Exhibit 10.42




 





 


BEHRINGER HARVARD BAILEYS
INVESTORS, L.P.,


a Delaware limited partnership


 


AMENDED AND RESTATED


LIMITED PARTNERSHIP AGREEMENT


 






 


December 1, 2009


 






 




 





INTERESTS IN THE PARTNERSHIP
ARE SUBJECT TO TRANSFER AND OTHER RESTRICTIONS. 
THIS AGREEMENT CONTAINS INDEMNIFICATION PROVISIONS IN SECTIONS 5.2
AND 5.3.


 


INTERESTS IN THE PARTNERSHIP
HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR UNDER
THE SECURITIES LAWS OF ANY STATE IN RELIANCE UPON EXEMPTIONS UNDER SUCH ACT AND
LAWS.  THE TRANSFER OF INTERESTS IN THE
PARTNERSHIP IS PROHIBITED UNLESS SUCH TRANSFER IS MADE IN COMPLIANCE WITH ALL
SUCH APPLICABLE ACTS.  ADDITIONAL
RESTRICTIONS ON TRANSFERS OF INTERESTS IN THE PARTNERSHIP ARE SET FORTH IN THIS
AGREEMENT.


 

















 


TABLE OF CONTENTS


 


	
  ARTICLE I. ORGANIZATION

  	
   

  	
  1

  
	
  1.1    Formation

  	
   

  	
  1

  
	
  1.2    Name

  	
   

  	
  2

  
	
  1.3    Purpose

  	
   

  	
  2

  
	
  1.4    Registered
  Agent and Office; Principal Place of Business

  	
   

  	
  2

  
	
  1.5    Foreign
  Qualifications

  	
   

  	
  2

  
	
  ARTICLE II. CAPITAL CONTRIBUTIONS

  	
   

  	
  2

  
	
  2.1    Initial
  Capital Contributions

  	
   

  	
  2

  
	
  2.2    Additional
  Capital Contributions

  	
   

  	
  2

  
	
  2.3    Additional
  Capital Contribution Procedures

  	
   

  	
  3

  
	
  2.4    Failures
  to Make Additional Capital Contributions

  	
   

  	
  3

  
	
  2.5    Capital
  Accounts

  	
   

  	
  4

  
	
  2.6    No
  Return of Capital Contributions

  	
   

  	
  5

  
	
  2.7    No
  Interest

  	
   

  	
  5

  
	
  2.8    Partner
  Loans

  	
   

  	
  5

  
	
  2.9    BH
  Additional Capital Contributions

  	
   

  	
  6

  
	
  2.10  BH-Funded
  Accrued Development Fee, BH-Funded Affiliate Fees and BH-Funded
  Hard Cost Savings

  	
   

  	
  6

  
	
  2.11  Exercise
  of Conversion Right

  	
   

  	
  7

  
	
  2.12  Modification
  of Senior Loan

  	
   

  	
  7

  
	
  ARTICLE III. MANAGEMENT OF THE PARTNERSHIP

  	
   

  	
  8

  
	
  3.1    Management

  	
   

  	
  8

  
	
  3.2    Limitations
  on Power and Authority of the General Partner

  	
   

  	
  8

  
	
  3.3    Liability
  of the General Partner

  	
   

  	
  8

  
	
  3.4    Compensation;
  Reimbursement

  	
   

  	
  8

  
	
  3.5    Other
  Activities

  	
   

  	
  8

  
	
  3.6    Transactions
  with Affiliates; Deferred Affiliate Fees

  	
   

  	
  8

  
	
  3.7    Devotion
  of Time

  	
   

  	
  10

  
	
  3.8    REIT
  Compliance

  	
   

  	
  10

  
	
  3.9    Removal
  of the General Partner Upon Triggering Events

  	
   

  	
  10

  
	
  ARTICLE IV. RIGHTS AND OBLIGATIONS OF THE LIMITED PARTNERS

  	
   

  	
  12

  
	
  4.1    No
  Authority

  	
   

  	
  12

  
	
  4.2    Liability
  of Limited Partners

  	
   

  	
  12

  
	
  4.4    Permanent
  Financing of the Project

  	
   

  	
  12

  
	
  ARTICLE V. EXCULPATION AND INDEMNIFICATION

  	
   

  	
  12

  
	
  5.1    Exculpation

  	
   

  	
  12

  
	
  5.2    Indemnification

  	
   

  	
  12

  
	
  5.3    Guaranties

  	
   

  	
  13

  
	
  ARTICLE VI. DISTRIBUTIONS

  	
   

  	
  13

  
	
  6.1    Distributable
  Cash

  	
   

  	
  13

  
	
  6.2    Tax
  Distributions

  	
   

  	
  14

  
	
  6.3    Minimum
  Distributions to REIT

  	
   

  	
  14

  
	
  6.4    Distributions
  upon Liquidation

  	
   

  	
  14

  
	
  6.5    Distributions
  of Certain Lender-Funded Amounts

  	
   

  	
  14

  
	
  6.6    Certain
  Definitions

  	
   

  	
  15

  
	
  ARTICLE VII. TAX ALLOCATIONS AND OTHER TAX MATTERS

  	
   

  	
  16

  
	
  7.1    Allocations
  of Profits and Losses to Capital Accounts

  	
   

  	
  16

  



 


ii

















 


	
  7.2    Other
  Allocation Rules

  	
   

  	
  19

  
	
  7.3    Tax
  Allocations; Section 704(c) of the Code

  	
   

  	
  19

  
	
  7.4    Certain
  Definitions

  	
   

  	
  20

  
	
  7.5    Tax
  Matters Partner; Tax Returns; Tax Elections

  	
   

  	
  23

  
	
  7.6    Tax
  Returns; Tax Elections

  	
   

  	
  23

  
	
  7.7    No
  Publicly Traded Partnership

  	
   

  	
  23

  
	
  7.8    Amounts
  Withheld; Taxes of Taxing Authorities

  	
   

  	
  24

  
	
  ARTICLE VIII. ADMISSIONS, TRANSFERS AND WITHDRAWALS

  	
   

  	
  24

  
	
  8.1    Admissions

  	
   

  	
  24

  
	
  8.2    Transfer
  of General Partner’s Interest

  	
   

  	
  24

  
	
  8.3    Transfer
  of Limited Partners’ Interest

  	
   

  	
  24

  
	
  8.4    Substituted
  Partners

  	
   

  	
  25

  
	
  8.5    Withdrawal
  of Partners

  	
   

  	
  26

  
	
  8.6    Transfer
  of Interests in Partners

  	
   

  	
  26

  
	
  8.7    BREOF
  Partner’s Put Right

  	
   

  	
  26

  
	
  8.8    BREOF
  Partner’s Tag-Along Right

  	
   

  	
  28

  
	
  8.9    Buy/Sell
  Rights

  	
   

  	
  29

  
	
  8.10  Call Right

  	
   

  	
  29

  
	
  8.11  Net
  Profits Payment

  	
   

  	
  29

  
	
  8.12  Tax
  Characterization of Net Profits Payments

  	
   

  	
  30

  
	
  ARTICLE IX. FISCAL AND OPERATIONAL MATTERS

  	
   

  	
  30

  
	
  9.1    Fiscal
  Year

  	
   

  	
  30

  
	
  9.2    Books
  of Account

  	
   

  	
  30

  
	
  9.3    Inspection

  	
   

  	
  30

  
	
  9.4    Bank
  Accounts

  	
   

  	
  30

  
	
  9.5    Title
  to Partnership Property

  	
   

  	
  30

  
	
  9.6    No
  Employees

  	
   

  	
  31

  
	
  9.7    Insurance

  	
   

  	
  31

  
	
  9.8    Reports

  	
   

  	
  31

  
	
  9.9    Budgets

  	
   

  	
  31

  
	
  ARTICLE X. AMENDMENTS AND WAIVERS

  	
   

  	
  32

  
	
  10.1  Amendments
  and Waivers

  	
   

  	
  32

  
	
  ARTICLE XI. DISSOLUTION,
  LIQUIDATION AND TERMINATION

  	
   

  	
  32

  
	
  11.1  Dissolution

  	
   

  	
  32

  
	
  11.2  Accounting

  	
   

  	
  32

  
	
  11.3  Liquidation

  	
   

  	
  33

  
	
  11.4  Termination

  	
   

  	
  33

  
	
  11.5  No Deficit
  Capital Account Restoration Obligation

  	
   

  	
  33

  
	
  11.6  Deemed
  Contribution and Distribution

  	
   

  	
  33

  
	
  11.7  No Other
  Cause of Dissolution

  	
   

  	
  33

  
	
  ARTICLE XII. MISCELLANEOUS PROVISIONS

  	
   

  	
  34

  
	
  12.1  Representations
  of the Partners

  	
   

  	
  34

  
	
  12.2  Attorneys’
  Fees

  	
   

  	
  34

  
	
  12.3  Binding
  Effect

  	
   

  	
  34

  
	
  12.4  Construction

  	
   

  	
  34

  
	
  12.5  Counterparts

  	
   

  	
  35

  
	
  12.6  Entire
  Agreement

  	
   

  	
  35

  
	
  12.7  Expenses

  	
   

  	
  35

  
	
  12.8  Further
  Assurances

  	
   

  	
  35

  
	
  12.9  Governing
  Law

  	
   

  	
  35

  
	
  12.10 Jurisdiction;
  Venue

  	
   

  	
  35

  



 


iii

















 


	
  12.11 Notices

  	
   

  	
  35

  
	
  12.12 Public
  Statements

  	
   

  	
  36

  
	
  12.13 No Recourse

  	
   

  	
  36

  
	
  12.14 Remedies
  Cumulative

  	
   

  	
  36

  
	
  12.15 Severability

  	
   

  	
  36

  
	
  12.16 Third-Party
  Beneficiaries

  	
   

  	
  36

  
	
  12.17 Waiver of Jury
  Trial

  	
   

  	
  37

  
	
  12.18 Waiver of
  Partition

  	
   

  	
  37

  



 


iv

















 


GLOSSARY


 


	
  Act

  	
  1

  
	
  Adjusted Capital Account Deficit(s)

  	
  20

  
	
  Agreement

  	
  1

  
	
  Arbitration Notice

  	
  27

  
	
  Back-End Percentage Interests

  	
  15

  
	
  BH Additional Capital Contributions

  	
  6

  
	
  BH Partner

  	
  1

  
	
  BH-Funded Accrued Development Fee

  	
  6

  
	
  BH-Funded Affiliate Fees

  	
  6

  
	
  BH-Funded Construction Costs

  	
  7

  
	
  BH-Funded Hard Cost Savings

  	
  6

  
	
  BREOF Acceptance Notice

  	
  26

  
	
  BREOF Hypothetical Closing Costs

  	
  27

  
	
  BREOF Mark to Market Price

  	
  27

  
	
  BREOF Negotiation Deadline

  	
  26

  
	
  BREOF Partner

  	
  1

  
	
  BREOF Put Period

  	
  27

  
	
  BREOF Valuation Notice

  	
  26

  
	
  Buy-Sell Offer

  	
  E-1

  
	
  Call Notice

  	
  D-1

  
	
  Called Interest

  	
  D-1

  
	
  Calling Partner

  	
  D-1

  
	
  Capital Account

  	
  4

  
	
  Certificate

  	
  1

  
	
  Code

  	
  20

  
	
  Completion Date

  	
  27

  
	
  Completion Guaranty

  	
  3

  
	
  Contributing Partners

  	
  3

  
	
  Contribution Notice

  	
  3

  
	
  Conversion Option

  	
  1

  
	
  Defaulting Purchaser

  	
  E-3

  
	
  Deferred Affiliate Fees

  	
  9

  
	
  Deposit

  	
  E-2

  
	
  Depreciation

  	
  20

  
	
  Developer Partner

  	
  2

  
	
  Development Budget

  	
  31

  
	
  Dissolution Events

  	
  32

  
	
  Distributable Cash

  	
  15

  
	
  Effective Date

  	
  1

  
	
  Election

  	
  E-2

  
	
  Event of Withdrawal

  	
  11

  
	
  First Priority Preference Amount

  	
  15

  
	
  GAAP

  	
  31

  
	
  General Partner

  	
  1

  
	
  Gross Asset Value

  	
  21

  
	
  Guaranteed Indebtedness

  	
  13

  
	
  Guarantor

  	
  3

  
	
  Hard Costs Shortfall

  	
  7

  
	
  Hypothetical Distributions

  	
  D-1

  
	
  Indemnitees

  	
  12

  
	
  Initial Senior Loan

  	
  7

  
	
  Initiating Partner

  	
  E-1

  
	
  Institutional Partner

  	
  8

  
	
  Land

  	
  2

  
	
  Lender-Funded Amounts

  	
  14

  
	
  Limited Partners

  	
  1

  
	
  Loan Modification Terms

  	
  7

  
	
  Major Decision

  	
  8

  
	
  Major Decision Approval

  	
  8

  
	
  Mezzanine Loan

  	
  1

  
	
  Minimum Distribution Amount

  	
  14

  
	
  Non-Contributed Amount

  	
  3

  
	
  Non-Contributing Partner

  	
  3

  
	
  Non-Funding Notice

  	
  3

  
	
  Non-Initiating Partner

  	
  E-1

  
	
  Nonrecourse Deductions

  	
  21

  
	
  Nonrecourse Liability

  	
  22

  
	
  Offeree

  	
  E-1

  
	
  Offeree Group

  	
  E-1

  
	
  Offeree Value

  	
  E-1

  
	
  Offeror

  	
  E-1

  
	
  Offeror Group

  	
  E-1

  
	
  Offeror Value

  	
  E-1

  
	
  Operating Budget

  	
  31

  
	
  Original Agreement

  	
  1

  
	
  Partner Non-Recourse Debt

  	
  22

  
	
  Partner Non-Recourse Debt Minimum Gain

  	
  22

  
	
  Partner Non-Recourse Deductions

  	
  22

  
	
  Partners

  	
  1

  
	
  Partnership

  	
  1

  
	
  Partnership Costs

  	
  3

  
	
  Partnership Minimum Gain

  	
  22

  
	
  Partnership Property

  	
  22

  
	
  Permits

  	
  C-3

  
	
  Plans and Specifications

  	
  C-2

  
	
  Profit(s) and Loss(es)

  	
  22

  
	
  Profits Participation Agreement

  	
  D-1

  
	
  Project

  	
  2

  
	
  Project Owner

  	
  2

  
	
  Purchase Price

  	
  E-1

  
	
  Purchaser

  	
  E-2

  
	
  Regulatory Allocations

  	
  18

  
	
  REITs

  	
  10

  
	
  Report

  	
  C-3

  
	
  Representing Parties

  	
  C-1

  
	
  Revised Development Budget

  	
  31

  



 


v

















 


	
  Second Priority Preference Amount

  	
  16

  
	
  Section 8.11 Net Profits Payment

  	
  29

  
	
  Section 8.7 Net Profits Payment

  	
  28

  
	
  Section 8.8 Net Profits Payment

  	
  29

  
	
  Securities Act

  	
  34

  
	
  Seller

  	
  E-2

  
	
  Senior Loan

  	
  7

  
	
  Special REIT Distribution

  	
  14

  
	
  Special Tax Distribution

  	
  14

  
	
  Tag-Along Acceptance Notice

  	
  28

  
	
  Tag-Along Acceptance Period

  	
  28

  
	
  Tag-Along Hypothetical Price

  	
  29

  
	
  Tag-Along Notice

  	
  28

  
	
  Tag-Along Price

  	
  28

  
	
  Tag-Along Right

  	
  28

  
	
  Tag-Along Transaction

  	
  28

  
	
  Treasury Regulations

  	
  23

  
	
  Triggering Event

  	
  10

  
	
  Undistributed First Priority Capital

  	
  16

  
	
  Undistributed Second Priority Capital

  	
  16

  
	
  Unexpected Shortfall

  	
  3

  
	
  Withdrawing General Partner

  	
  1

  



 


vi

















 


BEHRINGER HARVARD BAILEYS
INVESTORS, L.P.


 


AMENDED AND RESTATED


 


LIMITED PARTNERSHIP AGREEMENT


 


THIS AMENDED AND RESTATED
LIMITED PARTNERSHIP AGREEMENT (this “Agreement”)
of BEHRINGER HARVARD BAILEYS INVESTORS, L.P.,
a Delaware limited partnership (the “Partnership”), is entered into as
of December 1, 2009 (the “Effective Date”), among BEHRINGER HARVARD BAILEYS GP, LLC, a Delaware limited
liability company, as the sole general partner (the “General Partner”),
and the persons listed from time to time as limited partners on Schedule I (the “Limited
Partners” and, together with the General Partner, the “Partners”).


 


Recitals


 


A.                                   On July 10, 2007, FF Baileys LLC (“Withdrawing General Partner”), as
general partner, and FF Investors III East LLC and BREOF Baileys, LLC (“BREOF Partner”), as limited partners, formed the Partnership, formerly known as
Fairfield Baileys Investors L.P., and entered into that certain Limited
Partnership Agreement of Fairfield Baileys Investors L.P. (the “Original
Agreement”).


 


B.                                     In connection with the transactions
contemplated in the Original Agreement, Behringer Harvard Baileys REIT, LLC (“BH
Partner”), made a mezzanine loan to the Project Owner pursuant to that
certain Mezzanine Loan Agreement dated as of July 10, 2007 (the “Mezzanine
Loan”).  In connection with the
Mezzanine Loan and the Original Agreement, the Partnership and BH Partner
entered into that certain Option Agreement dated as of July 10, 2007,
pursuant to which BH Partner has the option to convert the total outstanding
balance of the Mezzanine Loan and other amounts then owed to Mezzanine Lender,
including all outstanding principal, accrued interest, late charges and other
amounts due under the Mezzanine Loan, into an equity investment in the
Partnership and to become a Limited Partner in the Partnership (the “Conversion
Option”).


 


C.                                     The Partners now desire to amend and
restate the Original Agreement to reflect (i) the transfer of all of the
right, title and interest of Withdrawing General Partner in and to its general partner interest in the Partnership to General
Partner, (ii) the admission of the General Partner as a substituted
general partner of the Partnership, (iii) the withdrawal of Withdrawing General Partner as the general partner of the
Partnership, (iv) the exercise of the Conversion Option by BH Partner, (v) the
change of the name of the Partnership to Behringer Harvard Baileys Investors,
L.P., (vi) additional capital contributions, (vii) certain conforming
changes and (viii) other amendments, all on the terms and subject to the
conditions set forth herein.


 


Article I


Organization


 


1.1                                 Formation.  The
General Partner and the Limited Partners have formed a limited partnership
pursuant to and in accordance with the Delaware Revised Uniform Limited
Partnership Act (the “Act”).  The
General Partner filed, on behalf of the Partnership, a certificate of limited
partnership (the “Certificate”) conforming to the Act with the office of
the Secretary of State of the State of Delaware.  The term of the Partnership
began upon such filing and shall continue until the dissolution, liquidation
and termination of the Partnership in accordance with Article XI.


 


1

















 


1.2                                 Name.  
The name of the Partnership shall be Behringer Harvard Baileys Investors,
L.P.  The General Partner may change the
name of the Partnership from time to time. 
In such event, the General Partner shall promptly (i) give notice
thereof to each Limited Partner and (ii) file in the office of the
Secretary of State of the State of Delaware a certificate of amendment to the
Certificate reflecting such change of name.


 


1.3                                 Purpose.  The
purposes of the Partnership shall be to: (i) directly or indirectly,
acquire, hold, manage, sell and exercise rights in respect of membership
interests in Behringer Harvard Baileys Project Owner, LLC, a Delaware limited
liability company, formerly known as Fairfield Baileys, LLC (together with its
successors, the “Project Owner”), which in turn owns the real property
in Bailey’s Crossroads, Virginia particularly described on Schedule II
(the “Land”) on which the
Project Owner will construct a 414-unit apartment community (the “Project”),
and (ii) engage or participate in such other activities related or
incidental thereto as the General Partner may deem necessary, appropriate or
desirable from time to time.


 


1.4                                 Registered
Agent and Office; Principal Place of Business.  The
name and address of the Partnership’s initial registered agent and its initial
registered office in the State of Delaware are Corporation Service Company,
2711 Centerville Road, Suite 400, Wilmington, Delaware 19808.  The initial principal place of business of the
Partnership is located at c/o Behringer Harvard Baileys GP, LLC, 15601 Dallas
Parkway, Suite 600, Addison, Texas 75001. 
The General Partner may change such registered office, registered agent
or principal place of business from time to time.  In the event of any such change, the General
Partner shall promptly (i) give notice thereof to each Limited Partner and
(ii) file in the office of the Secretary of State of the State of Delaware
a certificate of amendment to the Certificate reflecting such change.  The Partnership may have such other place or
places of business within or outside the State of Delaware as may be determined
by the General Partner from time to time.


 


1.5                                 Foreign
Qualifications.  The General Partner shall cause the
Partnership to be registered or qualified as a foreign limited partnership
under its own name or under an assumed or fictitious name in any jurisdiction
in which the Partnership owns property or transacts business if such
registration or qualification is necessary to protect the limited liability of
the Limited Partners or to permit the Partnership lawfully to own property or
transact business in such jurisdiction.


 


1.6                                 Effect
of this Agreement.  Except as otherwise provided in
this Section 1.6 to the contrary, this Agreement supersedes the
Original Agreement in its entirety, and the Original Agreement shall no longer
have any force or effect on and after the Effective Date; provided, however, (i) the
provisions of Section 12.1 (Representations of the Partners) of the
Original Agreement shall continue in full force and effect and are unchanged by
this Agreement, and (ii) the provisions of Sections 5.1 and 5.2
of the Original Agreement shall continue in full force and effect and are
unchanged by this Agreement as to the Withdrawing General Partner and the other
Indemnitees (as defined therein).


 


Article II


Capital Contributions


 


2.1                                 Initial
Capital Contributions.  Each Partner has made or agreed
to make an initial capital contribution to the Partnership, in cash or in kind,
in the amount set forth opposite such Partner’s name on Schedule I.  For the purposes of determining the initial
balance in the Capital Accounts of the General Partner and FF Investors
III-East LLC (the “Developer Partner”), the Partners have agreed that no
amount shall be credited to the Capital Account of either such Partner in
respect of its contribution to the Partnership of the rights to acquire the
Land.


 


2.2                                 Additional
Capital Contributions.  If
the General Partner determines that the Partnership requires additional cash
funds in order to pay all of the expenditures of any kind made or to 


 


2

















 


be
made in respect of operation of the Partnership, the Project Owner or otherwise
in connection with the Project, including pre-development activities, studies,
tests, development and construction costs, development fees, principal,
interest, loan fees, points, penalties and other amounts payable on
indebtedness, ad valorem taxes, state and local taxes, impact fees, permit fees,
license fees, insurance premiums, escrow payments, repair and maintenance
costs, advertising expenses, professional fees, utilities costs, equipment
costs, sales commissions, management fees, leasing fees, salaries, wages,
fringe benefits, tenant improvement costs, costs to form the Partnership and
the Project Owner, and other similar types of costs, expenses, charges,
liabilities and obligations of any entity controlled by the Partnership and
otherwise relating to the Project (collectively, “Partnership Costs”),
and if the amount by which such Partnership Costs exceed the Partnership’s
available funds (the “Unexpected Shortfall”) is not otherwise required
to be funded by the Guarantor pursuant to the Completion Guaranty, then,
subject to the procedures set forth in Section 2.3, the General
Partner may request that the Partners make, and the Partners may, at their
option, make, additional capital contributions to the Partnership equal to
their respective Back-End Percentage Interests of the Unexpected Shortfall, it
being agreed that no Partner shall be required to make any additional capital
contributions under this Section 2.2.  For avoidance of doubt, the Partners
acknowledge and agree that neither the provision of, nor any funding under, the
Completion Guaranty shall be treated as capital contributions to the
Partnership.  As used herein, (i) “Completion
Guaranty” means the guaranty of completion provided in connection with the
Senior Loan, and “Guarantor” means the guarantor under the Completion
Guaranty.


 


2.3                                 Additional
Capital Contribution Procedures.  If the General
Partner desires to request an additional capital contribution from the Partners
pursuant to Section 2.2, then the General Partner shall deliver a
notice (“Contribution Notice”) to each Partner setting forth: (i) the
aggregate amount of the additional capital contribution to be made (which
amount shall not exceed the Unexpected Shortfall); (ii) each Partner’s
respective Back-End Percentage Interest of the aggregate additional capital
contribution; (iii) the date on which such additional capital contribution
is due (which date shall not be less than five business days after the
date on which the Contribution Notice is delivered); (iv) a brief
description of the reason for such additional capital contribution; (v) a
statement that the additional capital contribution is optional; and (vi) the
wiring or other instructions for payment by the Partners of such additional
capital contribution.


 


2.4                                 Failure
to Make Additional Capital Contributions.


 


(a)                                  If a Partner fails or elects not to make any additional
capital contribution requested pursuant to Section 2.2 (a “Non-Contributing
Partner”), then the General Partner shall send a notice (the “Non-Funding
Notice”) to all Partners identifying the Non-Contributing Partner, and
setting forth the amount of the additional capital contribution that such
Non-Contributing Partner failed or elected not to make (the “Non-Contributed
Amount”).  If a Non-Contributing
Partner fails to make the additional capital contribution to the Partnership
within five business days after the provision of a Non-Funding Notice to all
Partners, then the Partners that made their optional additional capital
contributions to the Partnership (the “Contributing Partners”), in their
sole and absolute discretion, may elect to make additional capital
contributions to the Partnership in an amount up to the Non-Contributed Amount
in the place and stead of the Non-Contributing Partner, with each Contributing
Partner having the right to contribute up to its pro rata share of the
Non-Contributed Amount based on the ratio that its Back-End Percentage Interest
bears to the aggregate Back-End Percentage Interests of all Contributing
Partners or in such other percentage as the Contributing Partners holding a
majority of all Back-End Percentage Interests held by all Contributing Partners
shall agree (provided that if a Partner is an affiliate of another Partner,
then neither such Partner shall be treated as a Contributing Partner unless
each such Partner contributes its pro rata share of the optional additional
capital contribution).  In the case of
any non-pro rata contributions by the Partners (i.e., other than in accordance
with Back-


 


3

















 


End Percentage Interests), the amounts so contributed shall
be treated as either (i) loans to the Partnership to be evidenced by one
or more non-negotiable demand promissory notes bearing interest at the rate of
14% per annum and requiring prepayment of principal and interest out of any
available Distributable Cash prior to any distributions of Distributable Cash
being made to the Partners, or (ii) if all of the Contributing Partners
agree in writing within 60 days after making such contributions, as additional
capital contributions, in which event the Back-End Percentage Interests of the
Partners shall be adjusted as provided in Section 2.4(b).


 


(b)                                 If the Back-End Percentage Interests of the Partners are
required to be adjusted as provided in Section 2.4(a), then the Back-End
Percentage Interests of each Non-Contributing Partner shall be reduced by the
quotient (expressed as a percentage) of: 
(i) the Non-Contributed Amount; divided by (ii) the sum of the
aggregate capital contributions made to the Partnership by all Partners from
the Effective Date through the applicable date of determination.  The Back-End Percentage Interest of each
Contributing Partner shall be increased by its proportionate share of the
amount that the Back-End Percentage Interest of the Non-Contributing Partner is
reduced (determined based upon the ratio that the portion of Non-Contributed
Amount paid by such Partner bears to the aggregate portion of the
Non-Contributed Amount paid by all Partners). 
Further, if the Back-End Percentage Interests of the Partners are
required to be adjusted as provided in Section 2.4(a), then the
amount of any additional capital contributions to the Partnership in (1) an
amount up to the Non-Contributed Amount made by a Contributing Partner or (2) in
an amount up to the amount of any non-pro rata contributions by the Partners
(i.e., other than in accordance with Back-End Percentage Interests) made by a
Contributing Partner shall, in either case, increase the Undistributed First
Priority Capital of each such Contributing Partner.  For illustration purposes only, assume
that:  (A) an additional capital
contribution was requested; (B) the Non-Contributing Partner’s Back-End
Percentage Interest is 50%; (C) the Contributing Partner’s Back-End
Percentage Interest is 50%; (D) the Non-Contributed Amount is $1,000,000;
and (E) the sum of the aggregate capital contributions made to the
Partnership by the Partners from the Effective Date through the applicable date
of determination equals $10,000,000. 
Under these circumstances, the Non-Contributing Partner’s Back-End
Percentage Interest would decrease from 50% to 40% (50% minus the quotient
(expressed as a percentage) of: (1) $1,000,000; divided by (2) $10,000,000);
and the Contributing Partner’s Back-End Percentage Interest would increase from
50% to 60%.


 


(c)                                  THE PARTNERS ACKNOWLEDGE AND AGREE THAT THE PARTNERSHIP
INTEREST OF A NON-CONTRIBUTING PARTNER MAY BE SUBSTANTIALLY DILUTED FOR
FAILING (OR ELECTING NOT) TO MAKE CAPITAL CONTRIBUTIONS UNDER SECTION 2.2.


 


2.5                                 Capital
Accounts.


 


(a)                                  A separate capital account (a “Capital Account”) shall
be established for each Partner in accordance with the following provisions.


 


(i)                                     Each Partner’s Capital Account shall be increased by: (A) the
amount of money contributed by the Partner to the Partnership; (B) the
initial Gross Asset Value of property (other than money) contributed by, or on
behalf of, the Partner to the Partnership (net of liabilities secured by such
contributed property that the Partnership assumes or subject to which it takes
the property), determined as of the date of such contribution; and (C) such
Partner’s distributive share of Profits and items in the nature of Partnership
income and gain that are specially allocated hereunder.


 


4
















 


(ii)                                  Each Partner’s Capital Account shall be decreased by: (A) the
amount of money distributed to the Partner; (B) the Gross Asset Value of
property (other than money) distributed to the Partner by the Partnership (net
of liabilities secured by such distributed property that the Partner assumes or
subject to which it takes the property), determined as of the date of such
distribution; and (C) such Partner’s distributive share of Losses and any
items in the nature of expenses or losses that are specially allocated
hereunder.


 


(iii)                               Upon the transfer of all or any portion of an interest in the
Partnership, the transferee shall succeed to the Capital Account of the
transferor to the extent it relates to the interest transferred.


 


(b)                                 The provisions of this Section 2.5 relating to
the maintenance of Capital Accounts are intended to comply with the
requirements of Section 1.704-1(b) of the Treasury Regulations and
shall be interpreted and applied in a manner consistent with such Treasury
Regulations; provided, however, that nothing contained herein shall be
construed as creating a deficit capital account restoration obligation or
otherwise personally obligating any Partner to make capital contributions in
excess of the capital contributions expressly otherwise provided for in this
Agreement.  If the General Partner
reasonably determines that it is prudent to modify the manner in which the
Capital Accounts, or any debits or credits thereto (including debits or credits
relating to liabilities that are secured by contributions or distributed
property or that are assumed by the Partnership or the Partners), are computed
in order to comply with such Treasury Regulations, then the General Partner may
make such modification if such modification is not likely to have a material
effect on the amounts distributed to any person pursuant to Article XI
upon the dissolution, liquidation and termination of the Partnership.  The General Partner also shall (i) make
any adjustments that are necessary or appropriate to maintain equality between
the Capital Accounts of the Partners and the amount of Partnership capital
reflected on the Partnership’s balance sheet, as computed for book purposes, in
accordance with Section 1.704-1(b)(2)(iv)(q) of the Treasury
Regulations, and (ii) make any appropriate modifications if unanticipated
events might otherwise cause this Agreement not to comply with Section 1.704-1(b) of
the Treasury Regulations.


 


2.6                                 No
Return of Capital Contributions.   No Partner
shall be entitled to a withdrawal or return of its capital contributions to the
Partnership or the balance in its Capital Account.  Instead, each Partner shall look solely to
distributions from the Partnership for such purpose as provided in Article VI
and Article XI.


 


2.7                                 No
Interest.  No Partner shall be entitled to
interest on its capital contributions to the Partnership or the balance in its
Capital Account, and any interest actually received by reason of the investment
of any part of the Partnership’s funds shall constitute the Partnership’s
property.


 


2.8                                 Partner
Loans.  If the Partnership or the Project Owner
has insufficient funds to meet its obligations as they become due or to carry
out its operations, business and affairs, then, in lieu of borrowing any
required funds from third parties, selling assets or requesting additional
capital contributions, then the General Partner with Major Decision Approval
may, but shall not be required to, cause the Partnership to borrow the
necessary funds from one or more Partners; provided, however, that any such
borrowing shall, in the judgment of the General Partner and with Major Decision
Approval, be on such terms and conditions as are no less favorable than those
that reasonably could be obtained in an arm’s length transaction with a person
that is not an affiliate of the Partnership or the General Partner.  No Partner shall be obligated to loan or
advance any funds to the Partnership.  No
loan or advance to the Partnership shall be deemed a capital contribution to
the Partnership.  For the avoidance of
doubt, no 


 


5

















 


amounts
shall be borrowed without Major Decision Approval if such borrowed amounts
would be a substitute for obligations required to be funded by the Guarantor
pursuant to the Completion Guaranty.


 


2.9                                 BH
Additional Capital Contributions.  Before the
execution and delivery of this Agreement and before the exercise of the
Conversion Option, the General Partner made additional capital contributions to
the Partnership pursuant to Section 2.2 (“BH Additional Capital
Contributions”).  BREOF Partner  did not make
any additional capital contribution to the Partnership when the BH Additional
Capital Contributions were made.  In
connection with the BH Additional Capital Contributions: (i) the General
Partner was a Contributing Partner; (ii) BREOF Partner was a
Non-Contributing Partner; (iii) Developer Partner was a Non-Contributing
Partner; (iv) the Undistributed First Priority Capital of the General
Partner increased by the entire amount of the BH Additional Capital
Contribution (other than the portion thereof made in accordance with the
Back-End Percentage Interest of the General Partner at the time the BH
Additional Capital Contribution was made), and (v) the Back-End Percentage
Interests of the Partners were adjusted. 
The Contributed Amount and Non-Contributed Amount of each Partner in
respect of the BH Additional Capital Contributions, and the Back-End Percentage
Interests of the Partners as of the Effective Date, are set forth on Schedule I.


 


2.10                           BH-Funded
Accrued Development Fee, BH-Funded Affiliate Fees and BH-Funded Hard
Cost Savings.


 


(a)                                  As of the Effective Date, the General Partner made an
additional capital contribution to the Partnership in the amount set forth on Schedule I as the BH-Funded
Accrued Development Fee (the “BH-Funded Accrued Development Fee”), which
amount represents a portion of the development fee described in Section 3.6(a) that
was earned and payable before the Effective Date but was not funded by proceeds
under the Initial Senior Loan.  The
General Partner shall cause the Partnership to pay the BH-Funded Accrued
Development Fee to FF Development L.P. on the Effective Date.  Subject to the provisions of this Section 2.10(a),
the General Partner agrees to make additional capital contributions to the
Partnership (the “BH-Funded Affiliate Fees”) in an aggregate amount not
to exceed: (i) a portion of the development fee described in Section 3.6(a) equal
to the positive difference between (a) the amount of the development fee
described in clause (A) of Section 3.6(a) that is
included in the Development Budget and (b) the amount of the development
fee described in clause (A) of Section 3.6(a) that
is included in the Revised Development Budget; (ii) the amount of the
development fee described in clause (B) of Section 3.6(a);
and (iii) the portion of the general contractor’s fee described in Section 3.6(b) for
which payment is deferred until completion of the Project as set forth in the
Senior Loan documents.  From time to
time, the General Partner shall make the additional capital contributions to
the Partnership representing the BH-Funded Affiliate Fees and shall cause the
Partnership to pay the BH-Funded Affiliate Fees, or portion thereof, then due
and payable to the persons entitled thereto and at the times set forth in the
provisions of Sections 3.6(a) and (b), as applicable,
unless and to the extent that the payment of any portion thereof is made
available and paid from proceeds under the Senior Loan.


 


(b)                                 Subject to the provisions of this Section 2.10(b),
the General Partner agrees to make additional capital contributions to the
Partnership (the “BH-Funded Hard Cost Savings”) in an aggregate amount
not to exceed $100,000.  The BH-Funded
Hard Cost Savings represents the amount to which FF Development L.P., the
general contractor for the construction of the Project, may be entitled
pursuant to the applicable provisions of the agreement for construction for the
Project.  From time to time, the General
Partner shall make the additional capital contributions to the Partnership
representing the BH-Funded Hard Cost Savings and shall cause the Partnership to
pay the BH-Funded Hard Cost Savings, or portion thereof, then due and payable
to FF Development L.P. at the times and in the manner set forth in the
applicable provisions of the 


 


6

















 


agreement for construction for the Project, unless and to the
extent that the payment of any portion thereof is made available and paid from
proceeds under the Senior Loan.


 


(c)                                  Subject to the provisions of this Section 2.10(c),
the General Partner agrees to make additional capital contributions to the
Partnership (the “BH-Funded Construction Costs”) in an aggregate amount
not to exceed $411,041.00 to fund the amount, if any, that hard construction
costs of the Project (excluding fees to the general contractor) exceed
$74,036,778.75 (the “Hard Costs Shortfall”).  From time to time, the General Partner shall
make the additional capital contributions to the Partnership representing the
BH- Funded Construction Costs to the extent of the Hard Costs Shortfall and
shall cause the Partnership to pay such Hard Costs Shortfall at the times and
in the manner set forth in the applicable provisions of the agreement for
construction for the Project, unless and to the extent that the payment of any
portion thereof is made available and paid from the proceeds under the Senior
Loan.


 


(d)                                 (d)                                 The entire amount of the BH-Funded Accrued Development Fee,
and, to the extent contributed to the capital of the Partnership, the amount so
contributed of the BH-Funded Affiliate Fees, the amount so contributed of the
BH-Funded Hard Cost Savings, and the amount so contributed of the BH-Funded
Construction Costs, shall be treated as additional capital contributions that
increase the Undistributed First Priority Capital of the General Partner, and (ii) the
Back-End Percentage Interests of the Partners (other than the General Partner)
shall be reduced by the quotient (expressed as a percentage) of:  (i) the sum of the BH-Funded Accrued
Development Fee, the amount so contributed of the BH-Funded Affiliate Fees plus
the amount so contributed of the BH-Funded Hard Cost Savings; divided by (ii) the
sum of the aggregate capital contributions made to the Partnership by all
Partners from July 10, 2007 (i.e., the effective date of the Original
Agreement) through the applicable date of determination.  The Back-End Percentage Interest of the
General Partner shall be increased by its proportionate share of the aggregate
amount that the Back-End Percentage Interest of the Partners (other than the
General Partner) is reduced in connection with such BH-Funded Accrued
Development Fee, BH-Funded Affiliate Fees and BH-Funded Hard Cost Savings.  For the avoidance of doubt, the foregoing
adjustments of the Back-End Percentage Interest of the Partners in respect of
the BH-Funded Accrued Development Fee are reflected on Schedule I.  THE PARTNERS ACKNOWLEDGE AND AGREE THAT THE
PARTNERSHIP INTEREST OF THE PARTNERS (OTHER THAN THE GENERAL PARTNER) MAY BE
SUBSTANTIALLY DILUTED AS PROVIDED IN THIS SECTION 2.10.


 


2.11                           Exercise
of Conversion Right.  After payment of the BH
Additional Capital Contributions and before the execution and delivery of this
Agreement, BH Partner, in its capacity as Mezzanine Lender, exercised the
Conversion Right.  Upon the exercise of
the Conversion Right by Mezzanine Lender, Mezzanine Lender was admitted as a
Limited Partner in the Partnership and was deemed to have made a capital
contribution in cash to the Partnership (classified as Undistributed Second
Priority Capital) in an amount equal to the outstanding principal amount of and
any accrued but unpaid interest on the Mezzanine Loan at the time of exercise,
which amount is included in the capital contributions of BH Partner set forth
on Schedule I.


 


2.12                           Modification
of Senior Loan.  The construction loan for the Project
made by Bank of America, N.A. (or a bank group led by it) (the “Initial
Senior Loan”) is being modified contemporaneously with the execution and
delivery of this Agreement.  The terms
and conditions of such modification are generally set forth on Exhibit G (“Loan
Modification Terms”) and are more particularly described in the
modification documentation entered into pursuant thereto, with any changes
therein as the General Partner may have approved in connection with the
documentation process.  The Initial
Senior Loan, as modified by such modification documentation, is referred to
herein as the “Senior Loan.”  The 


 


7

















 


Partners hereby approve the Loan Modification
Terms and the documentation of the Senior Loan.


 


Article III


Management of the Partnership


 


3.1                                 Management.  
Subject to the limitations set forth in Section 3.2 and except as
otherwise expressly provided herein to the contrary, the business and affairs
of the Partnership shall be managed by the General Partner and all
determinations relating to the business and affairs of the Partnership
(including all decisions required or permitted to be made by the Partnership in
respect of its equity interest in the Project Owner) shall be made exclusively
by the General Partner.


 


3.2                                 Limitations
on Power and Authority of the General Partner.  No
act or determination set forth on Exhibit A
(each, a “Major Decision”) shall be taken on behalf of the Partnership
by the General Partner without Major Decision Approval.  As used herein, “Major Decision Approval”
means the prior written consent or approval of BH Partner and BREOF Partner (BH
Partner and BREOF Partner each is an “Institutional Partner”).  The General Partner shall give notice to each
Institutional Partner of any request for Major Decision Approval.  In the event either Institutional Partner
does not respond to such request within five business days, such Major
Decisions shall be deemed to have been disapproved.  After such deemed disapproval, the General
Partner may give another notice to such Institutional Partner who did not
timely respond, which notice must, as a condition to the effectiveness thereof,
be conspicuously marked in bold, all capital letters of at least
11-point font both on the outside of the delivery envelope and on the notice
itself: “URGENT/BAILEYS SECOND NOTICE: FAILURE TO RESPOND
IN FIVE BUSINESS DAYS IS DEEMED APPROVAL OF THE MATTER DESCRIBED HEREIN.”  If such non-responding Institutional Partner does
not respond to such request within five business days, such Major Decisions
shall be deemed to have been approved and consented to, and Major
Decision Approval shall be deemed to have been given, in respect of the matter
at issue.


 


3.3                                 Liability
of the General Partner.  The General
Partner shall not be personally liable for the debts or obligations of the
Partnership unless (but solely to the extent) expressly required by applicable
law; provided, however, that all such debts and obligations shall be paid or
discharged first with the property of the Partnership (including insurance
proceeds) before the General Partner shall be obligated to pay or discharge any
such debt or obligation with its personal assets.  Notwithstanding the foregoing, the General
Partner shall not be personally liable for any debt or obligation that is
nonrecourse or that, under the terms thereof, does not create or impose such
liability.


 


3.4                                 Compensation;
Reimbursement.  The General Partner shall not be
entitled to a management fee or other compensation for serving as the general
partner of the Partnership.  The
Partnership shall promptly reimburse the General Partner and its affiliates for
all reasonable costs and other obligations paid or incurred by them on behalf
of the Partnership to the extent that they are included in the Revised
Development Budget or the Operating Budget, as applicable.  Nothing contained in this Section 3.3
is intended to affect the Back-End Percentage Interest of the General Partner
or the amounts otherwise distributable to the General Partner by reason of its
Back-End Percentage Interest.


 


3.5                                 Other
Activities.  Neither this Agreement nor any
principle of law or equity shall preclude or limit, in any respect, the right
of any Partner, its affiliates or any of their respective officers, directors,
stockholders, members, managers, partners, employees or agents to engage in or
derive profit or compensation from any activities or investments, including
activities or investments that are in competition with the Partnership, nor
give any other Partner any right to participate or share in such activities or
investments or any profit or compensation derived therefrom.


 


3.6                                 Transactions
with Affiliates; Deferred Affiliate Fees.  Unless approved
in accordance with Section 3.2, except as otherwise provided in
this Agreement, neither the General Partner nor any 


 


8

















 


affiliates
of the General Partner shall receive any remuneration, fees or other payments
from the Project Owner or the Partnership. 
In addition to the services and transactions specifically contemplated
by this Agreement, the General Partner, its affiliates and their respective
representatives and advisors may with Major Decision Approval provide services
to, and engage in transactions with, the Partnership on terms and conditions
that are, in the judgment of the General Partner, deemed to be not less
favorable than would be obtained in a comparable arm’s length transaction with
a person that is not an affiliate of the General Partner.


 


(a)                                  FF Development L.P. shall receive a development fee equal to
3% of the lesser of (i) the total Project costs set forth in Development
Budget, excluding the Development Fee in the Development Budget or (ii) the
total Project costs, excluding the Development Fee, actually incurred by
Project Owner and the Partnership in developing the Project; in either case,
with (A) the portion of the fee equal to 2.25% of total Project costs due
and payable by the Partnership with each loan draw under the construction loan
for the Project during construction of the Project and ending on the Completion
Date based on the total Project costs incurred with respect to such draw, and (B) the
portion of the fee equal to 0.75% of total Project costs payable when the
Project is at least 50% leased by unaffiliated, third-party tenants.


 


(b)                                 FF Development L.P. shall be the general contractor for the
construction of the Project pursuant to an agreement for construction, the form
and substance of which shall be subject to Major Decision Approval, and
pursuant and subject to such agreement shall receive a general contractor’s fee
equal to 6% of the lesser of (i) the hard construction costs set forth in
the Development Budget, excluding the general contractor’s fee in the
Development Budget or (ii) the hard construction costs, excluding the
general contractor’s fee in the Development Budget, actually incurred by
Project Owner and the Partnership in developing the Project, due and payable by
the Partnership with each loan draw under the construction loan for the Project
during construction of the Project and ending on the Completion Date based on
the hard construction costs incurred with respect to such draw.


 


(c)                                  FF Properties L.P. shall be the property manager of the
Project pursuant to a property management agreement, the form and substance of
which shall be subject to Major Decision Approval, and pursuant and subject to
such agreement shall receive a monthly property management fee equal to the
greater of (i) two percent (2%) of gross receipts collected from the
Project for the previous month or (ii) $5,000.  Payment of the property management fee shall
commence as provided in the property management agreement.


 


(d)                                 Certain employees of or consultants to the Developer Partner
or its affiliate shall receive an acquisition fee or commission payable in the
amount of $145,728.  The acquisition fee
or commission shall be payable as follows: (i) 62.5% of such fee or
commission on the closing of the Senior Loan; and (ii) 37.5% of such fee
or commission as and in the manner prescribed for the Deferred Affiliate
Fees.  As used herein, the “Deferred
Affiliate Fees” means 37.5% of the fees or commission described in Sections 3.6(d),
3.6(e) and 3.6(f). 
Any portion of the Deferred Affiliate Fees remaining after the
Completion Date shall be paid to the Developer Partner from any net
Distributable Cash remaining after any distribution of Distributable Cash to
the Partners pursuant to Sections 6.1(a), 6.1(b), 6.1(c) and
6.1(d).


 


(e)                                  Certain employees of or consultants to the Developer Partner
or its affiliate shall receive a capital markets fee payable in the amount of
$242,000.  The capital markets fee shall
be payable as follows: (i) 62.5% of such fee on the closing of the Senior
Loan; and (ii) 37.5% of such fee as and in the manner prescribed for the
Deferred Affiliate Fees.


 


9

















 


(f)                                    Certain employees of or consultants to the Developer Partner
or its affiliate shall receive a development processing fee in the amount of
$364,320.  The development processing fee
shall be payable as follows: (i) 62.5% of such fee on the closing of the
Senior Loan; and (ii) 37.5% of such fee as and in the manner prescribed
for the Deferred Affiliate Fees.


 


(g)                                 Developer Partner or its affiliate shall provide, without
additional compensation from the Partnership, asset management services to the
Partnership, including (i) assisting the General Partner in the
preparation of the Operating Budget, (ii) advising the General Partner in
connection with all Major Decisions, (iii) monitoring the services of the
general contractor for the construction of the Project and the property manager
of the Project and act as a liaison between the General Partner and the general
contractor and property manager of the Project, (iv) assisting in the
maintenance of the records and books of account of the Partnership and the
preparation of financial statements and tax returns of the Partnership, (v) advising
the General Partner on ways to manage the Project to achieve the goals of and
to comply with the applicable business plan, (vi) informing the General
Partner as to significant market trends and conditions of which Developer
Partner is aware and which it believes may warrant consideration or action by
the General Partner on behalf of the Partnership, (vii) upon request,
recommending to the General Partner professional service providers in
connection with the Project and (viii) performing such other similar
services reasonably requested by the General Partner on behalf of the
Partnership.


 


3.7                                 Devotion
of Time.   The General Partner shall devote such
time and efforts to the operations, business and affairs of the Partnership as
are reasonably necessary to manage and supervise the operations, business and
affairs of the Partnership in an efficient manner.  Subject to the limitations set forth in Section 3.2
and the provision thereof in the Revised Development Budget or the Operating
Budget, as applicable, the General Partner shall have the right to employ, at
the expense of the Partnership, any agent or third person to manage or provide
other services to the Project Owner and the Partnership.


 


3.8                                 REIT
Compliance.  The General Partner acknowledges that
the BH Partner and certain of its affiliates qualify as real estate investment
trusts within the meaning of Section 856 of the Code (“REITs”) and,
as such, the BH Partner intends for its interest in the Partnership not to
adversely affect its classification (or the classification of any entity
directly or indirectly controlling BH Partner or any of its affiliates) as a
REIT.  Accordingly, for so long as the BH
Partner is a Limited Partner, the Partnership’s operations and the operations
of each other entity in which the Partnership may have a direct or indirect
interest shall be conducted at all times in a manner that will enable BH
Partner and its affiliates to satisfy all the requirements for REIT status
under the Code.  In furtherance of the
foregoing (and not in limitation thereof), notwithstanding any other provision
herein to the contrary, the General Partner agrees to consult regularly with
counsel for the BH Partner to ensure that the business of the Partnership and
its underlying contractual arrangements are structured in such manner as to
comply with the REIT classification rules.


 


3.9                                 Removal
of the General Partner upon Triggering Event.


 


(a)                                  Triggering Events.  Subject
to Section 3.11(b), the Institutional Partners may remove the
General Partner with Major Decision Approval upon the occurrence of any of the
following events (each, a “Triggering Event”):


 


(i)                                     the General Partner breaches any of its obligations hereunder
or under any other agreement or contract relating to the Project to which the
General Partner is a party, and such breach continues for ten days after
the receipt by the General Partner of notice of such breach from any
Institutional Partner;


 


10

















 


(ii)                                  an affiliate of the General Partner breaches any of its
obligations under any agreement or contract relating to the Project to which it
is a party, and such breach continues for ten days after the receipt by
such affiliate of notice of such breach from any Institutional Partner;


 


(iii)                               the General Partner or any affiliate thereof commits any act
of gross negligence, willful misconduct, bad faith or fraud in connection with
its duties or obligations hereunder or under any other agreement or contract relating
to the Project to which it is a party;


 


(iv)                              the General Partner or any affiliate thereof is convicted of,
or pleads guilty or nolo contendere
to, any felony involving moral turpitude;


 


(v)                                 the General Partner or any affiliate thereof misapplies or
misappropriates Partnership or the Project Owner funds in violation of this
Agreement or otherwise;


 


(vi)                              the General Partner (A) makes a general assignment for
the benefit of creditors, (B) files a voluntary petition in bankruptcy, (C) files
a petition or answer seeking for itself any reorganization, arrangement,
composition, readjustment, liquidation, dissolution, or similar relief under
any bankruptcy or debtor relief law, (D) files an answer or other pleading
admitting or failing to contest the material allegations of a petition filed
against it in any bankruptcy or insolvency proceeding brought against it, or (E) seeks,
consents to, or acquiesces in the appointment of a trustee, receiver, or
liquidator of the General Partner or of all or any substantial part of its
property;


 


(vii)                           if within 60 days after the commencement of any
proceeding against the General Partner seeking reorganization, arrangement,
composition, readjustment, liquidation, dissolution, or similar relief under
any bankruptcy or debtor relief law, the proceeding is not dismissed;


 


(viii)                        if within 60 days after the appointment (without the
General Partner’s consent or acquiescence) of a trustee, receiver, or
liquidator of the General Partner or of all or any substantial part of its property,
the appointment is not vacated or stayed; or


 


(ix)                                if within 60 days after the expiration of any such stay,
the appointment is not vacated (the events described in Sections 3.9(a)(vii) through
3.9(a)(ix) being referred to herein as an “Event of Withdrawal”).


 


(b)                                 Conditions Precedent.  The
removal of the General Partner pursuant to Section 3.9(a) shall
not be effective and the business of the Partnership shall not be deemed to be
continued pursuant to Section 11.1, unless each of the following
conditions precedent shall have been satisfied: 
(i) a new general partner shall have been selected and admitted as
a new general partner of the Partnership by the Institutional Partners (other
than any Institutional Partner that is an affiliate of the General Partner
being removed), and such new general partner shall have assumed all obligations
of a General Partner under this Agreement arising after the date on which such
new general partner is admitted to the Partnership; (ii) such new general
partner shall have filed an amendment to the Certificate reflecting the
admission of the new general partner in place of the withdrawing General
Partner; (iii) the removed General Partner’s interest is converted to an
interest as a Limited Partner; and (iv) any required consents of any
lender to the Partnership for the change in general partner shall have been
obtained, and the Guarantor shall have been released of its liability from all
creditors of the Partnership (subject, however, to the terms of any 


 


11

















 


recourse provisions in loan documents then applicable to and
binding the General Partner) or refinancing of the existing indebtedness of the
Partnership without the liability of the General Partner.


 


Article IV


Rights and Obligations of the Limited Partners


 


4.1                                 No
Authority.  No Limited Partner shall participate in
the management, control or direction of the Partnership’s operations, business
or affairs, transact any business for the Partnership or have the power to act for
or on behalf of or to bind the Partnership, such powers being vested solely and
exclusively in the General Partner; provided, however, that nothing contained
in this Section 4.1 shall prohibit any Limited Partner from acting
as an officer, manager, member or partner of the General Partner or its
affiliates or from limiting any voting or consent right as otherwise specified
herein.


 


4.2                                 Liability
of Limited Partners.  Except as otherwise required by
applicable law, no Limited Partner shall be personally liable for any debt or
obligation of the Partnership; provided, however, that each Limited Partner
shall be obligated to make the capital contributions and other payments
required to be made by such Limited Partner pursuant to this Agreement or
applicable law.  No Limited Partner shall
be liable, or deemed to have any fiduciary or other obligation to any other
Partner under the Act or otherwise, for any act of the General Partner,
notwithstanding that such Limited Partner or any of its officers, directors, stockholders,
managers, members, partners or affiliates may be acting as officers, directors,
managers, members or partners of the General Partner or its affiliates.


 


4.3                                 Permanent
Financing of the Project.  At any time
after the Completion Date, the General Partner or any BH Partner (upon Major
Decision Approval) shall have the right, by notice to and with the prior
written approval of the other, which approval shall not be unreasonably
withheld, to cause the Partnership to cause the Project Owner to obtain
permanent financing for the Project in an amount not less than the amount then
owed by the Project Owner under the construction loan for the Project.  If such right properly is exercised, the
Partners shall use commercially reasonable efforts to obtain such permanent
financing; provided, however, that the terms and conditions of such permanent
financing shall be reasonably acceptable to all Partners and such permanent
financing shall be non-recourse to the Partners.  The Partnership shall bear all of the costs
and expenses incurred in negotiating and obtaining such permanent financing.


 


Article V


Exculpation and Indemnification


 


5.1                                 Exculpation.  None
of the General Partner, its affiliates or any of their respective officers,
directors, stockholders, managers, members, partners, employees or agents
(collectively, “Indemnitees”) shall be liable, responsible or
accountable in damages or otherwise to the Partnership or any Partner by reason
of, arising from or relating to the operations, business or affairs of, or any
action taken or failure to act on behalf of, the Partnership, except to the
extent that any of the foregoing is caused by the gross negligence, willful
misconduct, violation of law or bad faith of such Indemnitee.


 


5.2                                 Indemnification.   The Partnership shall indemnify, defend and
hold harmless each Indemnitee against any claim, loss, damage, liability or
expense (including reasonable attorneys’ fees, court costs and costs of
investigation and appeal) suffered or incurred by such Indemnitee by reason of,
arising from or relating to the operations, business or affairs of, or any
action taken or failure to act on behalf of, the Partnership, except to the
extent any of the foregoing is caused by the gross negligence, willful
misconduct, violation of law or bad faith of such Indemnitee.  Unless a determination has been made by
final, nonappealable order of a court of competent jurisdiction that
indemnification is not required, the Partnership shall, upon the request of any
Indemnitee, advance or promptly reimburse such 


 


12

















 


Indemnitee’s
reasonable costs of investigation, litigation or appeal, including reasonable
attorneys’ fees; provided, however, that the affected Indemnitee shall, as a
condition of such Indemnitee’s right to receive such advances or
reimbursements, undertake in writing promptly to repay the Partnership for all
such advancements and reimbursements if a court of competent jurisdiction
determines that such Indemnitee is not then entitled to indemnification under
this Section 5.2.  No Partner
shall be required to contribute capital in respect of any indemnification under
this Section 5.2 unless otherwise provided in another written
agreement to which such Partner is a party.


 


5.3                                 Guaranties.  To
the extent that any Indemnitee provides a guaranty or similar undertaking to
any third-party covering any obligation or liability of the Partnership or the
Project Owner (including a loan to any of them) (“Guaranteed Indebtedness”),
the Partnership shall indemnify such Indemnitee against any amount paid under
such guaranty or other undertaking and any costs incurred in defending against
a claim for performance by such person under the guaranty or other undertaking,
except to the extent any of the foregoing is caused by the gross negligence,
willful misconduct, violation of law or bad faith of such Indemnitee.  Upon request, the Partnership will enter into
an indemnity agreement acceptable to the General Partner and BH Partner with
any person entitled to indemnity under this Section 5.3 confirming
the Partnership’s obligations to such person. 
The form of such indemnity agreement shall be subject to the approval of
BREOF Partner, which approval shall not be unreasonably withheld, conditioned
or delayed.  No guarantee or other
undertaking contemplated in this Section 5.3 shall be the
Completion Guaranty, and nothing in this Section 5.3 requires the
Partnership to indemnify any Indemnitee to the extent any cost or liability
incurred by such Indemnitee is required to be funded pursuant to the Completion
Guaranty.


 


Article VI


Distributions


 


6.1                                 Distributable
Cash.  The General Partner shall
determine on a quarterly basis the amount of Distributable Cash of the
Partnership.  Except as otherwise
expressly provided herein, all Distributable Cash shall be distributed in the
following order of priority within 30 days after the end of each fiscal
quarter:


 


(a)                                  first, to the
Partners pro rata in proportion to each such Partner’s accrued and unpaid First
Priority Preference Amount, if any, until each such Partner has received
distributions under this Section 6.1(a) equal to such Partner’s
accrued and unpaid First Priority Preference Amount;


 


(b)                                 second, to the
Partners pro rata in proportion to and to the extent of the Undistributed First
Priority Capital, if any, of each Partner;


 


(c)                                  third, to the
Partners pro rata in proportion to each such Partner’s accrued and unpaid
Second Priority Preference Amount, if any, until each such Partner has received
distributions under this Section 6.1(c) equal to such Partner’s
accrued and unpaid Second Priority Preference Amount;


 


(d)                                 fourth, to the
Partners pro rata in proportion to and to the extent of the Undistributed
Second Priority Capital, if any, of each Partner; and


 


(e)                                  thereafter, subject
to the provisions of Section 8.11 and further subject to any
payment of the Deferred Affiliate Fees, to all Partners pro rata in proportion
to their respective Back-End Percentage Interests.


 


13

















 


6.2                                 Tax
Distributions.  Notwithstanding any other
provision of this Agreement to the contrary, the General Partner shall have the
right and authority to make distributions of Distributable Cash from the
Partnership (no later than April 1 after the close of a fiscal year) to
the Partners (including the General Partner) in an amount that, when combined
with all other distributions made or deemed made to such Partner in respect of
such fiscal year, is not less than the product of (i) the highest marginal
federal income tax rate applicable to individuals (applying the tax rates in
effect for the period in question so as to achieve the objective of the parties
of determining the tax cost to such Partner, as if such Partner was an
individual taxpayer, on a stand-alone basis) and (ii) the aggregate net
taxable income allocated to such Partner in respect of such year (with such
amount to be separately calculated for the different categories of income and
gain allocable to such Partner that are subject to different marginal tax
rates).  To the extent that the
distributions made or deemed made to a Partner pursuant to Section 6.1
in respect of any fiscal year are less than the amount determined to be made by
the General Partner by reference to this Section 6.2, any such additional
distribution (a “Special Tax Distribution”) in respect of such year
payable to any Partner pursuant to this Section 6.2 shall reduce on
a dollar-for-dollar basis, until fully recovered and notwithstanding any other
provision of this Agreement to the contrary (but without duplication of any
amount to be so recovered pursuant to Section 6.3), any
distributions to which such Partner is otherwise entitled from the Partnership
under or by reference to Section 6.1. The Partnership shall have no
obligation to borrow funds or incur indebtedness to fund any Special Tax
Distribution made pursuant to this Section 6.2.


 


6.3                                 Minimum
Distributions to REIT.  Notwithstanding any other
provision of this Agreement to the contrary, the General Partner shall use its best
efforts and endeavor to make distributions to BH Partner from the Partnership
(no later than January 15 after the close of a fiscal year) in an amount
(the “Minimum Distribution Amount”) that, when combined with all other
distributions made to BH Partner in respect of such fiscal year (inclusive of
distributions pursuant to Section 6.2 hereof made by January 15
after the close of a fiscal year), is not less than 90% of the taxable income
allocated to BH Partner in respect of such fiscal year.  To the extent that distributions made to BH
Partner pursuant to Sections 6.1 or 6.2 in respect of
any fiscal year (and no later than January 15 after the close of such
fiscal year) are less than the Minimum Distribution Amount, any such additional
distribution in respect of such year payable to BH Partner pursuant to this Section 6.3
(a “Special REIT Distribution”) shall reduce on a dollar-for-dollar
basis, until fully recovered and notwithstanding any other provision of this
Agreement to the contrary, any distributions to which such Partner is otherwise
entitled from the Partnership under or by reference to Section 6.1.
The Partnership shall have no obligation to borrow funds or incur indebtedness
to fund any Special REIT Distribution made pursuant to this Section 6.3.  It is the intention of the parties that this Section 6.3
shall take precedence over Section 6.2, and to the extent that both
a Special Tax Distribution and Special REIT Distribution is made to BH Partner
in respect of a fiscal year, any reduction in future distributions to such
Limited Partner pursuant to or by reference to Section 6.1 as
authorized by Section 6.2 and this Section 6.3 shall be
applied without duplication of any such Special Tax Distribution or Special
REIT Distribution amounts.


 


6.4                                 Distributions
upon Liquidation.  Upon liquidation of the Partnership the
assets of the Partnership shall be distributed in accordance with Article XI.  Unless approved by the Limited Partners, the
General Partner shall only distribute marketable securities, cash or cash
equivalents to the Partners.  Subject to
the foregoing, if any direct interests in real property are distributed to the
Partners in kind, then the Partners shall own and hold the same as tenants in
common in accordance with their respective interests in such real property.


 


6.5                                 Distributions
of Certain Lender-Funded Amounts.  If and to the
extent that the portion of any additional capital contribution made by the
General Partner for the BH-Funded Accrued Development Fee, the BH-Funded
Affiliate Fees or the BH-Funded Hard Cost Savings is made available and paid
from proceeds under the Senior Loan (such portion, the “Lender-Funded
Amounts”), whether


 


14
















 


through
recognition of hard cost savings, reallocation of budget line items or
otherwise, then the amount of the Lender-Funded Amounts shall be treated as
Distributable Cash, and the General Partner may, in its sole discretion, from
time to time distribute to the General Partner such deemed Distributable Cash
pursuant to Sections 6.1(a) and (b).  Any portion of the BH-Funded Accrued
Development Fee, the BH-Funded Affiliate Fees or the BH-Funded Hard Cost
Savings that is not made available and paid from proceeds under the Senior
Loan, and thus all or a portion thereof is not treated as Lender-Funded
Amounts, then the amount thereof that is not treated as Lender-Funded Amounts
shall continue as Undistributed First Priority Capital of the General Partner
and shall be distributed to the General Partner pursuant to the provisions of
this Agreement.


 


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


 


(a)           “Back-End
Percentage Interests” means the percentage interest of a Partner in certain
allocations of Profits, Losses and other items of income, gain, loss or
deduction and certain distributions of cash and property.  As of the Effective Date, the Back-End
Percentage Interest of each Partner is set forth opposite such Partner’s name
on Schedule I.  The Back-End Percentage Interest of any
Partner may be adjusted pursuant to Section 2.4, and, upon the
transfer of all or any portion of an interest in the Partnership in accordance
with this Agreement, the transferee shall succeed to the Back-End Percentage
Interest of the transferor to the extent it relates to the transferred interest
in the Partnership.  After any such
adjustment, the Back-End Percentage Interest of such Partner, as adjusted,
shall constitute such Partner’s Back-End Percentage Interest for all purposes
under this Agreement.


 


(b)           “Distributable Cash” for any period
means the net cash receipts of the Partnership as determined on the cash
receipts and disbursements basis of accounting, including distributions from
the Project Owner and other Entities owned by the Partnership, cash from
operations or investments, proceeds from the sale, exchange or other
disposition of Partnership assets and refinancings, less the portion thereof
set aside by the General Partner, subject to Section 3.2, to pay or
establish reserves for Partnership expenses, debt payments, capital
improvements, replacements and contingencies, including (A) the working
capital needs of the Partnership, (B) the payment of liabilities incurred
(including any loan made by any Partner) or arising in the reasonably
foreseeable future in connection with the operations, business and affairs of
the Partnership, and (C) capital expenditures or contributions incurred or
arising in the reasonably foreseeable future. 
Distributable Cash shall not be reduced by Depreciation, amortization,
cost recovery deductions or similar allowances, but shall be increased by
reductions in reserves previously established pursuant to the immediately
preceding sentence.  Furthermore, except
as otherwise determined by the General Partner, subject to Section 3.2,
or in connection with a final liquidating distribution, Distributable Cash
shall not include capital contributions made by the Partners or Partner
loans.  Notwithstanding the foregoing
provisions of this definition to the contrary, the amount of the Lender-Funded
Amounts shall be deemed to be Distributable Cash as provided in Section 6.5.


 


(c)           “First
Priority Preference Amount” means, with respect to each Partner, an
aggregate amount computed like interest at a rate equal to 14%  per annum, compounded quarterly, on the average daily
balance from time to time during the applicable period to which the First
Priority Preference Amount relates of such Partner’s Undistributed First
Priority Capital, reduced by all distributions made to such Partner pursuant to
or by reference to Section 6.1(a) (inclusive of any such
distributions pursuant to Section 11.3(f)).


 


15

















 


(d)           “Second
Priority Preference Amount” means, with respect to each Partner, an
aggregate amount computed like interest at a rate equal to 9.5% per annum,
compounded quarterly, on the average daily balance from time to time during the
applicable period to which the Second Priority Preference Amount relates of
such Partner’s Undistributed Second Priority Capital, reduced by all
distributions made to such Partner pursuant to or by reference to Section 6.1(c) (inclusive
of any such distributions pursuant to Section 11.3(f)).


 


(e)           “Undistributed
First Priority Capital” means, with respect to each Partner (other than a
Default Partner) on any day, the amount in a special recordkeeping account
maintained by the Partnership for such Partner equal to the excess, if any, of (i) the
aggregate amount of (A) any additional capital contributions made by such
Partner as of such date pursuant to Section 2.2 to fund an
Unexpected Shortfall that are treated as increasing the Undistributed First
Priority Capital of such Contributing Partner pursuant to Section 2.4(b),
plus (B) any additional capital contributions made by the General Partner
as of such date pursuant to Section 2.10 in respect of the
BH-Funded Accrued Development Fee, the BH-Funded  Deferred Affiliate Fees and the BH-Funded
Hard Cost Savings, over (ii) the aggregate distributions to such
Partner pursuant to or by reference to Section 6.1(b) (inclusive
of any such distributions pursuant to Section 11.3(f)).  Upon the transfer of all or any portion of an
interest in the Partnership in accordance with this Agreement, the transferee
shall succeed to the Undistributed First Priority Capital of the transferor to
the extent it relates to the transferred interest in the Partnership.


 


(f)            “Undistributed
Second Priority Capital” means, with respect to each Partner on any day,
the amount in a special recordkeeping account maintained by the Partnership for
such Partner equal to the excess, if any, of (i) the sum of (A) the
aggregate capital contributions of such Partner made to the Partnership as of
such date as credited to the Capital Account of such Partner pursuant to Section 2.1
plus (B) the aggregate additional capital contributions of such Partner
made to the Partnership as of such date to fund an Unexpected Shortfall other
than any such additional capital contribution that is treated as increasing a
Contributing Partner’s Undistributed First Priority Capital pursuant to Section 2.4(b),
over (ii) the aggregate distributions to such Partner pursuant to or by
reference to Section 6.1(d) as of such date (inclusive of any
such distributions pursuant to Section 11.3(f)).  Upon the transfer of all or any portion of an
interest in the Partnership in accordance with this Agreement, the transferee
shall succeed to the Undistributed Second Priority Capital of the transferor to
the extent it relates to the transferred interest in the Partnership; provided,
however, upon assignment of the Withdrawing General Partner’s interest in the
Partnership to the General Partner, the Withdrawing General Partner’s
Undistributed Second Priority Capital and Second Priority Preference Amount
were assigned to the Developer Partner, and General Partner did not and does
not succeed to such amounts.


 


Article VII


Tax Allocations and Other Tax Matters


 


7.1           Allocations of Profits and
Losses to Capital Accounts.


 


(a)           General
Rule.  Except as provided in Section 7.1(b) or
elsewhere in this Agreement, Profits (and items thereof) and Losses (and items
thereof) for any fiscal year shall be allocated among the Partners in a manner
such that the Capital Account of each Partner, immediately after giving effect
to such allocation, is, as nearly as possible, equal to the amount of
distributions that would be made to such Partner during such fiscal year or
period pursuant to Section 6.1, if (i) the Partnership were
dissolved and terminated; (ii) its affairs were wound up and each
Partnership asset was sold for cash equal to its Gross Asset Value; (iii) all
Partnership liabilities were satisfied (limited in respect of each nonrecourse
liability to the Gross Asset Value


 


16

















 


of the assets securing such liability); and (iv) the net
assets of the Partnership were distributed in accordance with Section 6.1
to the Partners immediately after giving effect to such allocation, minus, to
the extent applicable, such Partner’s share of Partnership Minimum Gain and
Partner Non-Recourse Debt Minimum Gain allocable pursuant to Section 7.1(c)(i) or
7.1(c)(ii), computed immediately prior to the hypothetical sale of
assets.  The General Partner may make
such other assumptions (whether or not consistent with the above assumptions)
as are necessary to effectuate the intended economic arrangement of the
Partners.


 


(b)           Allocations
Relating to Last Fiscal Year.  The Partners intend that the
provisions of this Article VII be interpreted, to the extent
permissible under Section 704(b) of the Code and the Treasury
Regulations thereunder, to produce liquidating distributions pursuant to Article XI
that do not differ from the distributions that would have been made had
liquidating distributions been controlled by Section 6.1.  Accordingly, except as otherwise provided
elsewhere in this Agreement, if upon the dissolution, liquidation and
termination of the Partnership pursuant to Article XI and after all
other allocations provided for in Section 7.1 have been tentatively
made as if this Section 7.1(b) were not in this Agreement, a
distribution to the Partners under Article XI would be different
from a distribution to the Partners under Section 6.1, then Profits
(and items thereof) and Losses (and items thereof) for the fiscal year in which
the Partnership dissolves, liquidates and terminates pursuant to Article XI
shall be allocated among the Partners in a manner such that the Capital Account
of each Partner, immediately after giving effect to such allocation, is, as
nearly as practicable, equal (proportionately) to the amount of the
distributions that would be made to such Partner during such last fiscal year
pursuant to Section 6.1.  The
General Partner may apply the principles of this Section 7.1(b) to
any fiscal year preceding the fiscal year in which the Partnership dissolves,
liquidates and terminates (including through application of Section 761(e) of
the Code) if delaying application of the principles of this Section 7.1(b) would
likely result in distributions under Article XI that are materially
different from distributions under Section 6.1 in the fiscal year
in which the Partnership dissolves, liquidates and terminates.


 


(c)           Special
Allocations.  The following special allocations shall be made in
the following order of priority.


 


(i)            If there
is a net decrease in Partnership Minimum Gain during any fiscal year, then each
Partner shall be specially allocated items of Partnership income and gain for
such fiscal year (and, if necessary, subsequent fiscal years) in an amount
equal to such Partner’s share of the net decrease in Partnership Minimum Gain,
determined in accordance with Section 1.704-2(g) of the Treasury Regulations.


 


(ii)           If there
is a net decrease in Partner Non-Recourse Debt Minimum Gain attributable to a
Partner Non-Recourse Debt during any fiscal year, then each Partner who has a
share of the Partner Non-Recourse Debt Minimum Gain, determined in accordance
with Section 1.704-2(i)(5) of the Treasury Regulations, shall be
specially allocated items of Partnership income and gain, including gross
income, for such fiscal year (and, if necessary, subsequent fiscal years) in an
amount equal to such Partner’s share of the net decrease in Partner
Non-Recourse Debt Minimum Gain, determined in accordance with Section 1.704-2(i)(4) of
the Treasury Regulations.


 


(iii)          If any
Limited Partner unexpectedly receives any adjustments, allocations or
distributions described in Section 1.704-1 (b)(2)(ii)(d)(4), (5) or (6) of
the Treasury Regulations, then items of Partnership income and gain, including
gross income, shall be specially allocated to each such Limited Partner in an
amount and manner sufficient to eliminate the Adjusted Capital Account Deficit
of such Limited


 


17

















 


Partner as quickly as practicable; provided, however, that an
allocation pursuant to this Section 7.1(c)(iii) shall be made
if and only to the extent that such Limited Partner would have an Adjusted
Capital Account Deficit after all other allocations provided for in this Article VII
have been tentatively made as if this Section 7.1(c)(iii) were
not in this Agreement.


 


(iv)          If any
Limited Partner has an Adjusted Capital Account Deficit at the end of any
fiscal year, then each such Limited Partner shall be specially allocated items
of Partnership income and gain in the amount of such excess as quickly as
practicable; provided, however, that an allocation pursuant this sentence shall
be made only if and to the extent that such Limited Partner would have an
Adjusted Capital Account Deficit after all other allocations provided for in
this Article VII have been made as if the allocations provided for
in this sentence and in Section 7.1(c)(iii) were not in this
Agreement.


 


(v)           Losses
allocated pursuant to Section 7.1(a) or 7.1(b) shall
not exceed the maximum Losses that can be so allocated without causing any
Limited Partner to have an Adjusted Capital Account Deficit at the end of any
fiscal year.  If some, but not all, of
the Limited Partners would have Adjusted Capital Account Deficits as a
consequence of the allocation of Losses pursuant to Section 7.1(a) or
7.1(b), then the limitations set forth in this Section 7.1(c)(v) shall
be applied on a Limited Partner-by-Limited Partner basis so as to allocate the
maximum permissible Losses to each Limited Partner under the Section 1.704-l(b)(2)(ii)(d) of
the Treasury Regulations.  All Losses in
excess of the limitations set forth in this Section 7.1(c)(v) shall
be allocated to the General Partner.


 


(vi)          Non-Recourse
Deductions for any fiscal year shall be considered an additional item of
taxable loss or deduction that is included in the determination of Profits and
Losses and that is then allocated among the Partners as part of the allocation
of Profits and Losses.


 


(vii)         Any
Partner Non-Recourse Deductions for any fiscal year shall be specially
allocated to the Partner who bears the economic risk of loss in respect of the
Partner Non-Recourse Debt in accordance with Section 1.704-2(i)(1) of
the Treasury Regulations.


 


(viii)        To the
extent an adjustment to the adjusted tax basis of any Partnership asset
pursuant to Section 734(b) or 743(b) of the Code is required
pursuant to Section 1.704-1(b)(2)(iv)(m)(2) or 1.704-1(b)(2)(iv)(m)(4) of
the Treasury Regulations, to be taken into account in determining Capital
Accounts as the result of a distribution to a Partner in complete liquidation
of its interest in the Partnership, the amount of such adjustment to Capital
Accounts shall be treated as an item of gain (if the adjustment increases the
basis of the asset) or loss (if the adjustment decreases such basis) and such
gain or loss shall be specially allocated to the Partners in accordance with
their respective interests in the Partnership if Section 1.704-1(b)(2)(iv)(m)(2) of
the Treasury Regulations is applicable, or to the Partner to whom such
distribution was made if Section 1.704-1(b)(2)(iv)(m)(4) of the
Treasury Regulations is applicable.


 


(d)           Curative
Allocations.  The allocations set forth in Section 7.1(c) (the
“Regulatory Allocations”) are intended to comply with the Treasury
Regulations.  It is the intent of the
Partners that, to the extent practicable, all Regulatory Allocations shall be
offset either with other Regulatory Allocations or with special allocations of
other items of Partnership income, gain, loss or deduction pursuant to this Section 7.1(d).  Therefore, notwithstanding any other
provision of 


 


18

















 


this Article VII to the contrary (other than the
Regulatory Allocations), the General Partner shall make such offsetting special
allocations of Partnership income, gain, loss or deduction in whatever manner
it reasonably determines appropriate so that, after such offsetting allocations
are made, each Partner’s Capital Account balance is, to the extent practicable,
equal to the Capital Account balance such Partner would have had if the
Regulatory Allocations were not part of the Agreement and all Partnership items
were allocated pursuant to Sections 7.1(a) and 7.1(b).  In exercising its discretion under this Section 7.1(d),
the General Partner shall take into account future Regulatory Allocations under
Sections 7.1(c)(i) and 7.1(c)(ii) that, although
not yet made, are likely to offset other Regulatory Allocations previously made
under Sections 7.1(c)(vi) and 7.1(c)(vii).


 


7.2           Other Allocation Rules.


 


(a)           In each
fiscal year, Profits (and items thereof) and Losses (and items thereof) shall
be allocated:


 


(i)            at the
time of any distribution pursuant to Section 6.1 for the period
commencing on the later of (A) the first day of such fiscal year and (B) the
date of the most recent prior distribution in such fiscal year, and ending on
the date immediately preceding such distribution;


 


(ii)           as of the
last day of each fiscal year, for the period commencing on the later of (A) the
first day of such fiscal year and (B) the date of the most recent prior
distribution in such fiscal year, and ending on such last day; and


 


(iii)          at such
other times as the Gross Asset Values of Partnership property are adjusted
pursuant to clause (ii) of the definition of Gross Asset Value.


 


(b)           If the
Partners’ interests vary during a fiscal year due to the contribution of
additional capital to the Partnership or because of a transfer of interests in
the Partnership, then allocations of Profits and Losses and any other items of
income, gain, loss, deduction or credit allocated under this Article VII
shall be allocated among the Partners whose interests changed during the fiscal
year based upon the length of time during such year that each Partner held a
particular interest in the Partnership and as if the items were incurred or
received, as the case may be, ratably throughout the entire taxable year;
provided, however, that if a material portion of the assets of the Partnership
are sold, exchanged or otherwise disposed of after a change in interest, but
during the fiscal year in which the change occurs, then any items of income,
gain, loss, deduction or credit losses attributable to such sale, exchange or
other disposition shall be allocated, to the extent permitted by any allowable
convention or election under the Code, only among those Partners then owning an
interest in the Partnership, in accordance with their respective interests, on
the date of the sale, exchange or other disposition.


 


7.3           Tax Allocations; Section 704(c) of
the Code.


 


(a)           Except as
otherwise provided in Section 7.3(b), for each fiscal year or period,
items of Partnership income, gain, loss, deduction and expense shall be
allocated, for federal, state and local income tax purposes, among the Partners
in the same manner as the Profits (and items thereof) or Losses (and items
thereof) of which such items are components were allocated pursuant to Section 7.1.


 


(b)           In
accordance with Section 704(c) of the Code and the Treasury
Regulations thereunder, income, gain, loss and deduction in respect of any
property contributed to the capital


 


19

















 


of the Partnership shall, solely for tax purposes, be
allocated among the Partners so as to take account of any variation between the
adjusted basis of such property to the Partnership for U.S. federal income
tax purposes and its initial Gross Asset Value (computed in accordance with
clause (i) of the definition of Gross Asset Value) using the “traditional
method” described in Section 1.704-3(b) of the Treasury Regulations;
provided, however, that any other method allowable under applicable Treasury
Regulations may be used for any contribution of property as to which there is
agreement between the contributing Partner and the General Partner.


 


(c)           If the
Gross Asset Value of any Partnership asset is adjusted pursuant to clause (ii) of
the definition of Gross Asset Value, then subsequent allocations of income,
gain, loss and deduction in respect of such asset shall take account of any
variation between the adjusted basis of such asset for U.S. federal income
tax purposes and its Gross Asset Value in the same manner as under Section 704(c) of
the Code and the Treasury Regulations thereunder.


 


(d)           Any
elections or other decisions relating to such allocations shall be made by the
General Partner in any manner that reasonably reflects the purpose and
intention of this Agreement.  Allocations
pursuant to this Section 7.3 are solely for purposes of federal,
state and local taxes and shall not affect, or in any way be taken into account
in computing, any Partner’s Capital Account or share of Profits, Losses, other
items or distributions pursuant to any provision of this Agreement.


 


(e)           The
Partners are aware of the income tax consequences of the allocations made by
this Article VII and shall be bound by the provisions of this Article VII
in reporting their shares of Partnership income and loss for income tax
purposes.


 


7.4           Certain Definitions.  As
used in this Agreement, the following terms have the following meanings.


 


(a)           “Adjusted
Capital Account Deficit(s)”  means,
in respect of any Partner, the deficit balance, if any, in such Partner’s
Capital Account as of the end of the relevant fiscal year, after giving effect
to the following adjustments:


 


(i)            the
Capital Account shall be increased by any amounts that such Partner is obligated
to restore pursuant to any provision of this Agreement or is deemed to be
obligated to restore pursuant to the penultimate sentence of Section 1.704-2(g)(1) of
the Treasury Regulations and of Section 1.704-2(i)(5) of the Treasury
Regulations; and


 


(ii)           the
Capital Account shall be decreased by the items described in
Sections 1.704-l(b)(2)(ii)(d)(4), 1.704-l(b)(2)(ii)(d)(5) and
1.704-1(b)(2)(ii)(d)(6) of the Treasury Regulations.


 


(iii)          This
definition of Adjusted Capital Account Deficit is intended to comply with the
provisions of Section 1.704-l(b)(2)(ii)(d) of the Treasury
Regulations and shall be interpreted consistently therewith.


 


(b)           “Code”
means the Internal Revenue Code of 1986, as amended from time to time.


 


(c)           “Depreciation” means for each fiscal
year an amount equal to the depreciation, amortization or other cost-recovery
deduction allowable in respect of an asset for such fiscal year, except that if
the Gross Asset Value of any asset differs from its adjusted basis for
U.S. federal income tax purposes at the beginning of such fiscal year,
Depreciation shall be an amount that bears the same ratio to such beginning
Gross Asset Value as the U.S. federal income tax 


 


20

















 


depreciation, amortization or other cost-recovery deduction
for such fiscal year bears to such beginning adjusted tax basis; provided,
however, that if the adjusted basis for U.S. federal income tax purposes
of an asset at the beginning of such fiscal year is zero, then Depreciation shall
be determined with reference to such beginning Gross Asset Value using any
reasonable method approved by the General Partner.


 


(d)           “Gross Asset Value” means an asset’s
adjusted basis for U.S. federal income tax purposes, except as follows:


 


(i)            the initial
Gross Asset Value of any asset contributed by a Partner to the Partnership
shall be the gross fair market value of such asset, as reasonably determined by
the contributing Partner and the General Partner;


 


(ii)           the Gross
Asset Values of all assets shall be adjusted to equal their respective gross
fair market values, as reasonably determined by the General Partner, as of the
following times:


 


(A)          the acquisition of an
additional interest in the Partnership by any new or existing Partner in
exchange for more than a de minimis
contribution;


 


(B)           the distribution by the Partnership
to a Partner of more than a de minimis
amount of property as consideration for an interest in the Partnership; and


 


(C)           the liquidation of the
Partnership within the meaning of Section 1.704-l(b)(2)(ii)(g) of the
Treasury Regulations; provided, however, that adjustments pursuant to
clauses (i) and (ii) of this definition shall be made only if
the General Partner reasonably determines that such adjustments are necessary
to reflect the relative economic rights of the Partners.


 


(iii)          the Gross
Asset Value of any asset distributed to any Partner shall be adjusted to equal
the gross fair market value of such asset on the date of distribution as
determined by the General Partner;


 


(iv)          the Gross
Asset Values of assets shall be increased (or decreased) to reflect any
adjustments to the adjusted basis of such assets pursuant to Section 734(b) or
743(b) of the Code, but only to the extent that such adjustments are taken
into account in determining Capital Accounts pursuant to Section 1.704-l(b)(2)(iv)(m) of
the Treasury Regulations and clause (f) of the definition of Profits
and Losses; provided, however, that Gross Asset Values shall not be adjusted
pursuant to this clause (d) to the extent the General Partner
determines that an adjustment pursuant to clause (b) of this
definition is necessary or appropriate in connection with a transaction that
would otherwise result in an adjustment pursuant to this clause (d); and


 


(v)           if the
Gross Asset Value of an asset has been determined or adjusted pursuant to
clause (a), (b) or (d) of this definition, then such Gross Asset
Value shall thereafter be adjusted by the Depreciation taken into account in
respect of such asset for purposes of computing Profits and Losses.


 


(e)           “Nonrecourse
Deductions” has the meaning set forth in Sections 1.704-2(b)(1) and
1.704-2(c) of the Treasury Regulations.


 


21

















 


(f)            “Nonrecourse Liability” has the
meaning set forth in Section 1.704-2(b)(3) of the Treasury
Regulations.


 


(g)           “Partner Non-Recourse Debt” has the
meaning set forth in Section 1.704-2(b)(4) of the Treasury
Regulations for “partner nonrecourse debt.”


 


(h)           “Partner Non-Recourse Debt Minimum Gain”
means an amount, in respect of each Partner Nonrecourse Debt, equal to the
Partnership Minimum Gain that would result if such Partner Nonrecourse Debt
were treated as a Nonrecourse Liability, determined in accordance with Section 1.704-2(i)(3) of
the Treasury Regulations.


 


(i)            “Partner Non-Recourse Deductions”
has the meaning set forth in Sections 1.704-2(i)(1) and 1.704-2(i)(2) of
the Treasury Regulations for “partner nonrecourse deductions.”


 


(j)            “Partnership Minimum Gain” means
the same as “partnership minimum gain” as set forth in Section 1.704-2(b)(2) and
1.704-2(d) of the Treasury Regulations.


 


(k)           “Partnership
Property” means collectively, all right, title and interest of the
Partnership in and to all or any portion of all assets (real, personal,
tangible or intangible) owned by the Partnership including, the securities or
other interests of another person owned by the Partnership.


 


(l)            “Profit(s) and Loss(es)”  means, for each fiscal year, an amount equal
to the Partnership’s taxable income or loss for such fiscal year, determined in
accordance with Section 703(a) of the Code (for this purpose, all
items of income, gain, loss or deduction required to be stated separately
pursuant to Section 703(a)(l) of the Code shall be included in
taxable income or loss), with the following adjustments:


 


(i)            any
income of the Partnership that is exempt from U.S. federal income tax and
not otherwise taken into account in computing Profits or Losses pursuant to
this definition of Profit(s) and Loss(es) shall be added to such taxable
income or loss;


 


(ii)           any
expenditures of the Partnership described in Section 705(a)(2)(B) of
the Code or treated as Code Section 705(a)(2)(B) expenditures
pursuant to Section 1.704-l(b)(2)(iv)(i) of the Treasury Regulations,
and not otherwise taken into account in computing Profits or Losses pursuant to
this definition of Profit(s) and Loss(es) shall be subtracted from such
taxable income or loss;


 


(iii)          if the
Gross Asset Value of any Partnership asset is adjusted pursuant to clause (b) or
(c) of the definition of Gross Asset Value, then the amount of such
adjustment shall be taken into account as gain or loss from the disposition of
such asset for purposes of computing Profits or Losses;


 


(iv)          gain or
loss resulting from any disposition of Partnership Property in respect of which
gain or loss is recognized for U.S. federal income tax purposes shall be
computed by reference to the Gross Asset Value of the Partnership Property
disposed of, notwithstanding that the adjusted tax basis of such Partnership Property
differs from its Gross Asset Value;


 


(v)           in lieu of
the depreciation, amortization and other cost recovery deductions taken into
account in computing such taxable income or loss, there shall be


 


22

















 


taken into account Depreciation for such fiscal year,
computed in accordance with the definition thereof; and


 


(vi)          to the
extent an adjustment to the adjusted tax basis of any Partnership Property
pursuant to Section 734(b) or 743(b) of the Code is required
pursuant to Section 1.704-l(b)(2)(iv)(m)(4) of the Treasury
Regulations to be taken into account in determining Capital Accounts as a
result of a distribution other than in complete liquidation of a Partner’s
economic rights, the amount of such adjustment shall be treated as an item of
gain (if the adjustment increases the basis of the asset) or loss (if the
adjustment decreases the basis of the asset) from the disposition of the asset
and shall be taken into account for purposes of computing Profits or Losses.


 


(vii)         Notwithstanding
any other provision of this definition of Profits and Losses to the contrary,
any items that are specially allocated pursuant to Section 7.1(c) shall
not be taken into account in computing Profits or Losses.


 


(viii)        The
amounts of the items of Partnership income, gain, loss or deduction available
to be specially allocated pursuant to Section 7.1(c) shall be
determined by applying rules analogous to those set forth in clauses (i) through
(vi) of this definition.


 


(m)          “Treasury
Regulations” means the temporary or final Treasury Regulations promulgated
under the Code, as such regulations may be amended from time to time (including
corresponding provisions of succeeding regulations).


 


7.5           Tax Matters Partner; Tax
Returns; Tax Elections.   The General Partner is
hereby designated as the “tax matters partner” under Section 6231 of the
Code.  If an audit of the Partnership’s
U.S. federal income tax return is commenced, then the General Partner
shall promptly advise all Limited Partners of the audit and the status thereof
but shall not agree to any final adjustment without Major Decision
Approval.  The General Partner also shall keep the Partners informed of all
administrative and judicial proceedings, as required by Section 6223(g) of
the Code, and shall promptly furnish to the Partners a copy of each notice or
other communication received by the General Partner from the Internal Revenue
Service (except such notices or communications as are sent directly to the
Partners by the Internal Revenue Service).


 


7.6           Tax Returns; Tax Elections.  The
General Partner shall, at the expense of the Partnership, prepare and file, or
shall cause to be prepared and filed, all U.S. federal, state and local
income and other tax returns required to be filed by the Partnership.  The General Partner shall determine the
accounting methods and conventions to be used in the preparation of the
Partnership’s tax returns and shall make any and all elections under the tax
laws of the United States and any other relevant jurisdictions as to the
treatment of items of income, gain, loss, deduction and credit of the
Partnership, or any other method or procedure related to the preparation of the
Partnership’s tax returns; provided, however, that neither the Partnership, nor
the General Partner on behalf of the Partnership, shall make an election to
exclude the Partnership from the provisions of subchapter K of the Code or
to have the Partnership treated as an entity other than a partnership.  Each Limited Partner shall be responsible for
preparing and filing all tax returns required to be filed by such Limited
Partner.


 


7.7           No Publicly Traded
Partnership.  The General Partner is authorized to
take all actions necessary to prevent the Partnership from being treated as a
publicly traded partnership within the meaning of Section 7704 of the
Code.  To ensure that interests in the
Partnership are not traded on an established securities market within the
meaning of Section 1.7704-1(b) of the Treasury Regulations or readily
tradable on a secondary market or the substantial equivalent thereof within the
meaning of Section 1.7704-1(c) of the Treasury Regulations,
notwithstanding any other provision of this Agreement 


 


23

















 


to
the contrary: (i) the Partnership shall not participate in the
establishment of a market or the inclusion of its interests thereon, and (ii) the
Partnership shall not recognize any transfer made on any market by (A) redeeming
the transferor Partner (in the case of a redemption or repurchase by the
Partnership) or (B) admitting the transferee as a Partner or otherwise
recognizing any rights of the transferee, such as a right of the transferee to
receive Partnership distributions (directly or indirectly) or to acquire an
interest in the capital or profits of the Partnership.


 


7.8           Amounts Withheld; Taxes of Taxing Authorities.  To
the extent required by the laws of any taxing authority, each Partner requested
to do so by the General Partner shall promptly submit to the Partnership an
agreement indicating that such Partner (i) will make timely income tax
payments to such taxing authority and (ii) accepts personal jurisdiction
of such taxing authority in respect of the collection of income taxes
attributable to such Partner’s income and interest and penalties assessed on
such income.  If any Partner fails to
provide such agreement, then the Partnership may withhold and pay over to such
taxing authority the amount of tax, penalty and interest determined under the
laws of such taxing authority in respect of such income.  The Partnership may, where permitted by the rules of
any taxing authority, file a composite, combined or aggregate tax return
reflecting the income of the Partnership and pay the tax, interest and
penalties of some or all of the Partners on such income to the taxing
authority, in which case the Partnership shall inform the Partners of the
amount of such tax, interest and penalties so paid.  Without limiting the foregoing provisions of
this Section 7.1, the Partnership is authorized to withhold from
distributions and to pay over to any federal, state or local government any
amount required to be so withheld pursuant to the Code or any provision of any
other federal, state or local law and shall allocate any such amount to the
Partner in respect of which such amount was withheld.  All amounts withheld by the Partnership
pursuant to the Code or any provision of any state or local tax law in respect
of any payment, distribution or allocation by the Partnership to the Partners
shall be treated as amounts distributed to the Partners pursuant to Article VI
for all purposes of this Agreement.  Each
Partner shall provide such identifying numbers and other certificates as are
requested by the Partnership to enable it to comply with any tax reporting or
withholding requirement under the Code or any applicable state, local or
foreign tax law.


 


Article VIII

Admissions, Transfers and Withdrawals


 


8.1           Admissions.  No new Partner may be
admitted to the Partnership without the prior written consent of the General
Partner and Major Decision Approval, and then only upon satisfaction of such
terms and conditions as are required by the General Partner.


 


8.2           Transfer of General
Partner’s Interest.  The General Partner shall not
transfer, assign, encumber, hypothecate or otherwise convey all or any portion
of its general partner interest in the Partnership without Major Decision
Approval; provided, however, the General Partner may transfer, assign or
otherwise convey all or any portion of its interest in the Partnership to any
affiliate of the General Partner without having to obtain the prior written
consent of any Partner or other person.


 


8.3           Transfer of Limited
Partners’ Interests.


 


(a)           No
Transfers Without Consent.  No Limited Partner may transfer,
assign, encumber, hypothecate or otherwise convey all or any portion of such
Limited Partner’s interest in the Partnership without the prior written consent
of the General Partner and Major Decision Approval; provided, however, any
Limited Partner may transfer, assign or otherwise convey all or any portion of
its interest in the Partnership to any affiliate of such Limited Partner
without having to obtain the prior written consent of any Partner or other
person.


 


24
















 


(b)                                 Restrictions on Transfer.  Any
purported transfer of an interest in the Partnership in violation of this
Agreement shall be void and of no force or effect.  Notwithstanding any provision of this
Agreement to the contrary, no Partner shall make or suffer any transfer of its
interest in the Partnership if such transfer would:  (i) require the Partnership, or the
interest in the Partnership being transferred, to be registered or qualified
under federal or state securities laws; (ii) cause the Partnership to be
classified other than as a partnership for U.S. federal income tax
purposes or be treated as a publicly traded partnership under Section 7704
of the Code; or (iii) cause the Partnership to be in breach or default
under any mortgage, deed of trust or other security agreement encumbering the
Project or any of the Partnership’s assets.


 


(c)                                  Death, Bankruptcy, etc. of Limited Partner.  In the event of the death, incompetence,
insolvency, bankruptcy, dissolution, liquidation or termination of any Limited
Partner:


 


(i)                                     the Partnership shall not be dissolved, liquidated or
terminated, and the remaining Partners shall continue the Partnership and its
operations, business and affairs until the dissolution thereof as provided in Section 11.1;


 


(ii)                                  such Limited Partner thereupon shall cease to be a Partner
for all purposes of this Agreement and, except as provided in Section 8.4,
no officer, partner, beneficiary, creditor, trustee, receiver, fiduciary or
other legal representative and no estate or other successor in interest of such
Limited Partner (whether by operation of law or otherwise) shall become or be
deemed to become a Limited Partner for any purpose under this Agreement;


 


(iii)                               the Partnership interest of such Limited Partner shall not be
subject to withdrawal or redemption (by such Limited Partner’s estate or other
legal representative or successor in interest) in whole or in part prior to the
dissolution, liquidation and termination of the Partnership;


 


(iv)                              the estate or other successor in interest of such Limited
Partner shall be deemed a transferee of, and shall be subject to all of the
obligations in respect of, the Partnership interest of such Limited Partner as
of the date of death, incompetence, insolvency, bankruptcy, dissolution,
liquidation or termination, except to the extent the General Partner (with
Major Decision Approval) releases such estate or successor from such
obligations; and


 


(v)                                 any legal representative or successor in interest having
lawful ownership of the assigned Partnership interest of such Limited Partner
shall have the right to receive notices, reports and distributions, if any, to
the same extent as would have been available to such Limited Partner.


 


8.4                                 Substituted
Partners.  A transferee of any general or limited
partnership interest in the Partnership may become a substituted General
Partner or Limited Partner, as the case may be, as to the interest in the
Partnership transferred, in place of the transferor only with the prior written
consent of the General Partner and Major Decision Approval.  Notwithstanding the preceding sentence, a
transferee who is a then existing Partner shall automatically without the
consent of the General Partner become a substituted Limited Partner in place of
the transferor as to the interest in the Partnership transferred.  The General Partner and its affiliates shall
have the right to be a Limited Partner or to become a substituted Limited
Partner.  Unless a transferee of any
Partnership interest of a Partner becomes a substituted General Partner or
substituted Limited Partner in accordance with this Agreement, such transferee
shall not be entitled to any of the rights granted to a Partner hereunder other
than the right to receive all or part 


 


25

















 


of
the share of the income, gains, losses, deductions, expenses, credits,
distributions or returns of capital to which its transferor would otherwise be
entitled in respect of the Partnership interest so transferred.  As a condition precedent to becoming a
substituted General Partner or Limited Partner, as the case may be, the
transferee shall execute a joinder agreement agreeing to be bound by the terms
and conditions of this Agreement in a form satisfactory to the General Partner
in the case of a substituted Limited Partner or to the Institutional Partners
holding a majority of the Back-End Percentage Interests held by all
Institutional Partners in the case of a substituted General Partner.


 


8.5                                 Withdrawal
of Partners.  Except as permitted by this Section 8.5,
no Partner shall have any right to withdraw or resign from the Partnership,
unless (i) such Partner transfers its entire interest in the Partnership
to one or more transferees, all of whom have been admitted as substituted
General or Limited Partners, as the case may be, in accordance with Section 8.4
or (ii) such Partner’s entire interest in the Partnership is transferred
in accordance with Section 8.7, Section 8.8, Exhibit E or Exhibit F.


 


8.6                                 Transfers
of Interests in Partners.  No Partner
shall permit any transfer, either directly or indirectly, by any equity owner
of all or any portion of the stock, partnership interests or other equity
interests of such Partner, either voluntarily or involuntarily, without Major
Decision Approval; provided, however, any equity owner of any Partner may
directly or indirectly transfer all or any portion of the stock, partnership
interests or other equity interests of such Partner, either voluntarily or
involuntarily, to an affiliate of such Partner without having to obtain the
prior written consent of any Partner or other person.  For purposes of this Section 8.6,
the issuance of new equity interests will be deemed a transfer of those equity
interests; provided, however, the direct or indirect transfer of stock, partnership
interests or other equity interests in Behringer Harvard Holdings,
LLC, Behringer Harvard REIT I, Inc., Behringer Harvard Mid-Term Value
Enhancement Fund I LP, Behringer Harvard Short-Term Opportunity Fund I LP,
Behringer Harvard Opportunity REIT I, Inc., Behringer Harvard Strategic
Opportunity Fund I LP, Behringer Harvard Strategic Opportunity Fund II LP or
Behringer Harvard Multifamily REIT I, Inc. (or any other person directly
or indirectly sponsored by or affiliated with Behringer Harvard Holdings, LLC,
provided such person’s sole investment is not an investment in this
Partnership) and their respective affiliates, on the one hand, and Brookfield US
Real Estate Opportunity Fund I, L.P. (or any other person
directly or indirectly sponsored by or affiliated with BREOF Holdings
LLC, provided such person’s sole investment is not an investment in this
Partnership), or affiliates of either of them, on the other
hand, as applicable, shall not be deemed a transfer for purposes of this Section 8.6.


 


8.7                                 BREOF
Partner’s Put Right.


 


(a)                                  BREOF Valuation Notice.  At
any time during the BREOF Put Period, BREOF Partner shall have the right to
initiate a pricing procedure to ascertain the market price for the Project by
delivery of a notice to BH Partner (the “BREOF Valuation Notice”).  The BREOF Valuation Notice shall set forth
the BREOF Partner’s determination of the fair market value of the Project.


 


(b)                                 Acceptance and Rejection Notices.  If BH Partner disagrees with the fair market
value of the Project as set forth in the BREOF Valuation Notice, then BH
Partner and BREOF Partner shall negotiate to attempt to reach an agreement as
to the fair market value within 30 days after the date of the BREOF
Valuation Notice (“BREOF Negotiation Deadline”).  At any time prior to expiration of the BREOF
Negotiation Deadline, (i) BH Partner may accept the fair market value of
the Project set forth in the BREOF Valuation Notice by delivery of notice of
acceptance (“BREOF Acceptance Notice”) to BREOF Partner, (ii) BH
Partner may reject the fair market value of the Project set forth in the BREOF
Valuation Notice by delivery of notice of rejection to BREOF Partner, or (iii) BH
Partner and BREOF Partner may agree in writing to the fair market value of the
Project other than the fair market value set forth in the BREOF Valuation
Notice.  If 


 


26

















 


BH Partner timely delivers a BREOF Acceptance Notice or if BH
Partner and BREOF Partner agree upon a fair market value of the Project as
described in clause (iii) above, then the fair market value so agreed
upon shall be the “BREOF Mark to Market Price” and the provisions of Section 8.7(d) shall
apply.


 


(c)                                  Arbitration.  If
BH Partner and BREOF Partner do not agree upon the fair market value of the
Project prior to the expiration of the BREOF Negotiation Deadline, then either
such Partner may deliver to the other a notice of arbitration (the “Arbitration
Notice”), pursuant to which the “BREOF Mark to Market Price” shall
be determined by “baseball style” arbitration in accordance with the provisions
of Exhibit D.


 


(d)                                 Purchase of BREOF’s Partnership Interest.  Once the BREOF Mark
to Market Price has been determined, BH Partner shall, within 60 days after
such determination, purchase BREOF Partner’s interest in the Partnership.


 


(e)                                  Closing.  The purchase price for BREOF Partner’s
interest in the Partnership shall be an amount equal to the share of
hypothetical net distribution proceeds that would be received by BREOF Partner
in respect of its interest in the Partnership assuming: (i) the
Partnership sold the Project for the BREOF Mark to Market Price; and (ii) the
Partnership: (A) paid the BREOF Hypothetical Closing Costs together with
any other reasonable and customary closing and transaction costs that would be
payable in an arms-length sale of the Project to the extent the amount of the
BREOF Hypothetical Closing Costs are insufficient to cover such costs; (B) discharged
all outstanding Partnership liabilities and indebtedness to which the Project,
the Project Owner and the Partnership were subject (including the outstanding
principal, interest and prepayment premiums (if any) of the construction loan);
(C) repaid all Partner loans; and (D) paid the Section 8.7 Net
Profits Payment to the Developer Partner; and (iii) after giving effect to
the preceding clauses (i) and (ii), the resulting net assets of the
Partnership were distributed in accordance with Section 6.1
immediately prior to the closing of the purchase of BREOF Partner’s interest in
the Partnership, after giving effect to all capital contributions,
distributions and allocations for all periods. 
At the closing, BREOF Partner shall assign all of its interest in the
Partnership to BH Partner (or its designee) by written assignment in a form and
substance reasonably acceptable to BH Partner and to BREOF Partner; provided,
however, that BREOF Partner shall convey its interest in the Partnership to BH
Partner (or its designee), free and clear of all liens, claims and
encumbrances, and BH Partner shall likewise execute and deliver to BREOF
Partner all documents that may be reasonably requested to confirm the sale and
purchase of such Partnership interest. 
The purchase price paid by BH Partner (or its designee) for BREOF
Partner’s interest in the Partnership shall be satisfied in cash at the
closing.


 


(f)                                    Certain Definitions.  As
used in this Section 8.7, the following terms have the following
meanings:


 


(i)                                     “BREOF Put Period” means the period commencing on the
last day of the 24th month following the Effective Date and continuing until
the last day of the 36th month following the Effective Date, subject to the
other terms and conditions of this Agreement.


 


(ii)                                  “BREOF Hypothetical Closing Costs” means the amount
equal to the product of (1) the BREOF Mark to Market Price; multiplied by (2) 1.75%.


 


(iii)                               “Completion Date” means the date upon which the
General Partner receives (A) a copy of the final Certificate of Occupancy
in respect of the Project, and 


 


27

















 


(B) lien waivers, releases or other similar evidences of
payment from the general contractor on the Project.


 


(iv)                              “Section 8.7 Net Profits Payment” means 50% of
the net Distributable Cash remaining to be distributed from a hypothetical sale
of the Project and distribution of proceeds from that sale assuming: (i) the
Partnership sold the Project for the BREOF Mark to Market Price and (ii) the
Partnership (A) paid the BREOF Hypothetical Closing Costs together with
any other reasonable and customary closing and transaction costs that would be
payable in an arms-length sale of the Project to the extent the amount of the
BREOF Hypothetical Closing Costs are insufficient to cover such costs; (B) discharged
all outstanding liabilities and indebtedness to which the Project, the Project
Owner and the Partnership were subject (including the outstanding principal,
interest and prepayment premiums (if any) of the construction loan); (C) repaid
all Partner loans; and (D) distributed to the Partners the amounts payable
pursuant to Sections 6.1(a), 6.1(b), 6.1(c) and 6.1(d).


 


8.8                                 BREOF
Partner’s  Tag-Along Right.


 


(a)                                  General.  Provided the General Partner and BH Partner
elect to sell all or any portion of their Partnership interests in the
Partnership, then BREOF Partner shall have the right (the “Tag-Along Right”)
to require the General Partner and BH Partner to purchase all or a portion of
the Partnership interest of BREOF Partner as a part of the transaction in which
the General Partner and BH Partner sells their Partnership interests (a “Tag-Along
Transaction”).  If the General
Partner and BH Partner elect to sell any portion (but less than all) of their
Partnership interests, then BREOF Partner shall be entitled to require the
General Partner and BH Partner to purchase only an applicable proportionate
share (determined based upon the ratio that the portion of interests the
General Partner or BH Partner elects to sell bears to the aggregate interests
of the General Partner and BH Partner) of the Partnership interest of BREOF
Partner.


 


(b)                                 Notice; Exercise.  The General Partner shall notify BREOF
Partner of any transaction that would trigger a Tag-Along Transaction (the “Tag-Along
Notice”).  The Tag-Along Notice shall
include the Tag-Along Hypothetical Price. 
BREOF Partner may elect to require the General Partner and BH Partner to
purchase from BREOF Partner all or the applicable portion of its interest in
the Partnership by delivering notice of such election (the “Tag-Along
Acceptance Notice”) to the General Partner and BH Partner within 30 days
after delivery of the Tag-Along Notice (the “Tag-Along Acceptance Period”).  The Tag-Along Acceptance Notice shall state
that BREOF Partner desires to transfer all or the applicable portion of its
Partnership interest to the General Partner and BH Partner.


 


(c)                                  Tag-Along Price.  The
purchase price (the “Tag-Along Price”) for the Partnership interest of
BREOF Partner or portion thereof being sold, as applicable, shall be an amount
equal to the share of hypothetical net distribution proceeds that would be
received by BREOF Partner in respect of its Partnership interest or portion
thereof being sold, as applicable, assuming: (i) the Partnership sold the
Project for the Tag-Along Hypothetical Price; and (ii) the Partnership: (A) paid
the BREOF Hypothetical Closing Costs together with any other reasonable and
customary closing and transaction costs that would be payable in an arms-length
sale of the Project to the extent the amount of the BREOF Hypothetical Closing
Costs are insufficient to cover such costs; (B) discharged all outstanding
Partnership liabilities and indebtedness to which the Project, the Project
Owner and the Partnership were subject (including the outstanding principal,
interest and prepayment premiums (if any) of the construction loan); (C) repaid
all Partner loans; and (D) paid the Section 8.8 Net Profits Payment
to the Developer Partner; and 


 


28

















 


(iii) after giving effect to the preceding clauses (i) and
(ii), the resulting net assets of the Partnership were distributed to BREOF
Partner in accordance with Section 6.1 immediately prior to the
closing of the purchase of the BREOF Partner’s interest in the Partnership,
after giving effect to all capital contributions, distributions and allocations
for all periods.  The General Partner and
BH Partner may allocate payment of the Tag-Along Price between each of them in
their discretion provided the aggregate amount paid by the General Partner or
BH Partner equals the Tag-Along Price.


 


(d)                                 Effect of Exercise of Tag-Along Right.  Upon delivery of the Tag-Along Acceptance Notice
by BREOF Partner, BREOF Partner shall be obligated to sell its interest in the
Partnership, or applicable portion thereof, to the General Partner or BH Partner,
as determined by the General Partner or BH Partner in their discretion, for the
Tag-Along Price, and the General Partner or BH Partner (or any designated
affiliate of either of them), as applicable, shall be obligated to purchase
BREOF Partner’s interest in the Partnership, or applicable portion
thereof.  The closing of the sale and
purchase of BREOF Partner’s interest in the Partnership, or applicable portion
thereof, pursuant to the Tag-Along Right shall occur contemporaneously with the
closing of the Tag-Along Transaction.


 


(e)                                  Certain Definitions.  As
used in this Section 8.8, the following terms have the following
meanings:


 


(i)                                     “Section 8.8 Net Profits Payment” means 50% of
the net Distributable Cash remaining to be distributed from a hypothetical sale
of the Project and distribution of proceeds from that sale assuming: (i) the
Partnership sold the Project for the Hypothetical Tag-Along Price and (ii) the
Partnership (A) paid the BREOF Hypothetical Closing Costs together with
any other reasonable and customary closing and transaction costs that would be
payable in an arms-length sale of the Project to the extent the amount of the
BREOF Hypothetical Closing Costs are insufficient to cover such costs; (B) discharged
all outstanding liabilities and indebtedness to which the Project, the Project
Owner and the Partnership were subject (including the outstanding principal,
interest and prepayment premiums (if any) of the construction loan); (C) repaid
all Partner loans; and (D) distributed to the Partners the amounts payable
pursuant to Sections 6.1(a), 6.1(b), 6.1(c) and 6.1(d).


 


(ii)                                  “Tag-Along Hypothetical Price” means the purchase
price that would have to be paid for a sale of the Project in order for the
General Partner and BH Partner to receive the same net sales proceeds the
General Partner and BH Partner would receive for the sale of their Partnership
interests or portions thereof being sold in the Tag-Along Transaction.


 


8.9                                 Buy/Sell
Rights.   Commencing on the last day of the 36th
month following the Effective Date, any Partner shall have the right, at any
time, to initiate the buy/sell procedure set forth on Exhibit E.


 


8.10                           Call
Right.   The General Partner or BH Partner
shall have the right, at any time, to initiate the call procedure set forth on Exhibit F.


 


8.11                           Net
Profits Payment.   If the Project is sold pursuant to a
sale approved in accordance with Section 3.2 (provided such sale is
not occurring pursuant to Sections 8.7, 8.8 or 8.9),
then the Partnership shall pay the Developer Partner, on a one-time basis, an
amount equal to 50% of the net Distributable Cash remaining after the Partners
have received the amounts payable pursuant to Sections 6.1(a), 6.1(b),
6.1(c) and 6.1(d) (such net amount, the “Section 8.11
Net Profits Payment”).  For 


 


29

















 


avoidance of doubt, the Partnership shall not
be required to pay the Section 8.10 Net Profits Payment if the Developer
Partner has been paid any amount pursuant to Section 8.9 or 8.10.


 


8.12                           Tax
Characterization of Net Profits Payments.  Notwithstanding
any other provision of this Agreement to the contrary, (i) any payment to
the Developer Partner of the Section 8.11 Net Profits Payment (including
pursuant to Section 8.10 hereof) or the Buy/Sell Net Profits Payment shall
be deemed a portion of the purchase price of the applicable transaction to
which such payment applies for all purposes, including federal income tax
purposes, and (ii) any payment thereof to Developer Partner shall be
accounted for federal income tax purposes, including the allocation of gain for
tax purposes, in the same manner as a distribution to the Partners pursuant to Section 6.1(e).


 


Article IX

Fiscal and Operational Matters


 


9.1                                 Fiscal
Year.  The fiscal year of the Partnership
shall be the same as its taxable year, which shall be the period beginning on January 1
of a given year (other than the year in which the Partnership is formed, which
shall be the period beginning on the date of such formation) and ending on December 31
of each calendar year, unless another fiscal year is required for
U.S. federal income tax purposes. 
The Partnership shall have the same fiscal year for U.S. federal
income tax purposes and for accounting purposes.


 


9.2                                 Books
of Account.  The General Partner shall keep or cause
to be kept complete and appropriate records and books of account in which shall
be entered all such transactions and other matters relative to the Partnership’s
operations, business and affairs as are usually entered into records and books of
account that are maintained by persons engaged in business of like character or
are required by the Act.  Except as
otherwise expressly provided herein, such books and records shall be maintained
in accordance with the basis utilized in preparing the Partnership’s
U.S. federal income tax returns.  At
the cost and expense of the Partnership, the books and records of the
Partnership shall be audited in order to permit the General Partner to comply
with the reporting requirements set forth in Section 9.8(b), such
auditor to be selected from time to time by the General Partner with Major
Decision Approval.


 


9.3                                 Inspection.  The
books and records of the Partnership shall be maintained at the principal place
of business of the Partnership, and all such books and records and the Project
shall be available for inspection (and copying, as applicable) at the
reasonable request of any Limited Partner during the ordinary business hours of
the Partnership and upon reasonable notice given to the General Partner.  The General Partner shall meet with the
Institutional Partners from time to time from time to time until the Completion
Date at the request of the Institutional Partners to discuss the progress of
the development of the Project.  In
addition, the General Partner shall keep each Institutional Partner reasonably
informed about meetings with the construction lender, the general contractor or
the architect for the Project, and any Institutional Partner shall be entitled
to attend and participate in any such meeting.


 


9.4                                 Bank
Accounts.  The funds of the Partnership shall be
deposited in such account or accounts in the name of the Partnership as are
reasonably determined by the General Partner from time to time.  All withdrawals from or charges against such
accounts of the Partnership shall be made by the General Partner or by its
representatives.  The Partnership’s funds
shall not be commingled with the funds of any other person.


 


9.5                                 Title
to Partnership Property.  Title to all
property owned or leased by the Partnership shall be held and conveyed in the
name of the Partnership.  All property
owned by the Partnership shall be owned by the Partnership and, insofar as
permitted by applicable law, no Partner shall have any ownership interest in
any Partnership property in its individual name or right, and each Partner’s
interest in the Partnership shall be personal property for all purposes.


 


30

















 


9.6                                 No
Employees.  The Partnership shall have no
employees.


 


9.7                                 Insurance.  The
General Partner shall, on behalf of the Partnership and at the Partnership’s
cost and expense, obtain, maintain and keep in full force and effect, such
insurance coverage as the General Partner deems necessary, appropriate or
advisable.


 


9.8                                 Reports.  The
General Partner shall prepare, or cause to be prepared at the Partnership’s
expense, and deliver to each Limited Partner:


 


(a)                                  within 90 days after the end of each fiscal year of the
Partnership a draft report of the audited financial statements of the Partnership
for such fiscal year (which financial statements shall be prepared in
accordance with U.S. generally accepted accounting principles (“GAAP”),
consistently applied, and shall include a balance sheet, income statement,
statement of cash flows, a statement of partners’ equity, and all applicable
footnote disclosures);


 


(b)                                 within 120 days after the end of each fiscal year of the
Partnership the final audited financial statements and report of the
Partnership for such fiscal year (which financial statements shall be prepared
in accordance with GAAP, consistently applied, and shall include a balance
sheet, income statement, statement of cash flows, a statement of partners’
equity, and all applicable footnote disclosures); and


 


(c)                                  within 45 days after the end of each fiscal quarter of
the Partnership, (i)  unaudited financial statements prepared in
accordance with an Other Comprehensive Basis of Accounting (Federal Income Tax
Basis), consistently applied in accordance with past practices (which financial
statements shall include a balance sheet, an income statement, a statement of
cash flows and a statement of partners’ equity) and (ii) a schedule of
projected funding requirements by the Partners for the next 90-day period
(which schedule shall be prepared in good faith but which otherwise shall not
be binding on the Partnership).


 


The financial statements of the Partnership provided to the Limited
Partners from time to time under this Section 9.8 shall be, true,
complete and correct, shall accurately reflect the financial condition of the
Partnership, the results of its operations and sources and uses of funds as of
the date of each such statement and for the applicable period then ended, and
shall be accompanied by a written certification of the General Partner to such
effect.


 


9.9                                 Budgets.


 


(a)                                  The Partners have approved the initial budget for development
of the Project set forth on Exhibit B-1
(the “Development Budget”).  The
Partners have approved the revised budget for development of the Project set forth
in the Loan Modification Terms and on Exhibit B-2
(the “Revised Development Budget”).


 


(b)                                 At least 60 days prior to the estimated date of the
substantial completion of the Project, and thereafter no later than November 1
of each year, the General Partner shall prepare or cause to be prepared for the
portion of the calendar year ending after such substantial completion or for
the full calendar year after such November 1, as applicable, an operating
budget for the Project (the “Operating Budget”) setting forth, among
other things, (i) a budget of proposed operating and capital expenditures
to be made in such year in respect of the Project, including cost and timing
estimates therefor, and (ii) the estimated receipts, expenditures, escrow
deposits and reserves for each year on a monthly basis, showing the expected
sources of funds.  The General Partner
shall submit the proposed Operating Budget to the Institutional Partners for
Major Decision Approval.  The
Institutional Partners will use their good faith, reasonable efforts 


 


31

















 


to reach agreement on the final form of the Operating Budget
no later than 60 days after the submission of the proposed Operating Budget to
the Institutional Partners by the General Partner, and upon such approval by
all of the Institutional Partners, such Operating Budget shall be the Operating
Budget for the Project.  Until an
Operating Budget for a particular year is approved by the Institutional
Partners, the most recent Operating Budget shall serve as the Operating Budget
for such calendar year, provided that (A) any nonrecurring expenditure in
such prior Operating Budget shall be excluded, and (B) nondiscretionary
expenses shall be deemed included.


 


Article X

Amendments and Waivers


 


10.1                           Amendments
and Waivers.  This Agreement may be modified or
amended, or any provision hereof waived, only with the written consent of the
General Partner, the Developer Partner, the consent or vote of a majority in
interest of all Limited Partners and Major Decision Approval.


 


Article XI

Dissolution, Liquidation and Termination


 


11.1                           Dissolution.  The
Partnership shall be dissolved upon the first to occur of the following events
(“Dissolution Events”):


 


(a)                                  the election of the General Partner to dissolve the
Partnership at any time with Major Decision Approval;


 


(b)                                 the election of the General Partner to dissolve the
Partnership at any time if all or substantially all of the Partnership’s assets
shall have been sold or disposed of or shall consist of cash; or


 


(c)                                  a decree of judicial dissolution in respect of the
Partnership shall have been entered and become final; or


 


(d)                                 the failure of the Partners to continue the Partnership’s
business pursuant to Section 3.9 within 90 days after the
occurrence of an Event of Withdrawal in respect of the General Partner.


 


Within
90 days after the occurrence of an Event of Withdrawal in respect of the
General Partner, the Partnership’s business may be continued by agreement of a
majority in interest of all Limited Partners and Major Decision Approval if
each of the conditions set forth in Section 3.9 is satisfied.  If the Limited Partners fail to continue the
Partnership’s business as provided in this Section 11.1, then the
Partnership shall be liquidated under Section 11.4.


 


11.2                           Accounting.  After
the dissolution of the Partnership (without reconstitution) pursuant to Section 11.1, the books of
the Partnership shall be closed, and a proper accounting of the Partnership’s
assets, liabilities and operations shall be made by the General Partner, all as
of the most recent practicable date.  The
General Partner shall serve as the liquidator of the Partnership unless it
fails or refuses to serve or the Partnership has been dissolved (without
reconstitution) as a result of an Event of Withdrawal.  If the General Partner does not serve as the
liquidator, then one or more other persons may be elected to serve by Major
Decision Approval.  The liquidator shall
have all rights and powers that the Act confers on any person serving in such
capacity.  The expenses incurred by the
liquidator in connection with the dissolution, liquidation and termination of
the Partnership shall be borne by the Partnership.


 


32

















 


11.3                           Liquidation.  As expeditiously
as practicable, but in no event later than one year (except as may be necessary
to realize upon any material amount of property that may be illiquid), after
the dissolution of the Partnership (without reconstitution) pursuant to Section 11.1,
the liquidator shall wind up the operations, business and affairs of the
Partnership and liquidate the assets and properties of the Partnership.  The proceeds of such liquidation shall be
applied in the following order of priority:


 


(a)                                  first, to
payment of the expenses of the liquidation;


 


(b)                                 second, to
payment of the liabilities and obligations of the Partnership to creditors of
the Partnership (other than to Partners who are also creditors);


 


(c)                                  third, to
payment of liabilities of the Partners who are also creditors (other than
payments in respect of Partner loans);


 


(d)                                 fourth, to
establish a reserve fund (which may be in the form of cash or other property,
as the liquidator shall determine) for any and all other liabilities, including
contingent liabilities, of the Partnership in a reasonable amount determined by
the liquidator with Major Decision Approval to be appropriate for such purposes
or to otherwise make adequate provision for such other liabilities;


 


(e)                                  fifth, to
payment of the debts of the Partnership to the Partners in respect of Partner
loans; and


 


(f)                                    thereafter, to the
Partners in accordance with their respective positive Capital Account balances,
after giving effect to all contributions, distributions and allocations for all
periods.


 


11.4                           Termination.  At
the time final distributions are made in accordance with Section 11.4, a certificate
of cancellation shall be filed in accordance with the Act, and the legal
existence of the Partnership shall terminate.


 


11.5                           No
Deficit Capital Account Restoration Obligation.  Notwithstanding
any other provision of this Agreement to the contrary, in no event shall any
Partner who has a deficit balance in its Capital Account (after giving effect
to all capital contributions, distributions and allocations for all periods,
including the fiscal year during which the liquidation of the Partnership
occurs), have any obligation to make any contribution to the capital of the
Partnership or any other person for any purpose whatsoever, except as may be
required by applicable law or in respect of any deficit balance resulting from
a failure to contribute capital or a withdrawal of capital in contravention of
this Agreement.


 


11.6                           Deemed
Contribution and Distribution.  If the
Partnership is liquidated within the meaning of Section 1.704-1(b)(2)(ii)(g) of
the Treasury Regulations, but no Dissolution Event has occurred, then the
Partnership’s property shall not be liquidated, the Partnership’s debts and
other liabilities shall not be paid or discharged, and the Partnership’s
affairs shall not be wound up.  Instead,
solely for U.S. federal income tax purposes, the Partnership shall be
deemed to have contributed all property and liabilities to a new limited
partnership in exchange for an interest in such new limited partnership and,
immediately thereafter, the Partnership shall be deemed to liquidate by
distributing interests in the new limited partnership to the Partners.


 


11.7                           No
Other Cause of Dissolution.  The Partnership
shall not be dissolved, or its legal existence terminated, for any reason
whatsoever except as expressly provided in this Article XI.


 


33

















 


Article XII

Miscellaneous Provisions


 


12.1                           Representations
of the Partners.  Each Partner represents and warrants to
the Partnership and every other Partner that such Partner (i) understands
and acknowledges that the interests in the Partnership have not been registered
under the Securities Act of 1933, as amended (the “Securities Act”), or
the securities laws of any state or other jurisdiction and, unless so
registered, may not be offered, sold, transferred, or otherwise disposed of
except pursuant to an exemption from, or in a transaction not subject to, the
registration requirements of the Securities Act and any applicable securities
laws of any state or other jurisdiction; (ii) is an “accredited investor”
(as defined in Rule 501(a) of Regulation D under the Securities
Act); (iii) has knowledge and experience in financial and business matters
such that it is capable of evaluating the merits and risks of purchasing the
interests in the Partnership; (iv) is able to bear the economic risk of an
investment in the interests in the Partnership for an indefinite period,
including the risk of a complete loss of any such investment; and (v) is
acquiring the interests in the Partnership for investment for its own account,
and not with a view to, or for sale in connection with, any distribution
thereof.  In addition to the foregoing
representations and warranties, the Withdrawing General Partner and the Limited
Partners (other than the Institutional Partners), jointly and severally, make
to the General Partner and to the Institutional Partners each of the
representations and warranties set forth on Exhibit C.


 


12.2                           Attorneys’
Fees.  If any dispute arises out of or relates
to the subject matter hereof or the transactions contemplated hereby, then the
prevailing party in such dispute shall be entitled to receive from the
non-prevailing party all reasonable costs of investigation, litigation and
appeal (including reasonable attorneys’ fees and disbursements) incurred by the
prevailing party in connection therewith, in addition to any other relief to
which the prevailing party may be entitled, whether at law, in equity or
otherwise.


 


12.3                           Binding
Effect.  Except as otherwise specifically
provided in this Agreement, this Agreement shall be binding upon and inure to
the benefit of the Partners and their respective legal representatives,
successors and permitted assigns.


 


12.4                           Construction.


 


(a)                                  The Article and Section headings in this Agreement
are for convenience of reference only and shall not be deemed to alter or
affect the meaning or interpretation of any provision hereof.  All references to “Articles,” “Sections,” “Exhibits”
and “Schedules” contained in this Agreement are, unless specifically indicated
otherwise, references to articles, sections, exhibits and schedules of or to
this Agreement.  Whenever in this
Agreement the singular number is used, the same shall include the plural where
appropriate (and vice versa), and words of any gender shall include each other
gender where appropriate.  No provision
of this Agreement will be interpreted in favor of, or against, any party hereto
by reason of the extent to which any such party or its counsel participated in
the drafting hereof or by reason of the extent to which any such provision is
inconsistent with any prior draft hereof or thereof.  If any notice, payment, closing or other
action is to occur by the terms hereof on a day that is not a business day,
then such action shall be taken on the next succeeding day that is a business
day.


 


(b)                                 As used in this Agreement, the following words or phrases
shall have the meanings indicated: (i) “affiliate” means, as to any
specified person, any other person that directly, or indirectly through one or
more intermediaries controls, is controlled by or is under common control with,
such specified person or, if such specified person is an individual, the
spouse, sibling, parent, child or lineal descendent of such specified person; (ii) “business
day” means any day other than Saturday, Sunday or any day on which banks in
Dallas, Texas or the State in which the Project is located are required or
authorized by law to be closed for business;


 


34
















 


(iii) “control” (and, the terms “controlling,”
“controlled by” and “under common control with”) means the
possession, directly or indirectly, of the power to direct or cause the
direction of the management or policies of a person, whether through the ownership
of voting securities, by contract or otherwise; (iv) “day” means a
calendar day; (v) “hereby,” “herein,” “hereof,” “hereto,”
“hereunder,” and words of similar import refer to this Agreement as a
whole and not to any particular provision hereof; (vi) “include,” “including”
or their derivatives means “including without limitation”; (vii) “laws”
means statutes, regulations, rules, judicial orders and other legal
pronouncements having the effect of law; (viii) “majority in interest
of all Limited Partners” means Limited Partners whose Back-End Percentage Interests represent at
least a majority of the Back-End Percentage Interests of all Limited Partners;
(ix) “or” means “and/or”; (x) “person” means any
individual, corporation, partnership, limited liability company, joint venture,
trust, unincorporated association or other form of business or legal entity or
governmental entity; (xi) “transfer” means any assignment, bequest,
exchange, gift, sale or other transfer or disposition, or any pledge,
hypothecation, mortgage, granting of a security interest or other encumbrance,
whether voluntarily or involuntary, or by operation of law, by contract or
otherwise; and (x) “U.S.” means the United States of America.


 


12.5                           Counterparts.  This
Agreement may be executed in multiple counterparts, all of which shall
constitute one and the same instrument.


 


12.6                           Entire
Agreement.  This Agreement constitutes the entire
agreement among the Partners in respect of the subject matter hereof and
supersedes all prior agreements and understandings, if any, among them in
respect of such subject matter.


 


12.7                           Expenses.  The Partnership
shall bear and reimburse the General Partner and each Institutional Partner for
all of the reasonable expenses (including fees and disbursements of its counsel)
incurred by or on behalf of it in connection with the preparation, negotiation,
execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby.


 


12.8                           Further
Assurances.  Each Partner shall execute and deliver
all such further and additional instruments and agreements and shall take all
such further and additional actions, as may be reasonably necessary to (i) evidence
or carry out the provisions of this Agreement or to consummate the transactions
contemplated hereby or (ii) enable the Partnership or any Partner to
comply with the requirements of any applicable law.


 


12.9                           Governing
Law.  This Agreement shall be governed by and construed and
enforced in accordance with the laws of the State of Delaware (without regard
to principles of conflicts of laws).


 


12.10                     Jurisdiction;
Venue.  Any action, suit or proceeding seeking
to enforce any provision of, or based on any matter arising out of or relating
to, this Agreement or the transactions contemplated hereby can only be brought
in federal court sitting in the Northern District of Texas or, if such court
does not have jurisdiction, any district court sitting in Dallas County,
Texas.  Each Partner hereby consents to
the jurisdiction of such courts (and of the appropriate appellate courts
therefrom) in any such action, suit or proceeding and irrevocably waives, to
the fullest extent permitted by applicable law, any objection that it may now
or hereafter have to the laying of the venue of any such action, suit or proceeding
in any such court or that any such action, suit or proceeding that is brought
in any such court has been brought in an inconvenient forum.


 


12.11                     Notices.  All
notices, requests, demands, consents, votes, approvals, waivers and other
communications required or permitted hereunder shall be effective only if in
writing and delivered (i) in person, (ii) by a nationally recognized
overnight courier service requiring acknowledgment of receipt of delivery, (iii) by
U.S. certified or registered mail, postage prepaid and return receipt
requested, or (iv) by 


 


35

















 


facsimile,
if to the Partners, at the addresses or facsimile numbers set forth on Schedule I, and if to the
Partnership, at the address of its principal place of business referred to in Section 1.3,
or to such other address or facsimile number as the Partnership or any
Partner shall have last designated by notice to the Partnership and all other parties
hereto in accordance with this Section 12.11.  Notice shall be deemed given, received and
effective on:  (i) if given by
personal delivery or courier service, the date of actual receipt by the
receiving party, or if delivery is refused on the date delivery was first
attempted; (ii) if given by certified or registered mail, the third day
after being so mailed if posted with the U.S. Postal Service; and (iii) if
given by facsimile, the date on which the facsimile is transmitted if confirmed
by transmission report during the transmitter’s normal business hours, or at
the beginning of the next business day after transmission if confirmed at any
time other than the transmitter’s normal business hours.  Any person entitled to notice may change any
address or facsimile number to which notice is to be given to it by giving
notice of such change of address or facsimile number as provided in this Section 12.11.  The inability to deliver notice because of
changed address or facsimile number of which no notice was given shall be
deemed to be receipt of the notice as of the date such attempt was first
made.  Notwithstanding the foregoing
provisions of this Section 12.11, routine communications including
distribution checks, financial statements and reports of the Partnership may be
sent by first-class mail, postage prepaid.


 


12.12                     Public
Statements.  The Partners shall consult with each
other before issuing any press release or making any public statement in
respect of the Project Owner, the Project, this Agreement or the transactions
contemplated hereby and, except for any press release or public statement the
making of which is required or deemed advisable by any Institutional Investor
or its counsel to be made to such Institutional Partner’s affiliates, agents,
attorneys, representatives, consultants, prospective lenders, current and
prospective investors and their advisors and current and prospective financial
partners in connection with financial reporting, securities disclosures or
other legal, tax or financial requirements or guidelines applicable to such
Institutional Investor or its respective affiliates, including any disclosures
required by applicable law or any listing agreement with any national
securities exchange, will not issue any such press release or make any such
public statement prior to such consultation.


 


12.13                     No-Recourse.  Notwithstanding
any other provision of this Agreement to the contrary, no Partner nor any
person acting on its behalf shall assert any claim or cause of action against
any controlling person, officer, director, partner, manager, member, agent,
employee or other representative of any of Institutional Partner in connection
with, arising out of or relating to this Agreement or the transactions
contemplated hereby.


 


12.14                     Remedies
Cumulative.  Any rights and remedies provided for
herein are cumulative and are not exclusive of any rights or remedies that may
be available to any Partner whether at law, in equity or otherwise.


 


12.15                     Severability.  If
any provision of this Agreement, or the application of such provision to any
person or circumstance, shall be held invalid under the applicable law of any
jurisdiction, then the remainder of this Agreement or the application of such
provision to other persons or circumstances or in other jurisdictions shall not
be affected thereby.  In addition, if any
provision of this Agreement is invalid or unenforceable under any applicable
law, then such provision shall be deemed inoperative to the extent that it may
conflict therewith and shall be deemed modified to conform to such law.  Any provision hereof that may prove invalid
or unenforceable under any law shall not affect the validity or enforceability
of any other provision hereof.


 


12.16                     Third-Party
Beneficiaries.  Except as expressly provided in Article V,
nothing express or implied in this Agreement, is intended or shall be construed
to confer upon or give any person other 


 


36

















 


than
the parties hereto and their respective successors and permitted assigns any
right, benefit or remedy under or by reason of this Agreement.


 


12.17                     Waiver
of Jury Trial.  TO THE MAXIMUM EXTENT PERMITTED BY
APPLICABLE LAW, EACH PARTY HERETO, HEREBY KNOWINGLY, VOLUNTARILY AND
INTENTIONALLY WAIVES ALL RIGHTS IT MAY HAVE TO A TRIAL BY JURY IN RESPECT
OF ANY ACTION, SUIT OR PROCEEDING, DIRECTLY OR INDIRECTLY, AT ANY TIME ARISING
OUT OF, OR RELATING TO, THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY.


 


12.18                     Waiver
of Partition.  Each Partner hereby irrevocably waives
all rights that it may have to maintain an action for partition of any of the
Partnership’s property.


 


* * * * *


 


REMAINDER OF PAGE INTENTIONALLY BLANK.


SIGNATURE PAGE(S) FOLLOWS.


 


37

















 


IN
WITNESS WHEREOF, the undersigned Partners have executed and delivered this Agreement
as of the Effective Date.


 


	
   

  	
  GENERAL PARTNER:

  
	
   

  	
   

  
	
   

  	
  BEHRINGER HARVARD BAILEYS GP, LLC

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Mark T. Alfieri

  
	
   

  	
  Name:

  	
  Mark T. Alfieri

  
	
   

  	
  Title:

  	
  Chief Operating Officer

  
	
   

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  LIMITED PARTNERS:

  
	
   

  	
   

  
	
   

  	
  BEHRINGER HARVARD BAILEYS REIT, LLC

  
	
   

  	
   

  
	
   

  	
  By:

  	
  Behringer Harvard Baileys Venture, LLC,

  
	
   

  	
   

  	
  its manager

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  Behringer Harvard Baileys, LLC,

  
	
   

  	
   

  	
   

  	
  its manager

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  By:

  	
  /s/ Mark T. Alfieri

  
	
   

  	
   

  	
   

  	
  Name:

  	
  Mark T. Alfieri

  
	
   

  	
   

  	
   

  	
  Title:

  	
  Chief Operating Officer

  



 


Amended and Restated Limited
Partnership Agreement


Signature Page(s)


 

















 


	
   

  	
  BREOF BAILEYS LLC

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ David Arthur

  
	
   

  	
  Name:

  	
  David Arthur

  
	
   

  	
  Title:

  	
  President and Chief Executive Officer

  



 


Amended and Restated Limited
Partnership Agreement


Signature Page(s)


 

















 


	
   

  	
  FF INVESTORS III-EAST LLC

  
	
   

  	
   

  
	
   

  	
  By:

  	
  FF Properties, Inc.,

  
	
   

  	
   

  	
  its manager

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/ Ted R. Bradford

  
	
   

  	
   

  	
  Name:

  	
  Ted R. Bradford

  
	
   

  	
   

  	
  Title:

  	
  Senior Vice President

  



 


Amended and Restated Limited
Partnership Agreement


Signature Page(s)


 

















 


EXECUTION FOR A LIMITED
PURPOSE


 


The
undersigned joins in the execution of this Agreement to evidence its consent
and agreement to the provisions of Section 12.1.


 


	
   

  	
  WITHDRAWING GENERAL PARTNER:

  
	
   

  	
   

  
	
   

  	
  FF BAILEYS LLC

  
	
   

  	
   

  
	
   

  	
  By:

  	
  FF Properties, Inc.,

  
	
   

  	
   

  	
  its manager

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/ Ted R. Bradford

  
	
   

  	
   

  	
  Name:

  	
  Ted R. Bradford

  
	
   

  	
   

  	
  Title:

  	
  Senior Vice President

  



 


Amended and Restated Limited
Partnership Agreement


Signature Page(s)


 
















 


EXHIBIT A


to


Amended and Restated Limited Partnership Agreement


 


MAJOR DECISIONS


 


1.                                      The approval of
and any modifications to any Operating Budget (other than an expenditure for a
nondiscretionary expense); provided, however, that BREOF Partner’s consent or
approval with respect to the matters described in this paragraph 1 shall
not be unreasonably withheld, conditioned or delayed.


 


2.                                      With respect to
the Project Owner or the Partnership, (i) the making of a general
assignment for the benefit of creditors, (ii) the filing of a voluntary
petition in bankruptcy, (iii) the filing of a petition or answer seeking
for itself, any reorganization, arrangement, composition, readjustment,
dissolution, liquidation, or similar relief under any bankruptcy or debtor relief
law, (iv) the filing of an answer or other pleading admitting or failing
to contest the material allegations of a petition filed against it in any
bankruptcy or insolvency proceeding brought against it, or (v) the
seeking, consenting to, or acquiescence in the appointment of a trustee,
receiver, or liquidator of the Partnership or of all or any substantial portion
of its properties.


 


3.                                      The acquisition
by the Project Owner or the Partnership of any land, improved or unimproved
real property or any improvements thereon or interest therein other than the
Land, other than any de minimus
amounts of land ancillary to and necessary or beneficial for the operation of
the Project.


 


4.                                      The (i) incurrence
by the Project Owner of any additional indebtedness for borrowed money (i.e.,
other than indebtedness incurred on or before the Effective Date), including,
without limitation, debt financings, refinancings, hedging transactions, the
approval of any applicable loan documentation for such additional indebtedness,
financings, refinancings (including any refinancing of the Senior Loan), or
transactions and other terms thereof (or the approval of any amendment,
modification or supplement thereto) or the retention of any broker, finder or
similar agent by or on behalf of the Project Owner or the Partnership in
connection with such additional indebtedness, financings, refinancings, or
transactions; or (ii) amendment or modification of the Senior Loan
documents.


 


5.                                      The sale,
exchange, mortgage, encumbrance or other transfer or disposition of all or any
portion of the Project except for the replacement of furniture, fixtures and
equipment in the ordinary course of business following completion of the
Project in accordance with the Operating Budget.


 


6.                                      Entering into,
amending, modifying, terminating or renewing any lease of space in the Project
except residential tenant leases in the ordinary course of business; provided,
however, that BREOF Partner’s consent or approval with respect to the matters
described in this paragraph 6 shall not be unreasonably withheld,
conditioned or delayed.


 


7.                                      Settling any
proceeding or entering into any other agreement with respect to an actual or
threatened condemnation.


 


8.                                      The initiation,
defense, adjustment, settlement or compromise of any claim, action, suit or
judgment by or against the Project Owner or the Partnership involving an amount
in excess of $75,000 or any claim for equitable relief other than initiating
actions to collect rentals and other amounts payable under leases affecting the
Project or to dispossess any occupant or the Project who is in default.


 


A-1

















 


9.                                      Entering into,
amending, modifying, terminating or renewing any construction, design, service,
maintenance, employment or contractor agreement that (i) is not terminable
without penalty on not more than 30 days’ notice and (ii) together with
all agreements for which expenditures thereunder are included in the same
Operating Budget line item, provide for aggregate payments in excess of the
amounts set forth in the most recent Operating Budget for such services;
provided, however, entering into any construction or design contracts for
initial construction of the Project having a contract sum of $100,000 or less
shall not be a Major Decision.


 


10.                                The voluntary
dissolution, liquidation, or termination of the Project Owner or the
Partnership.


 


11.                                Lending or
advancing money to, or guarantying any debt, liability, or obligation of, any
other natural person or entity.


 


12.                                Consenting to
or otherwise approving any transfer of all or any portion of an interest in the
Project Owner or the Partnership unless such transfer is expressly permitted by
the provisions of this Agreement.


 


13.                                Establishing
reserves as contemplated in the definition of Distributable Cash to the extent
such reserves exceed $250,000.


 


14.                                Any material
change in the purpose or character of business of the Project Owner or the
Partnership.


 


15.                                The sale or
agreement to sell all or substantially all of the assets or business of the
Project Owner or the Partnership, or the merger, interest exchange, conversion,
or combination of the Project Owner or the Partnership with or into any other
entity.  For the avoidance of doubt, the
exercise of any rights in respect of the Call Right or any Tag-Along
Transaction shall not be a Major Decision.


 


16.                                The taking of
any action that would cause the Project Owner or the Partnership to become a
general partner of any entity.


 


17.                                Entering into,
giving or granting any options, rights of first refusal, deeds of trust,
mortgages, pledges, ground leases, security interests (other than in connection
with any equipment leases or personal property that is financed in the ordinary
course of business), or otherwise encumbering the Project, any portion thereof,
or any other Project Owner or Partnership property, other than residential
tenant leases of the Project entered into in the ordinary course of business,
easements and materialmen’s liens granted in the ordinary course of business
(including, without limitation, during construction upon the Project) and other
immaterial and routine encumbrances necessary or beneficial to the operation of
the Project.


 


18.                                Commingling the
funds of the Project Owner or the Partnership with the funds of any other
natural person or entity.


 


19.                                Except as
expressly provided in this Agreement, admitting any natural person or entity as
a new partner or member of the Project Owner or the Partnership or issuing or
selling any membership, partnership or other equity interests in the Project
Owner or the Partnership.


 


20.                                The engagement
in any transaction between or among the Project Owner or the Partnership, on
the one hand, and the General Partner or any affiliate of the General Partner,
on the other hand, other than as expressly contemplated by or permitted in this
Agreement;


 


A-2

















 


21.                                Any amendment,
repeal, or restatement of the Certificate, the certificates of organization of
the Project Owner, this Agreement or the limited liability company of the
Project Owner other than in connection with rights granted to the General
Partner in this Agreement.


 


22.                                Filing any
federal, state or local tax return or amendment thereto on behalf of the
Project Owner or the Partnership.


 


23.                                Changing the
elections or choices of methods of reporting income or loss for federal or
state income tax purposes provided for in this Agreement unless required under
applicable law.


 


24.                                Selecting or
changing the auditors of the Partnership.


 


25.                                Consenting to
any material re-zoning or subdivision of the Land or any other material change
in the legal status thereof not otherwise consistent with management and
development of the Project.


 


26.                                Introducing or
permitting to be introduced any environmentally harmful substance or material
to the Project (or portion thereof) which was known at the time to be
environmentally harmful (except for lawful introductions of any such substance
or material).


 


27.                                Making any
decision regarding any material environmental matter relating to the Project
(i.e., any matter that would required to be reflected in the a Phase I
environmental site assessment, soils report or other environmental or
engineering report, that would increase compliance costs for the Project or
that would expose the Partnership or the Project Owner to liability),
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.


 


28.                                In the event of
fire, other casualty or partial condemnation of the Project where the cost of
repair exceeds 10% of the value of the Project 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 Project.


 


29.                                Releasing,
compromising, assigning or transferring any material claims of or any material
rights or benefits of the Project Owner or the Partnership.


 


30.                                Making any
distributions to the Partners other than as expressly contemplated in this
Agreement.


 


31.                                Making any
investment in any natural person or entity or business or directly or
indirectly acquiring any securities or other ownership interests in any natural
person or entity other than the Project Owner.


 


32.                                Increasing the
capital requirement of any Partner.  For
the avoidance of doubt, a request by the General Partner for additional capital
contributions and the making of additional capital contributions by any Partner
as provided in Section 2.2 through 2.4 of this Agreement, as
applicable, are not Major Decisions.


 


A-3

















 


EXHIBIT C


to


Amended and Restated Limited Partnership Agreement


 


REPRESENTATIONS AND WARRANTIES OF


WITHDRAWING GENERAL PARTNER AND DEVELOPER PARTNER


 


The Withdrawing General
Partner and the Developer Partner (collectively, the “Representing Parties”), jointly and
severally, make to the General Partner and to the Institutional Partners, as of
the Effective Date, each of the following representations and warranties:


 


1.                                      Each of the
Representing Parties is duly formed and validly existing as a corporation,
limited partnership or limited liability company, as the case may be, under the
laws of the State of its organization with power and authority to enter into
this Agreement and to perform its obligations under this Agreement and the
other agreements described or contemplated in this Agreement.


 


2.                                      No consent,
waiver, approval or authorization of, or filing, registration or qualification
with, or notice to, any governmental instrumentality or any other natural
person or entity is required to be made, obtained or given by such Representing
Party in connection with the execution and delivery of this Agreement.


 


3.                                      The execution,
delivery and performance of this Agreement by each Representing Party will not
conflict with, or with or without notice or the passage of time or both, result
in a breach of, any of the terms or provisions of, or constitute a default
under, any material indenture, mortgage, loan agreement or instrument to which
such Representing Party is a party or by which such Representing Party or any
of its properties is bound, any applicable law or regulation, or any judgment,
order, or decree of any court entered against such Representing Party or any of
its properties.


 


4.                                      This Agreement
has been duly executed and delivered by each Representing Party and constitutes
a legal, valid and binding obligation of such Representing Party, enforceable
against such Representing Party in accordance with the terms hereof, except as
enforceability hereof may be limited by bankruptcy, insolvency or
reorganization laws or by applicable principles of equity.


 


5.                                      There are no
attachments, executions, assignments for the benefit of creditors or voluntary
or involuntary proceedings in bankruptcy or proceedings under any other debtor
relief laws contemplated by or, to the knowledge of any Representing Party,
pending or threatened against any Representing Party.


 


6.                                      None of the
Representing Parties or any of their respective affiliates have granted any
rights, options, rights of first refusal or any other agreements of any kind, which
are currently in effect, to purchase or to otherwise acquire the Project or any
part thereof or any interest therein.


 


7.                                      The Land as it
presently exists is zoned for use and operation as a multi-family residential
community without relying for compliance upon a variance or a preexisting,
nonconforming use.  None of the
Representing Parties has made any application for variance or change in zoning
which is pending.


 


8.                                      To the best of
the knowledge of the Representing Parties, the Project does not fail to conform
to any law or regulation.  None of the
Representing Parties has received notice, written or otherwise, from any
federal, state, municipal or other governmental instrumentality requiring the
correction 


 


C-1

















 


of any condition with respect to the Project, or any
part thereof, by reason of a violation of any law or regulation or otherwise.


 


9.                                      None of the
Representing Parties has received notice of, or has any other knowledge or
information of, any pending or contemplated condemnation action with respect to
the Project, or any part thereof.


 


10.                                The complete
set of plans and specifications (the “Plans and Specifications”)
prepared for the Project by CNK and Associates, the architect for the Project, will
not violate any restriction, condition or agreement contained in any easement,
restrictive covenant or similar instrument or agreement affecting the Project
or any part thereof.  Upon completion of
construction in accordance with the Plans and Specifications, the Project will
be suitable for the purposes for which it is intended.


 


11.                                [Intentionally
Deleted].


 


12.                                None of the
Representing Parties, the Project Owner or the Partnership has received written
notice of, and the Representing Parties do not have any other actual knowledge
or information of, any proposed change in the valuation of the Project for real
estate taxes from that assessed for the current assessment period, nor do the
Representing Parties have any other actual knowledge or information of any
pending action or proceeding designed to levy any special assessment against
the Project.  None of the Representing
Parties, the Project Owner or the Partnership has received written notice of,
and the Representing Parties do not have any other actual knowledge or
information of, any possible future improvements by a governmental
instrumentality, any part of the cost of which is proposed to be assessed
against the Project (other than through inclusion in general real estate tax
levies).  To the best of the knowledge of
each Representing Party, no action is pending to seek an increase in or
reduction of real estate taxes.


 


13.                                None of the
Representing Parties, the Project Owner or the Partnership has received, and
the Representing Parties do not have any other knowledge or information of, any
notice from any insurance company or board of fire underwriters requesting the
performance of any work or alteration with respect to the Project or requiring
an increase in the insurance rates applicable to the Project.  To the knowledge of each Representing Party,
the Project complies with the requirements of all insurance carriers providing
insurance therefor.


 


14.                                None of the
Representing Parties, the Project Owner or the Partnership has received written
notice, and the Representing Parties do not have any other actual knowledge or
information, of any pending or threatened judicial or administrative action, of
any action pending or threatened by adjacent landowners or other persons, or of
any natural or artificial condition upon or affecting the Project, or any part
thereof, any of which would result in any material change in the condition of
the Project, or any part thereof, or in any way limit or impede the development
of the Project.


 


15.                                All water,
sewer, gas (if any), electric, telephone and drainage facilities and other
utilities required by law for the normal and proper operation of the Project
are, or upon completion of the Project in accordance with the Plans and
Specifications will be, installed to the property line and are, or upon
completion of the Project in accordance with the Plans and Specifications will
be, connected with valid permits and in good repair, condition and working
order.  Such utilities will be adequate
to serve the Project and to permit full compliance with all requirements of
law.  To the best of the knowledge of
each Representing Party, all utilities serving or to serve the Project enter or
will enter it through currently effective public or private easements.  To the best of the knowledge of each
Representing Party, no fact or condition exists which would result in the
termination of such utility services to the Project.


 


C-2

















 


16.                                The Project has
direct access to all streets and roadways abutting the Project, all of which
are completed and, to the knowledge of each Representing Party, dedicated
streets and roadways that, to the knowledge of each Representing Party, have
been accepted for public maintenance by the appropriate governmental instrumentality.  All applicable governmental authorities have
approved vehicular and pedestrian ingress to and egress from the Project that
is adequate for the normal and proper operation of the Project.  To the knowledge of each Representing Party,
no fact or condition exists which would result in the termination of such
ingress and egress.


 


17.                                To the best of
the knowledge of each Representing Party, no portion of the Project is situated
in an area designated by the Secretary of the United States Department of
Housing and Urban Development (or by any other federal, state, municipal or
other governmental instrumentality) as having special flood or mudslide
hazards.


 


18.                                To the best of
the knowledge of each Representing Party, there are no unrecorded reciprocal
easement agreements affecting the Project, except as may be indicated in the
owner’s policy of title insurance obtained in connection with the construction
loan for the Project.


 


19.                                To the best of
the knowledge of each Representing Party, there are no conditions which are in
noncompliance with environmental laws or regulations with respect to the
Land.  To the best of the knowledge of
each Representing Party, no permits, consents, licenses, certificates, approvals,
registrations and authorizations in connection with environmental matters
(collectively, the “Permits”) are required by any law or regulation with
respect to the Land.  To the best of the
knowledge of each Representing Party, except as provided in that certain Phase
I Environmental Site Assessment dated December 20, 2006, ECS Project No. 9730-D
for FF Development, LP (“Report”) all operations on or at the Land are
and have been conducted in compliance with applicable environmental laws and
regulations.  None of the Representing
Parties has received any notification from any governmental instrumentality
seeking any information or alleging any violation of any law or regulation with
respect to any conditions on the Land, or on any real property within the
vicinity of the Land, subject to regulation under applicable environmental laws
or regulations.  None of the Representing
Parties has caused or permitted, nor has any actual knowledge of, any release
of any hazardous materials on-site or, to the extent involving hazardous
materials generated or processed on-site, off-site of the Land.  To the best of the knowledge of each
Representing Party, the Project (and all uses thereof and operations conducted
thereon) complies with all Permits, and no hazardous materials are located on,
in or under the Project.  To the best of
the knowledge of each Representing Party, no condition, circumstance, or set of
facts directly or indirectly applicable to the Land constitutes or could
reasonably be deemed to constitute a hazard to health, safety, property or the
environment for which any of Representing Parties is or may be liable, or which
is, or with the passage of time, could become a claim or noncompliance under
environmental laws or regulations.


 


20.                                Except as
provided in the Report, to the best of the knowledge of each Representing
Party, there is not now, nor has there been in the past, any asbestos or
asbestos-containing materials located on, incorporated in, or otherwise
contained in the Project or any portion thereof, and, to the best of the
knowledge of each Representing Party, there are not now, and have not in the
past been, any underground storage tanks or similar facilities located on the
Project or any portion thereof.


 


21.                                There are no
actions, suits or proceedings pending or, to the knowledge of each Representing
Party, threatened against each Representing Party affecting any portion of the
Project or its use as a multi-family residential project, at law or in equity
or before or by any federal, state, municipal or other governmental
instrumentality.


 


C-3

















 


22.                                To the extent
that after the date hereof (i) the Partnership owns any interest, directly
or indirectly, in any entity in which the Partnership did not have such
ownership interest on or prior to the date hereof, or (ii) any
Representing Party owns an interest in Partnership, directly or indirectly,
through an entity that did not own an interest in the Partnership on or prior
to the date hereof, the foregoing representations and warranties shall bind the
Representing Parties with respect to such entity with the same force and effect
that they bind the Representing Parties with respect to the Partnership.


 


C-4
















 


EXHIBIT D


to


Amended and Restated Limited Partnership Agreement


 


ARBITRATION PROCEDURE


 


(1)                                  The Partner (the “Initiating
Partner”) delivering an Arbitration Notice and the Partner receiving the
Arbitration Notice (the “Non-Initiating Partner”) shall attempt to
agree, within 21 days after the delivery of the Arbitration Notice upon
the appointment of one arbitrator to resolve the matter.  If an agreement on a single arbitrator is not
be reached within such 21-day period, then the Initiating Partner and the Non-Initiating
Partner each shall appoint one arbitrator within 15 days after the
expiration of such 21-day period and shall specify the name and address of
their respective arbitrator to the other party prior to the expiration of such
15-day period; provided, however, that if any Partner fails to specify the name
and address of its selected arbitrator within such 15-day period, then the
other Partner may give such failing Partner notice, and if within seven days
after such notice the failing Partner still has not specified an arbitrator,
then the arbitrator selected by the other Partner(s) shall act as the
arbitrator as if all parties had agreed to the appointment of such arbitrator
to resolve the determination of the BREOF Mark to Market Price.


 


(2)                                  If two arbitrators are
selected, then the arbitrators shall appoint a third arbitrator within
15 days after their appointment.  If
the arbitrators are unable to agree upon a third arbitrator within such 15-day
period, then the third arbitrator shall be appointed as soon as reasonably
practicable thereafter by a court of competent jurisdiction residing in the
county in which the Project is situated, subject to the qualification
requirements set forth below.  In the
event of the failure, refusal or inability of any arbitrator to act, a new
arbitrator shall be appointed as a replacement, which appointment shall be made
in the same manner as set forth above. 
Immediately after the selection of the final arbitrator, the arbitrators
shall meet and, within 21 days after the complete selection of the
arbitrators, endeavor to determine the BREOF Mark to Market Price.


 


(3)                                  Within 15 days after
the selection of all arbitrators, the Initiating Partner and the Non-Initiating
Partner shall submit to the arbitrators such party’s proposed BREOF Mark to
Market Price, as well as all other economic terms relevant to the determination
of the BREOF Mark to Market Price, together with reasonable evidence supporting
such proposed BREOF Mark to Market Price. 
The arbitrators shall select the proposed BREOF Mark to Market Price
submitted by one of the parties, whichever proposal the arbitrators deem to be
the most nearly correct according to the definitions, terms and requirements
set forth in this Agreement, with no compromise.  The power of the arbitrators shall be
exercised by the concurrence of a majority, except that if only one arbitrator
is required, the decision of such arbitrator shall govern.  The proposed BREOF Mark to Market Price
selected by the arbitrator(s) shall be the BREOF Mark to Market
Price.  The determination of the
arbitrator(s) shall be final and non-appealable, shall be binding on all
Partners and may be enforced in any court of competent jurisdiction.


 


(4)                                  Each arbitrator
shall have the authority to request additional facts or evidence from each of
the parties and, if any arbitrator so requires, a hearing to present the
same.  In the event of such a hearing, rules of
evidence applicable to state court judicial proceedings in civil district
courts in Dallas, Texas shall govern; provided, however, that evidence will be
admitted or excluded in the sole discretion of the arbitrator(s).  The arbitrator(s) shall resolve the
controversy and shall execute and acknowledge its (or their) decision, together
with a brief statement describing the rationale for such decision, in writing
and simultaneously deliver a copy thereof to each of the parties personally or
by registered or certified mail, return receipt requested.  If the arbitrator(s) fail(s) to
reach an agreement during such 21-day period (as may be extended in accordance
with the next sentence), then the arbitrator(s) shall be discharged, and
new arbitration proceedings shall commence, with new arbitrators being
appointed in the same manner as 


 


D-1

















 


set
forth above.  By agreement in writing,
the Initiating Partner and the Non-Initiating Partner may extend the time to
reach agreement either before or after the expiration thereof up to a maximum
of 30 additional days.  The periods
within which the arbitrators must act are not jurisdictional.


 


(5)                                  Each arbitrator shall (A) be
an independent appraiser licensed under the laws of the state in which the
Project is located, and (B) have been actively and continuously engaged in
appraising multi-family rental communities as an MAI appraiser familiar with
the applicable sub-market of the Project for not less than the previous
five years.  The arbitrators
selected by the Initiating Partner and the Non-Initiating Partner shall be
instructed that they are neutral arbitrators and shall not have any ex parte communication with the appointing party and may not
be appraisers that consulted with the Initiating Partner or the Non-Initiating
Partner in negotiations regarding the BREOF Mark to Market Price prior to the
submission of the BREOF Mark to Market Price proposals to arbitration.  In addition, any additional arbitrator shall
be an independent appraiser having no relationship representing the Initiating
Partner, the Non-Initiating Partner or their respective affiliates during the
immediately preceding 365-day period prior to selection.


 


(6)                                  Each party to the
arbitration proceeding shall bear its own costs and the costs of the arbitrator
it appoints.  The cost of any additional
arbitrator (or the single arbitrator if only one arbitrator is required) shall
be split equally between the Initiating Partner and the Non-Initiating Partner.


 


D-2

















 


EXHIBIT E


to


Amended and Restated Limited Partnership Agreement


 


BUY/SELL PROCEDURE


 


If any Partner institutes the provisions of
this Exhibit E, then the following shall apply.


 


(a)                                  The Partner that initiates
the provisions of this Exhibit E by making an offer to the other
Partners as described below (the “Buy-Sell Offer”) is referred to as the
“Offeror” and each other Partner is referred to as the “Offeree”;
provided that if there is more than one Offeree, the Offerees shall
collectively constitute the “Offeree Group”, which shall be treated as
one Partner (i.e., one Offeree) for purposes of this Exhibit E, and
such Partners must act as a group with regard to all decisions or elections to
be made by pursuant to this Exhibit E.  If the General Partner or BH Partner is the
Offeror, then the General Partner and BH Partner shall comprise the “Offeror
Group”, which shall be treated as one Partner (i.e., one Offeror) for
purposes of this Exhibit E, and such Partners must act as a group
with regard to all decisions or elections to be made by pursuant to this Exhibit E.  Any such decisions or elections to be made
pursuant to this Exhibit E by any Partners comprising the Offeror
Group or the Offeree Group, as applicable, shall be made by a majority of the
Back-End Percentage Interests of the Offeror Group or the Offeree Group, as
applicable.  References in this Exhibit E
to Offeror or Offeree shall be deemed to refer to Offeror Group or Offeree
Group, as the context may require.  If
the provisions of this Exhibit E are initiated, then the General
Partner shall transfer all of its Capital Account to BH Partner, except that
the General Partner shall retain a portion of its Capital Account necessary to
maintain a 1% Back-End Percentage Interest, and upon such transfer the Back-End
Percentage Interests of the General Partner and BH Partner shall be adjusted
accordingly.  If the closing of a
purchase under this Exhibit E does not close, then BH Partner may
transfer all or any portion of the Capital Account assigned from the General
Partner back to the General Partner.


 


(b)                                 The Buy-Sell Offer shall (i) be
in writing and be signed by the Offeror, and (ii) specify the cash
purchase price (the “Purchase Price”) on which the Offeror would
purchase all of the assets of the Project Owner and as if such assets were free
and clear of all liens, claims and encumbrances.  The General Partner shall promptly provide
any books, records, contracts and other data or information regarding the
Partnership, the Project Owner or the Project that a Partner may reasonably
request with respect to analyzing the potential consequences of accepting or
rejecting a Buy-Sell Offer under this Exhibit E.


 


(c)                                  A copy of the Buy-Sell Offer
shall be delivered to the General Partner who shall, within 15 days, determine
and notify each Offeree as to the amount that Offeree would receive as a
Partner (the “Offeree Value”) and the amount the Offeror would receive
as a Partner (the “Offeror Value”) in respect of its interest in the
Partnership if (i) all of the Project Owner’s and the Partnership’s assets
were sold for the Purchase Price, and (ii) the Project Owner and the
Partnership (A) discharged all outstanding liabilities and indebtedness to
which the Project, the Project Owner and the Partnership were subject
(including the outstanding principal, interest and prepayment premiums (if any)
of the construction loan); and (B) repaid all Partner loans; and (iii) after
giving effect to the preceding clauses (A) and (B), the Developer Partner
received its Buy/Sell Net Profits Payment and the resulting Distributable Cash
of the Partnership were distributed in accordance with Section 6.1
immediately prior to the closing of the purchase of the interest in the
Partnership, after giving effect to all capital contributions, distributions
and allocations for all periods. 
Contemporaneously with the delivery of the notice of Offeree Value and
Offeror Value, the General Partner shall notify each Offeree of any Guaranteed
Indebtedness that is scheduled to mature before the anticipated Buy/Sell
closing date.  Upon delivery of such
maturity notice, the Buy/Sell procedure in this Exhibit E shall be
held in abeyance until the Partners resolve pursuant to 


 


E-1

















 


the provisions of this Agreement whether to modify, extend or
re-finance the Guaranteed Indebtedness that is scheduled to mature.  As used herein, “Buy/Sell Net Profits
Payment” means 50% of the net Distributable Cash remaining to be
distributed from a hypothetical sale of the Project and distribution of
proceeds from that sale assuming: (i) the Partnership sold the Project for
the Purchase Price and (ii) the Partnership (A) paid reasonable and
customary closing and transaction costs that would be payable in an arms-length
sale of the Project; (B) discharged all outstanding liabilities and
indebtedness to which the Project, the Project Owner and the Partnership were
subject (including the outstanding principal, interest and prepayment premiums
(if any) of the construction loan); (C) repaid all Partner loans; and (D) distributed
to the Partners the amounts payable pursuant to Sections 6.1(a), 6.1(b),
6.1(c) and 6.1(d)


 


(d)                                 Each Offeree shall have the
right, exercisable by delivery of notice (the “Election”) to the Offeror
within 30 days from the receipt of the Buy-Sell Offer, to elect either to:


 


(i)                                     Sell to the
Offeror all of the Offeree’s right, title and interest in and to its interest
in the Partnership for a cash purchase price equal to the Offeree Value; or


 


(ii)                                  Purchase all of
the Offeror’s right, title and interest in and to its interest in the
Partnership for a cash purchase price equal to the Offeror Value.


 


Failure of the Offeree to give the Offeror notice of the Offeree’s
Election shall be deemed, upon the expiration of such 30-day period, to be an
Election to sell under this subparagraph (d).


 


(e)                                  Within 15 days following the
Election (or the date a deemed Election has been made), the party purchasing
the interests of the other (the “Purchaser”) shall deliver into escrow
with a title company mutually satisfactory to the Purchaser and the party who
is the seller (the “Seller”) $1,000,000 in cash (the “Deposit”)
to serve as a good faith deposit.  At
closing, the Deposit shall be returned to the Purchaser.  Notwithstanding the foregoing, if the
Purchaser was previously a Defaulting Purchaser, the amount of the Deposit
under this provision shall be 150% of the amount delivered as the Deposit in
the last transaction where the Purchaser was a Defaulting Purchaser.  At closing, the Seller shall assign all of
its Partnership Interests to the Purchaser by written assignment with full
warranty of title in a form reasonably acceptable to the Purchaser.  The Seller shall convey its Partnership
Interests free and clear of all liens, claims, and encumbrances, and the Seller
shall execute and deliver to the Purchaser all documents which may be required
to give effect to the sale and purchase of such Partnership Interests.  If there is more than one Purchaser
purchasing the interests of the Seller(s), then unless such Purchasers
otherwise agree between or among themselves, the aggregate interests being
purchased, the aggregate price for those interests and the aggregate amount of
the Deposit each shall be allocated between or among the Purchasers according
to their respective Back-End Percentage Interests.


 


(f)                                    The closing of a purchase
under this Exhibit E will be held at the Partnership’s principal
office and shall take place on the date 45 days after the Offeree’s Election or
deemed Election or as otherwise agreed by the Offeror and Offeree.  At the closing, the Purchaser shall pay to
the Seller the purchase price (being, as applicable, either the Offeror Value
or the Offeree Value).  The closing of a
purchase under this Exhibit E will be held in abeyance for not more
than 60 days to afford the Partners time to seek any lender consent required
for the transfer of the General Partner’s interest under this Exhibit E.  The Partners shall use commercially
reasonable efforts to obtain such lender’s consent.  If such consent is not obtained within such
60-day period, then the purchase under this Exhibit E shall be
adjourned without prejudice or penalty to any Partner, the Deposit shall be
returned to the Purchaser, and the provisions of this Exhibit E
shall remain in effect and may be exercised as provided in this Agreement.


 


E-2

















 


(g)                                 If the Purchaser fails to
purchase the interests of the Seller in accordance with this Exhibit E
for any reason other than the Seller’s default or the failure or inability to
obtain the consent of lender as provided in subparagraph (f) of this Exhibit E,
the Seller, as the sole and exclusive remedy on account thereof, shall receive
the Deposit as liquidated damages.  If
there is more than one Purchaser and any such Purchaser defaults (so that
Seller would be entitled to receive the Deposit as liquidated damages), the
non-defaulting Purchaser(s) shall have the right, but not the obligation,
to cure such default as between the Purchaser(s) and Seller(s), at any
time within five days after the scheduled closing date, by acquiring the entire
interests of Seller(s) for its or their own account (and not for any
defaulting Purchaser) and, in such event, shall have the right to apply each
defaulting Purchaser’s share of the Deposit towards the purchase price without
compensation to any defaulting Purchaser as liquidated damages for such
default.  If the Seller refuses to
consummate the sale of its interests in accordance with this Exhibit E,
the Purchaser shall have, as its sole remedy on account thereof, the right to
enforce specific performance.  If the
Purchaser fails to purchase the interests of the Seller in accordance with this
Exhibit E, the Purchaser shall be a “Defaulting Purchaser”
for the purposes of subparagraph (e) of this Exhibit E.


 


(h)                                 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 Exhibit E shall have
terminated.


 


(i)                                     From and after the date on
which a Buy-Sell Offer has been delivered until the Buy-Sell closing date, the
General Partner shall not sell or enter into a binding contract to sell (or
permit the Project Owner to sell or to enter into a binding contract to sell)
all or any portion of the Project, enter into any material binding agreement
with respect to the Partnership, the Project Owner or the Project or make any
new financing commitments on behalf of the Partnership or the Project
Owner.  The General Partner shall keep
the other Partners fully informed as to the status of the Partnership’s affairs
through the Buy-Sell closing date.


 


E-3

















 


EXHIBIT F


to


Amended and Restated Limited Partnership Agreement


 


CALL RIGHT


 


If the General Partner or BH
Partner (as applicable, the “Calling Partner”) institutes the provisions
of this Exhibit F, then the following shall apply.


 


(a)                                  At any time the
Calling Partner may deliver to Developer Partner a notice (the “Call Notice”)
that the Calling Partner is exercising its rights pursuant to this Exhibit F.  Within ten days after delivery of the Call
Notice, or such longer period as may be specified by the Calling Partner in the
Call Notice, the Calling Partner shall purchase, and Developer Partner shall
sell to the Calling Partner, all of the Partnership interest of the Developer
Partner in the Partnership (the “Called Interest”).  At the closing of the purchase and sale of
the Called Interest: (i) the Calling Partner shall pay to Developer
Partner the purchase price of $10.00; (ii) Developer Partner shall assign the
Called Interest to the Calling Partner, free and clear of all liens, claims and
encumbrances, pursuant to an assignment agreement prepared by the Calling
Partner and reasonably acceptable to Developer Partner; (iii) Developer
Partner shall execute and deliver to the Calling Partner all documents which
may be required to give effect to the sale and purchase of the Called Interest
to the Calling Partner; and (iv) the General Partner shall cause the
Partnership to enter into a profits participation agreement (the “Profits
Participation Agreement”) with Developer Partner or an affiliate designated
by Developer Partner.  If requested by
the General Partner, BREOF Partner shall join in the execution of the Profits
Participation Agreement to evidence its consent thereto and approval thereof.


 


(b)                                 The Profits
Participation Agreement shall be prepared by the General Partner on behalf of
the Partnership and shall be subject to the reasonable approval of Developer
Partner or its designated affiliate, as applicable, and of the BREOF
Partner.  The Profits Participation
Agreement shall provide that the Partnership shall pay to Developer Partner or
such designated affiliate: (i) the Deferred Affiliate Fees in the amounts
and at the times provided in the Agreement as if Developer Partner had
continued as a Limited Partner in the Partnership; and (ii) payments in
cash equal to the amount the distributions, if any, pursuant to Sections 6.1
(including any amount payable pursuant to Section 8.11) and 11.3
that Developer Partner would have received if Developer Partner had continued
as a Limited Partner in the Partnership (“Hypothetical Distributions”).  The Profits Participation Agreement shall
provide that the General Partner shall cause the Partnership to make any
Hypothetical Distributions within 30 days after each date on which
distributions are made to the Partners pursuant to Sections 6.1 and
11.3 to the extent Developer Partner would have been entitled to any
contemporaneous distribution pursuant to Sections 6.1 (including
any amount payable pursuant to Section 8.11) and 11.3.


 


F-1

















 


BEHRINGER
HARVARD BAILEYS INVESTORS, L.P.


 


SCHEDULE I


 


	
  Partner and Address

  	
   

  	
  Capital Contribution

  	
   

  	
  Back-End

  Percentage Interests

  	
   

  
	
  General Partner:

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Behringer
  Harvard Baileys GP, LLC 

  15601
  Dallas Parkway, Suite 600 

  Addison,
  Texas 75001 

  Facsimile
  No.: (214) 655-1610 

  Attention:
  Mark T. Alfieri

  	
   

  	
  $

  	
  29,117,514

  	
  (1)

  	
  43.86

  	
  %

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Limited Partners:

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  FF
  Investors III East LLC 

  2045
  Highway 360, Suite 250 

  Grand
  Prairie, Texas 75050 

  Facsimile
  No.: (214) 574-1301  

  Attention: Ted R. Bradford

  	
   

  	
  $

  	
  2,951,756

  	
  (2)

  	
  4.45

  	
  %

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  BREOF
  Baileys, LLC 

  BCE
  Place, Suite 300 

  181
  Bay Street, P.O. Box 762 

  Toronto,
  Ontario M5J 2T3 

  Facsimile
  No.: (416) 365-9642 

  Attention:
  David Arthur

  	
   

  	
  $

  	
  11,807,025

  	
  (3)

  	
  17.79

  	
  %

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Behringer
  Harvard Baileys REIT, LLC 

  15601
  Dallas Parkway, Suite 600 

  Addison,
  Texas 75001 

  Facsimile
  No.: (214) 655-1610 

  Attention:
  Mark T. Alfieri

  	
   

  	
  $

  	
  22,501,858

  	
  (4)

  	
  33.90

  	
  %

  
	
  Total All Partners:

  	
   

  	
  $

  	
  66,378,153

  	
   

  	
  100.0

  	
  %

  



 


Section 2.10(a)


BH-Funded Accrued Development Fee:   $195,521


 






(1) $28,826,339 is Undistributed First
Priority Capital, and $291,175 is Undistributed Second Priority Capital.


(2) Entire amount is Undistributed
Second Priority Capital.


(3) Entire amount is Undistributed
Second Priority Capital.


(4) Entire amount is Undistributed
Second Priority Capital.