company
during such period attributable to Capital Transactions, including without
limitation, (i) fees and commissions paid with regard thereto, (ii) all costs
and expenses incurred as a result of the applicable Capital Transaction,
(iii) all costs, expenses and payments to discharge part or all of any loan or
other financing

 

8

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required to be made as a result of the applicable Capital Transaction, (iv) all
costs and expenses relating to any sale, disposition, financing, refinancing,
monetization or securitization of the Property, and (v) all other closing costs
attributable or related to the applicable Capital Transaction.

 

“Net Loss” means, for any period, the excess of (i) Losses for such period, over
(ii) Profits, if applicable, for such period determined without regard to any
Profits or Losses allocated pursuant to Section 6.2.

 

“Net Profit” means, for any period, the excess of (i) Profits for such period,
over (ii) Losses, if applicable, for such period determined without regard to
any Profits or Losses allocated pursuant to Section 6.2.

 

“Non-Contributing Party” has the meaning set forth in Section 4.2(b).

 

“Non-recourse Deductions” has the meaning set forth in Treasury Regulation
Section 1.704-2(b)(1).

 

“Non-Withdrawing Member” has the meaning set forth in Section 4.1(e).

 

“Notices” has the meaning set forth in Section 13.3.

 

“OFAC” means the United States Office of Foreign Assets Control, Department of
the Treasury, any successor governmental or similar authority thereto.

 

“Offeree” shall have the meaning set forth in Section 15.1.

 

“Offeree Value” shall have the meaning set forth in Section 15.1(b).

 

“Offeror” shall have the meaning set forth in Section 15.1.

 

“Offeror Value” shall have the meaning set forth in Section 15.1(b).

 

“Operating Expenses” means, for any period, the sum of the total gross cash
expenditures of the Company attributable to operations during such period,
including without limitation (a) all cash operating expenses (including, without
limitation, all fees, commissions, expenses and allowances paid to any third
party or paid or reimbursed to any Member or any of its Affiliates pursuant to
any agreement or contract (including the Management Agreements) or otherwise, as
permitted hereunder), (b) all debt service payments including debt service on
loans made to the Company by the Members or any of their Affiliates, (c) all
expenditures which are treated as capital expenditures (as distinguished from
expense deductions), (d) all real estate taxes, personal property taxes and
sales taxes, (e) all deposits to the Company’s reserve accounts, and (f) all
costs and expenditures related to any acquisition of the Property; provided,
however, that Operating Expenses shall not include (i) any payment or
expenditure to the extent (A) the sources of funds used for such payment or
expenditure are not included in Operating Revenues or (B) such payment or
expenditure is paid out of any reserve account of the Company, (ii) any
expenditure properly attributable to any Capital Transaction, including the
dissolution and liquidation of the Company, or (iii) non-cash expenses such as
depreciation or amortization.

 

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“Operating Plan” means the initial and each subsequent annual strategic and
comprehensive operating plan prepared by or on behalf of the Managing Member
covering the Company’s anticipated operations and including (to the extent
applicable) any capital expenditures for the benefit of the Property, as
Approved by BH and in effect from time to time pursuant to the terms hereof, as
the same may be amended, supplemented or otherwise modified from time to time in
accordance with the terms hereof.

 

“Operating Revenues” means, for any period, the sum of the total gross cash
revenues received by the Company during such period from operations, including
all receipts of the Company from (a) proceeds from Capital Contributions ,
(b) rent (including additional rent and percentage rent) paid to the Company
(including for parking facilities), (c) concessions, (d) expense reimbursements,
(e) proceeds from rent or business interruption insurance, if any, (g) funds
made available to the extent such funds are withdrawn from the Company’s reserve
accounts and deposited into the Company’s operating accounts, and (h) all other
operating revenues and receipts realized by the Company, including, without
limitation, distributions and other payments and amounts received directly or
indirectly from any entity in which the Company owns an interest (and
attributable to operations) and interest accrued on any funds held by the
Company; provided, however, that Operating Revenues shall not include any
revenues or receipts realized by the Company incident to or from a Capital
Transaction, including the dissolution and liquidation of the Company.

 

“Oversight Agreement” means that certain Amended and Restated Property
Management and Leasing Agreement dated August 13, 2008 between Oversight
Manager, Behringer Harvard Opportunity REIT II, Inc., a Maryland corporation and
Behringer Harvard Opportunity OP II LP, a Texas limited partnership to the
extent applicable to the Property as a result of the Property Amendment to be
entered into on or before Closing by the Company, Behringer Harvard Opportunity
REIT II, Inc., Behringer Harvard Opportunity OP II LP and Oversight Manager in
the Form attached hereto Appendix A-2.

 

“Oversight Manager” means Behringer Harvard Opportunity II Management Services,
LLC, a Texas limited liability company.

 

“Partially Adjusted Capital Account” means, with respect to any Member for any
taxable year or other period of the Company, the Capital Account balance of such
Member at the beginning of such year or period, adjusted for all contributions
and distributions made or deemed made to or by such Member during such year or
period and all special allocations to such Member pursuant to Section 6.2 with
respect to such year or period, but before giving effect to any allocations of
Net Profit or Net Loss to such Member pursuant to Section 6.1 with respect to
such year or period.

 

“Permitted Exceptions” has the meaning set forth in Section 16.1(a).

 

“Permitted Transferee” has the meaning set forth in Section 9.2(c).

 

“Person” means any individual, partnership, corporation, limited liability
company, limited liability partnership, trust or other entity.

 

“Priority Capital Contribution” has the meaning set forth in Section 4.2(b).

 

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“Profit” means, for each taxable year or other period, an amount equal to the
Company’s items of taxable income and gain for such year or other period,
determined in accordance with Section 703(a) of the Code (including all items of
income and gain required to be stated separately under Section 703(a)(1) of the
Code), with the following adjustments:

 

(i)            any income of the Company that is exempt from federal income tax
and not otherwise taken into account in computing Profit will be added to
Profit;

 

(ii)           any gain resulting from any disposition of Company Property with
respect to which gain or loss is recognized for federal income tax purposes will
be computed by reference to the Book Basis of such property, notwithstanding
that the adjusted tax basis of such property may differ from its Book Basis;

 

(iii)          any items specially allocated pursuant to Section 6.2 shall not
be considered in determining Profit; and

 

(iv)          any increase to the Book Basis of Company assets pursuant to
Treasury Regulation Section 1.704-1(b)(2)(iv)(e) or (f) shall constitute an item
of Profit.

 

“Prohibited Person” means a Person with whom a U.S. Person is prohibited from
transacting business of the type contemplated by this Agreement or any other
Transaction Document, whether such prohibition arises under United States law,
regulation, executive orders and lists published by OFAC, including those
executive orders and lists published by OFAC with respect to Persons that have
been designated by executive order or by the sanction regulations of OFAC as
Persons with whom U.S. Persons may not transact business or must limit their
interactions to types approved by OFAC or otherwise.

 

“Promote-Loss For Cause Event” shall mean a For Cause Event described in
Section 7.2(e)(iii) pursuant to which MP is removed as Managing Member and which
results from the failure of the Managing Member to obtain the consent or
Approval of BH with respect to a Major Decision described in
Sections 7.1(a)(i)-(iv), 7.1(a)(ix), 7.1(a)(xi)-(xiii), 7.1(a)(xvii)-(xviii),
7.1(a)(xxi)-(xxii), 7.1(a)(xxiii)-(xxvii), 7.1(a)(xxix), 7.1(a)(xxxi)-(xxxiv),
7.1(a)(xxxv)-(xxxvii), 7.1(a)(xxxix)-(xli), 7.1(a)(xliii-xliv), and
7.1(a)(xlvii).

 

“Promote Percentages” means the collective reference to the First Tier Promote
Percentage, the Second Tier Promote Percentage and the Third Tier Promote
Percentage.

 

“Property” shall have the meaning set forth in the Purchase Agreement.

 

“Property Management Contract” means that certain Property Management Contract
entered into on or before the Closing Date between the Company and Property
Manager in the form Approved by BH.

 

“Property Manager” means Grand Peaks Property Management, LLC, or a replacement
Property Manager Approved by BH or appointed by BH in accordance with the terms
of this Agreement.

 

“Purchase Agreement” means that certain Real Estate Purchase and Sale Agreement,
effective June 6, 2011 as amended, between Seller, as seller, and Purchaser, to
which the

 

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Company shall take an assignment of Purchaser’s interest to purchase the
Property as provided herein, as the same may be amended, restated, replaced,
supplemented or otherwise modified from time to time.

 

“Purchaser” means Grand Peaks Properties, Inc., a Colorado corporation, and its
assigns.

 

“Pursuit Costs” has the meaning set forth in Section 4.1(b)(i).

 

“Reasonable Period” means, with respect to any defaulting Member, a period of
thirty (30) days after such defaulting Member receives written notice of its
default from a non-defaulting Member; provided, however, that if such breach can
be cured but cannot reasonably be cured within such thirty-day period, the
period shall continue, if such defaulting Member commences to cure the breach
within such thirty-day period, for so long as such defaulting Member diligently
prosecutes the cure to completion up to a maximum of the lesser of (i) an
additional sixty (60) days following the expiration of such thirty-day period,
or (ii) the period of time allowed for such performance under any applicable
Loan Documents.

 

“Recipient Party” has the meaning set forth in Section 9.5(a).

 

“ROFO Election” has the meaning set forth in Section 16.1(b).

 

“ROFO Escrow Agent” has the meaning set forth in Section 16.1(c).

 

“ROFO Escrow Deposit” has the meaning set forth in Section 16.1(c).

 

“ROFO Notice” has the meaning set forth in Section 16.1(a).

 

“ROFO Response Period” has the meaning set forth in Section 16.1(b).

 

“Second Tier Promote Percentage” means thirty-five percent (35%), subject to
adjustment as provided in Section 4.2(d).

 

“Seller” means Advenir@Margate, LLC, a Florida limited liability company.

 

“Single Purpose Entity” has the meaning set forth in Section 2.5(c)(ii).

 

“Shortfall” has the meaning set forth in Section 4.2(a).

 

“SPE Covenants” has the meaning set forth in Section 2.5(c).

 

“Substitute Contribution” has the meaning set forth in Section 4.2(b).

 

“Target Account” means, with respect to any Member for any taxable year of the
Company or other period, the excess of (a) an amount equal to the hypothetical
distribution such Member would receive if all assets of the Company, including
cash, were sold for cash equal to their Book Basis (taking into account any
adjustments to Book Basis for such year or other period but not adjustments
caused by any such hypothetical distributions pursuant to this clause (a)), all
liabilities allocable to such assets were then due and were satisfied according
to their terms (limited, with respect to each non-recourse liability, to the
Book Basis of the assets securing such liability) and all remaining proceeds
from such sale were distributed pursuant to Section 6.4, over (b) the amount of
Company Minimum Gain and Member Minimum Gain that

 

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would be charged back to such Member as determined pursuant to Treasury
Regulation Section 1.704-2 immediately prior to such sale.

 

“Target Interest” has the meaning set forth in Section 9.5(a).

 

“Third Tier Promote Percentage” means fifty percent (50%), subject to adjustment
as provided in Section 4.2(d).

 

“Transaction Documents” means, collectively, this Agreement, the Purchase
Agreement, the Management Agreements, and any Loan Documents, together with any
other agreement, document or instrument executed and/or delivered pursuant to
the provisions of any of the foregoing or in connection with the transactions
contemplated thereby, as the same may be amended, restated, replaced,
supplemented or otherwise modified from time to time in accordance with the
terms hereof and thereof.

 

“Transfer” has the meaning set forth in Section 9.1.

 

“Transfer Election” has the meaning set forth in Section 9.5(a).

 

“Transfer Escrow Agent” has the meaning set forth in Section 9.5(b).

 

“Transfer Escrow Deposit” has the meaning set forth in Section 9.5(b).

 

“Transfer ROFO Notice” has the meaning set forth in Section 9.5(a).

 

“Treasury Regulation” or “Regulation” means, with respect to any referenced
provision, such provision of the regulations of the United States Department of
the Treasury or any successor provision.

 

“Triggering Party” has the meaning set forth in Section 9.5(a).

 

“U.S. Person” means a United States citizen, a permanent resident of the United
States, an entity organized under the Laws of the United States or any of its
territories or having its principal place of business within the United States
or any of its territories, or any other Person that is a “United States person”
as described in, or for the purposes of, Executive Order 13224 of September 23,
2001 or any amendment, replacement or other modification thereto.

 

“Unreturned Capital Contributions” means, as to each Member and any time, the
excess, if any, of (i) such Member’s aggregate Capital Contributions made or
deemed made prior to such time, over (ii) all distributions made to such Member
pursuant to Section 6.4(b).

 

“Venture Coordinator” shall have the meaning set forth in Section 7.6.

 

“Winding Up Profit and Loss” means items of Net Profit or Net Loss in the
Winding Up Year.

 

“Winding Up Year” means the taxable year of the Company in which all of its
assets are disposed of, or the Company liquidates.

 

“Withdrawing Member” shall have the meaning set forth in Section 4.1(e).

 

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1.2           Other References. As used in this Agreement, unless otherwise
specified, all references to Sections, Articles or Appendices are to Sections,
Articles or Appendices of this Agreement.

 

ARTICLE II
ORGANIZATION

 

2.1           Formation. The Members hereby agree to form the Company as a
limited liability company under the Delaware Act, upon the terms and subject to
the conditions set forth in this Agreement. The Managing Member is hereby
authorized to file and record any amendments to the Certificate of Formation and
such other documents as may be reasonably required or appropriate under the
Delaware Act or the Laws of any other jurisdiction in which the Company may
conduct business or own property.

 

2.2           Name and Principal Place of Business.

 

(a)           The name of the Company is set forth on the cover page to this
Agreement. Subject to the Approval of BH and the terms of the Loan Documents,
the Managing Member may change the name of the Company or adopt such trade or
fictitious names for use by the Company as the Managing Member may from time to
time determine. All business of the Company shall be conducted under the name of
the Company name or approved trade or fictitious name, and title to all Company
Property shall be held in the name of the Company.

 

(b)           The principal place of business and office of the Company shall be
located at 4582 South Ulster Street Parkway, Suite 1200, Denver, Colorado 80237.

 

2.3           Term. The term of the Company commenced on the date of the filing
of the Certificate of Formation pursuant to the Delaware Act, and shall continue
until terminated pursuant to the provisions of this Agreement. The existence of
the Company as a separate legal entity shall continue until cancellation of the
Certificate of Formation as provided in the Delaware Act.

 

2.4           Registered Agent and Registered Office. The name of the Company’s
registered agent for service of process shall be Corporation Service Company,
and the address of the Company’s registered agent and the address of the
Company’s registered office in the State of Delaware shall be 2711 Centerville
Road, Suite 400, in the City of Wilmington, Delaware 19808. Subject to the
Approval of BH, such agent and such office may be changed from time to time by
the Managing Member with written notice to all Members.

 

2.5           Purpose.

 

(a)           The purpose of the Company shall be to:

 

(i)            perform its obligations and exercise its rights and remedies
under the Transaction Documents and any other agreements or contracts
contemplated by the foregoing, and to carry out the terms of and engage in the
transactions contemplated by the Transaction Documents;

 

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(ii)           directly or indirectly acquire, own, manage, service, operate,
improve, finance, refinance, develop, redevelop, construct, renovate, market,
lease, sell and otherwise deal with and dispose of the Company Property; and

 

(iii)          conduct all other activities reasonably necessary or desirable to
accomplish the foregoing purposes.

 

(b)           The Company shall not engage in other businesses and activities
except with the prior approval of all Members.

 

(c)           Notwithstanding the foregoing, until such time as the Assumed
Loans are paid in full, the following Special Purpose Entity Covenants (“SPE
Covenants”) shall be controlling over any conflicting provisions in this
Agreement. Capitalized terms not defined herein shall have the meanings ascribed
to them in the Loan Documents and all references to Lender in this Section
2.5(c) shall have the definition given in the Loan Documents.

 

(i)            Until the Assumed Loans are paid in full, the Company shall
remain a Single Purpose Entity.

 

(ii)           For purposes of these SPE Covenants, a “Single Purpose Entity”
means that the Company at all times since its formation and thereafter:

 

1.             shall not engage in any business or activity, other than the
ownership, operation and maintenance of the Mortgaged Property and activities
incidental thereto;

 

2.             shall not acquire, own, hold, lease, operate, manage, maintain,
develop or improve any assets other than the Mortgaged Property and such
Personalty as may be necessary for the operation of the Mortgaged Property and
shall conduct and operate its business as presently conducted and operated;

 

3.             shall preserve its existence and remain in good standing (if
applicable) under the laws of the jurisdiction of its formation or organization
and shall observe organizational formalities;

 

4.             shall not merge or consolidate with any other Person or entity;

 

5.             shall not take any action to (i) dissolve, wind-up, terminate or
liquidate in whole or in part; to sell, transfer or otherwise dispose of all or
substantially all of its assets; (ii) except as permitted in the Loan Documents,
change its legal structure; (iii) except as permitted in the Loan Documents
transfer or permit the direct or indirect transfer of any partnership,
membership or other equity interests, as applicable, without prior written
consent of the Lender, (iv) except as permitted in the Loan Documents, issue
additional partnership, membership or other equity interests, as applicable; or
(v) seek to accomplish any of the foregoing;

 

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6.             shall not, without the unanimous written consent of all of the
Company’s Members: (A) file any insolvency, or reorganization case or
proceeding, to institute proceedings to have the Company be adjudicated bankrupt
or insolvent, (B) institute proceedings under any applicable insolvency law, (C)
seek any relief under any law relating to relief from debts or the protection of
debtors, (D) consent to the filing or institution of bankruptcy or insolvency
proceedings against the Company, (E) file a petition seeking, or consent to,
reorganization or relief with respect to the Company under any applicable
federal or state law relating to bankruptcy or insolvency, (F) seek or consent
to the appointment of a receiver, liquidator, assignee, trustee, sequestrator,
custodian, or any similar official for the Company or a substantial part of its
property, (G) make any assignment for the benefit of creditors of the Company,
(H) admit in writing the Company’s inability to pay its debts generally as they
become due, or (I) take action in furtherance of any of the foregoing;

 

7.             shall not amend or restate its organizational documents if such
change would modify the requirements set forth in these SPE Covenants;

 

8.             shall not own any subsidiary or make any investment in, any other
Person or entity;

 

9.             shall not commingle its assets with the assets of any other
Person or entity and shall hold all of its assets in its own name;

 

10.           except as otherwise approved by Lender in connection with the
repair of the Mortgaged Property, shall not incur any debt, secured or
unsecured, direct or contingent (including, without limitation, guaranteeing any
obligation), other than, (A) the Assumed Loans (and any further indebtedness as
described in Section 43 of the Multifamily Mortgage/Deed of Trust securing the
Assumed Loans with regard to Supplemental Mortgages) and (B) customary unsecured
trade payables incurred in the ordinary course of owning and operating the
Mortgaged Property, provided the same is not evidenced by a note, do not exceed,
in the aggregate amount, at any time a maximum amount of two percent (2%) of the
original principal amount of the Assumed Loans and are paid within sixty (60
days of the date incurred;

 

11.           shall maintain its records, books of account, bank accounts,
financial statements, accounting records and other entity documents separate and
apart from those of any other Person or entity and shall not list its assets as
assets on the financial statement of any other Person or entity; provided,
however, that the Company’s assets may be included in a consolidated financial
statement of a related entity or Affiliate provided that such assets shall also
be listed on the Company’s own separate balance sheet;

 

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12.           except for capital contributions or capital distributions
permitted under the terms and conditions hereunder, shall only enter into any
contract or agreement with any general partner, Member, shareholder, principal
or Affiliate of the Company or any guarantor, or any general partner, Member,
principal or Affiliate thereof, upon terms and conditions that are commercially
reasonable and substantially similar to those that would be available on an
arm’s-length basis with third parties;

 

13.           shall not maintain its assets in such a manner that it will be
costly or difficult to segregate, ascertain or identify its individual assets
from those of any other Person or entity;

 

14.           shall not assume or guaranty (excluding any guaranty that has been
executed and delivered in connection with the Assumed Loans) the debts or
obligations of any other Person, hold itself out to be responsible for the debts
of another Person, pledge its assets to secure the obligations of any other
Person or otherwise pledge its assets for the benefit of any other Person, or
hold out its credit as being available to satisfy the obligations of any other
Person;

 

15.           shall not make or permit to remain outstanding any loans or
advances to any other Person except for those investments permitted under the
Loan Documents and shall not buy or hold evidence of indebtedness issued by any
other Person (other than cash or investment-grade securities);

 

16.           shall file its own tax returns separate from those of any other
Person or entity, except to the extent that the Company is treated as a
“disregarded entity” for tax purposes and is not required to file its own tax
returns under applicable law, and pay any taxes required to be paid under
applicable law;

 

17.           shall hold itself out to the public as a legal entity separate and
distinct from any other Person or entity and conduct its business solely in its
own name, shall correct any known misunderstanding regarding its separate
identity and shall not identify itself or any of its Affiliates as a division or
part of the other;

 

18.           shall maintain adequate capital for the normal obligations
reasonably foreseeable in a business of its size and character and in light of
its contemplated business operations and shall remain solvent and pay its debts
and liabilities from its assets as the same shall become due, provided, however,
that the foregoing covenant shall not constitute a requirement for the Members
to make additional contributions of capital;

 

19.           shall allocate fairly and reasonably shared expenses (including,
without limitation, shared office space) and use separate stationary, invoices
and checks;

 

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20.           shall pay (or cause its Property Manager or employee to pay on
behalf of the Company from the Company’s funds) its own liabilities (including,
without limitation, salaries of its own employees) from its own funds;

 

21.           shall not acquire obligations or securities of its partners,
Members or shareholders, as applicable;

 

22.           except as contemplated or permitted by the property management
agreement with respect to the Property Manager or Oversight Manager, shall not
permit any Affiliate or constituent party independent access to its bank
accounts; and

 

23.           shall maintain a sufficient number of employees (if any) in light
of its contemplated business operations.

 

ARTICLE III
MEMBERS

 

3.1           Admission of Members. Effective as of the date of this Agreement,
BH and MP are admitted as Members of the Company and MP shall be the sole
Managing Member of the Company. No other Person shall be admitted as a member of
the Company and no additional Interest shall be issued, without the Approval of
all of the Members, except as expressly permitted by this Agreement.

 

3.2           Limitation on Liability. Except as otherwise expressly provided in
the Delaware Act, the debts, obligations and liabilities of the Company, whether
arising in contract, tort or otherwise, shall be solely the debts, obligations
and liabilities of the Company, and no Member shall be obligated personally for
any such debt, obligation or liability of the Company solely by reason of being
a member of the Company. Except as otherwise expressly provided herein as to
certain recourse obligations of the Members and as may be otherwise provided in
the Delaware Act, the liability of each Member shall be limited to the amount of
Capital Contributions required to be made by such Member in accordance with the
provisions of this Agreement, but only when and to the extent the same shall
become due pursuant to the provisions of this Agreement. Further, except as
otherwise expressly provided herein to the contrary, no general or limited
partner of any Member, shareholder, member, partner or other holder of an equity
interest in any Member or Managing Member, or any officer, director or employee
of any of the foregoing or any of their Affiliates is obligated personally for
any debt, obligation or other liability of the Company solely by reason of their
being a general or limited partner of any Member, shareholder, member, partner
or other holder of an equity interest in any Member and/or Managing Member, or
officer, director or employee of any of the foregoing or any of their
Affiliates. Further, failure of the Company to observe any corporate or company
governance or other formalities or requirements relating to the exercise of its
powers or the management of its business or affairs under this Agreement or the
Delaware Act will not be grounds for any Member, general or limited partner of
any Member, shareholder, member or other holder of an equity interest in any
Member, or any officer, director or employee of any of the foregoing or any of
their Affiliates to be held liable or obligated for any debt, obligation or
other liability of the Company.

 

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ARTICLE IV
CAPITAL

 

4.1           Initial Capital Contributions.

 

(a)           Deposits Under the Purchase Agreement. It is acknowledged that, on
or prior to the date hereof, one or more of the Members (or their Affiliates)
has paid all or a portion of the deposits required under the Purchase Agreement
(the “Deposit”) and certain fees with respect to the assumption of the Assumed
Loans (the “Loan Fees”) On the date BH elects in a written notice from BH to MP,
MP or an Affiliate will cause the Purchase Agreement to be assigned by Purchaser
to and assumed by the Company in consideration of a credit by the Company to the
Capital Account of the applicable Member equal to the portion of the Deposit and
Loan Fees paid by such Member.

 

(b)           Pursuit Costs. (i) Prior to the date hereof, the MP Member Group
and BH and their respective Affiliates, have incurred, and may hereafter incur
prior to the Closing Date third party out-of-pocket costs and expenses in
connection with the negotiation and closing of the Purchase Agreement and their
respective due diligence analyses and other evaluations of the Property
(including, without limitation, costs of environmental and engineering and other
feasibility reports and studies, costs related to analyzing the Property
(including, without limitation, travel costs) and costs (including, without
limitation, attorneys’ fees) incurred by the Members in reviewing and analyzing
work conducted by Grand Peaks Properties, Inc. or its agents), fees and expenses
related to the assumption of the Assumed Loans, and costs to complete an audit
of the financial statements in respect of the Property in compliance with
certain Laws and regulations applicable to BH and/or its Affiliates
(collectively, the “Pursuit Costs”).

 

(ii)           Provided that the Company acquires the Property pursuant to the
Purchase Agreement, the Company shall pay or reimburse each Member for the
portion of any Deposit and Loan Fees it made after the date the Purchase
Agreement is assigned to the Company and all Pursuit Costs actually incurred by
such Member in good faith pursuant to the terms hereof to the extent set forth
in a budget approved by all Members, or shall credit such amounts against such
Member’s Initial Capital Contribution as provided in Section 4.1(d) below, so
that each Member’s share of such costs shall be in proportion to their
respective Contribution Percentages. If BH elects not to cause the Company to
acquire the Property or the Company fails to acquire the Property for any
reason, then, each Member (or its Affiliate) shall be responsible for and pay
all Pursuit Costs incurred by such Member as provided in the Agreement Regarding
Acquisition and Deposits dated July 26, 2011 between Grand Peaks
Properties, Inc. and Behringer Harvard Opportunity OP II LP.

 

(iii)          Fees of legal counsel for the Members incurred in connection with
or related to the negotiation of this Agreement shall be borne by each Member
and shall not be reimbursed by the Company.

 

(iv)          Notwithstanding anything to the contrary in this Agreement, the
Company shall pay a brokerage fee or commission payable to NorthMarq and to
Lender

 

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as provided below in this Section 4.1(b)(ii) in connection with the acquisition
of the Property and the Loan. MP and the MP Persons represent and warrant that
the amount of the fee or commission payable to NorthMarq in connection with the
equity being contributed to the Company by BH will be $37,500 (with an
additional $12,500 fee being paid to NorthMarq by Grand Peaks Properties, Inc.)
and the maximum amount of loan or commitment fees payable to the lenders under
the Loan will not exceed the amounts specified in the respective approval
letters relating to the assumption of the Assumed Loans and that no portion of
any such fees are or will be payable or paid to MP, any Affiliate of MP, or any
MP Person.

 

(c)           Failure to Close Purchase. Whether the Company shall proceed with
the transactions contemplated by the Purchase Agreement, including (without
limitation) whether it shall close the purchase of the Property, shall be
determined by BH in its sole discretion, and neither the MP Member Group nor any
Affiliate of the MP Member Group shall have any claim against the Company or BH
or any of its Affiliates by reason of such determination; provided that if BH
unilaterally determines not to close the acquisition of the Property, it shall
use reasonable efforts to keep the MP Member Group updated as to its decision
making process, and it shall provide notice of such final decision to the MP
Member Group as soon as possible.

 

(d)           Closing Contributions. In the event that BH decides to cause the
Company to close the purchase of the Property pursuant to the Purchase
Agreement, then on or before the Closing Date, the Members shall contribute in
cash (or be credited to the extent as provided in Sections 4.1(a) and
4.1(b)(ii) with making cash contributions) to the capital of the Company their
pro rata share (based upon their relative Contribution Percentages) of the sum
of (x) the amount reasonably necessary to close the acquisition of the Property,
closing costs, Pursuit Costs, other amounts payable or reimbursable by the
Company under Section 4.1(b) and (y) a reasonable amount of initial working
capital and reserves (which shall include anticipated capital expenditures to be
made in the period following acquisition of the Property as set forth in the
Initial Approved Budget and Operating Plan as well as any and all anticipated
third party loan commitment fees and closing costs which may be incurred in
connection with any permanent financing to be obtained by the Company) for the
Company, as Approved by the Members. MP will deliver to the Members for Approval
a statement of sources and uses for the closing and a detailed estimate of the
Initial Capital Contributions. Amounts payable to the Company by a Member on the
Closing Date may be set off from amounts the Company owes to a Member and each
Member shall receive credits for payments made prior to the Closing Date for
amounts paid to a third party as set forth in such Approved closing statement.

 

(e)           Withdrawing Members. Subject to the provisions of
Section 4.1(d) and this Section 4.1(e), if any Member (a “Withdrawing Member”)
fails to timely make all or any portion of its Initial Capital Contributions
pursuant to this Section 4.1 (a “Failed Contribution”), then one or more of the
other Members that is not an Affiliate of the Withdrawing Member (the
“Non-Withdrawing Member”) may either pursue all of its rights and remedies at
law and in equity, or elect to make such Failed Contribution, in which case, as
such Non-Withdrawing Member’s sole and exclusive remedy with respect thereto
(i) the Withdrawing Member shall be automatically terminated as a Member for all
purposes hereunder and (ii) the Interest of the Withdrawing Member (and its
share of the Deposit and Loan Fees) shall be deemed forfeited in its entirety
and such Withdrawing Member shall cease to have any Interest in the Company or

 

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any rights under this Agreement with respect thereto. Each Member acknowledges
and agrees that the other Members would not be entering into this Agreement were
it not for (i) the Members agreeing to make the Initial Capital Contributions
provided for in this Section 4.1, and (ii) the remedy provisions set forth above
in this Section 4.1(e). Each Member acknowledges and agrees that in the event
any Member fails to make its Initial Capital Contributions pursuant to this
Agreement, the other Members will suffer substantial damages and the remedy
provisions set forth above are fair, just and equitable in all respects.

 

4.2           Additional Capital Contributions.

 

(a)           If at any time or from time to time after all of the Initial
Capital Contributions have been contributed, the Managing Member determines that
additional funds (a “Shortfall”) are reasonably required (i) for development and
tenant improvement costs and other capital expenditures contemplated by the
Approved Budget and Operating Plan, (ii) to meet the ongoing obligations,
liabilities, Operating Expenses or reasonable business needs of the Company in
accordance with the then applicable Approved Budget or Operating Plan, or to pay
Necessary Expenses or other costs which are not provided for in the Approved
Budget and Operating Plan, but which are Approved by BH to the extent not
covered by the Initial Capital Contributions, or (iii) for any other purpose
Approved by BH, the Managing Member may (but shall not be obligated to), request
that each of the Members contribute its pro rata share (based upon the
Contribution Percentages of the Members at the time of such request) of such
Shortfall (any such contribution, an “Additional Capital Contribution”). If so
requested by the Managing Member or a Member pursuant to the foregoing
provisions, such contributions shall be due within five (5) Business Days
thereafter (or by the 1st calendar day of the next month, whichever is later).

 

(b)           Notwithstanding anything to the contrary contained herein, a
failure by any Member to make any Additional Capital Contribution to the extent
required or requested hereunder shall not constitute an Event of Default by such
Member and the sole consequences of such failure shall be as set forth in this
Section 4.2. If BH or MP (the “Non-Contributing Party”) fails to timely make all
or any portion of any Additional Capital Contribution as requested pursuant to
Section 4.2(a) above and the other party (the “Contributing Party”) makes all of
its share of any Additional Capital Contribution as requested pursuant to
Section 4.2(a) above, then the Contributing Party may make the full amount of
such Additional Capital Contribution on behalf of the Non-Contributing Party
(any such Capital Contribution by a Contributing Party, a “Substitute
Contribution”). In such an event, the Contributing Party may elect by written
notice given within five (5) Business Days of making the Substitute Contribution
either (i) to treat the entire amount contributed by the Contributing Party
(including both the Contributing Party’s and the Non-Contributing Party’s pro
rata portion thereof) as a Priority Capital Contribution (a “Priority Capital
Contribution”) by such Contributing Party in accordance with
Section 4.2(c) below, or (ii) to treat the Substitute Contribution as a regular
Capital Contribution in accordance with Section 4.2(d) below.

 

(c)           To the extent any Contributing Party elects to treat its own
Additional Capital Contribution and such Substitute Contribution as a Priority
Capital Contribution, such Priority Capital Contribution shall be returned on a
priority basis together with an eighteen

 

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percent (18%) per annum cumulative annual preferred return thereon as provided
in Section 6.3(a) and/or Section 6.4(a), as applicable.

 

(d)           If a Contributing Party elects to treat a Substitute Contribution
as a regular Capital Contribution, then the Contribution Percentage of the
Contributing Party shall be adjusted to equal the percentage equivalent of the
quotient determined by dividing:

 

(i)            the positive difference, if any, between:

 

(A)          the sum of (I) one hundred percent (100%) of the aggregate Capital
Contributions (excluding Substitute Contributions) then or theretofore made by
such Member to the Company, plus (II) two hundred percent (200%) of the
Substitute Contributions then or theretofore made by such Member to the Company
(the excess of 200% of such Member’s Substitute Contributions over the actual
amount of such Member’s Substituted Contributions is referred to herein as the
“Excess Amounts”); minus

 

(B)           the Substitute Contributions then or theretofore made by the other
Member to the Company; by

 

(ii)           one hundred percent (100%) of the aggregate Capital Contributions
(including, without limitation, Substitute Contributions) then or theretofore
made by all of the Members to the Company.

 

and the Contribution Percentage of the Non-Contributing Party shall be reduced
by the percentage necessary to insure that the Contribution Percentages add up
to 100%. At the same time, the Promote Percentages of each Member shall be
adjusted (increased or decreased in the same proportions as the Contribution
Percentages were adjusted pursuant to the foregoing provisions (e.g., if a
Member’s Contribution Percentage is reduced by half or 50%, then the Promote
Percentages of such Member will also be reduced by half or 50%). In addition, an
amount of Unreturned Capital Contributions equal to such Excess Amount shall be
treated as having been transferred from the Non-Contributing Party to the
Contributing Party but such transfer shall be solely for the purpose of
computing preferred return pursuant to Sections 6.3(b) and 6.4(b) and Unreturned
Capital Contributions pursuant to Section 6.4(c) with the result that each
Member will have Unreturned Capital Contributions in proportion to its adjusted
Contribution Percentage after giving effect to such transfer. The Capital
Accounts shall be adjusted accordingly.

 

Any Non-Contributing Party shall have until seventy-five (75) days after the
date on which its missed Additional Capital Contribution (the “Missed
Contribution”) was due in order to cure its failure to make such Missed
Contribution by depositing into an account designated by the Contributing Party
an amount equal to the amount of the Missed Contribution together with interest
thereon at a eighteen percent (18%) per annum rate from the due date established
by the Managing Member until such amount has been so deposited in full into such
account, at which point such amount shall promptly be distributed to the
Contributing Party if and to the extent the Contributing Party made a Substitute
Contribution on account of the Missed Contribution. If the Non-Contributing
Party makes such deposits as aforesaid, any adjustment to Contribution
Percentages, dilution to Promote Percentages (and the distributions affected
thereby) and

 

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transfers of Unreturned Capital Contributions caused by its failure to make the
applicable Additional Capital Contribution shall be unwound, and the payment,
dilution and transfers described above shall not be reflected in the Members’
Capital Accounts.

 

(e)           Each Member acknowledges and agrees that the other Members would
not be entering into this Agreement were it not for (i) the Members agreeing to
make the Capital Contributions provided for in this Section 4.2, and (ii) the
remedy provisions set forth above in this Section 4.2. Each Member acknowledges
and agrees that in the event any Member fails to make its Capital Contributions
pursuant to this Agreement, the other Members will suffer substantial damages
and the remedy provisions set forth above are fair, just and equitable in all
respects.

 

(f)            All Capital Contributions shall be made by wire transfer of funds
to accounts designated by the Managing Member from time to time.

 

(g)           Notwithstanding anything to the contrary in this Agreement, if
MP’s Contribution Percentage is reduced below five percent (5%) as a result of
the application of the provisions of this Section 4.2 after expiration of the
cure period above, then MP shall have no right to vote on or Approve any Major
Decision, the Budget, or any other matter which may or could result in a
Deadlock Event.

 

4.3           Capital Accounts. A separate Capital Account will be maintained
for each Member in accordance with Treasury Regulation
Section 1.704-1(b)(2)(iv). Consistent therewith, the Capital Account of each
Member will be determined and adjusted as follows:

 

(a)           Each Member’s Capital Account will be credited with:

 

(i)            any contributions of cash made by such Member to the capital of
the Company plus the fair market value of any property contributed by such
Member to the capital of the Company (net of any liabilities to which such
property is subject or which are assumed by the Company);

 

(ii)           the Member’s distributive share of Net Profit and any items in
the nature of income or gain specially allocated to such Member pursuant to
Section 6.2; and

 

(iii)          any other increases required by Treasury Regulation
Section 1.704-1(b)(2)(iv), without duplication.

 

(b)           Each Member’s Capital Account will be debited with:

 

(i)            any distributions of cash made from the Company to such Member
plus the fair market value of any property distributed in kind to such Member
(net of any liabilities to which such property is subject or which are assumed
by such Member);

 

(ii)           the Member’s distributive share of Net Loss and any items in the
nature of expenses or losses specially allocated to such Member pursuant to
Section 6.2; and

 

23

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(iii)          any other decreases required by Treasury Regulation
Section 1.704-1(b)(2)(iv), without duplication.

 

(c)           The provisions of this Section 4.3 and any other provisions of
this Agreement relating to the maintenance of Capital Accounts have been
included in this Agreement to comply with Section 704(b) of the Code and the
Treasury Regulations promulgated thereunder and will be interpreted and applied
in a manner consistent with those provisions.

 

4.4           No Further Capital Contributions. Except as expressly provided in
this Agreement or with the prior written consent of all of the Members, no
Member shall be required or entitled to contribute any other or further capital
to the Company, nor shall any Member be required or entitled to loan any funds
to the Company. No Member will have any obligation to restore any negative
balance in its Capital Account at any time including upon liquidation or
dissolution of the Company.

 

4.5           Assumed Loan.

 

(a)           It is acknowledged that both BH and the Managing Member on behalf
of the Company shall use good faith efforts to assume the loans secured by the
Property in the approximate aggregate amount of $15,550,000 defined and
described as the “Existing Loans” in the Purchase Agreement (herein called the
“Assumed Loans”) on terms which are acceptable to both BH and the Managing
Member, the assumption of such Assumed Loans on the Closing Date constituting
partial consideration for the acquisition of the Property under the Purchase
Agreement.

 

(b)           If either BH or the Managing Member does not Approve a financing
proposal for the Assumed Loans presented by the other party (the “Presenting
Member”), the party who fails to Approve such proposal (the “Rejecting Member”)
must identify to the Presenting Member the basis for such disapproval in
writing, and provided that the Seller under the Purchase Agreement agrees to
extend the Closing Date, and the Rejecting Member will thereafter have a period
of sixty (60) calendar days in which to obtain an alternative financing
commitment including terms not materially worse (taken as a whole) than the
financing terms originally proposed by the Presenting Member and including
improved or different terms with respect to the item(s) the Rejecting Member
originally identified as the reason for its disapproval. If the Rejecting Member
has not delivered to the Presenting Member a financing commitment on such
revised terms by the end of such sixty-day period, the Presenting Member shall
be empowered to alone cause the Company to Approve the original financing
proposal by such Member (notwithstanding the provisions of Section 7.1(a)(ii)).
Each Member agrees to act in a commercially reasonable manner in proposing,
voting to Approve or dis-Approve or otherwise acting in connection with a
financing proposal under Section 7.1(a)(ii) or under this Section 4.5. In
addition, in the event that Lender has not approved the assumption of the
Assumed Loans by the time of the expiration of any applicable deadlines in the
Purchase Agreement, on or before such deadlines, BH and the Managing Member
shall consult to determine a course of action under the Purchase Agreement in
connection therewith.

 

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(c)           The MP Persons will be the Key Principal (as such term is defined
in the Loan Documents) and shall be responsible for the non-recourse carve-outs
under the Loan Documents. Except in the case of an acquisition of MP’s interest
by BH as provided in this Agreement, neither BH nor any of its affiliates shall
be designated as the Key Principal liable under any non-recourse carve-outs
under the Loan Documents, provided that the Loan Documents may provide for the
substitution of BH or an Affiliate of BH acceptable to BH and the lender as Key
Principal.

 

ARTICLE V
INTERESTS IN THE COMPANY

 

5.1           Contribution and Promote Percentage Adjustments. The Promote
Percentages and Contribution Percentages of the Members may be adjusted only as
set forth in this Agreement.

 

5.2           Return of Capital. No Member shall be liable for the return of the
Capital Contributions (or any portion thereof) of any other Member, it being
expressly understood that any such return shall be made solely from the assets
of the Company. No Member shall be entitled to withdraw or receive a return of
any part of its Capital Contributions or Capital Account, to receive interest on
its Capital Contributions or Capital Account or to receive any distributions
from the Company, except as expressly provided for in this Agreement. No Member
shall have any obligation to restore any negative or deficit balance in its
Capital Account at any time including upon liquidation and dissolution of the
Company.

 

5.3           Ownership. All Company Property shall be owned by the Company,
subject to the terms and provisions of this Agreement.

 

5.4           Waiver of Partition; Nature of Interests in the Company. Except as
otherwise expressly provided for in this Agreement, each of the Members hereby
irrevocably waives any right or power that such Member might have to:

 

(a)           cause the Company or any of its assets to be partitioned;

 

(b)           cause the appointment of a receiver for all or any portion of the
assets of the Company;

 

(c)           compel any sale of all or any portion of the assets of the Company
pursuant to any applicable law; or

 

(d)           file a complaint, or to institute any proceeding at law or in
equity, to cause the termination, dissolution or liquidation of the Company.

 

Each of the Members has been induced to enter into this Agreement in reliance
upon the waivers set forth in this Section 5.4, and without such waivers no
Member would have entered into this Agreement. No Member shall have any interest
in any specific Company Property. The Interests of all Members in this Company
are personal property.

 

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ARTICLE VI
ALLOCATIONS AND DISTRIBUTIONS

 

6.1           Allocations. After application of Section 6.2, Profits and Losses
for each fiscal year or the applicable portion thereof shall be allocated among
the Members as of each Adjustment Date so as to reduce, proportionally, in the
case of Profits, the differences between their respective Target Accounts and
Partially Adjusted Capital Accounts as of each Adjustment Date and in the case
of Losses, the differences between their respective Partially Adjusted Capital
Accounts and Target Accounts as of each Adjustment Date. To the extent, that in
the fiscal year in which all or substantially all of the Company’s assets are
disposed of, or in the fiscal year in which the Company is liquidated, the
allocation of Profit or Loss set forth in the preceding sentence does not cause
each Member’s Partially Adjusted Capital Account to equal such Member’s Target
Account, items of income or gain will be reallocated to any Member with a
Partially Adjusted Capital Account which is less than its Target Account, and
items of loss, deduction or expense will be reallocated to any Member with a
Partially Adjusted Capital Account that is greater than its Target Account, in
such manner as to reduce, to the greatest extent possible, the difference
between each Member’s respective Target Account and its Partially Adjusted
Capital Account.

 

6.2           Allocations and Compliance with Section 704(b). The following
special allocations shall, except as otherwise provided, be made in the
following order:

 

(a)           Notwithstanding anything to the contrary contained in this
Article VI, if there is a net decrease in Company Minimum Gain or in any Member
Minimum Gain during any taxable year or other period, prior to any other
allocation pursuant hereto, such Member shall be specially allocated items of
Profit for such year (and, if necessary, subsequent years) in an amount and
manner required by Treasury Regulation Sections 1.704-2(f) or 1.704-2(i)(4). The
items of Profit to be so allocated shall be determined in accordance with
Treasury Regulation Section 1.704-2.

 

(b)           Non-recourse Deductions for any taxable year or other period shall
be allocated (as nearly as possible) under Treasury Regulation Section 1.704-2
to the Members, pro rata in proportion to their respective Contribution
Percentages.

 

(c)           Any Member Non-recourse Deductions for any taxable year or other
period shall be allocated to the Member that made or guarantied or is otherwise
liable with respect to the loan to which such Member Non-recourse Deductions are
attributable in accordance with principles under Treasury Regulation
Section 1.704-2(i).

 

(d)           Any Member who unexpectedly receives an adjustment, allocation or
distribution described in Treasury Regulation Section 1.704-1(b)(2)(ii)(d)(4),
(5) or (6) which causes or increases a negative balance in his or its Capital
Account shall be allocated items of Profit sufficient to eliminate such increase
or negative balance caused thereby, as quickly as possible, to the extent
required by such Treasury Regulation.

 

(e)           No allocation of an item of Loss shall be made to any Member if,
as a result of such allocation, such Member would have an Adjusted Capital
Account Deficit. Any

 

26

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such disallowed allocation shall be made to the Members entitled to receive such
allocation under Treasury Regulation Section 1.704 in proportion to their
respective Contribution Percentages.

 

(f)            For purposes of Section 752 of the Code and the Treasury
Regulations thereunder, excess non-recourse liabilities (within the meaning of
Treasury Regulations Section 1.752-3(a)(3)) shall be allocated to the Members
pro rata in proportion to their respective Contribution Percentages.

 

6.3           Distributions from Operations. Except as provided in Sections 6.5
and 6.6, the Company shall, as soon as reasonably practical (but no less often
than monthly, if appropriate), make distributions of Net Cash Flow to the
Members in the following manner and order of priority:

 

(a)           First, an amount of such Net Cash Flow will be distributed (in the
order and priority set forth below in this Section 6.3(a)) to the Members until
each of the Members has received aggregate distributions pursuant to this
Section 6.3(a) and Section 6.4(a) for the current period and all previous
periods, equal to the sum of (i) the aggregate amount of its Priority Capital
Contributions made pursuant to this Agreement, and (ii) an eighteen percent
(18%) per annum (using a 360 day year) cumulative preferred returned thereon
(amounts distributed under this Section 6.3(a) will be distributed in the
reverse order in which such Priority Capital Contributions were made — that is,
the most recent Priority Capital Contribution, together with the eighteen
percent (18%) per annum cumulative preferred return thereon, will be returned
and paid first to the Member having made such Priority Capital Contribution, and
then the next most recent Priority Capital Contribution, together with the
eighteen percent (18%) per annum cumulative preferred return thereon, will be
returned and paid to the Member having made such Priority Capital
Contribution, etc.);

 

(b)           Second, remaining Net Cash Flow, if any, shall be distributed pari
passu to each Member until each Member has received an amount equal to its
Unreturned Capital Contributions, with such distributions being made pro rata to
each Member in accordance with their respective Contribution Percentages;

 

(c)           Third, remaining Net Cash Flow, if any, shall be distributed pari
passu to the Members in accordance with their respective Contribution
Percentages until the Members have received aggregate distributions sufficient
to generate a 14% IRR in respect to such Members’ respective Capital
Contributions;

 

(d)           Fourth, remaining Net Cash Flow, if any, shall be distributed to
the Members, with the percentage of such remaining Net Cash Flow being
distributed to MP being equal to the First Tier Promote Percentage and the
remaining percentage of such remaining Net Cash Flow to the Members (pro rata in
accordance with their respective Contribution Percentages) until aggregate
distributions have been made to the Members in an amount necessary to provide an
18% IRR to all Members (i.e., to the extent that there is any remaining Net Cash
Flow to be distributed pursuant to this Section 6.3(d), 15% of the remaining Net
Cash Flow will be distributed to MP and 85% of the remaining Net Cash Flow will
be distributed to the Members pari passu, with the distributions to the Members
being on a pro rata basis in

 

27

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accordance with their respective Contribution Percentages, until an 18% IRR has
been achieved by the Members);

 

(e)           Fifth, remaining Net Cash Flow, if any, shall be distributed to
the Members, with the percentage of such remaining Net Cash Flow being
distributed to MP being equal to the Second Tier Promote Percentage and the
remaining percentage of such remaining Net Cash Flow to the Members (pro rata in
accordance with their respective Contribution Percentages) until aggregate
distributions have been made to the Members in an amount necessary to provide a
22% IRR to all Members (i.e., to the extent that there is any remaining Net Cash
Flow to be distributed pursuant to this Section 6.3(e), 35% of the remaining Net
Cash Flow will be distributed to MP and 65% of the remaining Net Cash Flow will
be distributed to the Members pari passu, with the distributions to the Members
being on a pro rata basis in accordance with their respective Contribution
Percentages, until a 22% IRR has been achieved by the Members); and

 

(f)            Sixth, thereafter, remaining Net Cash Flow, if any, shall be
distributed to the Members, with the percentage of such remaining Net Cash Flow
being distributed to MP being equal to the Third Tier Promote Percentage and the
remaining percentage of such remaining Net Cash Flow to the Members (pro rata in
accordance with their respective Contribution Percentages) (i.e., to the extent
that there is any remaining Net Cash Flow, 50% of the remaining Net Cash Flow
will be distributed to MP and 50% of the remaining Net Cash Flow will be
distributed to the Members pari passu, with the distributions to the Members
being on a pro rata basis in accordance with their respective Contribution
Percentages).

 

6.4           Distributions from Capital Transactions. Except as provided in
Sections 6.5 and 6.6, the Company shall, as soon as reasonably practical (but no
less often than monthly, if appropriate), make distributions of Net Capital
Proceeds (after establishment of appropriate and reasonable reserves, as
determined by the Managing Member or to the extent set forth in an Approved
Budget) to the Members in the following manner and order of priority:

 

(a)           first, an amount of such Net Capital Proceeds will be distributed
(in the order and priority set forth below in this Section 6.4(a)) to the
Members until each of the Members has received aggregate distributions pursuant
to this Section 6.4(a) and Section 6.3(a) for the current period and all
previous periods, equal to the sum of (i) the aggregate amount of its Priority
Capital Contributions made pursuant to this Agreement, and (ii) an eighteen
percent (18%) per annum (using a 360 day year) cumulative preferred returned
thereon (amounts distributed under this Section 6.4(a) will be distributed in
the reverse order in which such Priority Capital Contributions were made — that
is, the most recent Priority Capital Contribution, together with the eighteen
percent (18%) per annum cumulative preferred return thereon, will be returned
and paid first to the Member having made such Priority Capital Contribution, and
then the next most recent Priority Capital Contribution, together with the
eighteen percent (18%) per annum cumulative preferred return thereon, will be
returned and paid to the Member having made such Priority Capital
Contribution, etc.);

 

(b)           second, remaining Net Capital Proceeds, if any, shall be
distributed pari passu to each Member until each Member has received an amount
equal to its Unreturned

 

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Capital Contributions, with such distributions being made pro rata to each
Member in accordance with their respective Contribution Percentages;

 

(c)           third, remaining Net Capital Proceeds, if any, shall be
distributed pari passu to the Members in accordance with their respective
Capital Contributions until the Members have received aggregate distributions
sufficient to generate a 14% IRR in respect to such Members’ respective Capital
Contributions;

 

(d)           fourth, remaining Net Capital Proceeds, if any, shall be
distributed to the Members with the percentage of such remaining Net Capital
Proceeds being distributed to MP being equal to the First Tier Promote
Percentage and the remaining percentage of such remaining Net Capital Proceeds
to the Members (pro rata in accordance with their respective Contribution
Percentages) until aggregate distributions have been made to the Members in an
amount necessary to provide an 18% IRR to all Members (i.e., to the extent that
there are any remaining Net Capital Proceeds to be distributed under this
Section 6.4(d), 15% of the remaining Net Capital Proceeds will be distributed to
MP and 85% of the remaining Net Capital Proceeds will be distributed to the
Members pari passu, with the distributions to the Members being on a pro rata
basis in accordance with their respective Contribution Percentages, until an 18%
IRR has been achieved by the Members);

 

(e)           fifth, remaining Net Capital Proceeds, if any, shall be
distributed to the Members with the percentage of such remaining Net Capital
Proceeds being distributed to MP being equal to the Second Tier Promote
Percentage and the remaining percentage of such remaining Net Capital Proceeds
to the Members (pro rata in accordance with their respective Contribution
Percentages) until aggregate distributions have been made to the Members in an
amount necessary to provide an 22% IRR to all Members (i.e., to the extent that
there are any remaining Net Capital Proceeds to be distributed under this
Section 6.4 (e), 35% of the remaining Net Capital Proceeds will be distributed
to MP and 65% of the remaining Net Capital Proceeds will be distributed to the
Members pari passu, with the distributions to the Members being on a pro rata
basis in accordance with their respective Contribution Percentages, until a 22%
IRR has been achieved by the Members); and

 

(f)            sixth, thereafter, remaining Net Capital Proceeds, if any, shall
be distributed to the Members, with the percentage of such remaining Net Capital
Proceeds being distributed to MP being equal to the Third Tier Promote
Percentage and the remaining percentage of such remaining Net Capital Proceeds
to the Members (pro rata in accordance with their respective Contribution
Percentages) (i.e., to the extent that there is any remaining Net Capital
Proceeds, 50% of the remaining Net Capital Proceeds will be distributed to MP
and 50% of the remaining Net Capital Proceeds will be distributed to the Members
pari passu, with the distributions to the Members being on a pro rata basis in
accordance with their respective Contribution Percentages).

 

6.5           Special Distributions. From and after the time MP shall have been
terminated as the Managing Member due to a Promote-Loss For Cause Event or an
Event of Default, Net Cash Flow otherwise distributable under Section 6.3 and
Net Capital Proceeds otherwise distributable under Section 6.4(d) shall not be
distributed as provided in such Sections but rather shall be distributed as
provided pursuant to this Section 6.5, and, except as provided in Section 6.6,
the

 

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Company shall, as soon as reasonably practical (but no less often than monthly,
if appropriate), make distributions of such Net Cash Flow of Net Capital
Proceeds (i) first, as provided in Section 6.3(a), and (ii) second, to the
Members in proportion to their respective Contribution Percentages.

 

6.6           Distributions in Liquidation.

 

(a)           Upon the dissolution and winding-up of the Company, the proceeds
of the sale of the Property and other assets of the Company distributable to the
Members under Section 11.2(c)(iii) shall be distributed, not later than the
latest time specified for such distributions pursuant to Treasury Regulation
Section 1.704-1(b)(2)(ii)(b)(2) to the Members as provided in Section 6.4 above
as if such distributions are additional Net Capital Proceeds.

 

(b)           With the Approval of each Member, a pro rata portion of the
distributions that would otherwise be made to the Members under the preceding
provisions of this Section 6.6 may be distributed to a trust reasonably
established, for a reasonable period of time, for the benefit of the Members for
the purposes of liquidating Company assets, collecting amounts owed to the
Company, and paying any contingent or unforeseen liabilities or obligations of
the Company arising out of or in connection with the Company. The assets of any
trust established under this Section 6.6 will be distributed to the Members from
time to time by the trustee of the trust in the same proportions as the amount
would otherwise have been distributed by the Company to the Members under this
Agreement.

 

6.7           Tax Matters. The Members intend for the Company to be treated as a
partnership for federal income tax purposes. BH shall make all applicable
elections, determinations and other decisions under the Code and applicable
Treasury Regulations to the extent not provided for herein, including, without
limitation, the deductibility of a particular item of expense and the positions
to be taken on the Company’s tax return, and shall approve the settlement or
compromise of all audit matters raised by the Internal Revenue Service affecting
the Members generally. The MP Member Group shall take reporting positions on
their respective federal, state and local income tax returns consistent with the
positions determined for the Company by BH. The Managing Member shall cause all
federal, state and local income and other tax returns to be timely filed by the
Company after same are Approved by BH and shall, after receiving BH’s Approval
of such returns, be authorized to execute such returns (provided that the
Managing Member shall, for so long as it diligently performs its obligations
hereunder, not be responsible for the delays of BH or reputable accountants or
auditors retained by the Managing Member or at the request of BH on behalf of
the Company).

 

6.8           Tax Matters Partner. BH shall be the tax matters partner within
the meaning of Section 6231(a)(7) of the Code and, subject to Section 6.6, shall
exercise all rights, obligations and duties of a tax matters partner under the
Code; and the MP Member Group shall be kept informed of, and be given an
opportunity to participate in a non-binding manner in, all such matters which
the tax matters partner deems to be material.

 

6.9           Section 704(c). In accordance with Section 704(c) of the Code and
the applicable Treasury Regulations thereunder, income, gain, loss, deduction
and tax depreciation with respect to any property contributed to the capital of
the Company, or with respect to any property which

 

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has a Book Basis different than its adjusted tax basis, shall, solely for
federal income tax purposes, be allocated among the Members so as to take into
account any variation between the adjusted tax basis of such property to the
Company and the Book Basis of such property. Any elections, accounting
conventions or other decisions relating to such allocations shall be made by BH
in a manner that (i) reasonably reflects the purposes and intention of this
Agreement, (ii) complies with Code Sections 704(b) and 704(c) and the Treasury
Regulations thereunder, and (iii) with respect to reverse
Section 704(c) allocations, treat MP and BH on a pari passu basis.

 

6.10         Withholding. All amounts required to be withheld pursuant to
Section 1446 of the Code or any other provision of federal, state, or local tax
law shall be withheld and shall be treated as amounts actually distributed to
the Members for all purposes under this Agreement. If the Managing Member
determines that the Company has insufficient liquid assets to satisfy such
withholding obligation, the Member as to which withholding applies shall pay
cash to the Company (which in no event shall constitute a Capital Contribution)
within 5 days of a demand therefor in an amount sufficient to satisfy such
withholding obligation. Any failure to timely make such payment shall result in
a fully recourse loan bearing interest at 20% per annum (or the maximum amount
permitted by applicable Law, if less) until paid.

 

ARTICLE VII
MANAGEMENT

 

7.1           Managing Member and Major Decisions. Except as otherwise expressly
provided in this Agreement (including as otherwise provided in Section 4.5 with
regard to Assumed Loans), the business and affairs of the Company shall be
vested in and controlled by the Managing Member as provided below.

 

(a)           The Managing Member shall have responsibility for establishing the
policies and operating procedures with respect to the business and affairs of
the Company and for making all decisions as to all matters which the Company has
authority to perform. Subject to the remaining provisions of this Article VII,
all decisions made with respect to the management and control of the Company and
Approved by the Managing Member shall be binding on the Company and all Members.
The Managing Member may elect officers of the Company to implement the decisions
(including without limitation executing documents) of the Managing Member from
time to time. The Managing Member shall be responsible for performing, or for
causing to be performed, and shall have the authority to perform (subject to the
requirement of receiving BH’s Approval, as applicable, if and when required by
the terms hereof), the duties described in Section 7.2. Except as otherwise
expressly provided in this Agreement or as otherwise previously Approved by BH,
or provided for in any Approved Budget or Operating Plan, the Managing Member
shall not cause the Company to undertake any of the following matters without
the prior Approval of BH (a “Major Decision”):

 

(i)            the execution and delivery of any agreement or instrument with
respect to the purchase of the Property and the taking of any action required or
permitted to be taken under the Purchase Agreement (including without
limitation, all action necessary to close the purchase of the Property under the
Purchase Agreement or otherwise and any election thereunder as to whether or not
to purchase the Property) or any waiver under, amendment of or assignment (in
whole or in part) of any Transaction

 

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Document (including, without limitation, the Purchase Agreement), the execution
and delivery of any agreements with any governmental agency, any neighboring or
adjacent property owner, any community organizations or any other third parties,
or sending any correspondence to or having any other material communications
with, any governmental agency which directly binds the Company or advocates a
position on behalf of the Company with respect to the foregoing, any election
under the Purchase Agreement or other Transaction Documents which the Company
may exercise under same and exercise by the Company of rights and remedies
thereunder;

 

(ii)           any financing, refinancing or securitization of any Company
Property and the use of any proceeds thereof, including, without limitation,
interim and permanent financing, and any other financing or refinancing of the
operations of the Company and the execution and delivery of any documents,
agreements or instruments evidencing, securing or relating to any such
financing; provided, however, that no guaranties or credit enhancements can be
required from any Member or its Affiliates without such party’s consent;

 

(iii)          the Approval of any Budget and Operating Plan, and any amendments
or modifications thereto (which shall only be permitted in accordance with this
Agreement) and the approval of any supplemental budget, operating plan or other
proposal relating to any development and/or renovation of any portion of the
Company Property and any amendment or modifications thereto and the making or
incurring of any expenditure which is not included or contemplated thereby;

 

(iv)          establishing sales parameters for the Property and any sale,
assignment, transfer or other disposition of a Property or all or any material
portion of the Company Property or any merger, consolidation or other business
combination transaction involving the Company entirely for cash consideration;

 

(v)           any improvement, renovation, development, rehabilitation,
alteration, repair, or completion of construction of any Company Property, or
taking any action relating thereto which burdens or encumbers the Company
Property, which is not otherwise subject to any Approved Budget and Operating
Plan;

 

(vi)          any activity which generates revenues, or which is otherwise on
terms that vary materially from the ranges and guidelines in the Approved Budget
or Operating Plan; provided that, for purposes of this Section 7.1(a)(vi), such
a material variance shall include (I) an amount that is not within the ranges
established in the Approved Operating Plan or is in excess of the amount set
forth in the Approved Budget for such revenues, expenditure or line item by more
than five percent (5.0%) of the line item or (individually or when aggregated
with all other variances) five percent (5.0%) of the total Budget, whichever is
less (in addition to individual expenditures and obligations, such test shall be
applied to aggregate expenditures and obligations made on a quarterly basis as
well), and (II) terms that materially conflict with any other guidelines in the
Operating Plan regarding such transactions or any other requirements of BH;

 

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(vii)         any lease with regard to space in a Property which is not in
accord with the Leasing Guidelines;

 

(viii)        the making of any recurring operating expenditure or incurring of
any recurring operating obligation by or on behalf of the Company that varies
materially from the Approved Budget or entering into (or amending or modifying)
of any agreement which was not specifically included or contemplated in the
Approved Budget or Approved Operating Plan, or otherwise Approved by BH;
provided that, for purposes of this Section 7.1(a)(viii), such a material
variance shall include (A) expenditures or obligations involving an amount that
is in excess of the amount set forth on a quarterly basis or on an annual basis
in the Approved Budget or Approved Operating Plan for such expenditure on a line
item basis by more than five percent (5.0%) of the line item or (individually or
when aggregated with all other variances) five percent (5.0%) of the total
Budget, whichever is less, for such period, (B) expenditures or obligations
involving the incurrence of an expenditure or obligation for any transaction or
any series of related transactions when taken with all prior expenditures or
obligations during the particular quarter or fiscal year related thereto exceeds
the maximum expenditure amount provided in the Approved Budget or the Approved
Operating Plan for such particular transaction or series of transactions for
such period by the lesser of five percent (5.0%) of such maximum expenditure
amount for such particular transaction or series of transactions for such period
or (individually or when aggregated with all other variances) five percent
(5.0%) of the total Budget for such period, or (C) in the case of any material
service, maintenance or similar agreement proposed to be entered into, such
agreement is not terminable (without penalty) by the Company on thirty (30) days
or less written notice to the other party; provided, however, that expenditures
made or obligations incurred or agreements entered into pursuant to, or which
are specifically included in or contemplated under, the Approved Budget or the
Approved Operating Plan shall not be Major Decisions to the extent they do not
vary from amounts, provisions and requirements set forth in the Approved Budget
and the Approved Operating Plan and provided, however, with respect to any
expenditures in excess of $25,000 which are not included in an Approved Project
Budget, the making of which do not constitute a Major Decision, prior to making
such expenditure, Manager shall provide notice to BH of the amount of such
expenditure and the underlying reason for making the same;

 

(ix)           except with regard to the Management Agreements to be executed on
the Closing Date, entering into or consummating any transaction or arrangement
by and between the Company and the Managing Member or any Affiliate of the
Managing Member, or any other transaction involving an actual or potential
conflict of interest;

 

(x)            the establishment of reasonable reserves, determination of the
amount of available Net Cash Flow and Net Capital Proceeds, and making of
distributions to Members (subject to the requirements of Sections 6.3, 6.4, 6.5
and 6.6);

 

(xi)           the institution of any legal proceedings in the name of the
Company, settlement of any legal proceedings against the Company and confession
of any judgment against the Company or any property of the Company other than
the institution of any eviction, suits for breach of tenant leases or
proceedings involving

 

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amounts in dispute of less than $5,000, or proceedings contemplated or provided
for in the Approved Operating Plan;

 

(xii)          the possession or pledge of any Company Property for other than
Company purposes (which shall require the Approval of all Members) resulting in
a loss to the Company in excess of $500;

 

(xiii)         (A) the filing of any voluntary petition in bankruptcy on behalf
of the Company, (B) the consenting to the filing of any involuntary petition in
bankruptcy against the Company, (C) the filing of any petition seeking, or
consenting to, the reorganization or relief under any applicable federal or
state law relating to bankruptcy or insolvency, (D) the consenting to the
appointment of a receiver, liquidator, assignee, trustee, sequestrator (or other
similar official) of the Company or a substantial part of its property, (E) the
making of any assignment for the benefit of creditors, (F) the admission in
writing of the Company’s inability to pay its debts generally as they become due
or (G) the taking of any action by the Company in furtherance of any such
action;

 

(xiv)        except with regard to the Management Agreements to be executed on
or before the Closing Date, entering into any asset or property management or
leasing or development agreement, or other third party contract with respect to
which funds are not explicitly provided for, or the existence of which is not
contemplated, in the Approved Budget and/or Approved Operating Plan, as
applicable, with regard to the Company or any Company Property;

 

(xv)         the engagement of any servicer, manager, contractor, or sales or
placement agent or broker not expressly permitted hereunder for the management,
leasing, servicing, disposition, financing or refinancing of any Company
Property;

 

(xvi)        exercising any right, and the making of any material claim, demand
or application, the conduct of any material proceedings, the approval, consent
or determination of any material matter and/or the taking of any other material
action by or on behalf of the Company under any material agreement or contract
to which the Company is a party (including any Transaction Document);

 

(xvii)       the execution and delivery, amendment, restatement, replacement,
supplement or other modification of any of the Transaction Documents and any
approval, consent or other determination with respect to the foregoing;

 

(xviii)      determining the types and amounts of insurance coverage for the
Company and the Company Property, and the deductibles and underwriters with
regard thereto;

 

(xix)         the removal, dismissal, termination, replacement or employment of
the on-site manager of a Property or any other individual acting in a similar
capacity with respect to the Property;

 

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(xx)          the approval, determination or any other action expressly reserved
to BH under this Agreement, including, without limitation, any modification,
amendment, or renewal of any matter previously requiring the Approval of BH;

 

(xxi)         except as otherwise provided in this Agreement, extension of any
loans to any Member or its Affiliates;

 

(xxii)        acquisition of or lease of any additional real property by the
Company other than the Property;

 

(xxiii)       any act in contravention of this Agreement which would make it
impossible to carry out the business of the Company;

 

(xxiv)       admission of any additional Member into the Company or otherwise
issuing any equity interest in the Company or creating any subsidiaries of the
Company;

 

(xxv)        causing the Company to make any distribution of Company Property in
kind to any Member;

 

(xxvi)       changing the nature of the business conducted by the Company or its
purposes as described in Section 2.5 hereof;

 

(xxvii)      any merger, consolidation or other business combination transaction
involving the Company;

 

(xxviii)     with regard to any other Person in which the Company holds a direct
or indirect equity interest, the making of any decision, taking any action or
providing any consent or approval with regard to any matter which if made or
taken by the Company would have been a Major Decision as set forth in this
Agreement or which requires the consent of approval of the shareholders, board
of directors, executive committee, managing members, general partners or similar
management body or persons of any other Person in which the Company holds an
equity interest pursuant to any agreement, contract, document or law;

 

(xxix)       taking any action, entering into any agreement, or approving any
action or agreement by the Company (i) which would impair either Member’s
ability to invoke the procedures set forth in Article XV or Article XVI or their
respective rights thereunder, (ii) that will have the effect of subordinating
the rights of the Members to exercise their respective rights under
Section Article XV or Article XVI, or (iii) that will require any pre-payment of
indebtedness owed by the Company as a result of the exercise of the Members’
rights pursuant to Section Article XV or Article XVI;

 

(xxx)        selection of a general contractor to renovate the Property or to
restore the Property following a casualty or condemnation;

 

(xxxi)       making any tax elections that may affect the REIT status of
Behringer Harvard Opportunity REIT II, Inc. or any of its affiliates or the
acceleration or

 

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deferral of deductions or any other tax election that BH has specified in
writing to the Managing Member, including any elections noted as part of review
and Approval any tax return (collectively “BH Reserved Tax Elections”) required
by any federal, state or local Laws for the Company;

 

(xxxii)              changing the BH Reserved Tax Elections or methods of
reporting income or loss for federal or state income tax purposes provided for
in this Agreement unless required under applicable Law;

 

(xxxiii)             Approval or replacement of the tax matters partner;

 

(xxxiv)             Approval of any federal, state or local tax return to be
filed on behalf of the Company, which Approval may not be unreasonably withheld,
delayed or conditioned;

 

(xxxv)              any release, compromise, assignment or transfer of any
material claims of or any material rights or benefits of the Company;

 

(xxxvi)             in the event of fire, other casualty or partial condemnation
of the Property where the cost of repair or restoration exceeds 10% of the value
of the Property immediately prior to such casualty or condemnation, to determine
whether to construct or reconstruct improvements unless such construction or
reconstruction is required under the terms and provisions of any lease, mortgage
or security deed affecting the damaged or condemned portion of the Property;

 

(xxxvii)            settlement of any insurance claims by the Company where the
amount in controversy is greater than $25,000;

 

(xxxviii)           any decision regarding any environmental matter relating to
the Property, including, without limitation, the adoption of and implementation
of any operation and maintenance program or any other program to remove or
otherwise remediate hazardous materials or relating to the introduction or
allowance of any substance regulated of as a hazardous substance under
applicable Law (other than (1) supplies for cleaning, maintenance and operations
in commercially reasonable amounts required for use in the ordinary course of
business, provided such items are incidental to the use of the Property and are
used, stored and disposed of in compliance with all applicable Requirements of
Environmental Laws, and (2) gas, oil and other ordinary automotive fluids
contained in an ordinary manner in motor vehicles visiting the Property in the
ordinary course of business); provided, however, with respect to any
environmental matter that, if not timely resolved, would result in a violation
of any environmental indemnity or covenant provided by an indemnitor under the
Loan Documents or the Company to any lender, tenant or insurance company, or
would otherwise result in a violation of law, BH hereby agrees to reply promptly
(in no less than ten (10) days) to requests regarding such environmental
matters, provided that Managing Member indicates the urgency of such request
when providing notice of the Major Decision;

 

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(xxxix)              requiring Additional Capital Contributions in accordance
with Section 4.2(a);

 

(xl)                   making any allocations or distributions other than as
provided in Article VI of this Agreement;

 

(xli)                  establishing of or additions to a pre-approved list of
signatories on bank accounts (the initial list of pre-approved signatories is
attached hereto as Appendix C); provided, however, either Member shall have the
unilateral right to remove any Person from such pre-approved list of
signatories, and upon any such Person’s removal, such Person shall immediately
cease to have rights as a signatory on bank accounts;

 

(xlii)                 selecting title insurance underwriters which the Company
may use for any future loans on or sales of the Property;

 

(xliii)                any reciprocal easement agreement or similar agreement to
be entered into on behalf of the Company;

 

(xliv)               selecting outside Company auditors or any appraiser or
evaluation expert retained by the Company;

 

(xlv)                [intentionally omitted];

 

(xlvi)               approving the interim closing of the Company’s books on the
permitted Transfer of a Member’s Interest; and

 

(xlvii)              winding up the affairs of the Company after a voluntary or
involuntary dissolution.

 

(b)           The Managing Member shall have all of the same powers and duties
as a general partner of a limited partnership under the Laws of the State of
Delaware, including, without limitation (but subject to the other provisions of
this Agreement), the full power and authority to cause the Company to:

 

(i)            acquire, hold, operate, manage, sell, transfer, assign, convey,
exchange, lease, sublease, mortgage or otherwise dispose of or deal with all or
any part of the Company Property;

 

(ii)           in furtherance of the Company’s purposes and business, borrow
money, whether on a secured or unsecured basis, refinance, recast, modify,
amend, extend, compromise or otherwise deal with any such loan, and in
connection therewith, issue evidences of indebtedness and secure the same by
mortgages, deeds of trust, security agreements or other similar documents
affecting the assets of the Company;

 

(iii)          authorize other persons to execute and deliver such documents on
behalf of the Company as the Managing Member may deem necessary or desirable for
the Company’s business, including, without limitation, guaranties and
indemnities;

 

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(iv)          perform, or cause to be performed, all of the Company’s
obligations under any agreement to which the Company is a party;

 

(v)           enter into contracts on behalf of the Company and make
expenditures as are required to operate and manage the Company and the Company
Properties; and

 

(vi)          do, or cause to be done, any act which is necessary or desirable
to carry out any of the purposes of the Company.

 

(c)           Only the Managing Member shall have the right or power to make
decisions on behalf of and exercise control over the Company business, affairs
or operations; provided, however, that the Managing Member may elect to
implement those decisions through any Member it selects in writing, pursuant to
the terms hereof, and/or through one or more officers it elects in writing; and
provided further that the Managing Member may not, without the Approval of BH,
take any action which specifically requires the Approval of BH pursuant to the
terms hereof. Except as otherwise provided in this Agreement, BH shall not have
the right, absent prior authorization from the Managing Member, to bind the
Company by reason of Section 18-402 of the Delaware Act.

 

(d)           Notwithstanding anything in this Agreement to the contrary, the
Managing Member shall have no authority to perform any act for, on behalf of or
with respect to the Company in violation of any provision of any Management
Agreement or other property management or material agreement or loan agreement
(or Loan Document) to which the Company is a party, the Transaction Documents
and any and all applicable Laws, rules or regulations.

 

(e)           Notwithstanding anything to the contrary contained in this
Agreement, all Net Cash Flow and Net Capital Proceeds of the Company shall be
deposited into an account in the name of the Company, as set forth in
Section 7.2(c)(vi), prior to distribution of all or any portion thereof pursuant
to Article VI. The designation of such account pursuant to this
Section 7.1(e) shall have no effect on the distributions to be made pursuant to
Article VI.

 

7.2           Duties of Managing Member.

 

(a)           The Managing Member shall use commercially reasonable efforts to
implement the Approved Budget and Approved Operating Plan (including the Initial
Approved Budget and Approved Operating Plan) and shall otherwise perform those
duties set forth below, and shall have the authority to perform the duties
described in this Section 7.2 or as otherwise specifically set forth herein, in
each instance subject to the requirement of receiving the prior Approval of BH,
if and when required by the terms hereof. Specifically, the Managing Member
shall:

 

(i)            conduct the business of the Company on a day-to-day basis, and
use diligent efforts to cause such operations to be conducted in accordance with
the Approved Budget and the Approved Operating Plan, which duties may be
discharged by delegating the same to a property and/or development manager
pursuant to the Management Agreements;

 

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(ii)           subject to the limitations set forth in this Agreement, enter
into contracts and leases for the Company Property on behalf of the Company in
accordance with the current Approved Budget and Approved Operating Plan, and
make expenditures as are required to implement such Approved Budget and Approved
Operating Plan, but only to the extent that any such expenditures and amounts
required to be paid by the Company under such contracts, leases and other
instruments and documents are consistent with the parameters set forth in the
Approved Budget and Approved Operating Plan or otherwise authorized by the terms
of this Agreement; and

 

(iii)          perform such other duties and obligations as BH and MP shall
agree from time to time.

 

Subject to any right provided to the Managing Member to be reimbursed for
Company Expenses pursuant to Section 7.5, and subject further to the fees
authorized pursuant to the provisions of Section 7.3, the Managing Member shall
not otherwise be entitled to receive any fees or other compensation in respect
of any duties or services, and will not receive reimbursement for compensation
payable to any of its employees or other direct or indirect overhead which may
be attributable to such duties and services.

 

(b)           Notwithstanding anything to the contrary contained in
Section 7.1(a)(iii), if at the beginning of any calendar year the Budget and
Operating Plan or any item or portion thereof shall not have been Approved by
BH, then:

 

(i)            any items or portions of the Budget and Operating Plan and
amounts of expenses provided therein which have been so Approved shall become
operative immediately and the Managing Member shall be entitled to expend funds
in accordance with those operative portions;

 

(ii)           with respect to the Budget, the Managing Member shall be entitled
to, and shall, expend, in respect of non-capital, recurring expenses in any
month of the then-current calendar year, an amount equal to the budgeted amount
for the corresponding month of the immediately preceding calendar year, as set
forth on the immediately preceding calendar year Approved Budget after giving
effect to any dispositions or other material changes to the Company Property
during the prior or current year; provided, however, that if any contract
Approved by BH or entered into pursuant to the provisions hereof provides for an
automatic increase in costs thereunder after the beginning of the then current
calendar year, then the Managing Member shall be entitled to expend the amount
of such increase; and

 

(iii)          the Managing Member shall be entitled to, and shall, expend funds
in respect of debt service on the Company’s financing (including the expense of
curing any defaults thereunder), utilities, real estate taxes and assessments,
insurance and emergency repairs, any annual or other periodic fees, or other
expenditures which the Managing Member determines are necessary for the
continued ordinary operation of the Company Property, including without
limitation uninsured losses or deductibles, operating shortfalls, repairs,
additions or modifications to comply with applicable Laws or insurance
requirements, insurance premiums for insurance policies Approved by BH,

 

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and any final orders, judgments, or other proceedings and all costs and expenses
related thereto, regardless of whether the Budget has been approved or whether
such expenditures exceed the amounts provided for in the applicable Budget (all
of the foregoing described in this clause (iii), collectively, “Necessary
Expenses”).

 

(c)           Subject to the availability of adequate funds therefor in the
Approved Budget and from Operating Revenues, Capital Contributions or other
sources, and subject further, in any event, to the provisions of Section 7.1 and
any other relevant provisions hereof, in addition to and without limiting any
other duties set forth in this Agreement, the Managing Member shall:

 

(i)            oversee, coordinate and process the operations of the Company on
a day-to-day basis, including without limitation, the management, servicing,
leasing, development, renovation and sale of any and all of the assets which
comprise any portion of the Company Property, and prepare all communications
with any property manager, any tenant, lender and any other relevant third
parties;

 

(ii)           take all proper and necessary actions reasonably required to
cause the Company and all third parties at all times to perform and comply with
the terms and provisions (including without limitation, any provisions requiring
the expenditure of funds by the Company) of the Management Agreements, any Loan
Documents, the Transaction Documents and any other agreement, mortgage, lease,
or other contract, instrument or agreement to which the Company is a party or is
bound, or which affects all or any portion of the Company Property or the
operation thereof;

 

(iii)          pay in a timely manner all non-disputed operating expenses of the
Company in accordance with the terms of the Approved Budget and the Approved
Operating Plan or as otherwise provided herein;

 

(iv)          to the extent available, obtain and maintain insurance coverage on
the Company Property as Approved by BH and pay all non-disputed taxes,
assessments, charges and fees payable in connection with the ownership, use and
occupancy of the Company Property;

 

(v)           deliver to the other Members promptly upon the receipt or sending
thereof, copies of all material notices, reports and communications (other than
routine, usual and customary notices and other standard communications) between
the Company and any lender, manager, governmental agencies, neighboring property
owners, community groups and other relevant third parties affecting all or any
portion of any Company Property, or any of such other parties, which relates to
any existing or pending default thereunder or to any financial or operational
information required by such Person;

 

(vi)          deposit all receipts from operations of the Company Property to a
separate account established and maintained by the Managing Member in the name
of the Company, and not commingle those receipts with any other funds or
accounts of the Managing Member;

 

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(vii)         assist in the management and administration of the process of
selling and financing all or any portion of the Company Property;

 

(viii)        if and to the extent the Managing Member delegates to any loan
servicer or property manager (previously Approved by BH) or subcontracts with
any third party or Affiliate for the performance of any of the services to be
performed by the Managing Member, supervise and oversee the performance of the
services performed by such third parties or Affiliates and cause the same to be
performed in the manner required hereunder; and

 

(ix)           execute and deliver agreements, certificates and similar
documents (in the name or on behalf of the Company) which are necessary to
obtain and/or maintain any third party loan pursuant to Loan Documents Approved
by BH, as well as manage any approved financing or refinancing, on terms
Approved by BH.

 

(d)           Notwithstanding anything to the contrary contained in this
Agreement, BH shall have the absolute right, power and authority at any time
upon and after (i) the occurrence of any For Cause Event (as set forth in
Section 7.2(e) below) or (ii) the occurrence of any Event of Default (as set
forth in Article XII) to remove MP as the Managing Member and appoint or
designate BH or an Affiliate of BH as a replacement Managing Member.

 

(e)           Upon and after the occurrence of any For Cause Event as described
in this Section 7.2(e), or any Event of Default with respect to any member of
the MP Member Group, in each case subject to any applicable cure rights, BH
shall have the right in its sole and absolute discretion to terminate MP as the
Managing Member by the delivery of written notice and, upon any such termination
(1) BH may cause the Company to terminate any Management Agreement with an
Affiliate of MP immediately and without payment of a termination fee, (2) BH may
designate a successor Managing Member (which may be itself or an Affiliate of
BH), (3) any distributions to the Members under Sections 6.3 and 6.4 shall no
longer be made under Sections 6.3 and 6.4 hereof and from that time forward
shall be made instead under Section 6.5 hereof; provided, however, that this
clause (3) shall only apply in the event of a termination of MP as the Managing
Member as a result of a Promote-Loss For Cause Event or an Event of Default, and
(4) BH may make a Buy-Sell Offer under Section 15.1 and, notwithstanding
anything to the contrary contained in this Agreement, BH shall have the
unilateral right and authority to make all decisions on behalf of the Company
and cause the Company to take any and all actions which BH, in its sole
discretion, may determine. For the purposes of this Agreement, a “For Cause
Event” shall mean any of the following:

 

(i)            any actions or omissions on the part of (i) any on-site personnel
that are not cured as provided below or (ii) the MP Member Group or any of its
representatives (including, without limitation any MP Person), or by any other
Person at the explicit direction of any manager of MP or any MP Person which
amounts to fraud, willful misconduct or gross negligence; provided, however,
that with respect to any fraud, willful misconduct or gross negligence by any
on-site personnel not acting at the explicit direction of an MP Person (or at
the explicit direction of another Person acting at the explicit direction of an
MP Person), MP shall have the right to cure any damage or loss to the Company
resulting from an above-described action or omission within a Reasonable

 

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Period, which cure may include, but is not limited to, payment by MP to the
Company of the amount of any such damage or loss, and upon completion of such
cure within a Reasonable Period, it shall be deemed that no For Cause Event has
occurred as a result of any such act or omission by any on-site personnel; or

 

(ii)           any Change in Control occurs; or

 

(iii)          the Managing Member takes any action which, under this Agreement,
requires the consent or Approval of BH, without obtaining such consent or
Approval (except where BH is required not to withhold such consent or Approval
unreasonably, such consent or Approval has been duly requested and BH has either
unreasonably withheld it or has failed, within thirty (30) days after such
request, to state a reasonable objection to such action in a written notice to
the Managing Member); provided, however, that in the event MP has inadvertently
neglected to obtain the consent or Approval of BH, MP shall have the right to
cure any such action (if such action is susceptible of cure) within a Reasonable
Period by (A) reversing such action (to the extent such action can be reversed
without the Company or BH suffering any damage or liability), or (B) taking such
other steps as may be necessary to cure any damage or loss to the Company or BH
to the satisfaction of BH in its sole discretion resulting from such
unauthorized action or omission within a Reasonable Period, which cure may
include, but is not limited to, payment by MP to the Company or BH of the amount
of any damage or loss to the Company or BH resulting from such unauthorized
action, and upon completion of such cure within a Reasonable Period, it shall be
deemed that no For Cause Event has occurred. For purposes of the preceding
sentence, the inadvertent failure to MP to obtain the consent of BH to the
following actions shall be deemed susceptible of cure and, accordingly, MP shall
be afforded a Reasonable Period to cure same: the Major Decisions described in
Sections 7.1(a)(i)-(viii), 7.1(a)(xiv)-(xxi), 7.1(a)(xxviii), 7.1(a)(xxx),
7.1(a)(xxxviii), 7.1(a)(xlii), and 7.1(a)(xlv)-(xlvii).

 

(f)            Notwithstanding anything to the contrary elsewhere in this
Agreement, including Sections 6.5 and 7.2(e), MP may not be removed as the
Managing Member and Section 6.5 shall not become applicable until such time as
MP and its Affiliates are released from liability and indemnified for events or
matters occurring or relating to the period after the date of removal of MP as
the Managing Member and which do not relate to acts or omissions of any of the
MP Member Group or any Person Affiliated with the MP Member Group consistent
with the provisions of Section 15.2 as if MP were the selling Member under such
Section 15.2 (including the limitation thereof relating to environmental
hazards).

 

(g)           MP’s appointment as the Managing Member shall automatically
terminate if it (or a Permitted Transferee thereof) is no longer a Member of the
Company.

 

7.3           Management of the Property; Fees.

 

(a)           On the Closing Date, the Managing Member shall cause the Company
to enter into the Property Amendment in the form attached hereto as Appendix A
to add the Property to the Oversight Agreement and the Property Management
Contract in the form Approved by BH, which shall provide for the payment of
market standard leasing commissions

 

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and management fees in the aggregate amount of 3.75% of the Gross Revenues (as
defined therein) under the Management Agreements comprised of (i) 0.50% payable
under the Oversight Agreement and (ii) 3.25% payable under the Property
Management Contract and subject to the terms set forth therein.

 

(b)           Provided that the Property is purchased by the Company on the
Closing Date, beginning on the first day of the calendar month that is at least
30 days following Closing, and continuing on the first day of each calendar
month thereafter, until termination of this Agreement, the Company will pay MP
an asset management fee (the “Asset Management Fee”) equal to One Thousand Six
Hundred Sixty-Five and 00/100 Dollars ($1,665.00).

 

(c)           Provided that the Property is purchased by the Company on the
Closing Date, the Company will pay Purchaser an acquisition fee in the amount of
One Hundred Eighty-Seven Thousand Five Hundred Dollars ($187,500) and will pay
Behringer Harvard Opportunity Advisors II LP, a Texas limited partnership (or
its designee), an acquisition fee in the amount of One Hundred Eighty-Seven
Thousand Five Hundred Dollars ($187,500).

 

7.4           Duties and Conflicts.

 

(a)           The Members and their respective officers, employees, and
Affiliates shall devote such time to the Company business as they deem to be
necessary or desirable in connection with their respective duties and
responsibilities hereunder. Except as provided hereunder or as otherwise agreed
to in writing by the Members, no Member nor any member, partner, shareholder,
officer, director, employee, agent or representative of any Member shall receive
any salary or other remuneration for its services rendered pursuant to this
Agreement.

 

(b)           Each of the Members recognizes, acknowledges and agrees as
follows:

 

(i)            each of the Members and their respective Affiliates, employees,
agents, and representatives have or may have in the future other business
interests, activities and investments, some of which may be in conflict or
competition with the business of the Company, and are entitled to carry on such
other business interests, activities and investments;

 

(ii)           each of the Members and their respective Affiliates, employees,
agents, and representatives may engage, invest in and/or possess an interest in,
independently, with one another, or with others, any business activity of any
type or description, including without limitation, those that might be the same
as or similar to the business of the Company and that might be in direct or
indirect competition with the Company, and including, without limitation,
owning, financing, acquiring, leasing, promoting, developing, improving,
operating, managing and servicing real property and loans on its own behalf or
on behalf of other entities with which any of the Members is affiliated or
otherwise;

 

(iii)          each of the Members and their respective Affiliates, employees,
agents, and representatives may engage in any such activities, whether or not
competitive with the Company, without any obligation to offer any interest in
such activities to the Company or to the other Members;

 

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(iv)          neither the Company nor any Member shall have any right, by virtue
of this Agreement, in or to such ventures or activities, or the income or
profits derived therefrom, and the pursuit of such activities, even if
competitive with the business of the Company, shall not be deemed wrongful or
improper; and

 

(v)           the obligations and duties of the Members to each other and to the
Company shall be limited solely to those arising under the Transaction
Documents, and neither the Members nor their respective Affiliates shall be
obligated to present any investment opportunity or prospective economic
advantage to the Company or the Members, even if the opportunity is of the
character that, if presented to the Company or the Members, could be taken by
any of them.

 

(c)           Until such time as the Company has been dissolved in accordance
with Section 11.1, the MP Member Group and its respective Affiliates shall not
own or manage or participate in the ownership or management of any competing
multifamily apartment project of the same general class and with similar rent
parameters as the Property within a three-mile radius of the Property that may
compete with or be detrimental to the Property, unless such ownership or
management has been Approved by BH in its sole discretion. Such Approval rights
shall (i) cease to be applicable at such time as either (A) the Company no
longer has any ownership interest in the Property, or (B) neither BH nor any
Affiliate has any interest in the Company; and (ii) not apply to the existing
projects of the MP Member Group and its Affiliates owned or managed on the date
of this Agreement

 

(d)           Notwithstanding the preceding provisions of this Section 7.4, no
member of the MP Member Group or their Affiliates shall initiate the
solicitation of tenants in any building that comprises any part of the Property
to move to other buildings owned or managed by any member of the MP Member Group
or their Affiliates outside of the Company without the prior written consent of
BH. As used herein the term “initiate the solicitation of” shall mean the
initiation of contact directly between the MP Member Group or its Affiliates and
a tenant regarding a move by such tenant to a property which is not the
Property; provided, however, that such term shall in no event apply to
(i) responses to requests for proposals submitted by tenants or their brokers,
agents or representatives or (ii) new or additional requirements of such tenants
or (iii) general advertising. Furthermore, no member of the MP Member Group nor
their Affiliates shall actively discourage prospective tenants from leasing
available space in a building that comprises all or part of the Property and
shall not discriminate against a building that comprises any part of the
Property in favor of other properties owned outside the Company in its
presentations and communications with potential tenants.

 

7.5           Company Expenses.  The Company shall be responsible for paying,
and shall pay, all costs and expenses related to the business of the Company and
of acquiring, holding, owning, developing, leasing, servicing, collecting upon
and operating the Company Property, except for (i) costs of preparing the
reports to Members specifically called for by the terms hereof and the Approved
Budget and Operating Plan, which shall be the cost of the Managing Member
(provided that reasonable third party costs (including audit and legal) incurred
in connection with the same shall be at the Company’s expense), (ii) costs to be
borne by any third party under any agreement with the Company, and (iii) costs
to be borne by any Member or its Affiliates as specifically provided in this
Agreement or the Management Agreements. Subject to the

 

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preceding sentence and the other provisions of this Agreement, all management
fees and expenses payable under Section 7.3, costs of financing and financing
fees, fees and disbursements of attorneys, financial advisors, accountants,
appraisers, brokers and engineers, travel expenses, and all other fees, costs
and expenses directly attributable to the business and operations of the Company
shall be borne by the Company. In the event any such costs and expenses are or
have been paid by any Member, such Member shall be entitled to be reimbursed for
such payment so long as such payment is reasonably necessary for Company
business or operations and has been Approved by the other Member or is expressly
authorized in this Agreement or the appropriate Approved Budget or Approved
Operating Plan (including any permitted variance hereunder).  Notwithstanding
the foregoing, in no event shall the Company have any obligation to pay or
reimburse any Member or any of their respective Affiliates for any general
overhead or similar costs and expenses of such Member or Affiliate.

 

7.6           Venture Coordinator.  BH will designate an asset manager for its
investment in the Company (the “Venture Coordinator”) who will have primary
responsibility for fulfilling BH’s obligations under this Agreement and will be
empowered to Approve matters for and on behalf of BH, including with respect to
Major Decisions. Such Venture Coordinator shall be designated in writing and may
be changed by BH by Notice to MP.

 

7.7           Enforcement of Affiliate Agreements.  Notwithstanding anything
herein or in any other agreement to the contrary, in the event the Company has
the right to terminate, amend, modify, extend, renew, waive, consent to or
approve any material right or exercise any remedy with regard to any Management
Agreement or other agreement between the Managing Member or any Affiliate of the
Managing Member, on the one hand, and the Company, on the other hand, then the
exercise of any such right on behalf of the Company, including the giving of any
notice or approval with regard thereto, will be controlled solely by BH which
shall have the right to cause the Company to exercise any rights to vote or
influence the actions of the Company in connection therewith, and the Managing
Member shall not have the right to exercise any control over the Company’s
actions in respect thereof. Any decision made by BH in accordance with the
preceding sentence shall be implemented solely by BH.

 

ARTICLE VIII
BOOKS, RECORDS, REPORTS AND PROPERTY PLAN

 

8.1           Books and Records. The Managing Member shall maintain, or cause to
be maintained, at the expense of the Company, in a manner customary and
consistent with good accounting principles, practices and procedures, a
comprehensive system of office records, books and accounts (which records, books
and accounts shall be and remain the property of the Company) in which shall be
entered fully and accurately each and every financial transaction with respect
to the ownership and operation of the Company Property. Bills, receipts and
vouchers shall be maintained on file by the Managing Member. The Managing Member
shall maintain or cause to be maintained said books and accounts in a safe
manner and separate from any records not having to do directly with the Company
or any Company Property. At the cost and expense of the Company, the Managing
Member shall cause audits to be performed and audited statements and income tax
returns to be prepared as required by Section 8.3. Such books and records of
account shall be prepared and maintained by the Managing Member at the principal
place of business of the Managing Member. Each Member or its duly authorized

 

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representative shall have the right to inspect, examine and copy such books and
records of account at the Company’s office during reasonable business hours.
Additionally, upon request of a Member, all professionals given access to any
such books or records shall be directed to provide such books or records to such
Member.

 

8.2           Accounting and Fiscal Year. The books of the Company shall be kept
on the accrual basis in accordance with GAAP and on a tax basis and the Company
shall report its operations for tax purposes on the accrual method. The fiscal
year and federal income tax year of the Company shall end on December 31 of each
year, unless a different tax year shall be required by the Code.

 

8.3           Reports.

 

(a)           The Managing Member will prepare, or cause to be prepared, at the
expense of the Company, and furnish to each Member the following within the
periods set forth below (provided that for so long as it diligently performs its
obligations hereunder, the Managing Member shall not be responsible for the
delays of any Person that is not an Affiliate of Managing Member or reputable
accountants or auditors retained by the Managing Member on behalf of the
Company), all of which shall be certified by the Managing Member as being true
and correct:

 

(i)            within ten (10) days after the end of each calendar month of the
Company; provided, however, that if such day is a holiday or weekend, then on
the following business day, (A) an unaudited balance sheet of the Company dated
as of the end of such calendar month, (B) an unaudited related income statement
of the Company for such calendar month, (C) an unaudited statement of each
Member’s Capital Account for such calendar month, (D) an unaudited statement of
cash flows of the Company for such calendar month, and (E) a reconciliation of
actual Operating Expenses and Operating Revenues during such period compared
with the Budget amounts for such items, and (F) a monthly explanation of the
discrepancies; and

 

(ii)           within twelve (12) days after the end of each calendar month, a
status report of the Company’s activities during such calendar month, including
summary descriptions of additions to, dispositions of and leasing and occupancy
of Company Property and any material legal issues such as claims filed or
threatened against the Company, material claims of the Company against other
parties and developments in any then pending legal actions affecting the Company
during such month.

 

(b)           The Managing Member will prepare, or cause to be prepared, on an
accrual basis in accordance with GAAP and on a tax basis, at the expense of the
Company, and furnish to each Member no later than January 15 after the end of
each fiscal year of the Company the following, all of which shall be certified
by the Managing Member as being true and correct:

 

(i)            an unaudited balance sheet of the Company dated as of the end of
such fiscal year;

 

(ii)           an unaudited related income statement of the Company for such
fiscal year;

 

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(iii)          an unaudited statement of each Member’s Capital Account for such
fiscal year;

 

(iv)          an unaudited statement of cash flows of the Company as of the end
of the fiscal year; and

 

(v)           such other supporting schedules, reports and backup information as
are reasonably requested by BH; provided that any such supporting schedules,
reports, and backup information shall not be required to be provided on less
than fifteen days notice.

 

(c)           In addition, if requested by BH, the Managing Member will prepare,
at the expense of the Company, and furnish to each Member within forty-five (45)
calendar days after the end of each fiscal year of the Company, the final
audited amount of net income of the Company for such fiscal year and, within
sixty (60) calendar days after the end of such taxable year, each of the
following, all of which shall be certified by the Managing Member as being true
and correct and all of which shall be certified in the customary manner by the
Company Accountant (which firm shall provide such balance sheet, income
statement and statement of Capital Account in draft form to the Members for
review prior to finalization and certification thereof) (i) an audited balance
sheet of the Company dated as of the end of such taxable year; (ii) an audited
related income statement of the Company for such taxable year; (iii) an audited
statement of cash flows for such taxable year; and (iv) an audited statement of
each Member’s Capital Account for such taxable year.

 

(d)           All schedules of book income shall be prepared on a GAAP basis.
Promptly after the end of each fiscal year, the Managing Member will cause the
Company Accountant to prepare and deliver to each Member a report setting forth
in sufficient detail all such additional information and data with respect to
business transactions effected by or involving the Company during the fiscal
year as will enable the Company and each Member to timely prepare its federal,
state and local income tax returns in accordance with applicable Laws, rules and
regulations. The Managing Member will use its diligent commercially reasonable
efforts to cause the Company Accountant to prepare all federal, state and local
tax returns required of the Company, submit those returns to the other Members
for their approval not later than March 1st of the year following such fiscal
year and will file the tax returns after they have been Approved by BH and the
Managing Member.

 

(e)           The Managing Member shall prepare, or cause to be prepared, at
Company expense, such additional financial reports and other information as BH
may determine are appropriate. The Managing Member will furnish to each Member
upon request, at the expense of the Company, copies of all reports, statements,
notices and other material written information received by the Company or the
Managing Member from, or delivered by or on behalf of the Company to, any third
party lender. Subject to the provisions of Section 13.14, each Member shall be
permitted to deliver to any of its Affiliates, and BH shall be permitted to
deliver to any of its direct or indirect members, partners or investors, a copy
of any of the reports and statements provided to such Member pursuant to this
Section 8.3.

 

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(f)            All decisions as to accounting principles shall be made by the
Managing Member with the Approval of BH, subject to the provisions of this
Agreement.

 

8.4           The Company Accountant. The Company shall retain as the regular
accountant and auditor for the Company (the “Company Accountant”) any
nationally-recognized accounting firm designated by the Managing Member and
Approved by BH from time to time or any other accountant and auditor Approved by
BH. The reasonable fees and expenses of the Company Accountant shall be a
Company expense.

 

8.5           Reserves. The Managing Member may, in its discretion and subject
to the Approval of BH and such conditions as it shall determine, establish
reasonable reserves for the purposes and requirements as it may deem
appropriate.

 

8.6           The Budget and Operating Plan. No later than the Closing Date, the
Managing Member shall have prepared and submitted to BH for Approval (and BH
shall have Approved) a preliminary estimated Budget for the period through
December 31, 2011 and Operating Plan for the Company for the period from the
Closing Date through December 31, 2011, which shall include projected costs to
operate the Company and make tenant improvements, leasing conversions and
capital expenditures to be set forth therein to be made in the budget period
following acquisition of the Property and shall be in the form attached as
Appendix B hereto (the “Initial Approved Budget and Operating Plan”).
Thereafter, commencing for the 2012 fiscal year, the Budget and Operating Plan
shall be prepared in proposed form and submitted annually by the Managing Member
to BH for Approval at least sixty (60) calendar days prior to the end of the
current fiscal year (so that the Managing Member will submit a Budget and
Operating Plan for the 2012 fiscal year no later than November 1, 2011 to BH for
its Approval) with respect to the following fiscal year, together with five
(5) year forward projections (provided if the Managing Member should fail to
timely prepare and submit in proposed form any such Budget and Operating Plan,
BH shall be authorized to prepare such Budget and Operating Plan). In
formulating the comprehensive Budget and Operating Plan, to the extent
reasonably feasible at the time of preparation thereof, the Managing Member will
develop (for Approval by BH) proposed strategies regarding (i) plans for
renovation, leasing, financing, sale and rehabilitation of the Property and any
other real property and proposed reductions to Operating Expenses and other
Company costs and expenses and increases in revenues, (ii) preparation and
release of all promotional and advertising material relating to, and a marketing
plan for, the Company Property or concerning the Company, (iii) terms for any
proposed sale or disposition of any Company Property, or acquisition of
additional Company Property, and (iv) selection of legal counsel, accountants,
appraisers and other consultants for the Company to efficiently implement the
Approved Budget and Operating Plan. The Managing Member will also consider and
make recommendations to the extent it deems the same appropriate regarding the
financing, amendment, modification, alteration, change, cancellation, or
prepayment of any indebtedness evidenced by any loan presently or hereafter
affecting any Company Property, and procurement of title insurance and other
insurance for the Company, or decrease or vary the insurance carried by or on
behalf of the Company and any other matters affecting the Company’s business. BH
and the Managing Member may from time to time review the Approved Budget and
Operating Plan and make such amendments or modifications thereto as they shall
jointly determine to be appropriate or necessary.

 

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8.7           Accounts. All short term or liquid funds of the Company shall be
deposited in such checking accounts, savings accounts, time deposits, or
certificates of deposit in the name of the Company or shall otherwise be
invested in the name of the Company, in such manner as shall be jointly Approved
by the Managing Member and BH. Company funds shall not be commingled with those
of any other person or entity. Company funds shall be used only for the business
of the Company.

 

8.8           REIT Matters. Within fifteen (15) days following the end of each
calendar quarter, the Company shall provide to BH all tax information requested
by BH and necessary for BH (or its REIT affiliates) to comply with the REIT
requirements under Sections 856 and 857 of the Code (provided that BH has
advised MP of what tax information is necessary to accomplish such compliance).
Notwithstanding anything to the contrary in this Agreement, neither the Company
nor any Member (acting on the Company’s behalf) shall take any action which
would cause BH (or its REIT affiliates) to (a) fail to qualify as a “real estate
investment trust” (as defined under Sections 856 & 857 of the Code) or (b) incur
any additional taxes under Section 857 or Section 4981 of the Code (or any
successor provisions). In particular, the Company shall conduct its business
affairs in a manner so as to avoid incurring income that would not qualify under
Sections 856(c)(2) and 856(c)(3) of the Code and will not acquire assets that
are not described in Section 856(c)(4) of the Code unless approved by BH. The
Members shall periodically consult with each other (or their designee) to ensure
that any prospective transaction undertaken by the Company, or a Member acting
on behalf of the Company, shall not cause BH (or its REIT affiliates) to fail to
qualify as a REIT. If the Members disagree as to whether any transaction will
cause BH (or its REIT affiliates) to fail to qualify as a REIT (as defined under
Sections 856 and 857 of the Code) or incur any additional taxes under
Section 857 or Section 4981 of the Code (or any successor provisions), the
reasonable determination of BH shall be final.

 

ARTICLE IX
TRANSFER OF INTERESTS

 

9.1           No Transfer. Except as expressly permitted or contemplated by this
Agreement (including pursuant to Sections 9.2 and 9.5 below, and pursuant to
Article XV), no Member may sell, assign, give, hypothecate, pledge, encumber or
otherwise transfer (“Transfer”) all or any portion of its Interest, whether
directly or indirectly, without the Approval of the other Members. Any Transfer
in contravention of this Article IX shall be null and void. In no event shall
any Member transfer all or any part of its Interest to any Person if, as a
result of such Transfer, a Prohibited Person would be the direct, indirect, or
beneficial owner of all or a portion of such Interest. No Member, without the
prior Approval of the other Members, shall resign from the Company except as
permitted by this Article IX. Nothing in this Article IX is meant to or will be
interpreted to restrict in any way the ability of any equityholder in Behringer
Harvard Opportunity REIT II, Inc. BHO II, Inc., BHO Business Trust II or
Behringer Harvard Opportunity OP II, LP and/or their constituent owners from
transferring securities issued by such entities.

 

9.2           Permitted Transfers.

 

(a)           Notwithstanding anything to the contrary contained in this
Agreement but subject to the terms of the Loan Documents, BH and the MP Member
Group may from time to

 

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time without the consent or Approval of BH or the MP Member Group, as
applicable, Transfer (directly or indirectly) all or any portion of its direct
or indirect interest in the Company to any Affiliate other than a Prohibited
Person; provided, however, that any such Transfer (either individually or when
aggregated with any other prior Transfer by such Member or MP Member Group under
this Section 9.2(a)) shall not result in a Change in Control.

 

(b)           Notwithstanding anything to the contrary contained in this
Agreement but subject to the terms of the Loan Documents, any Member, its
constituents and/or the direct or indirect individual holders of any interest in
the Company may Transfer (directly or indirectly) all or any portion of its
direct or indirect interest in the Company to any Person (other than a
Prohibited Person) for estate planning purposes or to a trust for the benefit of
the immediate family members of the ultimate direct or indirect individual
holders of an interest in such Member on the date of this Agreement; provided,
however, that, any such Transfer (either individually or when aggregated with
any other prior Transfers by such Member or MP Member Group under this
Section 9.2(b)) shall not result in a Change in Control.

 

(c)           A transferee under Sections 9.2(a) or Section 9.2(b) in which the
Transfer otherwise complies with all of the requirements of this Article IX is a
“Permitted Transferee.” Any permitted Transfer under Sections 9.2(a) and
9.2(b) above shall not relieve the transferor of any of its obligations prior to
such Transfer. The parties hereto agree to amend the transfer provisions of
Article IX if any Member reasonably determines that such amendment is necessary
for the Company to be treated as a partnership for federal and state income tax
purposes. Nothing contained in this Article IX shall prohibit a Transfer
indirectly of any Interest in the Company if a direct Transfer would otherwise
be permitted under this Section 9.2. Subject to Section 9.3, any Permitted
Transferee pursuant to this Section 9.2 shall become a Member of the Company.
The provisions of this Section 9.2 will not apply to or be deemed to authorize
or permit any collateral transfer of, or grant of a security interest in, a
Member’s Interest in the Company, or in Company Property (which transfer or
grant shall be subject to the other provisions of this Agreement).

 

(d)           Notwithstanding the foregoing, if the Company is required by
applicable Law to recognize a Transfer that is not a permitted Transfer (an
“Unapproved Transfer”) (or if the Managing Member and the non-transferring
Member(s), in its (or their) sole discretion, shall elect to recognize but not
Approve a Transfer that is not a permitted Transfer), the Interest Transferred
shall be strictly limited to the transferor’s rights to allocations and
distributions as provided by this Agreement with respect to the transferred
Interest, which allocations and distributions may be applied (without limiting
any other legal or equitable rights of the Company) to satisfy any debts,
obligations, or liabilities for damages that the transferor or transferee of
such Interest may have to the Company or any other Member prior to any other
allocations or distributions relating to the Unapproved Transfer. In the case of
a Transfer or attempted Transfer of an Interest that is not a permitted
Transfer, the parties engaging or attempting to engage in such Transfer shall be
liable to indemnify and hold harmless the Company and the other Members from all
cost, liability and damage that any of such indemnified Persons may incur
(including, without limitation, incremental tax liability and lawyers’ fees and
expenses) as a result of such Transfer or attempted Transfer and efforts to
enforce the indemnity granted hereby. A Person who acquires an Interest in an
Unapproved Transfer as provided in this Section 9.2(d) but who is not admitted
as a substituted Member shall be entitled only to allocations and distributions
with respect to such Interest in accordance with

 

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this Agreement, and shall have no right to any information or accounting of the
affairs of the Company, shall not be entitled to inspect the books or records of
the Company, and shall not have any of the rights of a Member under the Act or
this Agreement, including any voting rights; provided, however, that no rights,
including but not limited to rights to distributions, shall be transferred or
permitted with respect to any Interest if a Prohibited Person would be the
direct, indirect or beneficial owner of all or any portion of such rights.

 

9.3           Transferees. Notwithstanding anything to the contrary contained in
this Agreement, no transferee of all or any portion of any Interest shall be
admitted as a Member unless (a) such Interest is transferred in compliance with
the applicable provisions of this Agreement, (b) such transferee shall have
furnished evidence of satisfaction of the requirements of Section 9.2 reasonably
satisfactory to a Majority-In-Interest of the remaining Members, and (c) such
transferee shall have executed and delivered to the Company such instruments as
a Majority-In-Interest of the remaining Members reasonably deem necessary or
desirable to effectuate the admission of such transferee as a Member and to
confirm the agreement of such transferee to be bound by all of the terms and
provisions of this Agreement with respect to such Interest. At the request of a
Majority-In-Interest of the remaining Members, each such transferee shall also
cause to be delivered to the Company, at the transferee’s sole cost and expense,
a favorable opinion of legal counsel, to the effect that (i) such transferee has
the legal right, power and capacity to own the Interest proposed to be
transferred, (ii) if applicable, such Transfer does not violate any provision of
any loan commitment or any mortgage, deed of trust or other security instrument
encumbering all or any portion of the Company Property or any Loan Document, and
(iii) such Transfer does not violate any federal or state securities Laws and
will not cause the Company to become subject to the Investment Company Act of
1940, as amended. As promptly as practicable after the admission of any Person
as a Member, the books and records of the Company shall be changed to reflect
such admission. All reasonable costs and expenses incurred by the Company in
connection with any Transfer of any Interest and, if applicable, the admission
of any transferee as a Member shall be paid by such transferee.

 

9.4           Section 754 Election. In the event of a Transfer of all or part of
the Interest of a Member, at the request of the transferee or if required by the
Code, or if otherwise in the best interests of the Company (as determined by a
Majority-In-Interest of the Members), the Company shall elect pursuant to
Section 754 of the Code to adjust the basis of Company Property as provided by
Sections 734 and 743 of the Code, and any cost of such election or cost of
administering or accounting for such election shall be at the sole cost and
expense of the requesting transferee.

 

9.5           Other Transfers.

 

(a)           On or after the second annual anniversary of this Agreement, in
the event BH or the MP Member Group desires to Transfer its Interest in a manner
which is not a permitted Transfer under Section 9.2(a) or (b), BH or the MP
Member Group, as applicable, may otherwise Transfer all of its Interest to a
bona fide third party transferee provided that as a condition to completing such
Transfer, the transferring Member or the MP Member Group (“Triggering Party”)
shall first deliver to the other Member or MP Member Group (“Recipient Party”)
written notice of its intention to sell all of its Interest (“Target Interest”)
setting forth the proposed purchase price and such other terms and conditions of
the proposed sale (“Transfer

 

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ROFO Notice”). At any time within thirty (30) calendar days after the date the
Recipient Party receives the Transfer ROFO Notice (the “Transfer Response
Period”), the Recipient Party shall have the right, exercisable by delivery of
notice in writing (the “Transfer Election”) to the Triggering Member, to either:

 

(i)            Approve the sale of the Target Interests and authorize the
Triggering Party to attempt to sell or dispose of the Target Interests on the
terms and conditions set forth in the Transfer ROFO Notice; or

 

(ii)           offer to purchase all of the Target Interests for a cash purchase
price and on the terms set forth in the Transfer ROFO Notice and subject to no
other terms and conditions (the “Acceptable Transfer Terms”).

 

(b)           Any election pursuant to Section 9.5(a)(ii) above shall be made by
(x) delivering to the Triggering Party the Transfer Election, which shall
affirmatively state that the Recipient Party is exercising such option, and
(y) depositing in an escrow account at a bank or other financial institution
selected by the Triggering Party (the “Transfer Escrow Agent”), a deposit equal
to 5% of the purchase price (the “Transfer Escrow Deposit”) (as set forth in the
applicable Acceptable Transfer Terms) within five calendar days of such
election. In the event of an election to purchase pursuant to
Section 9.5(a)(ii) above, within 60 calendar days of the date of the Recipient
Party’s Transfer Election to purchase, the Recipient Party and the Triggering
Party shall close the purchase of the Target Interests and the Triggering Party
shall assign the Target Interest to the Recipient Party or to a designee of the
Recipient Party, upon receipt of payment of the purchase price. All closings of
any purchase and sale under this Section 9.5 will be held at the Company’s
principal office and will take place no later than the closing date set forth in
the applicable Acceptable Transfer Terms.

 

(c)           If during the Transfer Response Period the Recipient Party neither
(x) authorizes the Triggering Party to attempt to sell the applicable Target
Interests as provided in Section 9.5(a)(i) nor (y) elects to purchase the Target
Interests of the Triggering Party’s provided in Section 9.5(a)(ii), then the
Recipient Party shall be deemed to have authorized and have Approved a Transfer
of the Target Interests pursuant to Section 9.5(a)(i) to a bona fide third party
transferee, for a purchase price not less than 95.0% of the purchase price set
forth in the Acceptable Transfer Terms, and otherwise pursuant to such other
terms, conditions and provisions as are determined appropriate in the reasonable
discretion of the Triggering Party. In the event the Recipient Party authorized
or is deemed to have authorized the Transfer of the applicable Target Interests
pursuant to the terms described above, and the Triggering Party thereafter
receives a bona fide offer for the purchase of the Target Interests from any
party for a purchase price which is at least equal to 95.0% of the purchase
price set forth in the Acceptable Transfer Terms, the Triggering Party may
consummate the sale of the Target Interest on such terms, without the
requirement of any Approval of the Recipient Party; provided, the Triggering
Party shall have entered into a binding contract for the transfer of the
applicable Target Interests within 180 calendar days after the date on which the
Recipient Party authorized or was deemed to have authorized such transfer, and
such Transfer must be consummated within the same 180-day-calendar-day period.
The failure of the Triggering Party to enter into such binding contract within
the 180-day period referred to in the immediately preceding sentence, shall
require the

 

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Triggering Party to again deliver to the Recipient Party a Transfer ROFO Notice
and to again follow the procedures set forth in this Section 9.5.

 

(d)           In the event the Recipient Party should default in its obligation
to purchase a Target Interest pursuant to the terms of this Section 9.5, the
following shall be the sole remedies for such default:

 

(i)            The Recipient Party will immediately and without any further
action cease to have any rights of first offer pursuant to the provisions of
this Section 9.5, including with regard to any future or subsequent Transfers of
any Interest by the Triggering Party;

 

(ii)           The Recipient Party will immediately and without any further
action cease to have any right to make a Buy-Sell Offer or otherwise trigger or
initiate the provisions set forth in Article XV;

 

(iii)          The Transfer Escrow Agent shall immediately deliver to the
Triggering Party the Transfer Escrow Deposit as liquidated damages to retain for
its own account (such amount shall not be deemed to be a contribution or
distribution of capital, or effect in any way the Capital Account of any Member
or the allocation provisions or any other provisions of this Agreement); and

 

(iv)          Thereafter, the Triggering Party may at any time Transfer all or
any portion of its Interests in the Company, without the prior Approval of the
Recipient Party and without having to comply with the provisions of this
Section 9.5.

 

(e)           Notwithstanding the foregoing, if the provisions of Article XV
have been initiated by any Member, then no Member may initiate the provisions of
this Section 9.5 until the procedures set forth in Article XV have been
completed or terminated pursuant to the provisions of such Article.

 

(f)            Notwithstanding the foregoing provisions of this Article IX, to
the extent any transfer is prohibited or requires the lender’s consent under the
Loan Documents, no transfer shall be permitted until such lender’s consent is
obtained and any transfer must be done in accordance with any applicable
lender’s consent or approval and the requirements of the Loan Documents. Any
transfer prohibited under the Loan Documents which is not consented to as
provided above shall be null and void. To the extent that any fees or expenses
are incurred in connection with a lender’s consent or approval, including a
transfer fee and lender’s legal fees, the Triggering Party shall be responsible
for payment of all such fees and expenses, the payment thereof being a condition
precedent to any such transfer.

 

ARTICLE X
EXCULPATION AND INDEMNIFICATION

 

10.1         Exculpation. No Member, Managing Member, general or limited partner
of any Member, shareholder, partner, or member or other holder of an equity
interest of any Member or manager, officer or director of any of the foregoing,
shall be liable to the Company or to any other Member for monetary damages for
any losses, claims, damages or liabilities arising from

 

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any breach of fiduciary duty or act or omission performed or omitted by it and
arising out of or in connection with this Agreement or the Company’s business or
affairs, provided that any such act or omission was taken in good faith, was
reasonably believed to be in the best interests of the Company and it was within
the scope of authority granted to such Person, and in the case of a Member,
Managing Member or related Person, was not attributable to such Member’s,
Managing Member’s or Person’s fraud, bad faith, willful misconduct or gross
negligence. No general or limited partner of any Member, Managing Member,
shareholder, partner, member or other holder of an equity interest in such
Member, Managing Member or manager, officer of director of any of the foregoing
shall be personally liable for the performance of any such Member’s or Managing
Member’s obligations under this Agreement, but the foregoing shall not relieve
any such partner, shareholder or member of any Member or Managing Member from
its obligations to such Member or Managing Member.

 

10.2         Indemnification.

 

(a)           The Company shall, to the fullest extent permitted by applicable
law, indemnify, defend and hold harmless each Member, the Managing Member and
each general or limited partner of any Member or such Member’s Affiliates,
shareholders, members, partners or other holders of any equity interest in such
Member or its Affiliates, or any manager, officer or director of any of the
foregoing (collectively, the “Indemnitees”), from and against any losses,
claims, demands, liabilities, costs, damages, expenses (including, without
limitation, reasonable fees and expenses of outside counsel) and causes of
action imposed on, incurred by, asserted against or to which such Indemnitee may
otherwise become subject by reason of or in connection with any breach of
fiduciary duty or matter arising out of or incidental to any act performed or
omitted to be performed by any such Indemnitee in connection with this Agreement
or the Company’s business or affairs; provided, that any such act or omission
was taken in good faith, was reasonably believed by the applicable Indemnitee to
be in the best interest of the Company and was within the scope of authority
granted to such Member or applicable Indemnitee, and in the case of a Member or
related Indemnitee, was not attributable to such Indemnitee’s fraud, bad faith,
willful misconduct or gross negligence. Any indemnity under this Section 10.2
shall be paid solely out of and to the extent of Company assets and shall not be
a personal obligation of any Member and in no event will any Member be required,
or permitted without the Approval of all of the Members, to contribute
additional capital under Section 4.2 to enable the Company to satisfy any
obligation under this Section 10.2. All judgments against the Company and the
Members, or any one or more thereof, wherein such Member (or Members) is
entitled to indemnification, must first be satisfied from Company assets.

 

(b)           The Company and each Member shall be indemnified and held harmless
by the other Member from and against any and all claims, demands, liabilities,
costs, damages, expenses and causes of action of any nature whatsoever arising
out of or attributable to (i) any act performed by or on behalf of such Member
(including acts performed as the Managing Member) which is not performed in good
faith or is not reasonably believed by such Member to be in the best interest of
the Company and within the scope of authority conferred upon such Member under
this Agreement, (ii) the fraud, bad faith, willful misconduct or gross
negligence of such Member, (iii) the breach by the Company of any of its
representations and warranties made under any Transaction Document, which breach
was the result of information or matters relating

 

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to such Member, or (iv) any denial of an insurance claim by the Company based on
an intentional misstatement or intentional withholding of information by any
Member.

 

(c)           The provisions of this Section 10.2 shall survive for a period of
four years from the date of dissolution of the Company, provided that, if at the
end of such period there are any actions, proceedings or investigations then
pending, any Indemnitee may so notify the Company and the other Members at such
time (which notice shall include a brief description of each such action,
proceeding or investigation and the liabilities asserted therein) and the
provisions of this Section 10.2 shall survive with respect to each such action,
proceeding or investigation set forth in such notice (or any related action,
proceeding or investigation based upon the same or similar claim) until such
date that such action, proceeding or investigation is finally resolved.

 

(d)           Notwithstanding anything to the contrary contained in this
Agreement, the obligations of the Company or any Member under this Section 10.2
shall (i) be in addition to any liability which the Company or such Member may
otherwise have and (ii) inure to the benefit of such Indemnitee, its Affiliates
and their respective members, partners, shareholders, managers, directors,
officers, employees, agents and Affiliates and any successors, assigns, heirs
and personal representatives of such Persons.

 

(e)           Notwithstanding any of the preceding provisions of this
Section 10.2, in no event shall the Company have any obligation under this
Section 10.2 that is prohibited by the charter of Behringer Harvard Opportunity
REIT II, Inc., as same may exist as of the date of this Agreement or after any
amendment hereafter made in order to comply with laws and regulations applicable
to real estate investment trusts. BH represents and warrants to MP that there is
no Company obligation under this Section 10.2 that is prohibited by the charter
of Behringer Harvard Opportunity REIT II, Inc., as such charter exists as of the
date of this Agreement.

 

ARTICLE XI
DISSOLUTION AND TERMINATION

 

11.1         Dissolution.

 

(a)           The Company shall be dissolved and its business wound up upon the
earliest to occur of any of the following events:

 

(i)            the sale, condemnation or other disposition of all Company
Property and the receipt of all consideration therefor;

 

(ii)           the unanimous agreement of the Members to dissolve the Company;
or

 

(iii)          the bankruptcy or dissolution of the last remaining Member (which
shall not include the occurrence of such an event with respect to any Member’s
constituent equity owners which does not cause such an event to occur with
respect to the Member itself) or the occurrence of any other event that
terminates the continued membership of all Members in the Company.

 

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(b)           Without limitation on, but subject to, the other provisions
hereof, the assignment of all or any part of a Member’s Interest permitted
hereunder will not result in the dissolution of the Company. Except as otherwise
specifically provided in this Agreement, each Member agrees that, without the
Approval of the other Members, a Member may not withdraw from or cause a
voluntary dissolution of the Company. In the event a Member withdraws from or
causes a voluntary dissolution of the Company in contravention of this
Agreement, such withdrawal or the causing of a voluntary dissolution shall not
affect such Member’s liability hereunder.

 

11.2         Termination. In all cases of dissolution of the Company, the
business of the Company shall be wound up and the Company terminated as promptly
as practicable thereafter, and each of the following shall be accomplished:

 

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

 

(b)           The Company Property shall be liquidated by the Liquidating Member
as promptly as possible, but in an orderly and businesslike and commercially
reasonable manner and subject to the provisions of the Operating Plan then in
effect or a liquidating plan Approved by BH. The Liquidating Member may
distribute Company Property in kind only with the Approval of all Members.

 

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

 

(i)            first, to the payment of (A) the debts and liabilities of the
Company (including any outstanding amounts due on any indebtedness encumbering
the Company Property, or any part thereof) and (B) the expenses of liquidation;

 

(ii)           second, subject to the Approval of BH, to the setting up of any
reserves which the Liquidating Member and the Managing Member shall determine to
be reasonably necessary for contingent, unliquidated or unforeseen liabilities
or obligations of the Company or any Member arising out of or in connection with
the Company. Such reserves may, in the discretion of the Liquidating Member, be
paid over to a national bank or national title company selected by it and
authorized to conduct business as an escrow agent to be held by such bank or
title company as escrow agent for the purposes of disbursing such reserves to
satisfy the liabilities and obligations described above, and at the expiration
of such period as the Liquidating Member may reasonably deem advisable,
distributing any remaining balance as provided in Section 11.2(c)(iii);
provided, however, that, to the extent that it shall have been necessary, by
reason of applicable law or regulation, to create any reserves prior to any and
all distributions which would otherwise have been made under
Section 11.2(c)(i) and, by reason thereof, a distribution under
Section 11.2(c)(i) has not been made, then any balance remaining shall first be
distributed pursuant to Section 11.2(c)(i);

 

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(iii)          thereafter, the balance, if any, to the Members in accordance
with Section 6.6.

 

11.3         Liquidating Member.  The Liquidating Member is hereby irrevocably
appointed as the true and lawful attorney in the name, place and stead of each
of the Members, such appointment being coupled with an interest, to make,
execute, sign, acknowledge and file with respect to the Company all papers which
shall be necessary or desirable to effect the dissolution and termination of the
Company in accordance with the provisions of this Article XI. Notwithstanding
the foregoing, each Member, upon the request of the Liquidating Member or the
Managing Member, shall promptly execute, acknowledge and deliver all such
documents, certificates and other instruments as the Liquidating Member or the
Managing Member shall reasonably request to effectuate the proper dissolution
and termination of the Company, including the winding up of the business of the
Company.

 

11.4         Claims of the Members. Members and former Members shall look solely
to the Company’s assets for the return of their Capital Contributions, and if
the assets of the Company remaining after payment of or due provision for all
debts, liabilities and obligations of the Company are insufficient to return
such Capital Contributions, the Members and former Members shall have no
recourse against the Company or any other Member.

 

ARTICLE XII
DEFAULT BY MEMBER

 

12.1         Events of Default. For the purposes of this Agreement, an “Event of
Default” shall exist with respect to a Member if and so long as any of the
following shall occur and be continuing:

 

(a)           A voluntary Transfer of any Member’s Interest, other than a
permitted Transfer made in accordance with Sections 9.2 and 9.5 or Article XV.

 

(b)           A Member’s voluntary withdrawal as a Member for any reason other
than a permitted Transfer of its Interest and the admission of the transferee as
a Member in its stead (in accordance with the applicable provisions of
Sections 9.2 or 9.5).

 

(c)           Any representation or warranty of such Member contained in
Sections 13.1, 14.1, or 14.2 is inaccurate or untrue in any material respect.

 

(d)           Such Member or its Affiliates shall violate any other material
term, breach any material provision or default in the performance of any of its
duties or material covenant applicable to such Member as set forth in this
Agreement (excluding a failure to make Additional Capital Contributions, the
exclusive remedy for which is set forth in Section 4.2) and (i) such violation,
breach or default causes a loss or damage in excess of $125,000 to the Company,
or any of its Members or their respective Affiliates, and (ii) such violation,
breach or default is not cured (including without limitation, by the breaching
Member reimbursing the Company or the affected Member for the resulting damage
or loss) within a Reasonable Period.

 

(e)           Solely with respect to MP, an “event of default” shall occur and
be continuing under any Management Agreement or other material agreement that
the Company

 

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enters into with the MP Member Group or any of its Affiliates, and (i) such
violation, breach or default causes Material Damage or Loss to the Company, or
any of its Members or their respective Affiliates, and (ii) such violation,
breach or default is not cured (including without limitation, by the MP Member
Group reimbursing the Company or the affected Member for the resulting Material
Damage or Loss) within a Reasonable Period.

 

Notwithstanding the foregoing provisions of this Section 12.1, a failure by any
Member to make any Additional Capital Contribution to the extent required or
requested hereunder shall not constitute an Event of Default by such Member.

 

12.2         Effect of Event of Default. Subject to the provisions hereof, upon
the occurrence of an Event of Default by BH or the MP Member Group, then the
non-defaulting party (BH or the MP Member Group) shall have the right, at any
time within one year from the date of such Event of Default and upon giving the
defaulting party at least ten (10) days prior written notice of such election to
pursue any right or remedy available to it at law or in equity against the
defaulting party (which shall represent a recourse obligation of such party). In
addition, BH shall have the remedies set forth in Section 7.2(e) if the
defaulting party is any member of the MP Member Group.

 

ARTICLE XIII
MISCELLANEOUS

 

13.1         Representations and Warranties of the Members.

 

(a)           Each Member represents and warrants to the other Members as
follows:

 

(i)            It is duly organized, validly existing and in good standing under
the Laws of its jurisdiction of formation with all requisite power and authority
to enter into this Agreement and to conduct the business of the Company.

 

(ii)           This Agreement constitutes the legal, valid and binding
obligation of the Member enforceable in accordance with its terms.

 

(iii)          No consents or approvals are required from any governmental
authority or other person or entity for the Member to enter into this Agreement
and the Company. All limited liability company, corporate or partnership action
on the part of the Member necessary for the authorization, execution and
delivery of this Agreement, and the consummation of the transactions
contemplated hereby, have been duly taken.

 

(iv)          The execution and delivery of this Agreement by the Member, and
the consummation of the transactions contemplated hereby, does not conflict with
or contravene the provisions of its organizational documents or any agreement or
instrument by which it or its properties are bound or any law, rule, regulation,
order or decree to which it or its properties are subject.

 

(v)           The Member has not retained any broker, finder or other commission
or fee agent other than NorthMarq or Lender and no such person has acted

 

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on its behalf in connection with the acquisition of the Company Property or the
execution and delivery of this Agreement.

 

(vi)          It understands that (A) an investment in the Company involves
substantial and a high degree of risk, (B) no federal or state agency has passed
on the offer and sale of the Interest in the Company to such Person, (C) it must
bear the economic risk of such Person’s investment in the Company for an
indefinite period of time, since such Person’s Interest in the Company has not
been registered for sale under the Securities Act of 1933 and, therefore, cannot
be sold or otherwise transferred unless subsequently registered under the
Securities Act of 1933 or an exemption from such registration is available, and
the Interest in the Company of such Person cannot be sold or otherwise
transferred unless registered under applicable state securities or blue sky Laws
or an exemption from such registration is available, (D) there is no established
market for the Interest of such Person in the Company and no public market will
develop and (E) such Person’s principals have such knowledge and experience in
real estate and, other financial and business matters that they are capable of
evaluating the merits and risks of an investment in the Company. It has acquired
its Interest solely for investment purposes only and not for the purpose of
resale.

 

(vii)         Neither such Member, nor, to such Member’s knowledge, any Person
who holds any interest in such Member and with respect only to MP, nor any MP
Person is a Prohibited Person nor a Person with whom a U.S. Person, including a
“financial institution” as defined in 31 U.S.C. 5312 (a)(z), as amended
(“Financial Institution”), is prohibited from transacting business of the type
contemplated by this Agreement or any Transaction Agreement, whether such
prohibition arises under United States law, regulation, executive orders and
lists published by the OFAC (including those executive orders and lists
published by OFAC with respect to Specially Designated Nationals and Blocked
Persons) or otherwise.

 

(viii)        Such Member has taken, and shall continue to take, such measures
as are required by applicable law to assure that the funds used to pay sellers
and lessors under the Transaction Agreements are derived: (i) from transactions
that do not violate United States law nor, to the extent such funds originate
outside the United States, do not violate the Laws of the jurisdiction in which
they originated; and (ii) from permissible sources under United States law and
to the extent such funds originate outside the United States, under the Laws of
the jurisdiction in which they originated.

 

(ix)           Such Member is in compliance with all applicable provisions of
the USA Patriot Act of 2001, Pub. L. No. 107-56.

 

(b)           In addition, MP represents and warrants to BH that it and the
Property Manager are Controlled by the MP Persons.

 

(c)           Each Member agrees to indemnify and hold harmless the Company and
each other Member and their officers, directors, shareholders, partners,
members, employees, successors and assigns from and against any and all loss,
damage, liability or expense (including costs and attorneys’ fees) which they
may incur by reason of, or in connection with, any breach

 

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of the foregoing representations and warranties or those set forth in
Article XIV made by such Member and all such representations and warranties
shall represent recourse obligations of the Members and will survive the
execution and delivery of this Agreement and the termination and dissolution of
the Company or any Member.  In addition, BH agrees to indemnify MP, the MP
Persons and their respective Affiliates for any losses or liabilities incurred
by them under any nonrecourse carveouts under the Loan which directly result
from any unauthorized transfers of the Property by BH or its Affiliates, from
any transfers of direct or indirect interests in BH, or from the fraud, willful
misconduct or gross negligence of BH.

 

13.2         Further Assurances. Each Member agrees to execute, acknowledge,
deliver, file, record and publish such further instruments and documents, and do
all such other acts and things as may be required by law, or as may be required
to carry out the intent and purposes of this Agreement.

 

13.3         Notices. All notices, demands, consents, requests for Approvals, or
other requests or communications which any of the parties to this Agreement may
desire or be required to give hereunder (collectively, “Notices”) shall be in
writing and shall be given by (i) personal delivery, (ii) facsimile transmission
with confirmed receipt or (iii) a reputable overnight courier service, fees
prepaid, addressed as follows:

 

If to BH to:

 

Behringer Harvard Parrot’s Landing, LLC
15601 Dallas Parkway, Suite 600
Addison, TX 75001

Attn: Executive Vice President of Real Estate
Fax: (214) 655-1610

 

 

 

With a copy to:

 

Behringer Harvard Opportunity REIT II, Inc.
15601 Dallas Parkway, Suite 600
Addison, TX 75001
Attn: Chief Legal Officer
Fax: (214) 655-1610

 

 

 

If to MP
and MP Persons to:

 

Margate Peak, LLC

4582 South Ulster Street Parkway, Suite 1200

Denver, Colorado 80237

Attn: Luke C. Simpson

Fax: (303) 991-3143

 

 

 

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

 

Otten, Johnson, Robinson, Neff & Ragonetti, P.C.

950 Seventeenth Street, Suite 1600

Denver, Colorado 80202

Attn: Michael Westover, Esq.

Fax: (303) 825-6525

 

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Any Member may designate another addressee (and/or change its address) for
Notices hereunder by a Notice given pursuant to this Section 13.3. A Notice sent
in compliance with the provisions of this Section 13.3 shall be deemed given on
the date of receipt.

 

13.4         Governing Law. This Agreement shall be governed by and construed in
accordance with the Laws of the State of Delaware applicable to agreements made
and to be performed wholly within that State.

 

13.5         Captions. All titles or captions contained in this Agreement are
inserted only as a matter of convenience and for reference and in no way define,
limit, extend, or describe the scope of this Agreement or the intent of any
provision in this Agreement.

 

13.6         Pronouns and Interpretation. All pronouns and any variations
thereof shall be deemed to refer to the masculine, feminine, and neuter,
singular and plural, as the identity of the party or parties may require. Unless
the context otherwise requires, (i) all references made in this Agreement to a
Section, Schedule, Annex or an Exhibit are to a Section, Schedule, Annex or an
Exhibit of or to this Agreement, (ii) “or” is disjunctive but not necessarily
exclusive, (iii) “will” shall be deemed to have the same meaning as the word
“shall” and (iv) words in the singular includes the plural and vice versa.
Whenever the words “include,” “includes” or “including” are used in this
Agreement, they shall be deemed to be followed by the words “without
limitation,” where or not so followed. All references to “$” or dollar amounts
are to lawful currency of the United States of America, unless otherwise
expressly stated.

 

13.7         Successors and Assigns. This Agreement shall be binding upon the
parties hereto and their respective executors, administrators, legal
representatives, heirs, successors and assigns, and shall inure to the benefit
of the parties hereto and, except as otherwise provided herein, their respective
executors, administrators, legal representatives, heirs, successors and
permitted assigns.

 

13.8         Extension Not a Waiver. No delay or omission in the exercise of any
power, remedy or right herein provided or otherwise available to a Member or the
Company shall impair or affect the right of such Member or the Company
thereafter to exercise the same. Any extension of time or other indulgence
granted to a Member hereunder shall not otherwise alter or affect any power,
remedy or right of any other Member or of the Company, or the obligations of the
Member to whom such extension or indulgence is granted.

 

13.9         Creditors Not Benefited. Nothing contained in this Agreement is
intended or shall be deemed to benefit any creditor of the Company or any
creditor of any Member, and no creditor of the Company shall be entitled to
require the Company or the Members to solicit or accept any Additional Capital
Contribution for the Company or to enforce any right which the Company or any
Member may have against any Member under this Agreement or otherwise or under
any guaranty.

 

13.10       Recalculation of Interest. If any applicable law is ever judicially
interpreted so as to deem any distribution, contribution, payment or other
amount received by any Member or the Company under this Agreement as interest
and so as to render any such amount in excess of the maximum rate or amount of
interest permitted by applicable law, then it is the express intent of the
Members and the Company that all amounts in excess of the highest lawful rate or
amount

 

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theretofore collected be credited against any other distributions,
contributions, payments or other amounts to be paid by the recipient of the
excess amount or refunded to the appropriate Person, and the provisions of this
Agreement immediately be deemed reformed, without the necessity of the execution
of any new document, so as to comply with the applicable law, but so as to
permit the payment of the fullest amount otherwise required hereunder. All sums
paid or agreed to be paid that are judicially determined to be interest shall,
to the extent permitted by applicable law, be amortized, prorated, allocated and
spread throughout the term of such obligation so that the rate or amount of
interest on account of such obligation does not exceed the maximum rate or
amount of interest permitted under applicable law.

 

13.11       Severability. In case any one or more of the provisions contained in
this Agreement or any application thereof shall be invalid, illegal or
unenforceable in any respect, the validity, legality and enforceability of the
remaining provisions contained herein and other application thereof shall not in
any way be affected or impaired thereby.

 

13.12       Entire Agreement. This Agreement contains the entire agreement
between the parties relating to the subject matter hereof and all prior
agreements relative hereto which are not contained herein are terminated.
Amendments, variations, modifications or changes herein may be made effective
and binding upon the Members by, and only by, the setting forth of same in a
document duly executed by each Member, and any alleged amendment, variation,
modification or change herein which is not so documented shall not be effective
as to any Member.

 

13.13       Publicity and Press Releases. No public announcement, press release
or other similar public disclosure of the terms of this Agreement, the
activities of the Company, or the plans of the Company will be made unless same
is Approved by BH. However, notwithstanding the preceding sentence, any Member
shall have the right, without obtaining the consent of any other Member, to make
disclosures in the course of normal reporting practices to its prospective
members, shareholders or partners, or actual members, shareholders or partners
or as may, in the reasonable judgment of such Member’s counsel, be required by
applicable Law. Furthermore, it is agreed that the foregoing provisions of this
Section 13.13 shall not prohibit a Member from disclosing such information to
the actual or prospective accountants, attorneys, consultants, lenders and
vendors of the Company to allow such parties to provide services, funds or goods
to the Company. Further, it is understood and agreed that BH is a direct or
indirect subsidiary of Behringer Harvard Opportunity REIT II, Inc., a company
that is required to make public disclosures of material facts and events under
U.S. federal securities Law, and that, notwithstanding anything to the contrary
contained herein, Behringer Harvard Opportunity REIT II, Inc. shall have the
right to determine, in its sole and absolute discretion, whether any such
disclosure is required by U.S. federal securities Law and to make such
disclosure of information as is consistent with such determination. The Members
have agreed that if a Member knowingly and intentionally breaches the obligation
set forth in the first sentence of this Section 13.13 (the “Non-Disclosure
Obligation”), the actual damages that will be incurred by the other Member as a
result of such breach would be extremely difficult or impracticable to
determine. Therefore, the Members agree that if a Member or any Affiliate of a
Member knowingly and intentionally breaches the Non-Disclosure Obligation, such
Member shall pay to the other Member liquidated damages (the “Liquidated
Damages”) in the amount of Twenty Thousand Dollars ($20,000) for each such
breach, such amount having been agreed upon, after negotiation, as the Members’
reasonable estimate of the damages that will be suffered by reason of a knowing
breach of the

 

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Non-Disclosure Obligation. Any Liquidated Damages becoming payable pursuant to
this Section 13.13 shall be paid within ten (10) days after the knowing breach
of the Non-Disclosure Obligation giving rise to the Liquidated Damages. If not
paid within such ten (10) day period, the Liquidated Damages shall thereafter
bear interest at the lesser of twelve percent (12%) per annum or the highest
rate permitted by applicable law. All Company distributions and other payments
that otherwise would be made to the Member that is liable for Liquidated Damages
shall be paid to the other Member until the Liquidated Damages and all interest
accrued thereon are paid in full (with all such payments being applied first to
accrued and unpaid interest and then to the Liquidated Damages).

 

13.14       Confidentiality.

 

(a)           The terms of this Agreement, the identity of any person with whom
the Company may be holding discussions with respect to any investment,
acquisition, disposition or other transaction, and all other business,
financial, or other information relating directly to the conduct of the business
and affairs of the Company, the Company Property or the relative or absolute
rights or interests of any of the Members (collectively, the “Confidential
Information”) that is not already publicly available or that has not been
publicly disclosed pursuant to authorization by all of the Members is
confidential and proprietary information of the Company, the disclosure of which
would cause irreparable harm to the Company and the Members. Accordingly, each
Member represents that it has not and agrees that it will not and will direct
its shareholders, members, partners, directors, officers, agents, advisors and
Affiliates not to, disclose to any Person any Confidential Information or
confirm any statement made by third Persons regarding Confidential Information
until the Company has publicly disclosed the Confidential Information pursuant
to authorization by all of the Members; provided, however, that any Member (or
its Affiliates) may disclose such Confidential Information if required by law
(it being specifically understood and agreed that anything set forth in a
registration statement or any other document filed pursuant to law will be
deemed required by law), if necessary for it to perform any of its duties or
obligations hereunder or in any property management agreement to which it is a
party covering any Company Property, or to market the Company Property or any
Interests as permitted by the terms of this Agreement, and to its attorneys and
advisors who agree to maintain a similar confidence; provided, however, that the
Company, MP and the MP Persons, BH and its Affiliates may disclose Confidential
Information to any of their partners, members, lenders, or other actual or
prospective investor in or Purchaser of the Company Property in accordance with
the terms of this Agreement. Without limitation of the foregoing, it is
understood and agreed that BH is an indirect subsidiary of Behringer Harvard
Opportunity REIT II, Inc., a company that is required to make public disclosures
of material facts and events under U.S. federal securities law, and that in
respect of item (b) in the preceding sentence, Behringer Harvard Opportunity
REIT II, Inc. shall determine, in its sole and absolute discretion, whether any
such disclosure is required by applicable law or regulations. Nothing contained
in the foregoing provisions shall be construed to prohibit the recordation in
the appropriate real estate records of any document that, when executed, is
necessary to effectuate the intent of this Agreement or will evidence or convey
an interest in real property or debt secured by real property and that is
customarily recorded.

 

(b)           Subject to the provisions of Section 13.14(a), each Member agrees
not to disclose any Confidential Information to any Person (other than a Person
(including without

 

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limitation an attorney or advisor) agreeing to maintain all Confidential
Information in strict confidence or a judge, magistrate or referee in any
action, suit or proceeding relating to or arising out of this Agreement or
otherwise), and to keep confidential all documents (including without
limitation, responses to discovery requests) containing any Confidential
Information. Each Member hereby consents in advance to any motion for any
protective order brought by any other Member represented as being intended by
the movant to implement the purposes of this Section 13.14, provided that, if a
Member receives a request to disclose any Confidential Information under the
terms of a valid and effective order issued by a court or governmental agency
and the order was not sought by or on behalf of or consented to by such Member,
then such Member may disclose the Confidential Information to the extent
required if the Member as promptly as practicable (i) notifies each of the other
Members of the existence, terms and circumstances of the order, (ii) consults in
good faith with each of the other Members on the advisability of taking legally
available steps to resist or to narrow the order, and (iii) if disclosure of the
Confidential Information is required, exercises its best efforts to obtain a
protective order or other reliable assurance that confidential treatment will be
accorded to the portion of the disclosed Confidential Information that any other
Member designates. The cost (including without limitation, attorneys’ fees and
expenses) of obtaining a protective order covering Confidential Information
designated by such other Member will be borne by the Company.

 

(c)           The covenants contained in this Section 13.14 will survive the
Transfer of the Interest of any Member and the termination of the Company.

 

13.15       Venue. Each of the Members consents to the jurisdiction of any court
in Wilmington, Delaware, Denver, Colorado, or Dallas, Texas for any action
arising out of matters related to this Agreement. Each of the Members waives the
right to commence an action in connection with this Agreement in any court
outside of Wilmington, Delaware, Denver, Colorado, or Dallas, Texas.

 

13.16       WAIVER OF JURY TRIAL. EACH OF THE MEMBERS HEREBY WAIVES TRIAL BY
JURY IN ANY ACTION ARISING OUT OF MATTERS RELATED TO THIS AGREEMENT, WHICH
WAIVER IS INFORMED AND VOLUNTARY.

 

13.17       Cooperation. In connection with the sale of the Company Property or
any portion thereof, each Member agrees to reasonably cooperate with each other
Member (the “Exchanging Member”), which seeks to structure the disposition of
its Interest in a manner that will afford the Exchanging Member an opportunity
to take advantage of provisions of the Code governing tax free exchanges or
reorganizations; provided that such structuring does not have an adverse effect
on any such sale (including without limitation, with respect to timing), and
provided that the Exchanging Member shall bear all costs and expenses associated
with such structuring, the other Members shall not be required to take title to
any property or interest or assume or be subject to any obligations, and the
Exchanging Member shall indemnify, defend and hold the other Member(s) and the
Company harmless from and against any and all liabilities that they may incur by
reason of their participation or cooperation in such exchange or reorganization
transaction, and such structuring shall not delay any such transaction, and
shall be subject to any reasonable restrictions proposed by the Members that are
not Exchanging Members.

 

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13.18       Counterparts. This Agreement may be executed in multiple
counterparts, each of which shall be an original but all of which together shall
constitute but one and the same agreement.

 

13.19       Attorneys’ Fees. If the Company or any Member obtains a judgment
against any Member by reason of the breach of this Agreement or the failure to
comply with the terms hereof, it is the intent of the parties that reasonable
attorneys’ fees and costs as fixed by the court shall be included in such
judgment.

 

13.20       Effectiveness. Pursuant to Section 18-201(d) of the Delaware Act,
this Agreement shall be effective as of the time of the filing of the
Certificate of Formation with the Office of the Delaware Secretary of State (the
“Effective Date”).

 

ARTICLE XIV
PATRIOT ACT

 

14.1         Compliance with International Trade Control Laws and OFAC
Regulations. Each Member represents, warrants and covenants to the other that:

 

(a)           It is not now nor shall it be at any time during the term of this
Agreement a Person with whom a U.S. Person, including a Financial Institution,
is prohibited from transacting business of the type contemplated by this
Agreement, whether such prohibition arises under U.S. law, regulation, executive
orders and lists published by the OFAC (including those executive orders and
lists published by OFAC with respect to Specially Designated Nationals and
Blocked Persons) or otherwise.

 

(b)           Such Member, no MP Person, and no Person who owns a direct
interest in such Member is not now nor shall be at any time during the term of
this Agreement a Person with whom a U.S. Person, including a Financial
Institution, is prohibited from transacting business of the type contemplated by
this Agreement, whether such prohibition arises under U.S. law, regulation,
executive orders and lists published by the OFAC (including those executive
orders and lists published by OFAC with respect to Specially Designated
Nationals and Blocked Persons) or otherwise.

 

14.2         Member’s Funds.

 

(a)           Each Member represents, warrants and covenants to the other Member
that it has taken, and shall continue to take during the term of this Agreement,
such measures as are required by law to assure that the funds invested in the
Company and/or used to make payments in connection therewith are derived
(i) from transactions that do not violate U.S. law nor, to the extent such funds
originate outside the United States, do not violate the Laws of the jurisdiction
in which they originated; and (ii) from permissible sources under U.S. law or to
the extent such funds originate outside the United States, under the Laws of the
jurisdiction in which they originated.

 

(b)           Each Member further represents, warrants and covenants to the
other Member that, to the best of its knowledge after making due inquiry,
neither the Member, nor any Affiliate, nor any holder of a direct interest in
such Member, no any MP Person, nor any Person

 

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providing funds to such Member (i) is under investigation by any governmental
authority for, or has been charged with, or convicted of, money laundering, drug
trafficking, terrorist related activities, any crimes which in the United States
would be predicate crimes to money laundering, or any violation of any
Anti-Money Laundering Laws; (ii) has been assessed civil or criminal penalties
under any Anti-Money Laundering Laws; (iii) has been convicted of any crimes
involving moral turpitude or tax fraud; and (iv) has had any of its funds seized
or forfeited in any action under any Anti-Money Laundering Laws.

 

14.3         Member Compliance with Patriot Act.  Each Member represents and
warrants that it is in material compliance with any and all applicable
provisions of the Patriot Act.

 

14.4         Cooperation with Other Members.  Each Member agrees to cooperate
with the other Member, in providing such additional information and
documentation on such Member’s legal or beneficial ownership, policies,
procedures and sources of funds as any Member deems necessary or prudent to
enable such Member to comply with Anti-Money Laundering Laws as now in existence
or hereafter amended. From time to time upon the written request of any Member,
each Member shall deliver to the other Member a schedule of the name, legal
domicile address and jurisdiction of organization, if applicable, for such
Member and each holder of a legal interest in such Member.

 

14.5         Actions Taken Pursuant to Anti-Money Laundering Laws.  If any
Member reasonably believes that a Member may have breached any of the
representations, warranties or covenants set forth in this Article XIV, each
such Member has the right (and may have the obligation under applicable law),
with or without notice to such other Member, to (a) notify the appropriate
governmental authority (or authorities) and to take such action as such
governmental authority (or authorities) may direct; and/or (b) withhold
distributions and segregate the assets constituting the Capital Contribution by
such Member or any of such Member’s funds or assets deposited with or otherwise
controlled by the Company pursuant to this Agreement or otherwise. Each Member
agrees that it shall not assert any claim (and hereby waives any claim that it
may now or hereafter have) against any other Member, or agents of such member
for any form or type of damages as a result of any of the foregoing actions,
regardless of whether such other Member’s reasonable belief is ultimately
demonstrated to be accurate.

 

ARTICLE XV
BUY-SELL PROCEDURE

 

15.1         General Provisions.  Either BH or MP (the “Offeror”) may, upon the
occurrence of a Deadlock Event, or if earlier, at any time following an Event of
Default or a For Cause Event with respect to BH or the MP Member Group, in which
event the non-breaching party (BH or MP) may be the Offeror, make an offer as
described below (the “Buy-Sell Offer”) to the other (the “Offeree”), as set
forth below.

 

(a)           The Buy-Sell Offer must (i) be in writing and be signed by the
Offeror, (ii) specify the Offeror’s good faith estimate of the fair market value
of the Company Property (the “Buy-Sell Offer Price”) at which the Offeror would
purchase all of the assets of the Company, as if such assets were free and clear
of all liens, claims and encumbrances (that can be discharged or removed with
the payment of money), (iii) disclose all liabilities and potential

 

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liabilities of the Company known to the Offeror and a good faith estimate of the
monetary amount of such liabilities, and (iv) disclose the terms and details of
any financing, refinancing, proposed sale, or other monetization event that the
Offeror has initiated, negotiated or discussed during the prior one hundred
eighty (180) calendar days with a third party for all or any portion of the
Company Property.

 

(b)           A copy of the Buy-Sell Offer must be delivered to the Offeree and
to the Company Accountant who shall, within ten (10) Business Days of the
Buy-Sell Offer, determine and notify the Members of the amount the Offeree would
receive (the “Offeree Value”) and the amount the Offeror would receive (the
“Offeror Value”) on account of its or their respective Interest(s) and any
Priority Capital Contributions if all Company Property were sold for the
aggregate Buy-Sell Offer Price, all liabilities of the Company were paid in
full, and the remaining proceeds were distributed to the Members in accordance
with Section 6.4.

 

(c)           The Offeree will have the right, exercisable by delivery of notice
in writing (the “Election”) to the Offeror within forty five (45) calendar days
after its receipt of the Buy-Sell Offer, to elect to either:

 

(i)            sell to the Offeror all of the Offeree’s rights, title and
interests in and to its or their Interest(s) in the Company (and in any Priority
Capital Contributions) for a cash purchase price equal to the Offeree Value; or

 

(ii)           purchase all of the Offeror’s rights, title and interests in and
to its or their Interest(s) in the Company (and in any Priority Capital
Contributions) for a cash purchase price equal to the Offeror Value.

 

Failure of the Offeree to timely give the Offeror notice of the Offeree’s
Election will be deemed, upon the expiration of such forty five (45) day period,
to be an Election to sell under Section 15.1(c)(i).

 

(d)           Contemporaneously with the Offeree’s Election or deemed Election,
the purchasing party under this Section 15.1 shall deposit in escrow with a
national title company or bank or other financial institution selected by the
selling party as escrowee an earnest money deposit in cash in an amount equal to
5% multiplied by the purchase price to be paid in connection with such purchase,
and, if for any reason such purchasing party fails to close such purchase as
provided in this Section 15.1, then the selling party may retain such deposit as
liquidated damages for its own account or elect to purchase all of the rights,
title and interests of the purchasing party in and to its or their
Interest(s) (and in any Priority Capital Contributions) for a cash purchase
price equal to 95% of the Offeree Value or Offeror Value, as applicable and
apply such deposit toward the purchase price. All closings of any purchase and
sale under this Section 15.1 will be held at the principal office of the Company
and shall take place no later than that date which is 90 calendar days after the
later of the Offeree’s Election or deemed Election.

 

(e)           Each of BH and MP will be entitled to enforce its rights under
this Section 15.1 by specific performance. If the purchasing party defaults
under this Section 15.1, it will have no right to make any future Buy-Sell Offer
hereunder.

 

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(f)            Any party may freely assign its rights and obligations pursuant
to this Section 15.1 by delivering notice of such assignment to BH or MP (as
applicable), provided that the assigning party will remain liable for any and
all obligations of its assignee, as if such party had not assigned its rights
pursuant to this Section 15.1.

 

(g)           Notwithstanding the foregoing, if the provisions of Section 9.5 of
this Agreement have been initiated by a Member, then no Member may initiate the
provisions of this Section 15.1 until the procedures set forth in Section 9.5
have been completed or terminated pursuant to the provisions thereof. No
Buy-Sell Offer may be made until all periods for making elections and performing
obligations under any previous Buy-Sell Offer pursuant to this Section 15.1 have
terminated.

 

15.2         Termination of Other Agreements. If a purchase and sale of
Interests under this Article XV is completed, all agreements between the Company
and a selling Member or its Affiliates related to the Company Property
(including the Management Agreements) will (at the election of the purchasing
party) be terminated on the date such Interest is purchased without payment of
any penalty or termination fee. In addition, at the closing of such purchase
made in accordance with Section 15.1, the purchaser shall, at its option, either
(i) obtain a release of the selling Member and its Affiliates from all
liability, direct or contingent, by all holders of all Company debts,
obligations or claims for which the selling Member or its Affiliates may be
personally liable (including any guaranties of the non-recourse carve-outs)
occurring or relating to the period on and after the date of the approval by the
lender under the Loan of the same and provided that such release shall not be
required to extend to any liability relating to environmental hazards under the
Loan Documents arising out of conditions existing on or before the date of the
of purchase of such Interests, or (ii) deliver to the selling Member an
agreement in form and substance reasonably satisfactory to the selling Member
from a creditworthy Affiliate to assume the debts, obligations or claims of the
selling Member and its Affiliates with respect to, and to defend, indemnify and
save the selling Member and its Affiliates harmless from, any liability to the
holders of such Company debts, obligations or claims; provided, however, that
such assumption and indemnification shall not extend to those claims arising
from the fraud, bad faith, willful misconduct or gross negligence of the selling
Member or any of its Affiliates. Unless such agreement and the indemnity from
such credit worthy party have been Approved by the selling Member in its
reasonable discretion by the closing, then the purchaser shall obtain the
release provided for above in clause (i).

 

15.3         Power of Attorney. In the event that the Offeror or Offeree shall
have failed or refused, within five calendar days after receipt of a notice from
the other requesting such party to execute, acknowledge and deliver such
documents, or cause the same to be done, as shall be required to effectuate the
provisions of Section 15.1 hereof, then the non-defaulting party may execute,
acknowledge and deliver such documents for, on behalf of and in the stead of the
defaulting party or on behalf of and in the name of the Company, as applicable,
and such execution, acknowledgment and delivery by the non-defaulting party
shall be for all purposes effective against and binding upon the defaulting
party or the Company, as applicable, as though such execution, acknowledgment
and delivery had been by the defaulting party or the Company, as applicable.
Each of the Members does hereby irrevocably constitute and appoint the other
Members as the true and lawful attorney in fact of such appointing Member, in
the name, place and stead of such appointing Member, as the case may be, to
execute, acknowledge and deliver

 

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such documents under the circumstances contemplated by this Section 15.3. It is
expressly understood, intended and agreed by each Member, that the grant of the
power of attorney to the other Members pursuant to this Section 15.3 is coupled
with an interest, is irrevocable and shall survive the death, dissolution,
termination or legal incompetency of such appointing Member, as the case may be,
or the assignment of the interest of such appointing Member in the Company, or
the dissolution of the Company.

 

ARTICLE XVI
RIGHT OF BH TO TRIGGER SALE OF THE PROPERTY; ROFO

 

16.1         ROFO on the Sale of the Property.

 

(a)           If on or after the second anniversary of this Agreement and
subject to the terms of any applicable Loan Documents, BH desires to sell the
Property to any third party, BH shall first deliver to MP written notice of its
intention to offer to sell the Property setting forth the proposed cash purchase
price which BH is willing to accept and all other material terms and conditions
of the proposed sale (“ROFO Notice”). BH need not have located a prospective
purchaser or have in its possession an actual offer to purchase in order to
exercise its rights pursuant to this Section 16.1(a). The ROFO Notice shall
include a statement by BH setting forth the financing and encumbrances, if any,
to which the Property will remain subject to upon conveyance (the “Permitted
Exceptions”) and shall be at a price stated in U.S. dollars only.

 

(b)           At any time within forty-five (45) calendar days after the date MP
receives the ROFO Notice (the “ROFO Response Period”), MP shall have the right,
exercisable by delivery of notice in writing (the “ROFO Election”) to BH to
either:

 

(i)            approve the terms of the proposed sale of the Property and
authorize BH to cause the Company to sell or dispose of the Property on the
terms and conditions set forth in the ROFO Notice; or

 

(ii)           purchase the Property for a purchase price equal to the cash
purchaser price stated in the ROFO Notice, less the sum of any debt or other
obligations to be assumed by the purchaser and on the other terms and conditions
set forth in the ROFO Notice and subject to no other terms and conditions.

 

(c)           Any election pursuant to subparagraph (ii) of
Section 16.1(b) above shall be made by (i) delivering to BH the ROFO Election,
which shall affirmatively state that MP is exercising such option, and
(ii) depositing in escrow with a national title company or a bank or other
financial institution selected by BH (the “ROFO Escrow Agent”), as escrowee, a
non-refundable earnest money deposit in cash equal to five percent (5%) of the
purchase price (the “ROFO Escrow Deposit”) (as set forth in the ROFO Notice)
within five (5) calendar days of such election. BH and the MP Member Group shall
close the purchase of the Property within 45 calendar days of the date of MP’s
ROFO Election to purchase pursuant to subparagraph (ii) above and the Company
shall convey the entire fee simple title to the Property by special warranty
deed to MP or its designee, against receipt of payment of the cash portion of
the purchase price and assumption of any debt as aforesaid, subject to no title
exceptions or other

 

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encumbrances other than the Permitted Exceptions (and such other title
exceptions as do not materially affect the operations of the Property).

 

(d)           If during the ROFO Response Period, MP does not (i) authorize BH
to attempt to sell the Property as provided in Section 16.1(b)(i) above, or
(ii) timely elect to purchase the Property by following the procedures in
Section 16.1(b)(ii) above, then MP shall be deemed to have authorized and
approved the sale of the Property pursuant to Section 16.1(b)(i), for a purchase
price not less than ninety-five (95%) of the purchase price set forth in the
ROFO Notice and otherwise pursuant to such other terms, conditions and
provisions as are determined appropriate in the reasonable discretion of BH. If
MP authorizes or is deemed to have authorized the sale of the Property pursuant
to the terms described above, and the Company thereafter receives a bona fide
offer for the purchase of the Property from any third party for a purchase price
payable at closing which is at least equal to ninety-five percent (95%) of the
purchase price set forth in the ROFO Notice, BH may consummate the sale of the
Property on such terms set forth in the ROFO Notice, without the requirement of
any consent or Approval of any other Member; provided, however, such sale must
be consummated within 360 calendar days after the date on which MP authorized or
was deemed to have authorized such sale. The failure of the Company to close
such sale within the 360-day period referred to in the immediately preceding
sentence requires BH to again deliver to MP an additional ROFO Notice and to
again follow the procedures set forth in this Section 16.1.

 

(e)           All closings of any purchase and sale under this Section 16.1 will
be held at the principal office of BH and all transfer, stamp and recording
taxes imposed on the transfer, and all prepayment fees, exit fees or other fees
or penalties payable to any lender in connection with any prepayment of any
financing incident to any purchase and sale under this Section 16.1 and all
other closing costs shall be allocated as set forth in the ROFO Notice (and in
the absence of such specific allocation, in accordance with local custom), and
each of the Company and MP shall each pay its own attorney’s fees. Upon the
closing of the purchase and sale under this Section 16.1, the MP Member Group
shall execute and deliver to the Company an agreement in mutually acceptable
form providing in effect that the MP Member Group shall indemnify and hold
harmless the Company from and after the closing date for all costs, expenses,
liabilities and obligations of and regarding the Property arising after the
closing date.

 

(f)            If MP shall default in its obligations to purchase the Property
pursuant to the terms of this Section 16.1, the following shall be the sole and
exclusive remedies for such default:

 

(i)            MP will immediately and without any further action cease to have
any right to make a Buy-Sell Offer or otherwise trigger or initiate the
provisions of Article XV;

 

(ii)           the ROFO Escrow Agent shall immediately deliver to BH the ROFO
Escrow Deposit as liquidated damages;

 

(iii)          thereafter, BH may cause the Company to sell at any time the
Property to any Person, without the prior written consent of MP and without
having to comply with the provisions of this Section 16.1.

 

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If BH shall default in its obligations to cause the Company to sell the Property
pursuant to the terms of this Section 16.1, then MP shall have the right to
pursue specific performance of such sale.

 

(g)           Notwithstanding the foregoing, if the provisions of Section 9.5 or
Article XV of this Agreement have been initiated by a Member or MP, then BH may
not initiate the provisions of this Section 16.1 until the procedures set forth
in Section 9.5 or Article XV have been completed or terminated pursuant to the
provisions thereof. No ROFO Notice may be delivered until all periods for making
elections and performing obligations under any previous ROFO Notice pursuant to
this Section 16.1 have terminated.

 

(h)           Subject to compliance with any applicable terms of the Loan
Documents, MP may freely assign its rights and obligations pursuant to this
Section 16.1 to an Affiliate by delivery of notice of such assignment to BH and
the Company, provided that MP will remain liable for any and all obligations of
its assignee, as if MP had not assigned its rights pursuant to this
Section 16.1(h).

 

16.2         Termination of Other Agreements.  If the Property is sold under
this Article XVI, all other agreements between the Company and MP or its
Affiliates applicable to the Property will be terminated on the date the
Property is purchased (without payment of any termination fee or penalty).

 

16.3         Power of Attorney.  If any Member shall have failed or refused,
within five (5) calendar days after receipt of a notice from the other Member
requesting such Member to execute, acknowledge and deliver such documents, or
cause the same to be done, as shall be required to effectuate the provisions of
Section 16.1, as applicable, then the other Member may execute, acknowledge and
deliver such documents for, on behalf of and in the stead of the other Member or
on behalf of and in the name of the Company, as applicable, and such execution,
acknowledgment and delivery by that Member shall be for all purposes effective
against and binding upon the other Member and the Company, as applicable, as
though such execution, acknowledgment and delivery had been by the refusing
Member or the Company as applicable. Each Member does hereby irrevocably
constitute and appoint each other Member as the true and lawful attorney-in-fact
of such appointing Member and the successors and assigns thereof, in the name,
place and stead of such appointing Member or the successors or assigns thereof,
as the case may be, to execute, acknowledge and deliver such documents under the
circumstances contemplated by Section 16.1. It is expressly understood, intended
and agreed by each Member, for such Member and its successors and assigns, that
the grant of the power of attorney to any other Member pursuant to this
Section 16.3 is coupled with an interest, is irrevocable and shall survive the
death, dissolution, termination or legal incompetency, as applicable, of such
appointing Member, or the assignment of the Interest of such appointing Member,
or the dissolution of the Company.

 

[Signature Page Follows]

 

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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
date set forth in the introductory paragraph hereof.

 

 

BH:

 

 

 

BEHRINGER HARVARD MARGATE HOLDING, LLC,
a Delaware limited liability company

 

 

 

 

By:

/s/ Gerald J. Reihsen, III

 

 

Name:

Gerald J. Reihsen, III

 

 

Title:

Executive Vice President — Corporate

 

 

 

Development & Legal

 

 

 

 

 

MP:

 

 

 

MARGATE PEAK, LLC,

 

a Colorado limited liability company

 

 

 

By:

/s/ Luke C. Simpson

 

 

Luke C. Simpson, Manager

 

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