**Exhibit 10.23**

 

 

 

LIMITED LIABILITY COMPANYAGREEMENT

 

OF

 

BEHRINGER HARVARD WATERFORDPLACE VENTURE, LLC

 

(a Delaware LimitedLiability Company)

 

 

 

Dated as of May 29,2009

 

THE INTERESTS (THE “INTERESTS”)OF BEHRINGER HARVARD WATERFORD PLACE VENTURE, LLC HAVE NOT BEEN REGISTEREDUNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), THESECURITIES LAWS OF ANY STATE OR ANY OTHER APPLICABLE U.S. OR NON-U.S.SECURITIES LAWS, IN EACH CASE  INRELIANCE UPON EXEMPTIONS FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIESACT AND SUCH LAWS.  THE INTERESTS MAY BEACQUIRED FOR INVESTMENT ONLY, AND NEITHER THE INTERESTS NOR ANY PART THEREOFMAY BE OFFERED FOR SALE, PLEDGED, HYPOTHECATED, SOLD, ASSIGNED ORTRANSFERRED AT ANY TIME EXCEPT IN COMPLIANCE WITH (I) THE SECURITIES ACT,ANY APPLICABLE STATE SECURITIES LAWS AND ANY OTHER APPLICABLE SECURITIES LAWS,AND (II) THE TERMS AND CONDITIONS OF THIS LIMITED****LIABILITYCOMPANY****AGREEMENT.  THE INTERESTS WILL NOT BE TRANSFERRED OFRECORD EXCEPT IN COMPLIANCE WITH SUCH LAWS AND THIS LIMITED LIABILITY COMPANYAGREEMENT.  THEREFORE, PURCHASERS OF THEINTERESTS WILL BE REQUIRED TO BEAR THE RISK OF THEIR INVESTMENT FOR ANINDEFINITE PERIOD OF TIME.

 

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**TABLE OF CONTENTS**

 
| ** ** | ** **                                                                                                                                   | ** **                                 | **Page** |
|------------|----------------------------------------------------------------------------------------------------------------------------------------------|--------------------------------------------|----------|
|       |                                                                                                                                         |                                       |     |
| ARTICLE 1  | DEFINITIONS                                                                                                                                  | 1                                          |
|       |                                                                                                                                         |                                       |     |
| ARTICLE 2  | THE VENTURE                                                                                                                                  | 8                                          |
|       |                                                                                                                                         |                                       |     |
|       | 2.1                                                                                                                                          | Formation of Venture                       | 8        |
|       |                                                                                                                                         |                                       |     |
|       | 2.2                                                                                                                                          | Venture Name and Principal Office          | 8        |
|       |                                                                                                                                         |                                       |     |
|       | 2.3                                                                                                                                          | Office of and Agent for Service of Process | 8        |
|       |                                                                                                                                         |                                       |     |
|       | 2.4                                                                                                                                          | Term of the Venture                        | 8        |
|       |                                                                                                                                         |                                       |     |
|       | 2.5                                                                                                                                          | Title to Assets                            | 8        |
|       |                                                                                                                                         |                                       |     |
|       | 2.6                                                                                                                                          | Purpose and Powers                         | 8        |
|       |                                                                                                                                         |                                       |     |
| ARTICLE 3  | MEMBERS AND CAPITAL CONTRIBUTIONS                                                                                                            | 11                                         |
|       |                                                                                                                                         |                                       |     |
|       | 3.1                                                                                                                                          | Members; Capital Contributions             | 11       |
|       |                                                                                                                                         |                                       |     |
|       | 3.2                                                                                                                                          | Capital Calls                              | 12       |
|       |                                                                                                                                         |                                       |     |
|       | 3.3                                                                                                                                          | Additional Capital Contributions           | 12       |
|       |                                                                                                                                         |                                       |     |
|       | 3.4                                                                                                                                          | Failure to Make Capital Contributions      | 13       |
|       |                                                                                                                                         |                                       |     |
|       | 3.5                                                                                                                                          | Return of Capital Contributions            | 15       |
|       |                                                                                                                                         |                                       |     |
|       | 3.6                                                                                                                                          | Capital Account                            | 15       |
|       |                                                                                                                                         |                                       |     |
|       | 3.7                                                                                                                                          | Transfer of Capital Account                | 15       |
|       |                                                                                                                                         |                                       |     |
|       | 3.8                                                                                                                                          | Tax Matters Partner                        | 15       |
|       |                                                                                                                                         |                                       |     |
|       | 3.9                                                                                                                                          | Liability for Venture’s Obligations   | 16       |
|       |                                                                                                                                         |                                       |     |
| ARTICLE 4  | ALLOCATIONS                                                                                                                                  | 16                                         |
|       |                                                                                                                                         |                                       |     |
|       | 4.1                                                                                                                                          | Allocation of Profits and Losses           | 16       |
|       |                                                                                                                                         |                                       |     |
|       | 4.2                                                                                                                                          | Tax Allocations                            | 16       |
|       |                                                                                                                                         |                                       |     |
| ARTICLE 5  | DISTRIBUTIONS AND EXPENSES                                                                                                                   | 17                                         |
|       |                                                                                                                                         |                                       |     |
|       | 5.1                                                                                                                                          | Distributions of Net Cash Flow             | 17       |
|       |                                                                                                                                         |                                       |     |
|       | 5.2                                                                                                                                          | Tax Provisions                             | 17       |
|       |                                                                                                                                         |                                       |     |
|       | 5.3                                                                                                                                          | Priority                                   | 17       |
|       |                                                                                                                                         |                                       |     |
|       | 5.4                                                                                                                                          | Expenses                                   | 17       |
|       |                                                                                                                                         |                                       |     |
| ARTICLE 6  | MANAGEMENT RIGHTS, DUTIES, AND POWERS OF THE MANAGER; TRANSACTIONS  INVOLVING THE MANAGER OR ITS AFFILIATES; ADDITIONAL OR SUCCESSOR MANAGER | 18                                         |
|       |                                                                                                                                         |                                       |     |
|       | 6.1                                                                                                                                          | Management of the Venture                  | 18       |
|       |                                                                                                                                         |                                       |     |
|       | 6.2                                                                                                                                          | Operating Plan                             | 19       |
|            |                                                                                                                                              |                                            |          |  |  |

 

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**TABLEOF CONTENTS**

 
| ** ** | ** **                                                   | ** **                                                     | **Page** |
|------------|--------------------------------------------------------------|----------------------------------------------------------------|----------|
|       |                                                         |                                                           |     |
|       | 6.3                                                          | Major Decisions                                                | 20       |
|       |                                                         |                                                           |     |
|       | 6.4                                                          | Business with Affiliates; Other Activities                     | 22       |
|       |                                                         |                                                           |     |
|       | 6.5                                                          | Maintenance of Domestic Status                                 | 23       |
|       |                                                         |                                                           |     |
|       | 6.6                                                          | Tax Status                                                     | 23       |
|       |                                                         |                                                           |     |
|       | 6.7                                                          | Liability for Venture’s Obligations                       | 23       |
|       |                                                         |                                                           |     |
|       | 6.8                                                          | Additional or Successor Manager                                | 23       |
|       |                                                         |                                                           |     |
|       | 6.9                                                          | Removal of Manager for Cause                                   | 23       |
|       |                                                         |                                                           |     |
| ARTICLE 7  | LIMITATIONS ON LIABILITY AND INDEMNIFICATION                 | 24                                                             |
|       |                                                         |                                                           |     |
|       | 7.1                                                          | Limitation of Liability                                        | 24       |
|       |                                                         |                                                           |     |
|       | 7.2                                                          | Indemnification                                                | 24       |
|       |                                                         |                                                           |     |
| ARTICLE 8  | TRANSFER OF MEMBERS’ INTERESTS IN THE VENTURE; BUY/SELL | 26                                                             |
|       |                                                         |                                                           |     |
|       | 8.1                                                          | Transfers of a Member’s Interest                          | 26       |
|       |                                                         |                                                           |     |
|       | 8.2                                                          | Buy/Sell Arrangement                                           | 27       |
|       |                                                         |                                                           |     |
|       | 8.3                                                          | Basis Election                                                 | 34       |
|       |                                                         |                                                           |     |
|       | 8.4                                                          | Void Transfer                                                  | 34       |
|       |                                                         |                                                           |     |
| ARTICLE 9  | EXCESS INTEREST PROVISIONS                                   | 34                                                             |
|       |                                                         |                                                           |     |
|       | 9.1                                                          | Definitions                                                    | 34       |
|       |                                                         |                                                           |     |
|       | 9.2                                                          | Ownership Limitation                                           | 35       |
|       |                                                         |                                                           |     |
|       | 9.3                                                          | Excess Interests                                               | 36       |
|       |                                                         |                                                           |     |
|       | 9.4                                                          | Prevention of Transfer                                         | 37       |
|       |                                                         |                                                           |     |
|       | 9.5                                                          | Notice                                                         | 37       |
|       |                                                         |                                                           |     |
|       | 9.6                                                          | Information for the Venture                                    | 38       |
|       |                                                         |                                                           |     |
|       | 9.7                                                          | Other Action by Venture                                        | 38       |
|       |                                                         |                                                           |     |
|       | 9.8                                                          | Ambiguities                                                    | 38       |
|       |                                                         |                                                           |     |
|       | 9.9                                                          | Modification of Existing Holder Limits                         | 38       |
|       |                                                         |                                                           |     |
|       | 9.10                                                         | Increase or Decrease in Ownership Limit                        | 39       |
|       |                                                         |                                                           |     |
|       | 9.11                                                         | Limitations on Changes in Existing Holder and Ownership Limits | 39       |
|       |                                                         |                                                           |     |
|       | 9.12                                                         | Waivers by Venture                                             | 39       |
|       |                                                         |                                                           |     |
|       | 9.13                                                         | Severability                                                   | 39       |
|       |                                                         |                                                           |     |
|       | 9.14                                                         | Trust for Excess Interests                                     | 39       |
|            |                                                              |                                                                |          |  |  |

 

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**TABLEOF CONTENTS**

 
| ** ** | ** **                            | ** **                                    | **Page** |
|------------|---------------------------------------|-----------------------------------------------|----------|
|       |                                  |                                          |     |
|       | 9.15                                  | Distributions on Excess Interests             | 39       |
|       |                                  |                                          |     |
|       | 9.16                                  | Voting of Excess Interests                    | 40       |
|       |                                  |                                          |     |
|       | 9.17                                  | Non-Transferability of Excess Interests       | 40       |
|       |                                  |                                          |     |
|       | 9.18                                  | Call by the Venture on Excess Interests       | 40       |
|       |                                  |                                          |     |
| ARTICLE 10 | DISSOLUTION OF VENTURE                | 41                                            |
|       |                                  |                                          |     |
|       | 10.1                                  | Bankruptcy of Member                          | 41       |
|       |                                  |                                          |     |
|       | 10.2                                  | Other Events of Dissolution                   | 41       |
|       |                                  |                                          |     |
|       | 10.3                                  | Distribution Upon Liquidation                 | 42       |
|       |                                  |                                          |     |
|       | 10.4                                  | Procedural and Other Matters                  | 43       |
|       |                                  |                                          |     |
| ARTICLE 11 | REPRESENTATIONS AND WARRANTIES        | 43                                            |
|       |                                  |                                          |     |
|       | 11.1                                  | Representations and Warranties of the Members | 43       |
|       |                                  |                                          |     |
| ARTICLE 12 | BOOKS AND RECORDS; REPORTS TO MEMBERS | 44                                            |
|       |                                  |                                          |     |
|       | 12.1                                  | Books                                         | 44       |
|       |                                  |                                          |     |
|       | 12.2                                  | Quarterly Reports                             | 44       |
|       |                                  |                                          |     |
|       | 12.3                                  | Annual Reports                                | 44       |
|       |                                  |                                          |     |
|       | 12.4                                  | Accountants; Tax Returns                      | 45       |
|       |                                  |                                          |     |
|       | 12.5                                  | Accounting and Fiscal Year                    | 45       |
|       |                                  |                                          |     |
|       | 12.6                                  | Project Valuations                            | 45       |
|       |                                  |                                          |     |
| ARTICLE 13 | MISCELLANEOUS                         | 45                                            |
|       |                                  |                                          |     |
|       | 13.1                                  | Notices                                       | 45       |
|       |                                  |                                          |     |
|       | 13.2                                  | Execution in Counterparts                     | 46       |
|       |                                  |                                          |     |
|       | 13.3                                  | Amendments                                    | 47       |
|       |                                  |                                          |     |
|       | 13.4                                  | Additional Documents                          | 47       |
|       |                                  |                                          |     |
|       | 13.5                                  | Validity                                      | 47       |
|       |                                  |                                          |     |
|       | 13.6                                  | Governing Law                                 | 47       |
|       |                                  |                                          |     |
|       | 13.7                                  | Waiver                                        | 47       |
|       |                                  |                                          |     |
|       | 13.8                                  | Consent and Approval                          | 47       |
|       |                                  |                                          |     |
|       | 13.9                                  | Waiver of Partition                           | 47       |
|       |                                  |                                          |     |
|       | 13.10                                 | Binding Effect                                | 47       |
|       |                                  |                                          |     |
|       | 13.11                                 | Entire Agreement                              | 48       |
|       |                                  |                                          |     |
|       | 13.12                                 | Captions                                      | 48       |
|            |                                       |                                               |          |  |  |

 

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**TABLEOF CONTENTS**

 
| ** ** | ** ** | ** **                                                                | **Page** |
|------------|------------|---------------------------------------------------------------------------|----------|
|       |       |                                                                      |     |
|       | 13.13      | No Strict Construction                                                    | 48       |
|       |       |                                                                      |     |
|       | 13.14      | Identification                                                            | 48       |
|       |       |                                                                      |     |
|       | 13.15      | Recourse to the Manager                                                   | 48       |
|       |       |                                                                      |     |
|       | 13.16      | Recourse to the Members                                                   | 48       |
|       |       |                                                                      |     |
|       | 13.17      | Remedies Not Exclusive                                                    | 48       |
|       |       |                                                                      |     |
|       | 13.18      | Use of Behringer Harvard Trade Name                                       | 48       |
|       |       |                                                                      |     |
|       | 13.19      | Venture Counsel                                                           | 49       |
|       |       |                                                                      |     |
|       | 13.20      | Waiver of Jury Trial                                                      | 49       |
|       |       |                                                                      |     |
| EXHIBITS   |       |                                                                      |
|       | A          | Members; Addresses; Capital Commitments; Percentage Interests             |     |
|       | B          | Legal Description of Project                                              |     |
|       | C          | Investment Guidelines                                                     |     |
|       | D          | Master Partnership Agreement                                              |     |
|       | E          | Form of Limited Liability Company Agreement for the Subsidiary  REIT |     |
|            |            |                                                                           |          |  |  |

 

iv

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**LIMITED LIABILITY COMPANYAGREEMENTOFBEHRINGER HARVARD WATERFORD PLACE VENTURE, LLC**

 

THIS LIMITED LIABILITYCOMPANY AGREEMENT of BEHRINGER HARVARD WATERFORD PLACE VENTURE, LLC is made andentered into as of May 29, 2009**,**by andbetween Behringer Harvard Waterford Place, LLC (“BH REIT”), a Delaware limitedliability company that is an indirect wholly owned subsidiary of BehringerHarvard Multifamily REIT I, Inc. with its principal office at 15601 DallasParkway, Suite 600, Addison, Texas 75001, and BEHRINGER HARVARD MASTERPARTNERSHIP I LP (“BH MP”), a Delaware limited partnership with its principaloffice at 15601 Dallas Parkway, Suite 600, Addison, Texas 75001.

 

**W I T N E S S E T H**

 

**WHEREAS**, BH REIT asthe Manager and a Member and BH MP as a Member desire to form a limitedliability company for the purpose of owning, operating and managing the realproperty at 4800 Tassajara Road, Dublin, California 94568, the legaldescription for which is set forth in Exhibit B hereof and known asWaterford Place Apartments (the “Project”);

 

**WHEREAS**, BH REIT andBH MP desire to establish their respective rights and duties relating to theVenture on the terms provided in this Agreement;

 

**NOW,THEREFORE****,** in consideration of thepremises and the mutual covenants of the parties hereto, and for other good andvaluable consideration, the receipt and sufficiency of which are herebyacknowledged, the parties hereby agree as follows:

 

**ARTICLE1**

** **

**DEFINITIONS**

** **

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

 

“Acquisition Date” has themeaning ascribed thereto in Section 3.1.

 

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

 

“Advisory Committee” meansthe Advisory Committee established pursuant to the terms of the MasterPartnership Agreement.

 

1

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

 

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

 

“Agreement” means thisLimited Liability Company Agreement, as amended, modified, supplemented orrestated from time to time.

 

“Alternative Offer Price”has the meaning ascribed thereto in Section 8.2(b)(ii).

 

“Applicable Law” has themeaning ascribed thereto in Section 3.4(d).

 

“Arbitration Notice” has themeaning ascribed thereto in Section 8.2(e)(ii)(A).

 

“Bankruptcy” has the meaningascribed thereto in Section 10.1(b).

 

“Bankruptcy Event” has themeaning ascribed thereto in Section 10.1(a).

 

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

 

“Behringer Party” has themeaning ascribed thereto in Section 8.2(e)(ii).

 

“Beneficial Owner” means aPerson who or which is or is treated as a direct or indirect owner of the SubsidiaryREIT for purposes of determining the status of the Subsidiary REIT as adomestically-controlled qualified investment entity under Section 897(h)(4)(B) ofthe Code.

 

“BH MP” has the meaningascribed thereto in the preamble to this Agreement.

 

“BH MP Venture” has themeaning ascribed thereto in Section 8.2(e)(i).

 

“BH REIT” has the meaningascribed thereto in the preamble to this Agreement.

 

“BH REIT Advisor” meansBehringer Harvard Multifamily Advisors I LP, a Texas limited partnership.

 

2

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“BH-Sponsored InvestmentProgram” means an entity formed or advised by Behringer Harvard Holdings, LLC,a Delaware limited liability company, or one of its Affiliates.

 

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

 

“Buy/Sell Interest” has themeaning ascribed thereto in Section 8.2(a)(ii).

 

“Capital Account” has themeaning ascribed thereto in Section 3.6.

 

“Capital Call” means a callfor capital to be contributed to the Venture in accordance with Section 3.2.

 

“Capital Commitment” means,with respect to any Member, the amount set forth opposite such Partner’s nameon Exhibit A, as amended from time to time.

 

“Capital Contribution” meansa capital contribution made by a Member to the Venture in accordance with Section 3.1or Section 3.3 hereof.

 

“Cause” means (i) amaterial breach of this Agreement by the Manager involving fraud or a violationof a fiduciary duty owed to the Venture or BH MP as a Member; (ii) thetermination of the Advisory Agreement by BH REIT as a result of, or within sixmonths of the occurrence of, fraud or willful misconduct on the part of BH REITAdvisor in respect of any Project or Venture; or (iii) the conviction of, orthe entry of a guilty plea or plea of no contest with respect to, a felonyinvolving fraud, embezzlement or dishonesty by BH REIT Advisor or anyAffiliated Entity of BH REIT Advisor.

 

“Certificate” means the Certificateof Formation of the Venture, as originally filed with the office of theSecretary of State of the State of Delaware on May 29, 2009, as amended,supplemented or otherwise modified from time to time as herein provided.

 

“Closing Date” has themeaning ascribed thereto in Section 8.2(d)(ii).

 

“Code” means the InternalRevenue Code of 1986, as amended from time to time (or any correspondingprovisions of succeeding law); any reference to any section of the Code shallinclude any corresponding provision of succeeding laws. Notwithstanding theforegoing, any change in the Code which materially increases the requirementsfor qualification of the Subsidiary REIT as a domestically-controlled qualifiedinvestment entity for purposes of Section 897(h)(4)(B) of the Code, orotherwise causes the Subsidiary REIT not to be a domestically-controlledqualified investment entity for purposes of Section 897(h)(4)(B) of the Code,shall not be included in the definition of “Code” hereunder, it beingunderstood that PGGM will bear the risk of such change; provided thatthe Manager will use commercially reasonable efforts to minimize the financialimpact to PGGM (indirectly through BH MP) of any such change at PGGM’s expense;provided further that the same does not adversely affect BH REIT’s taxstatus.

 

3

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

 

“Default” has the meaningascribed thereto in Section 3.4(a).

 

“Default Loan” has themeaning ascribed thereto in Section 3.4(b).

 

“Defaulting Member” has themeaning ascribed thereto in Section 3.4(a).

 

“Defaulting Purchaser” hasthe meaning ascribed thereto in Section 8.2(d)(i).

 

“Domestic Status Loss” meansa change in the Tax Sensitive Beneficial Owner Group, if the effect thereofwould be a disqualification of the Subsidiary REIT as a “domestically-controlledqualified investment entity” within the meaning of Section 897(h)(4)(B) of theCode.

 

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

 

“Earnest Money” has themeaning ascribed thereto in Section 8.2(d)(i).

 

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

 

“Escrow Agent” has themeaning described thereto in Section 8.2(d)(i).

 

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

 

“Initial Operating Plan” hasthe meaning described thereto in Section 6.2(a).

 

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

 

“Investment Guidelines”means the investment guidelines for the Project described in Exhibit C.

 

“Liquidation” means (i) whenused with reference to the Venture, the date upon which the Venture ceases tobe a going concern, and (ii) when used with reference to any Member, theearlier of (a) the date upon which there is a Liquidation of the Ventureor (b) the date upon which such Member’s entire Interest in the Venture isterminated other than by Transfer to a Person other than the Venture.

 

“Liquidator” has the meaningascribed thereto in Section 10.3(a).

 

4

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

 

“Major Dispute” means anydisagreement of the Members in respect of (i) the establishment of saleobjectives and parameters for the Project; (ii) the sale or other dispositionof the Project or any other property owned, directly or indirectly, by theVenture in excess of $100,000; (iii) incurring, materially restructuring ormaterially modifying any indebtedness of the Venture or the Subsidiary REIT inexcess of $100,000 or causing or the Venture or Subsidiary REIT to becomeliable as an endorser, guarantor, surety or otherwise, except as otherwisecontemplated under Section 6.3(a)(iii); (iv) a mortgage,pledge or hypothecation of the Project to secure indebtedness of the SubsidiaryREIT, except as otherwise contemplated under Section 6.3(a)(v); or (v)selling any additional interests in the Venture (other than to the developer ofthe Project).

 

“Management Company” meansHPT Management Services LP, a Texas limited partnership, and its successors andassigns.

 

“Manager” means BH REIT, orany permitted successor or delegee of Behringer in accordance with thisAgreement, in such Person’s capacity as the manager of the Venture.

 

“Mark to Market Price” hasthe meaning ascribed thereto in Section 8.2(e)(ii)(A).

 

“Master Partnership” meansthe limited partnership formed under the Master Partnership Agreement.

 

“Master PartnershipAgreement” means that certain limited partnership agreement, dated as of May 7,2007, by and between BH Institutional GP LP and PGGM, the form of which isattached as Exhibit D.

 

“Maximum Rate” has themeaning ascribed thereto in Section 3.4(d).

 

“Member” means BH MP or BHREIT, or any permitted successor or assign of either of them in accordance withthis Agreement, in such Person’s capacity as a member of the Venture.

 

“Negotiation Deadline” hasthe meaning ascribed thereto in Section 8.2(e)(ii)(A).

 

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

 

“Non-defaulting Member” hasthe meaning ascribed thereto in Section 3.4(a).

 

“Offer Price” has themeaning ascribed thereto in Section 8.2(a)(ii).

 

“Offering Notice” has themeaning ascribed thereto in Section 8.2(a).

 

“Offeror” has the meaningascribed thereto in Section 8.2 (a).

 

5

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“Operating Expenses” has themeaning ascribed thereto in Section 5.4(b).

 

“Option Period” has themeaning ascribed thereto in Section 8.2 (b).

 

“Organizational Expenses”has the meaning ascribed thereto in Section 5.4(a).

 

“Percentage Interest” means,as to any Member, its percentage ownership interest in the Venture as set forthin Exhibit A, as the same may be amended from time to time.

 

“Permitted TemporaryInvestments” means investments in (i) U.S. government and agencyobligations with maturities of not more than one year and one day from the dateof acquisition, (ii) commercial paper with maturities of not more than sixmonths and one day from the date of acquisition and having a rating assigned tosuch commercial paper by Standard & Poor’s Ratings Services or Moody’sInvestors Service, Inc. (or, if neither such organization shall rate suchcommercial paper at such time, by any nationally recognized rating organizationin the United States of America) equal to one of the two highest commercialpaper ratings assigned by such organization, it being understood that as of thedate hereof such ratings by Standard and Poor’s Rating Services are “P1” and “P2”and such ratings by Moody’s Investors Service, Inc. are “A1” and “A2,” (iii) interestbearing deposits in U.S. banks with an unrestricted surplus of at least $250million, maturing within one year and (iv) money market mutual funds withassets of not less than $500 million, substantially all of which assets arebelieved by the Manager to consist of items described in the foregoing clause(i), (ii) or (iii).

 

“Person” means an individualor Entity.

 

“PGGM” means StichtingPensioenfonds voor de Gezondheid, Geestelijke en Maatschappelijke Belangen, aDutch foundation.

 

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

 

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

 

“Project” has the meaningdescribed thereto in the recitals to this Agreement.

 

“Purchase Price” has themeaning ascribed thereto in Section 8.2 (d)(i).

 

“Purchaser” has the meaningascribed thereto in Section 8.2 (d)(i).

 

“Qualifying Opinion” means awritten opinion of outside, reputable tax counsel licensed to practice law inthe United States and acting reasonably.

 

“Real Estate Proceeds” meansproceeds from the direct sale of the Project (as opposed to proceeds from thesale of interests in the Subsidiary REIT).

 

“REIT” means a real estateinvestment trust under the Code.

 

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“REIT Member” means a director indirect (through another partnership or limited liability company) Memberof the Venture that is not a U.S. Person and for whom the direct or indirectreceipt of Real Estate Proceeds would have a material adverse tax consequenceon such Member.  For the avoidance ofdoubt PGGM is a REIT Member.

 

“Seller” has the meaningascribed thereto in Section 8.2 (d).

 

“Shares” means the shares ofbeneficial interests (including, for the avoidance of doubt, membershipinterests) in the Subsidiary REIT.

 

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

 

“Subsidiary REIT” means thesubsidiary to be formed by the Venture for the purpose of investing in theProject and that has qualified or intends to qualify as a REIT.  The form of limited liability companyagreement for the Subsidiary REIT is attached hereto as Exhibit E.

 

“Substitute Capital” has themeaning ascribed thereto in Section 3.3(b).

 

“Substituted Purchase Price”has the meaning ascribed thereto in Section 8.2 (d).

 

“Substituted Purchaser” hasthe meaning ascribed thereto in Section 8.2 (d).

 

“Taxes” shall mean alltaxes, charges, fees, duties, levies or other assessments, including withoutlimitation, income, gross receipts, net proceeds, ad valorem, turnover, realand personal property (tangible and intangible), sales, use, franchise, excise,value added, stamp, leasing, lease, user, transfer, fuel, excess profits,occupational and interest equalization, windfall profits, severance andemployees’ income withholding and Social Security taxes, which are imposed bythe United States, or any state, local or foreign government or subdivision oragency thereof, and such term shall include any interest, penalties oradditions to tax attributable to such Taxes.

 

“Tax Return” shall mean anyreport, return or other information required to be supplied to a taxingauthority in connection with Taxes.

 

“Tax Sensitive BeneficialOwner Group” means all Beneficial Owners of Shares other than (i) PGGM, (ii) PGGM’sdirect or remote transferees with respect to such Shares, and (iii) thedirect or indirect owners of PGGM or its transferees.

 

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

 

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

 

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

 

“Venture” means the limitedliability company formed hereby.

 

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“Venture Counsel” has themeaning ascribed thereto in Section 13.19.

 

**ARTICLE2**

** **

**THEVENTURE**

 

2.1           Formation of Venture. The Manager and the Members hereby form a limited liability companypursuant to the provisions of the Act, and the rights and liabilities of theMembers shall be as provided in the Act except as herein otherwise expresslyprovided.

 

2.2           Venture Name and PrincipalOffice.  The name of the Venture shall be “BehringerHarvard Waterford Place Venture, LLC” or such other name as the Manager maydetermine.  The principal place ofbusiness and the principal administrative office of the Venture shall be 15601Dallas Parkway, Suite 600, Addison, Texas 75001.  The Venture may change such office and mayhave such additional offices as the Manager may determine.

 

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

 

2.4           Term of the Venture. The term of the Venture commenced on the date the Certificate was firstfiled with the Secretary of State of the State of Delaware.  Unless sooner terminated as hereinafterprovided or by operation of law, the term of the Venture shall continue until December 31,2059.

 

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

 

2.6           Purpose and Powers.

 

(a)           The Venture is organized for the object and purpose ofinvesting in the Project through the Subsidiary REIT, owning, managing,supervising and disposing of such investment as provided in this Agreement,sharing the profits and losses therefrom and engaging in such activitiesnecessary, incidental or ancillary thereto and in any other lawful act oractivity in furtherance of the foregoing for which limited liability companiesmay be organized under the Act. Notwithstanding any other provision of this Agreement, the Venture, andthe Manager on behalf of the Venture, may execute, deliver and perform suchagreements and documents as the Manager determines are necessary or desirablefor the formation, organization and continuation of the Venture.  Any provision herein regarding the purposeand powers of the Venture and the authorization of actions hereunder may bedone through the Subsidiary REIT (and any subsidiary thereof).  In furtherance of this purpose, subject tothe limitations and restrictions set forth elsewhere in this Agreement,including, without limitation, Section 6.3 hereof, the Ventureshall have all powers necessary, suitable or convenient for the accomplishmentof the aforesaid purpose, as principal or agent, including, without limitation,all of the powers that may be exercised by the Manager on behalf of and, exceptas specifically provided herein, at the expense 

 

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of, the Venture pursuantto this Agreement or the Act, and further including, without limitation, thefollowing:

 

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

 

(ii)           to borrow money, encumber assets (other than theCapital Commitments of the Members) and otherwise incur recourse andnon-recourse indebtedness (including, without limitation, the issuance ofguarantees of the payment or performance of obligations by any Person) inconnection with or in furtherance of the acquisition or development or thefinancing or refinancing of the Project;

 

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

 

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

 

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

 

(vi)          to make additional investments in the Projectsubsequent to the Venture’s initial investment in the Project (including,without limitation, additional investments made to finance an acquisition bythe Subsidiary REIT or any capital improvements, tenant improvements or otherimprovements or alterations to any property constituting the Project orotherwise to protect the Venture’s investment in the Project or to provide workingcapital for the Project);

 

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

 

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

 

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

 

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

 

(xi)           subject to Sections 2.6(b) and (c),to enter into, make and perform all contracts, agreements and otherundertakings as may be necessary or advisable or incidental to carrying out itspurpose, including, without limitation, such agreements as the Manager deems 

 

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necessary or appropriatefor the acquisition, development, operation, management, financing, sale orother disposition of the Project or as otherwise contemplated by thisAgreement;

 

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

 

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

 

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

 

(xv)         to enter into and perform the terms of any creditfacility as borrower or guarantor and cause the Subsidiary REIT to enter intoand perform the terms of any credit facility as borrower, including, withoutlimitation, repaying borrowings under any credit facility on behalf of theVenture;

 

(xvi)        to do such other things and engage in such otheractivities as the Manager may deem necessary, convenient or advisable withrespect to the conduct of the business of the Venture, and have and exerciseall of the powers and rights conferred upon limited liability companie**s** formed pursuant to the Act.

 

(b)           (i)            Subject to Section 6.3(a)(i),the interest in the Project owned by the Venture may only be sold, exchanged orotherwise disposed of (A) by selling, exchanging or otherwise disposing offor cash the Venture’s Shares in the Subsidiary REIT or, subject to any otherrequirements of this Agreement, including, without limitation, Section 2.6(b)(ii),by selling, exchanging or otherwise disposing of for cash a Member’s interestin the Venture, or (B) in connection with a like-kind exchange of theProject pursuant to Section 1031 of the Code that does not result in therecognition of any taxable gain to the Subsidiary REIT, an involuntaryconversion of the Project pursuant to Section 1033 of the Code that doesnot result in the recognition of any taxable gain to the Subsidiary REIT, orany other disposition or transfer that pursuant to a nonrecognition provisionin the Code does not result in the recognition of any taxable gain to theSubsidiary REIT; provided that, in a transaction within the description of theforegoing clause (B) the Members agree on the asset or assets to be acquired asa result of such transaction.

 

(ii)           The Manager shall use “Best Efforts” (as definedbelow) to cause the Subsidiary REIT to satisfy the requirements for taxation asa Domestically-Controlled REIT; provided, however, that theManager and its Affiliates shall not be required to engage in any transactionwith, or on behalf of, the Venture or contribute additional capital to theVenture in connection with such obligation. For purposes of the foregoing sentence, the Manager’s “Best Efforts”means that (A) no Capital Contribution shall be accepted and no redemptionof interests in the Venture shall be allowed if as a result thereof more than49% of the interests in the

 

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Subsidiary REIT would beheld, directly or indirectly (including, without limitation, through theVenture) by Persons that are not U.S. Persons, and (B) no Transfer of less thanall of the Venture’s interest in the Subsidiary REIT shall be permitted if suchTransfer would result in the Subsidiary REIT no longer qualifying as aDomestically-Controlled REIT.  Insatisfying the requirements of this Section 2.6(b)(ii), in the absenceof actual knowledge to the contrary, the Manager shall be entitled to rely uponthe most recent written representations of the direct or indirect partners ormembers and prospective partners or members of the Venture regarding the extentto which they are, or are owned by, U.S. Persons.

 

(iii)          The Manager shall cause the limited liability companyagreement, charter or other governing document of the Subsidiary REIT toprovide that any Transfer that, if effective, would result in the interests inthe Subsidiary REIT being beneficially owned (as provided in Section 856(a) ofthe Code) by fewer than 100 Persons (determined without reference to any rules ofattribution) shall be void *ab initio* as tothe Transfer of any interest in the Subsidiary REIT which would be otherwisebeneficially owned (as provided in Section 856(a) of the Code) by thetransferee and that the intended transferee shall acquire no rights in suchinterest.

 

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

 

**ARTICLE 3**

** **

**MEMBERS AND CAPITAL CONTRIBUTIONS**

 

3.1           Members; Capital Contributions. The name, address and Capital Commitment of each Member shall be as setforth on Exhibit A.  Unlessotherwise agreed by each Member, the Members shall have no obligation to fundCapital Contributions to the Venture in excess of their respective CapitalCommitments set forth on Exhibit A. The Members shall be required to make Capital Contributions under this Section3.1 in connection with the Project, including the acquisition, development,improvement, financing (including any mezzanine financing), operation ormaintenance by the Venture through the Subsidiary REIT of the Project or to payany Organizational Expenses or Operating Expenses.  The obligation of each Member to make anyCapital Contribution with respect to the Project (including additional fundingsubsequent to the acquisition, development or financing of the Project)contemplated by this Section 3.1 is subject to the conditions concurrentthat (i) (A) the Venture has acquired an interest in the Project or a bindingcommitment has been executed for the acquisition of an interest in the Project;(B) the Project has been substantially developed by the Manager, an Affiliateor a BH-Sponsored Investment Program; or (C) the Venture, directly or indirectly,has provided mezzanine or other financing for the Project or a bindingcommitment for the provision of such financing has been executed and, in anycase, the applicable event under clause (A), (B) or (C) occurs no later than120 days after the date of this Agreement (the “Acquisition Date”) and (ii) eachother Member has made, or is concurrently making, its proportionate CapitalContribution.  If the conditions inclauses (i) and (ii) have not been satisfied or waived on or 

 

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before the AcquisitionDate, then subject to the payment of any Organizational Expenses or OperatingExpenses pursuant to Section 5.4, the Capital Contributions, if any,made by the Members pursuant to this Section 3.1 shall be returned tothe Members, and this Agreement will terminate and be of no further force andeffect.

 

3.2           Capital Calls.  The Managerfrom time to time may call for payment on at least ten (10) Business Days’prior notice of (i) each Member’s Capital Commitment, or any portion thereof,to the extent the conditions concurrent to the contribution obligations in Section3.1 are met or (ii) additional Capital Contributions in accordance with Section3.3.  Each call for contributions ofcapital from the Members shall be made in accordance with their respectivePercentage Interests.  Except asotherwise provided in Section 3.3 or unless otherwise agreed by aMember, the amount of such Capital Call for a Member shall not exceed theamount of its Capital Commitment as set forth on Exhibit A.  Except as otherwise provided in Section 3.3or unless otherwise agreed by a Member, such Member shall not be required tofund a Capital Call other than as provided in Section 3.1.

 

3.3           Additional Capital Contributions.

 

(a)           If at any time, and from time to time, after the dateon which each of the Members has made its Capital Contributions up to theamount of such Member’s Capital Commitment in accordance with Section 3.1hereof, additional cash in excess of Net Cash Flow and other funds available tothe Venture is required by the Venture (i) in order to pay any OrganizationalExpenses or Operating Expenses, or (ii) in respect of the Project, including inorder to pay the costs of maintenance, repairs, capital improvements, replacementsor other expenses necessary to comply with lease or other contractualobligations of the Subsidiary REIT (or any subsidiary thereof that owns theProject) and to keep the Project in good condition and repair, then the Managermay make a Capital Call for additional capital from the Members in proportionto their respective Percentage Interests in an amount believed in good faith bythe Manager to be the amount needed to fund the cash needs of the Venture andin such event shall provide the Members with not less than ten (10) BusinessDays’ advance notice of the date on which such contributions are required to bemade.  Subject to Section 3.3(b),the Members shall make their respective additional Capital Contributions as andwhen requested in such notice.

 

(b)           In the event that BH MP declines to make itsadditional Capital Contribution in accordance with Section 3.3(a), theManager shall be obligated to contribute, or to cause one or more of itsAffiliates, or Behringer or its Affiliates, to contribute, an amount (the “SubstituteCapital”) equal to the BH MP’s Capital Contribution specified in such CapitalCall.  Unless otherwise agreed by PGGM,such Persons shall contribute the Substitute Capital to the SubsidiaryREIT.  In consideration of the contributionof the Substitute Capital, the Subsidiary REIT shall issue Shares to the Person(s)contributing the Substitute Capital based on the value of the outstandingShares of the Subsidiary REIT determined in accordance with this Section 3.3(b).  The number of Shares to be issued by theSubsidiary REIT in consideration of the contribution of Substitute Capitalshall equal the amount of such Substitute Capital divided by the value of aShare, which value shall be determined by the net asset value of the SubsidiaryREIT, based upon the valuation of the Project specified in this Section 3.3(b)and the Subsidiary REIT’s interest in the Project and taking into account thefair value of any other assets and the liabilities of the Subsidiary REIT andthe number of Shares outstanding immediately prior to the 

 

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contribution of theSubstitute Capital.  The value of theProject shall be determined based on a valuation (or an update of the mostrecent valuation) that has been prepared within the three months preceding thecontribution of the Substitute Capital to the Subsidiary REIT and made by thereal estate valuation firm that prepared the most recent valuation of theProject for the Venture or another real estate valuation firm approved byAdvisory Committee, or, if there is no previous valuation, upon a valuationthat has been prepared by a real estate valuation firm approved by the AdvisoryCommittee; provided that, if there has been any event that in the reasonable judgmentof the Manager has had a material effect (whether beneficial or adverse) on theProject since the date of such valuation, a new valuation or an update of themost recent valuation shall be obtained for the valuation of the Project.

 

3.4           Failure to Make Capital Contributions.

 

(a)           If, for any reason, a Member (the “Defaulting Member”)fails to make a Capital Contribution under Section 3.1 (a “Default”),which Default continues for fifteen (15) days after notice from the Manager,the Member who has made, or is prepared to make, its contribution of suchcapital (the “Non-defaulting Member”) may, but shall not be obligated to, makea Default Loan to the Defaulting Member in accordance with Sections 3.4(b)through (e).

 

(b)           The Non-defaulting Member may, at its election, make aloan (a “Default Loan”) to the Defaulting Member of all of the amount that theDefaulting Member was obligated to contribute to the Venture.  The Defaulting Member hereby irrevocablyauthorizes and directs the Non-defaulting Member to advance the proceeds ofeach Default Loan to the Venture. Receipt by the Venture of such proceeds shall constitute a CapitalContribution of, and a loan made by the Non-defaulting Member to, theDefaulting Member, and such Default Loan shall be legally enforceable to thesame extent and in the same manner, subject to the terms of this Agreement, asif such proceeds were loaned directly to the Defaulting Member and contributedby the Defaulting Member to the Venture. The making of a Default Loan to the Defaulting Member shall not cure thedefault by the Defaulting Member.

 

(c)           Each Default Loan shall bear interest on the unpaidprincipal amount thereof from time to time outstanding from the date advanceduntil repaid, at the lesser of (i) six percent (6%) per annum plus the primecommercial lending rate that Citibank, N.A., New York announces from time totime to be in effect and (ii) the Maximum Rate permitted by Applicable Law, andall payments made thereon shall be applied first toward payment of unpaidaccrued interest and then (if anything remains) toward payment ofprincipal.  Each Default Loan, bothprincipal and interest, shall be due and payable from the Defaulting Member tothe Non-defaulting Member who has made such loan upon demand by such Non-defaultingMember, and the Non-defaulting Member shall have and is hereby granted a firstand prior lien and security interest upon the Interest of the Defaulting Memberand all amounts, payments and proceeds becoming distributable or payable by theVenture to such Defaulting Member to secure repayment of the Default Loan.

 

(d)           In no event shall the aggregate of the interest on aDefault Loan, plus any other amounts paid in connection with the Default Loanthat under Applicable Law would be deemed “interest,” ever exceed the maximumamount of interest which, under Applicable Law, could be lawfully charged onsuch Default Loan.  The Defaulting Memberand Non-defaulting 

 

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Member making the DefaultLoan specifically intend and agree to limit contractually the interest payableon each Default Loan to not more than an amount determined as being at theMaximum Rate.  Therefore, none of theterms of a Default Loan or any other instruments pertaining to or securing aDefault Loan shall ever be construed to create a contract to pay interest at arate in excess of the Maximum Rate, and neither the Defaulting Member nor anyother party liable therefor shall ever be liable for interest in excess of thatdetermined as being at the Maximum Rate. The provisions of this Section 3.4(d) shall control over allprovisions of or respecting a Default Loan and of any other instrumentspertaining to or securing a Default Loan. If any amount of interest taken or received by the Non-defaulting Membershall be in excess of the maximum amount of interest that, under ApplicableLaw, could lawfully have been collected on a Default Loan, then the excessshall be deemed to have been the result of a mathematical error by the partieshereto and shall be refunded promptly to the Defaulting Member.  All amounts paid or agreed to be paid inconnection with the indebtedness evidenced by a Default Loan that would underApplicable Law be deemed “interest” shall, to the extent permitted byApplicable Law, be amortized, prorated, allocated, and spread throughout thefull term of such Default Loan.  “ApplicableLaw” means the law in effect from time to time and applicable to a Default Loanthat permits the charging and collection of the highest permissible lawfulnonusurious rate of interest on a Default Loan, including laws of the UnitedStates of America and, to the extent applicable to a given Default Loan, lawsof the State of Texas.  It is intendedthat Chapter 303 of the Texas Finance Code, as amended, shall be included inthe laws of the State of Texas in determining Applicable Law; and for thepurpose of applying said Chapter 303 to a Default Loan, the interest ceilingapplicable to such Default Loan under said Chapter 303 shall be the rate determinedunder Section 303.001, et seq. of the Texas Finance Code.  “Maximum Rate” means the maximum lawfulnonusurious rate of interest (if any) that under Applicable Law theNon-defaulting Member is permitted to charge the Defaulting Member on a DefaultLoan from time to time.

 

(e)           If a suit or other proceeding in any court shall beinstituted for collection of a Default Loan or enforcement of the lien andsecurity interest securing payment of same, the Defaulting Member, in additionto all other remedies available at law or in equity in connection with suchDefault, shall be liable for all court costs and reasonable attorneys’ fees andother collection costs thereby incurred, payment of which shall likewise besecured by said security interest and lien. A Member who becomes a Defaulting Member shall continue to be aDefaulting Member until all Default Loans made to such Member have been fullyrepaid, both as to principal and interest and costs, and all amounts due fromthe Defaulting Member to the Venture and the Non-Defaulting Member inconnection with such Default Loans shall have been paid in full.  Notwithstanding anything to the contrary in Article5, all amounts of Net Cash Flow and any other payments and proceeds whichbecome distributable or payable to a Defaulting Member shall be paid, first, todischarge all accrued and unpaid interest and the outstanding principal (inthat order) of the Default Loans made to the Defaulting Member, and second (ifanything remains), to pay all remaining amounts due to the Venture from theDefaulting Member (with any amounts applied to discharge a Default Loan and anycosts or expenses in connection therewith being treated as having beendistributed to the Defaulting Member).

 

(f)            Notwithstanding anything to the contrary contained inthis Agreement, during the period that any Member is a Defaulting Member withrespect to a Capital Call, such Member’s Consent, whether otherwise requireddirectly or indirectly, shall not be required in 

 

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order for the Venture tomake or to implement any Major Decision, and any action, decision or othermatter set forth in Section 6.3(a) as a “Major Decision” shall cease tobe a Major Decision during such period.

 

3.5           Return of Capital Contributions. Except as otherwise expressly provided herein, (i) the CapitalContributions of a Member will be returned to that Member only in the mannerand to the extent provided in this Article 3 and in Articles 5and 9, (ii) except to the extent provided in this Article 3 andin Articles 5 and 9, no Member shall have any right to demand orreceive the return of any Capital Contribution to the Venture, and (iii) subjectto Section 8.2, no Member shall have the right or, subject to Sections8.2 and 10.3(a)(ii), the obligation to receive a distribution ofproperty other than cash.  No Membershall be entitled to interest on any Capital Contribution or Capital Accountnotwithstanding any disproportion therein as between the Members.  No Member shall be liable for the return ofany portion of the Capital Contributions of the Members, and the return of suchCapital Contributions shall be made solely from, and to the extent of,available Venture assets.  No Membershall be entitled to withdraw from the Venture.

 

3.6           Capital Account.  The Ventureshall establish and maintain throughout the life of the Venture for each Membera separate capital account (“Capital Account”) in accordance with Section 704(b)of the Code.  Such Capital Account shallbe increased by (i) the amount of the Capital Contributions made by such Memberto the Venture pursuant to this Agreement, and (ii) all items of income andgain allocated to such Member pursuant to Section 4.1; and such CapitalAccount shall be decreased by (A) the amount of cash and property distributedto such Member pursuant to this Agreement and (B) all items of loss anddeduction allocated to such Member pursuant to Section 4.1.  Any other Venture item which is required orauthorized under Section 704(b) of the Code to be reflected in the CapitalAccounts shall be so reflected.

 

3.7           Transfer of Capital Account. The original Capital Account established for each transferee shall be inthe same amount as the Capital Account or portion thereof of the Member whichsuch transferee succeeds, at the time such transferee is admitted to theVenture.  The Capital Account of anyMember whose Percentage Interest shall be increased by means of the Transfer toit of all or part of the Interest of another Member shall be appropriatelyadjusted to reflect such Transfer.  Anyreference in this Agreement to a Capital Contribution of, or distribution to, athen-Member shall include a Capital Contribution or distribution, as the casemay be, previously made by or to any prior Member on account of the Interest ofsuch then-Member.

 

3.8           Tax Matters Partner.  BH REIT shallbe the Venture’s “Tax Matters Partner” (as such term is defined in Section 6231(a)(7)of the Code), with all of the powers that accompany such status (except asotherwise provided in this Agreement). Promptly following the written request of the Tax Matters Partner, theVenture shall, to the fullest extent permitted by law, reimburse and indemnifythe Tax Matters Partner for all reasonable expenses, including, withoutlimitation, reasonable legal and accounting fees, claims, liabilities, lossesand damages incurred by the Tax Matters Partner in connection with anyadministrative or judicial proceeding with respect to the tax liability of theMembers.  The provisions of this Section3.8 shall survive the termination of the Venture and shall remain bindingon the Members for as long a period of time 

 

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as is necessary toresolve with the Internal Revenue Service any and all matters regarding theU.S. federal income taxation of the Venture or the Members.

 

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

 

**ARTICLE 4**

** **

**ALLOCATIONS**

** **

4.1           Allocation of Profits and Losses.

 

(a)           Except as otherwise provided in this Section 4.1,Profits and Losses shall be allocated among the Members in accordance withtheir respective Percentage Interests.

 

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

 

(c)           In the event that any amounts paid or payable to anyMember or any Affiliate which the Venture deducted or intended to deduct aredisallowed as deductions for federal income tax purposes (or it is determinedthat such amounts are no longer allowable as deductions), (i) the amounts thusdisallowed or no longer allowable will be allocated to the Member whichreceived them (or whose Affiliate received them) as income, and (ii) notwithstandingany provision herein to the contrary, the balance of the redetermined income orloss of the Venture for the taxable year in question shall, to the extentpermitted by law, be allocated among the Members to obtain the same allocationof Venture income or loss (after giving effect to the income allocated pursuantto clause (i) hereof) as would have been obtained for such taxable year if theamounts thus disallowed or no longer allowable had been proper deductions bythe Venture.

 

4.2           Tax Allocations.

 

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

 

(b)           In accordance with Section 704(c) of the Code and theregulations thereunder, income, gain, loss, and deduction with respect to anyproperty contributed to the capital of the Venture shall, solely for taxpurposes, be allocated among the Members so as to 

 

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take account of anyvariation between the adjusted basis of such property to the Venture forfederal income tax purposes and its fair market value as of the date ofcontribution.  In the event the bookvalue of any Venture property is adjusted pursuant to the Venture’s maintenanceof Capital Accounts, subsequent allocations of income, gain, loss, anddeduction with respect to such asset shall take account of any variationbetween the adjusted basis of such asset for federal income tax purposes andits book value for Capital Account purposes in the same manner as under Section704(c) of the Code and the regulations thereunder.  Any elections or other decisions relating tosuch allocations shall be made by the Manager in any manner that reasonablyreflects the purpose and intention of this Agreement.

 

(c)           Allocations pursuant to this Section 4.2are solely for purposes of federal, state, and local taxes and shall notaffect, or in any way be taken into account in computing, any Member’s CapitalAccount or share of Profits, Losses or distributions pursuant to any provisionof this Agreement.

 

**ARTICLE 5**

** **

**DISTRIBUTIONS AND EXPENSES**

** **

5.1           Distributions of Net Cash Flow. The Net Cash Flow of the Venture, as determined by the Manager, shall bedistributed no less frequently than quarterly to the Members in accordance withtheir respective Percentage Interests.

 

5.2           Tax Provisions.  In the eventthe Venture is subject to any tax or other obligation that is attributable tothe Interest of one Member, but not all the Members, such tax or otherobligation shall be specially allocated to, and charged against the CapitalAccount of, such Member, and the amounts otherwise distributable to such Memberpursuant to this Agreement shall be reduced by such amount but shallnevertheless be deemed to be a distribution of such amount to such Member forall purposes of this Agreement.

 

5.3           Priority. Notwithstanding any other provision of this Agreement, it isspecifically acknowledged and agreed by each Member that the Venture’s failureto pay any distribution pursuant to Section 5.1 to such Member shall notgive such Member creditor status with regard to such unpaid amount; but rather,such Member shall be treated only as a Member of whatever class such Person isa Member, and not as a creditor, of the Venture.  This Section 5.3 is, as permitted by Section18-606 of the Act, intended to override the provisions of Section 18-606 of theAct relating to a member’s status and remedies as a creditor, to the extentthat such provisions would be applicable in the absence of this Section 5.3.

 

5.4           Expenses.

 

(a)           Organizational Expenses.  The Membersshall bear, either directly or indirectly through the Venture, allout-of-pocket costs (including, without limitation, legal and accounting feesand expenses) incurred in connection with the formation and organization of theVenture, the Subsidiary REIT and any subsidiary thereof (“OrganizationalExpenses”) in accordance with their respective Percentage Interests.  The Manager may make one or more 

 

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Capital Calls inaccordance with Article 3 in order to enable the Venture to pay (or, ifapplicable, to reimburse to the Manager or its Affiliates) any OrganizationalExpenses.

 

(b)           Operating Expenses.  The Ventureshall bear all other costs and expenses of the Venture’s activities andoperations, including without limitation, the following: (i) Taxes of theVenture, fees and expenses of professional advisors to the Venture, premiumsfor insurance (including, without limitation, error and omissions, directorsand officers and other forms of liability insurance (other than the cost ofliability insurance for the Manager, its Affiliates and any of their respectiveofficers, directors, partners, members, shareholders and employees)) protectingthe Venture, the Manager and other Indemnified Persons and litigation costs ofthe Venture; (ii) administrative expenses related to the Venture, includingwithout limitation, fees and expenses of accountants, lawyers and otherprofessionals incurred in connection with the Venture’s annual audit, financialreporting, legal opinions and preparation of Tax Returns; (iii) the Venture’sproportionate share of all fees, costs and expenses incurred in evaluating,developing, negotiating, structuring, acquiring, holding, appraising,financing, selling or otherwise disposing of or otherwise dealing with theSubsidiary REIT and the Project (or the Venture’s interest therein) pursued forthe Venture in accordance with the terms of this Agreement, whether or not theVenture actually invests therein (including, without limitation, any “dead deal”costs, travel, legal, accounting, due diligence, projections, valuations andother fees and out-of-pocket expenses related thereto); (iv) all fees andexpenses incurred in connection with obtaining independent, third-partyvaluations of the Venture pursuant to Section 12.6; (v) indemnificationexpenses incurred pursuant to Section 7.2; and (vi) all other customaryfees, costs and expenses of the Venture (collectively, “Operating Expenses”).  The Manager may make one or more CapitalCalls in accordance with Article 3 in order to enable the Venture to payany Operating Expenses.

 

**ARTICLE 6**

** **

**MANAGEMENT RIGHTS, DUTIES, AND POWERS OF THEMANAGER; TRANSACTIONS INVOLVINGTHE MANAGER OR ITS AFFILIATES;ADDITIONAL OR SUCCESSOR MANAGER**

 

6.1           Management of the Venture.

 

(a)           Right, Power and Authority of Manager. Except as provided in this Agreement, the Manager shall have the right,power and authority to manage and control the day-to-day affairs of theVenture.  Subject to Section 6.3and except for any other provision of this Agreement that requires the Consentof the Members, any action taken by the Manager on behalf of the Venture shallconstitute the act of, and serve to bind, the Venture.  Without limiting the generality of theforegoing, it is understood and agreed that the Manager may enter into lettersof intent, purchase agreements or other commitments relating to the acquisitionor development of the Project on behalf of the Venture and in anticipation ofthe purchase or development of the Project by the Subsidiary REIT (or asubsidiary thereof), it being acknowledged that any liability thereby incurredby the Manager in connection therewith shall be subject to indemnificationunder Section 7.2.  In no eventshall any Person dealing with the Manager with respect to the conduct of theaffairs of the Venture be obligated to ascertain that 

 

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the terms of thisAgreement have been complied with or be obligated to inquire into the necessityor expediency of any action of the Manager. The Manager shall be required to devote only such time to the businessof the Venture as is reasonably necessary to perform its obligations under thisAgreement.

 

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

 

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

 

6.2           Operating Plan.  (a)        Within60 days after the execution of this Agreement the Manager shall prepare orcause to be prepared an initial operating plan (the “Initial Operating Plan”)for the Project covering the period from the Venture’s acquisition of anownership interest in the Project through the end of the first full fiscal yearof the Venture following such acquisition. The Initial Operating Plan shall contain all material pertinent leasing,financing, operational and disposition information together with a detailedbudget of projected operating and capital expenses and revenues and any otherinformation deemed appropriate by the Manager for the Project to the extent applicable.  The operations of the Project through the endof such first full fiscal year shall be conducted in all material respects inaccordance with the Initial Operating Plan, except for any action orexpenditure the Manager deems reasonably necessary or appropriate in the eventof an emergency situation affecting the Project, as determined by the Managerin its reasonable discretion.

 

(b)           Thirty days before the end of the Venture’s first fullfiscal year after the acquisition of its ownership interest in the Project andeach subsequent fiscal year of the Venture, the Manager shall prepare, or causeto be prepared, and submit to the Members for their review and approval anoperating plan (a “Subsequent Operating Plan”) for the Project for the nextsucceeding fiscal year of the Venture. Each Subsequent Operating Plan for the Project shall contain allmaterial pertinent leasing, financing, operational and disposition informationtogether with a detailed budget of projected operating and capital expenses andrevenues and any other information deemed appropriate by the Manager for theapplicable fiscal year.  The Members maymake comments on and suggestions for the Subsequent Operating Plan, and ifaccepted by the Manager in its reasonable discretion, such comments andsuggestions shall be incorporated into a revised Subsequent Operating Plan forsuch Project.  Upon receiving the Consentof the Members for the Subsequent Operating Plan (as revised, if applicable),the Manager shall cause the operations of the Project for the applicable fiscalyear to be conducted in all material respects in accordance with suchSubsequent Operating Plan.  If theMembers have not granted their Consent to a Subsequent Operating Plan for theProject prior to the beginning of the fiscal year for which the SubsequentOperating Plan is intended to be used, the Manager shall cause the operationsof the Project to be conducted in all material respects in accordance with theoperating plan for the immediately preceding fiscal year (the “Prior OperatingPlan”); provided that, (i) the Manager may make such adjustments to the PriorOperating Plan as the Manager reasonably 

 

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deems necessary orappropriate under the circumstances, except that, other than as permitted byclause (iii) of this Section 6.2, the Manager may not increase any itemsof operating or capital expenses in excess of the amounts permitted by clause (ii)of this Section 6.2 without the Consent of the Members, (ii) the Managermay increase each item of operating and capital expenses in the Prior OperatingPlan by up to 5%, and (iii) in the event of an emergency situation affectingthe Project, as determined by the Manager in its reasonable discretion, theManager may take, or cause to be taken, such action in respect of suchemergency situation as the Manager deems reasonably necessary or appropriate;provided that, the Manager promptly advises the Members of such emergencysituation and such action taken or caused to be taken.  After its approval by the Members, anymaterial deviation from or amendment to an approved Subsequent Operating Planshall require the Consent of the Members pursuant to Section 6.3, exceptfor any action or expenditure the Manager deems reasonably necessary orappropriate in the event of an emergency situation affecting the Project, asdetermined by the Manager in its reasonable discretion.

 

6.3           Major Decisions.

 

(a)           Notwithstanding anything to the contrary contained inthis Agreement (except as otherwise provided in Section 3.4(f) orpermitted in accordance with Section 6.2), the Manager shall have noauthority on behalf of the Venture to take any action, make any decision,expend any sum or undertake or suffer any obligation if to do so wouldconstitute a Major Decision, unless such Major Decision is approved in advancein writing by all of the Members (or, in the case of clause (vii) below, by theaffected Member(s))  As used herein, “MajorDecision” means any decision of the Venture to do or take any of the followingactions:

 

(i)            selling or otherwise disposing of the Project(including without limitation, the sale of the Venture’s interest therein), orcausing the Subsidiary REIT to sell or otherwise dispose of the Project, or anyother property having a value in excess of $100,000, or Transferring anymaterial interest therein;

 

(ii)           selling any additional interests in the Venture or theSubsidiary REIT (other than, in the case of the Subsidiary REIT, such number ofShares as the Manager may reasonably determine to be necessary or appropriateto permit the Subsidiary REIT to qualify or maintain its status as a REIT or asprovided in Section 3.3(b)); provided that, the sale of an interest inthe Venture to the developer of the Project and the admission of such developeras a member of the Venture shall not require the Consent of the Members.

 

(iii)          incurring, materially restructuring or materiallymodifying any indebtedness of the Venture or the Subsidiary REIT in excess of$100,000 or causing the Venture or the Subsidiary REIT to become liable as anendorser, guarantor, surety or otherwise for any debt, obligation orundertaking of any other Person in excess of $100,000 other than in accordancewith the Initial Operating Plan or the applicable Subsequent Operating Plan, asthe case may be, except for (A) indebtedness of the Venture or the SubsidiaryREIT arising in the ordinary course of business for trade payables, wages,taxes or otherwise for goods or services rendered or provided to the Venture orthe Subsidiary REIT, and (B) endorsements of the Venture or the Subsidiary REITfor deposit or collection of checks, drafts and similar instruments received bythe Venture or the Subsidiary REIT in the ordinary course of business;

 

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(iv)                              establishing sale objectives andparameters in respect of the Project or the Venture’s interest therein that arecontrary to the Investment Guidelines or making any material deviation from,waiver of or amendment to the Investment Guidelines;

 

(v)                                 causing or permitting the Venture or theSubsidiary REIT to mortgage, pledge or hypothecate the Project (except pursuantto leases entered into in the ordinary course of business) to secure anyindebtedness for borrowed money of the Venture other than in accordance withthe Initial Operating Plan or the applicable Subsequent Operating Plan, as thecase may be;

 

(vi)                              calling for or requiring any CapitalContribution from a Member such that the aggregate Capital Contributions ofsuch Member would be in excess of its Capital Commitment, except as otherwiseagreed by the Members or as otherwise provided in Section 3.3hereof;

 

(vii)                           making any Tax election or decisionaffecting the Tax treatment of any or all of the Members in connection with itsor their participation in the Venture other than as contemplated by Section 3.8;

 

(viii)                        determining that the Subsidiary REITshall no longer qualify and operate as a REIT;

 

(ix)                                adopting and implementing a SubsequentOperating Plan or making any material deviation from or amendment to theInitial Operating Plan or a previously approved Subsequent Operating Plan otherthan as contemplated by Section 6.2; or

 

(x)                                   Transferring any interest in the Ventureto any Person or admitting any Person as a Member of the Venture except inaccordance with the proviso of Section 6.3(a)(ii) or Article 8.

 

(b)                                 In connection with any proposed Consentto a Major Decision, the Manager shall provide the Members with suchinformation as they may reasonably request and as shall be reasonably availableto the General Partner for the Members (or, in the case of clause (vii) ofSection 6.3(a), the affected Member(s)) to make a prudent judgmentwhether to approve or disapprove the proposed action.  The Manager shall give the Members not lessthan 10 Business Days’ advance written notice of, and request their Consent to,each proposed Major Decision.  Should aMember fail to respond to a Consent request with respect to a Major Decisionwithin 10 Business Days from when such notice is given, such Member shallconclusively be deemed to have granted its Consent to such Major Decision(other than a Major Decision identified in Section 6.3(a)(i), (ii) or(vii), which shall require the affirmative Consent of each Member or, inthe case of Section 6.3(a)(vii), the affected Member(s)) and shallwaive any right to withdraw such Consent or otherwise object to such MajorDecision, provided that the notice must indicate that it will become effectiveat the expiration of the 10 Business Day period in order to become effective insuch manner.

 

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6.4                                 Business with Affiliates; OtherActivities.

 

(a)                                  The Venture, directly or through theSubsidiary REIT, may invest in the Project, notwithstanding that Behringer, anyof its Affiliates or any BH-Sponsored Investment Program holds a material (orlesser) interest in the Project or that the Project has been recently developedby, or is to be developed by, Behringer, any of its Affiliates or anyBH-Sponsored Investment Program, and, subject to Sections 2.6(b) and6.3(a)(i), may sell, assign or otherwise Transfer interests in theProject or other assets of the Venture or the Subsidiary REIT to, and otherwiseenter into a joint venture or other partnership or co-ownership arrangementwith, Behringer, any of its Affiliates or any BH-Sponsored Investment Program.

 

(b)                                 The Venture, directly or through theSubsidiary REIT (and any other Person to which any of the foregoing are relatedor in which any of the foregoing are interested), may, as necessary orappropriate, engage in any transaction with or employ or retain Behringer orany of its Affiliates to provide services (including, without limitation,administration, accounting, construction management, data processing,development, engineering, environmental, financing, insurance brokerage,management and servicing, leasing, legal, market research, mortgage financing,property management or other similar services) that would otherwise beperformed for the Venture or the Subsidiary REIT by third parties on terms(including, without limitation, the consideration to be paid) that aredetermined by the Manager to be fair and reasonable to the Venture or theSubsidiary REIT, as the case may be, and such Persons may receive from theVenture (and any such other Person) compensation (including, withoutlimitation, salary, salary related employment costs and expenses of theemployees who provide such services and other overhead expenses allocablethereto, as reasonably determined by the Manager based on the time expended bythe employees who render such services or on a project-by-project basis) inaddition to that expressly provided for in this Agreement.  It is expressly acknowledged and agreed thatthe Manager may cause the Subsidiary REIT (or any subsidiary thereof that ownsthe Project) to engage the Management Company (or another Affiliate ofBehringer), to perform property management, leasing and related services forthe Project for a fee equal to the lesser of (i) 3.75% of the grossrevenues from the Project and (ii) the amount that an Affiliate ofBehringer or BH REIT otherwise pays to the Management Company (or such otherAffiliate) for property management, leasing and related services.

 

(c)                                  Nothing herein contained shall prevent orprohibit Behringer, any of its Affiliates, or any of their respective trustees,officers, directors, members, partners, employees or shareholders fromacquiring, developing, investing in, managing, leasing or otherwise dealing inreal property of any kind or nature for its own account or that of any of itsAffiliates or third parties or from entering into, engaging in or conductingany other activity or performing for a fee any service (including, withoutlimitation, engaging in any business dealing with real property of any type orlocation, acting as a director, officer or employee of any corporation, as atrustee of any trust, as a general partner of any partnership, as a member ormanager of any limited liability company or as an official of any other Entity,or receiving compensation for services to, or participating in profits derivedfrom, the investments of any such corporation, trust, partnership, limitedliability company or other Entity, regardless of whether such activities arecompetitive with the Venture or the Project). The fact that Behringer or its Affiliates may encounter opportunities topurchase, otherwise acquire, lease, sell or otherwise dispose of real orpersonal property and may take advantage of such opportunities themselves orintroduce such 

 

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opportunities to otherPersons in which it has or has not any interest, shall not subject Behringer orits Affiliates to liability to the Venture or any of the Members (or any of thedirect or indirect partners or members of the Members) on account of the lostopportunity.

 

6.5                                 Maintenance of Domestic Status. The Manager hereby agrees that, notwithstanding anything herein to thecontrary, unless caused, consented to or induced by PGGM or any Affiliatethereof, either directly or through BH MP, neither the Manager nor any of itsAffiliates will (a) voluntarily take any action that, to the knowledge ofthe Manager, would result in a Domestic Status Loss, or (b) permit tooccur any action that is within its reasonable control to prevent and that, tothe knowledge of the Manager, would result in a Domestic Status Loss.  The provisions of this Section 6.5shall not apply if there is not at least one REIT Member.

 

6.6                                 Tax Status.  Each Memberagrees to take commercially reasonable actions to assist the other Member inachieving the most favorable tax treatment for such other Member (and theowners of such Member); provided that, no Member shall be required to take orpermit any action which (a) creates any risk of material adverse economicor tax consequences for such Member (or the owners of such Member), unless therequesting Member agrees to reimburse each such Person that may be subject tosuch consequences for all adverse economic and tax consequences, or (b) iscontrary to law.

 

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

 

6.8                                 Additional or Successor Manager. The Manager may delegate its rights and powers as a manager under thisAgreement and the Act, and may admit to the Venture as an additional orsuccessor Manager, any of its Affiliates, Behringer or any of its Affiliateswithout the Consent of any Member, provided that, the Manager arranges for suchPerson(s) to be bound by the provisions of this Agreement by having suchPerson(s) execute such documents as may be reasonably required to makesuch Person(s) party to this Agreement as an additional or successorManager(s).  In the event that any such Personis admitted as an additional Manager, the Manager and such additional Managershall share in the rights and powers, as well as any duties and obligations,under this Agreement and the Act in such manner and to such extent as theManager and such additional Manager may agree. In the event that any such Person is admitted as a successor Manager,the Manager shall thereupon cease to have any rights, powers, duties orobligations under this Agreement and the Act, and such Person, as the successorManager, shall assume all such rights, powers, duties and obligationspreviously held by the Manager.  Exceptas provided in this Section 6.8, the Manager may not admit anyPerson as an additional or successor Manager without the Consent of theMembers.

 

6.9                                 Removal of Manager for Cause. Notwithstanding anything herein to the contrary, BH MP shall have thesole right to elect to remove the Manager for Cause.  Upon the occurrence of any event constitutingCause for its removal, the Manager shall deliver written notice of such eventto BH MP within five (5) Business Days of the occurrence of suchevent.  BH MP shall exercise its right toremove the Manager, if at all, by delivering to the Manager written notice of 

 

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such election withintwenty (20) Business Days of the delivery of the notice of Cause from theManager.  In the event BH MP shallexercise the right to remove the Manager, BH MP shall promptly (but in no eventlater than ten (10) Business Days after its exercise of the right ofremoval) appoint a successor Manager of the Venture.  Upon the removal of the Manager the Ventureshall file an amendment to its Certificate evidencing the removal of theManager as manager of the Venture.

 

**ARTICLE7LIMITATIONS ON LIABILITY AND INDEMNIFICATION**

** **

7.1                                 Limitation of Liability. To the maximum extent permitted under the Act in effect from time totime, neither the Manager nor any other Indemnified Person shall be liable tothe Venture or to any Member for (a) any act or omission performed orfailed to be performed by it, or for any losses, claims, costs, damages orliabilities arising from any such act or omission, except to the extent suchloss, claim, cost, damage or liability results from such Indemnified Person’s grossnegligence, willful misconduct, fraud or a material breach of this Agreement, (b) anytax liability imposed on the Venture or (c) any losses due to thenegligence (gross or ordinary), dishonesty or bad faith of any agents of theVenture, as long as such persons are selected with reasonable care.  Without limiting the generality of theforegoing, each Indemnified Person shall, in the performance of his, her or itsduties, be fully protected in relying in good faith upon the records of theVenture and upon information, opinions, reports or statements presented to suchIndemnified Person by the Manager or by any other Person as to matters suchIndemnified Person reasonably believes are within such other Person’sprofessional or expert competence and who has been selected with reasonablecare by or on behalf of the Venture.  Anyrepeal or modification of this Section 7.1 shall not adverselyaffect any right or protection of a Person existing at the time of such repealor modification.

 

7.2                                 Indemnification.

 

(a)                                  Advancement of Expenses. In the event that the Manager, any of its Affiliates or any directors,officers, shareholders, partners, members, employees, trustees, representativesor agents of any of them (each, an “Indemnified Person” and collectively, the “IndemnifiedPersons”) becomes involved in any capacity in any threatened, pending orcompleted action, proceeding or suit, whether civil, criminal, administrativeor investigative, by reason of the fact that it, he or she was a manager,officer, employee, representative or agent of the Venture, the Manager orotherwise authorized to act hereunder or in connection herewith or otherwisefailed to act in connection with the business or affairs of the Venture or oneof its direct or indirect subsidiaries or otherwise is or was serving at theVenture’s or one of the Venture’s direct or indirect subsidiary’s request as adirector, trustee, officer, partner, employee or agent of another Entity, theVenture will periodically reimburse such Indemnified Person for its reasonablelegal and other expenses (including, without limitation, the costs of anyinvestigation and preparation) incurred in connection with such involvement,provided that such Indemnified Person shall promptly repay to the Venture theamount of any such reimbursed expenses paid to it if it is ultimatelydetermined by a court having appropriate jurisdiction in a decision that is notsubject to appeal, that such Indemnified Person is not entitled to beindemnified by the Venture under this Section 7.2.

 

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

 

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

 

(d)                                 Exclusivity. The indemnification provided by this Section 7.2 shall notbe deemed to be exclusive of any other rights to which the Indemnified Personmay be entitled under any agreement or as a matter of law, or otherwise, bothas to action in an Indemnified Person’s official capacity and to action inanother capacity, and shall continue as to an Indemnified Person who has ceasedto have an official capacity for acts or omissions during such officialcapacity or otherwise when acting at the request of the Manager and shall inureto the benefit of the heirs, successors and administrators of such IndemnifiedPerson.

 

(e)                                  Limitation. Notwithstanding any of the foregoing to the contrary, the provisions ofthis Section 7.2 shall not be construed as to provide for theindemnification of any Indemnified Person for any liability (including, withoutlimitation, liability under U.S. federal securities laws which, undercertain circumstances, impose liability on Persons that act in good faith), tothe extent (but only to the extent) that such indemnification would be inviolation of applicable law, but shall be construed so as to effectuate theprovisions of this Section 7.2 to the fullest extent permitted bylaw.

 

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

 

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

 

**ARTICLE8TRANSFER OF MEMBERS’ INTERESTS IN THE VENTURE;BUY/SELL**

** **

8.1                                 Transfers of a Member’s Interest.

 

(a)                                  No Member may Transfer all or any portionof its Interest or have any transferee admitted as a substituted Member inrespect of such Interest or any portion thereof without the prior writtenConsent of the Manager, which Consent may be withheld in the sole discretion ofthe Manager.  In the event a Memberdesires to secure permission to Transfer its Interest or any portion thereof,it shall notify the Manager in the manner described in Section 13.1hereof and shall deliver such information to the Manager as it may request,including, if requested, evidence reasonably satisfactory to the Manager withrespect to (i) compliance with applicable federal and state securitieslaws and (ii) any other appropriate laws or regulations.  No Transfer may be made if it would violateapplicable federal or state securities laws or other laws or regulations.

 

(b)                                 In the event any Member desires toTransfer all or any portion of its Interest in the Venture (and the ManagerConsents thereto) the Transferring Member shall arrange for its transferee tobe bound by the provisions of this Agreement by having such transferee execute suchdocuments as shall be reasonably required by the Manager to make the transfereea party to this Agreement and by delivering the same to the Manager togetherwith such other information that may be reasonably requested by counsel to theManager.  The transferee of all or anyportion of the Interest of a Member shall become a substituted Member as to theInterest (or portion thereof) thus Transferred upon the written Consent of theManager, which Consent may be granted or withheld in the sole discretion of theManager.  Any such substituted Membershall succeed to all of the rights and assume all of the obligations of theMember to the extent of the portion of the Interest in the Venture which hasbeen Transferred to such substituted Member. A transferee of all of any portion of the Interest of a Member who isnot a substituted Member shall have the right to receive allocations of income,gain, loss and deduction and distributions of Net Cash Flow and otherdistributions pursuant to this Agreement, but shall have no other rightshereunder, and neither the transferor nor the transferee shall have the rightto vote with respect to any Interest so Transferred.  The effective date of any Transfer under Section 8.1(a) or (b) shall be the date on which the transfereeexecutes and delivers to the Manager the documents required by the Manager, andthe Manager grants its Consent in accordance with Section 8.1(a) or(b), as the case may be.

 

(c)                                  Anything contained in Sections 8.1(a) or(b) to the contrary notwithstanding, no Transfer of an Interest orany portion shall be effective if it would result in the Venture beingclassified as an association (or publicly traded partnership) taxable as a 

 

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corporation for federalor state income tax purposes, and any such Transfer shall be effected in suchmanner as may be necessary to maintain the classification of the Venture as apartnership for federal and state income tax purposes.

 

(d)                                 Notwithstanding anything to the contraryin this Agreement, no Interest in the Venture, or any portion thereof, shall beissued in a transaction that is (or transactions that are) registered orrequired to be registered under the Securities Act of 1933, as amended, and anyTransfer of an Interest or any portion thereof must be made in a transactionthat is exempt from registration or qualification under the Securities Act of1933, as amended, and applicable state securities law.

 

(e)                                  No admission (or purported admission) ofa Member and no Transfer (or purported Transfer) of all or part of a Member’sInterest (or any interest or right or attribute therein) in the Venture shallbe effective, and no Person shall otherwise become a Member, if the Venturewould or may have more than 100 members, treating as a member for this purposeeach Person indirectly owning an Interest (or any interest therein) in theVenture through a partnership, a grantor trust or an S corporation.

 

8.2                                 Buy/Sell Arrangement. Any time after the occurrence and during the continuation of (i) aMajor Dispute for a period of not less than fifteen (15) days (such 15-dayperiod to commence upon written notice by a Member to the other Member), or (ii) anevent triggering the Subsidiary REIT’s “Excess Share” provisions pursuant to itslimited liability company agreement (or other governing instrument), theneither Member shall be entitled to initiate the buy/sell rights set forth inthis Section 8.2.

 

(a)                                  Either Member (an “Offeror”) may serveupon the other Member (an “Offeree”) a notice (an “Offering Notice”) whichshall contain the following:

 

(i)                                     statement of intent to rely on this Section 8.2;and

 

(ii)                                  a statement of the aggregate dollaramount that the Offeror would be willing to pay in cash (the “Offer Price”) forall of the Offeree’s interest (the “Buy/Sell Interest”) in the Shares (assumingthat the Venture were liquidated and the Shares owned by the Venture weredistributed in-kind to the Members), as specified in the Offering Notice.

 

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

 

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

 

(ii)                                  to purchase the Buy/Sell Interest of theOfferor for a price (the “Alternative Offer Price”) that is in proportion tothe Offer Price (based upon the relative Percentage Interests of the Members),together with a statement of whether the Offeree elects to purchase the Offeror’sBuy/Sell Interest in respect of the Venture or the Shares.

 

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(c)                                  If the Offeree does not notify theOfferor of its election prior to expiration of the Option Period, the Offereeshall for all purposes be conclusively deemed to have elected to sell itsBuy/Sell Interest to the Offeror for the Offer Price indicated in Section 8.2(a)(ii).

 

(d)                                 (i) If BH REIT is the Memberobligated to purchase the Buy/Sell Interest under Section 8.2(b) or(c) (the “Purchaser”), then within five (5) Business Daysafter the date of the exercise of the election by the Offeree or five (5) BusinessDays after the expiration of the Option Period, whichever is earlier, thePurchaser shall deposit in cash an amount in escrow, which amount while inescrow shall be invested in Permitted Temporary Investments as directed by thePurchaser (such amount, together with any interest earned thereon being the “EarnestMoney”), equal to 10% of the Offer Price or Alternative Offer Price, as thecase may be (such Offer Price or Alternative Offer Price, as applicable, beingthe “Purchase Price”), with an independent third party (the “Escrow Agent”)reasonably satisfactory to BH MP as the Member obligated to sell its Interestunder this Section 8.2(d) (the “Seller”).  The Earnest Money shall be applied againstthe Purchase Price at the closing referenced below, or shall be paid to theSeller as liquidated damages in the event of a default by the Purchaser inaccordance with this Section 8.2(d)(i).  In the event the Purchaser fails to deposittimely such Earnest Money as provided above or fails or refuses to close on thepurchase and sale of its Buy/Sell Interest on the Closing Date (such Purchaserbeing then referred to as the “Defaulting Purchaser”), then within fifteen (15)days thereafter, unless the Defaulting Purchaser has earlier cured such defaultby depositing the required Earnest Money as provided above or has proven to thereasonable satisfaction of the Seller that the Defaulting Purchaser is ready, willingand able to close such purchase and sale, the Seller shall have the option ofsubstituting itself as Purchaser of the Buy/Sell Interest of the DefaultingPurchaser (such Seller being then referred to as the “Substituted Purchaser”)under this Section 8.2(d) at a purchase price (the “SubstitutedPurchase Price”) equal to 90% of the Purchase Price multiplied by the ratio ofBH REIT’s Percentage Interest to BH MP’s Percentage Interest if the DefaultingPurchaser is BH REIT (or if, after becoming the Purchaser in accordance with Section 8.2(e),BH MP or the BH MP Venture is the Defaulting Purchaser, 90% of the PurchasePrice multiplied by the ratio of BH MP’s Percentage Interest to BH REIT’sPercentage Interest).  In the event thatthe Seller elects to become the Substituted Purchaser in accordance with thepreceding sentence, the Seller shall, within 10 Business Days after the Sellerobtains the right to become the Substituted Purchaser, give written notice tothe Defaulting Purchaser of its intention to do so, which notice shall specifythe Substituted Purchase Price.  Withinfive (5) Business Days after such notice the Substituted Purchaser shalldeposit Earnest Money equal to 10% of the Substituted Purchase Price in escrowwith an Escrow Agent selected by the Substituted Purchaser, whereupon, forpurposes of Sections 8.2(d)(ii) and (iii) below, theSubstituted Purchaser shall become the Purchaser, the Defaulting Purchasershall become the Seller and the Substituted Purchase Price shall become thePurchase Price.  Alternatively, after thedefault by the Defaulting Purchaser and its failure to cure such default priorto the earlier of (A) fifteen (15) days after such default and (B) theSeller’s election to become the Substituted Purchaser, the Seller may elect toobtain, and retain as liquidated damages for the Defaulting Purchaser’s defaultunder this Section 8.2(d), the amount of Earnest Money deposited bythe Defaulting Purchaser (or the amount that should have been deposited by theDefaulting Purchaser as Earnest Money but was not).

 

(ii)                                  On or before the date on which thePurchaser is required to make the Earnest Money deposit referenced in Section 8.2(d)(i) (or,if the Substituted Purchaser has 

 

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become the Purchaser,within five (5) Business Days after such Purchaser has made its EarnestMoney deposit), the Purchaser shall fix a closing date (the “Closing Date”) notlater than 30 days (or as soon thereafter as practicable) following (i) thedate of the election by the Offeree, or (ii) if no election was made, thedate of the expiration of the Option Period, provided that such Option Periodshall be subject to extension by up to 150 days if BH MP has become theSubstituted Purchaser.  If the Purchaser’selection has been to purchase the Seller’s interest in the Shares, immediatelyprior to the Closing Date, the Venture shall make a distribution in-kind of theShares owned by the Venture to the Members in accordance with their respectivePercentage Interests.  For purposes ofthe distribution in-kind, the distributed Shares shall have a value per Shareequal to the Purchase Price divided by the number of Shares to be distributedto the Seller.  The closing shall takeplace on the Closing Date at a location reasonably designated by thePurchaser.  The Purchaser may assign itsrights to purchase the Seller’s Buy/Sell Interest hereunder to any third party,including one or more of its Affiliates; provided that, the Purchaser shallremain liable for any such obligation to purchase.

 

(iii)                               At the closing on the Closing Date, thePurchaser shall pay the Seller, in cash, the amount determined under Section 8.2(d)(i),as the Purchase Price (with the Purchaser’s Earnest Money being creditedagainst such amount at the closing) and the Seller shall execute and deliver tothe Purchaser or its designee stock powers, bills of sale, instruments ofassignment, and other instruments as the Purchaser may reasonably require, togive it or its designee good and indefeasible title to all of the Seller’sright, title and interest in and to all of its Buy/Sell Interest.  The Venture shall pay all closing costs;provided, however, that the Purchaser and the Seller shall pay their ownrespective legal costs and expenses in connection with the preparation of theclosing documentation.  In addition, onthe Closing Date, the Purchaser shall cause the Seller to be released from anyliability accruing from and after the Closing Date in respect of the Venture(including any financing arrangements entered into by the Venture or withrespect to the Project) or shall indemnify the Seller with respect to suchliability.

 

(iv)                              The Purchase Price to be paid pursuant tothis Section 8.2(d) in respect of the applicable Buy/SellInterest being sold shall be reduced proportionately on a per Share basis forany distributions made by the Venture after the determination of the OfferPrice and prior to the Transfer of the applicable Buy/Sell Interest.

 

(v)                                 A sale of its Buy/Sell Interest shall notrelieve the Seller from any obligations or liabilities arising under or inconnection with this Agreement prior to the closing of the sale of the Buy/SellInterest, including, without limitation, any obligation to repay a Default Loanin accordance with Section 3.4, and the Purchaser shall be entitledto withhold from the Purchase Price an amount equal to the then outstandingprincipal and accrued and unpaid interest of any such Default Loan in paymentthereof.  Similarly, after the closing ofthe sale of a Buy/Sell Interest the Purchaser shall remain liable to the Sellerfor the amount of any Default Loan incurred by the Purchaser and outstanding onand after the closing of such sale until the outstanding principal and anyaccrued and unpaid interest of such Default Loan has been paid in full.

 

(e)                                  (i)                                     If BH MP is the Offeree pursuant to Section 8.2(a) andelects to purchase BH REIT’s Buy/Sell Interest, or has become the SubstitutedPurchaser, then BH MP shall have 150 days after the earlier of the election byBH MP to purchase BH REIT’s Buy/Sell 

 

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Interest under this Section 8.2and the expiration of the Option Period either to purchase BH REIT’s Buy/SellInterest or to find a third party to form a joint venture or other jointownership arrangement (the “BH MP Venture”) with BH MP for the acquisition andownership of BH REIT’s Buy/Sell Interest. In the event that BH MP either decides to purchase BH REIT’s Buy/SellInterest or finds a third party for such joint venture or other joint ownershiparrangement for the purchase of BH REIT’S Buy/Sell Interest, BH MP shall sonotify BH REIT in writing within such 150-day period.  In such event, BH MP or the BH MP Venture, asthe case may be, shall become the “Purchaser,” BH REIT shall become the “Seller”and the provisions in Section 8.2(d), to the extent notinconsistent with this Section 8.2(e)(i), shall apply; providedthat, BH MP or BH MP Venture, as the case may be, shall have five (5) BusinessDays after its election to proceed with the purchase to deposit its EarnestMoney in escrow.  If BH MP is the Offerorpursuant to Section 8.2(a) and BH REIT, as the Offeree, electsto sell its Buy/Sell Interest to BH MP, then the provisions of this Section 8.2(e)(i) shallapply and, if BH MP does not find a third party with whom to form a jointventure or other joint ownership arrangement and otherwise elects not toproceed with the purchase of BH REIT’s Buy/Sell Interest, the provisions of Section 8.2(e)(ii) shallapply.

 

(ii)                                  If BH MP does not find a third party withwhom to form a joint venture or other joint arrangement and otherwise electsnot to proceed with the purchase, or if BH MP does not notify BH REIT inwriting within the applicable 150-day period that BH MP or the BH MP Venturewill proceed with the purchase, then, subject to Section 2.6(b), BHREIT shall have the opportunity to elect to purchase, or to have Behringer, itsAffiliate or another designee (collectively, the “Behringer Party”) purchase,or to seek to cause the sale of, the Project in accordance with the followingprocedures.

 

(A)                              The Behringer Party and BH MP shallattempt to mutually agree on a fair market value of the Project throughnegotiation for a period of ten (10) days (the “Negotiation Deadline”)commencing upon BH MP’s election not to proceed with the purchase or theexpiration of the 150-day period, whichever is earlier.  If the Behringer Party and BH MP do not agreeupon the fair market value of the Project prior to the expiration of theNegotiation Deadline, then either the Behringer Party or BH MP may deliver tothe other a written notice of arbitration (the “Arbitration Notice”), pursuantto which the fair market value (the “Mark to Market Price”) of the Projectshall be determined by “baseball style” arbitration in accordance with theprovisions in paragraphs (B) through (H) of this Section 8.2(e)(ii).

 

(B)                                The Behringer Party and BH MP shall eachuse reasonable efforts to agree, within ten (10) days after the deliveryof an Arbitration Notice, upon the appointment of one arbitrator to agree on aMark to Market Price of the Project.  Ifan agreement on a single arbitrator is not reached within such 10-day period,then the Behringer Party and BH MP shall each appoint one arbitrator within ten(10) days after the expiration of such previous 10-day period and shallspecify the name and address of their respective arbitrators to the other partyprior to the expiration of such 10-day period; provided that, if one partyfails to specify the name and

 

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address of its selected arbitrator within such 10-dayperiod, then the other party shall give such failing party written notice, andif within three (3) days after such written notice the failing party stillhas not specified an arbitrator, then the arbitrator selected by the otherparty shall act as the sole arbitrator as if both parties had agreed to theappointment of such arbitrator as provided above.

 

(C)                                If two arbitrators have been selected,then such arbitrators shall then appoint a third arbitrator within ten (10) daysafter their appointment.  If the firsttwo arbitrators are unable to agree upon a third arbitrator within such 10-dayperiod, then the third arbitrator shall be appointed as soon as reasonablypracticable thereafter by a court of competent jurisdiction residing in thecounty in which the Project is situated, subject to the qualificationrequirements set forth in paragraph (G) of this Section 8.2(e)(ii).  In the event of the failure, refusal orinability of any arbitrator to act, a new arbitrator shall be appointed as areplacement, which appointment shall be made in the same manner as set forthabove for the appointment of such resigning arbitrator.  Immediately after the selection of the finalarbitrator, the three arbitrators shall meet and, within fifteen (15) daysafter the completion of the selection of the arbitrators shall, or, if there isonly one arbitrator, within fifteen (15) days after his selection, sucharbitrator shall, endeavor to determine the Mark to Market Price.

 

(D)                               Within ten (10) days after theselection of the sole arbitrator or all arbitrators, as the case may be, theBehringer Party and BH MP shall submit to the arbitrator(s) such party’sproposed Mark to Market Price as well as all other economic terms relevant tothe determination of the Mark to Market Price, together with reasonableevidence supporting such proposed Mark to Market Price.  The arbitrator(s) shall select eitherthe proposed Mark to Market Price submitted by the Behringer Party or theproposed Mark to Market Price submitted by BH MP, whichever proposal thearbitrator(s) deem to be the most nearly correct according to thedefinitions, terms and requirements set forth in this Agreement and theinformation submitted to the arbitrator(s) by the parties, with nocompromise.  The power of the arbitrator(s) shallbe exercised by the concurrence of at least two arbitrators, except that ifonly one arbitrator is selected, the decision of such arbitrator shallgovern.  The proposed Mark to MarketPrice selected by the arbitrator(s) shall be the “Mark to Market Price.”  The determination of the arbitrator(s) shallbe final and non-appealable, shall be binding on both BH MP and the BehringerParty, and may be enforced in any court of competent jurisdiction.

 

(E)                                 The price (the “Buy/Sell Market Price”)to be paid for BH MP’s Buy/Sell Interest shall be equal to the amount that BHMP would receive assuming that the Project were sold at its Mark to MarketPrice, the Subsidiary REIT and, if applicable, any subsidiary thereof owning an

 

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interest in the Project were liquidated, all of theirother assets sold, their debts and other liabilities discharged, and any netproceeds remaining were distributed to the Members in proportion to theirrespective interests in the Venture. Within ten (10) days after the decision of the arbitrator(s) determiningthe Mark to Market Price, the Behringer Party shall deliver written notice toBH MP stating whether the Behringer Party elects (x) to purchase BH MP’sBuy/Sell Interest at the Buy/Sell Market Price or (y) seek to obtain athird-party purchaser for the Project. In the event that the Behringer Party elects to purchase BH MP’sBuy/Sell Interest, the Behringer Party and BH MP shall close on such purchaseat the Buy/Sell Market Price payable in cash within thirty (30) days of suchelection by the Behringer Party.  Theprovisions of Section 8.2(d) shall, to the extent notinconsistent with Section 8.2(e)(ii), shall apply to suchpurchase.  In the event that theBehringer Party elects to seek to obtain a third-party purchaser, the BehringerParty shall have 150 days from such election to obtain such third-partypurchaser either to purchase (1) the Members’ entire Interests in the Venture,or (2) all of the Venture’s Shares in the Subsidiary REIT, in either casefor a price equal to what Members would have received assuming the Project weresold at the Mark to Market Price, the Subsidiary REIT and, if applicable, anysubsidiary thereof owning an interest in the Project were liquidated, all oftheir other assets sold, their debts and liabilities discharged, and any netproceeds remaining were distributed to the Members in proportion to theirrespective interests in the Venture.  TheBehringer Party shall provide prompt written notice advising BH MP of theidentity of such third-party purchaser, if any. In the event that a third party is to purchase either the Interests ofthe Members or the Shares owned by the Venture, the third-party purchaser shallpurchase such Interests or Shares for cash at the closing of such purchase,which shall occur within thirty (30) days of the Behringer Party’s writtennotification of the third-party purchaser’s identity.  In such event, the Mark to Market Price shallbe reduced for any distributions made by the Venture to its Members after thedetermination of the Mark to Market Price and the closing of such sale.  Such sale shall not relieve either Memberfrom any obligations or liabilities arising under or in connection with thisAgreement prior to such sale including, without limitation any obligation torepay a Default Loan in accordance with Section 3.4.  If, at the end of such 150-day period, theBehringer Party has not obtained a third-party purchaser, the Behringer Partyshall advise BM MP of such fact, and the Behringer Party may, within such150-day period, elect to purchase BM MP’s Buy/Sale Interest at the Buy/SellMarket Price, in which event such purchase price shall be payable in cash at aclosing to be held thirty (30) days after the end of such 150-day period, andthe provisions of Section 8.2(d) shall, to the extent notinconsistent with Section 8.2(e)(ii), apply to the purchase of BHMP’s Buy/Sell Interest under this Section 8.2(e).  In the event that the Behringer Party doesnot elect to purchase BH MP’s Buy/Sell Interest and does not 

 

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find a third-party purchaser for the Project, eitherBH REIT or BH MP may, at its election, re-initiate the Buy/Sell procedure inaccordance with this Section 8.2 but otherwise shall not beobligated to purchase the other party’s Buy/Sell Interest.

 

(F)                                 The arbitrator(s) shall have theauthority to request additional facts or evidence from each of the parties and,if such arbitrator(s) so require, a hearing to present the same.  In the event of such a hearing, rules ofevidence applicable to state court judicial proceedings in civil districtcourts in Dallas, Texas shall govern; provided that, evidence will be admittedor excluded in the sole discretion of the arbitrator(s).  The arbitrator(s) shall resolve thecontroversy and shall execute and acknowledge his or their decision, togetherwith a brief statement describing the rationale for such decision, in writingand simultaneously deliver a copy thereof to each of the parties personally orby registered or certified mail, return receipt requested.  If the arbitrators fail to reach an agreementduring such 15-day period (as may be extended in accordance with the nextsentence), then they shall be discharged, and new arbitration proceedings shallcommence, with new arbitrators being appointed in the same manner as set forthabove.  By agreement in writing, theBehringer Party and BH MP may extend the time to reach agreement either beforeor after the expiration thereof up to a maximum of thirty (30) additionaldays.  The period within which thearbitrator(s) must act are not jurisdictional.

 

(G)                                Each arbitrator shall (x) be anindependent appraiser licensed under the laws of the state in which the Projectis situated, and (y) have been actively and continuously engaged inappraising multifamily rental communities as Member of the Appraisal Institutein the county in which the Project is situated, for not less than the previousfive years.  The arbitrator(s) selectedby the Behringer Party and BH MP shall be instructed that they are neutralarbitrators and shall not have any *ex parte*communication with the appointing party and may not be appraisers thatconsulted with the Behringer Party or BH MP in negotiations regarding the Markto Market Price prior to the submission of the Mark to Market Price proposalsto arbitration.  In addition, the solearbitrator or third arbitrator, as the case may be, shall be an independentappraiser having no relationship representing the Behringer Party, BH MP, PGGMor their respective Affiliates during the immediately preceding 365-day periodprior to selection.

 

(H)                               Each party to the arbitration proceedingshall bear its own costs and the costs of the arbitrator it appoints.  The cost of the third arbitrator (or thesingle arbitrator if only one arbitrator is required) shall be split equallybetween the Behringer Party and BH MP.

 

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8.3                                 Basis Election. In the event that a distribution of any of the Venture’s property ismade in the manner provided in Section 734 of the Code, or where aTransfer of an Interest in the Venture permitted by this Agreement is made inthe manner provided in Section 743 of the Code, then, upon the request ofany Member, the Venture shall file an election under Section 754 of theCode, in accordance with procedures set forth in the applicable Treasuryregulations.  Each Member shall providethe Venture with all information necessary to give effect to any election underSection 754 of the Code.

 

8.4                                 Void Transfer. In no event shall any Interest, or any portion, thereof, be Transferredto a minor or an incompetent or in violation of any state or Federal law or inviolation of this Article 8. Any such attempted Transfer shall be void and ineffectual and shall notbind the Venture or any Member.

 

**ARTICLE9EXCESS INTEREST PROVISIONS**

** **

9.1                                 Definitions.  For purposesof this Article 9,the following terms shall have the following meanings:

 

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

 

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

 

“Excess Interest Trust” shall mean thetrust created pursuant to Section 9.14.

 

“Excess Interest Trustee” shall mean aPerson, who shall be unaffiliated with the Venture, any Purported BeneficialTransferee and any Purported Record Transferee, identified by the Venture asthe trustee of the Excess Interest Trust.

 

“Excess Interests” shall have themeaning given to it in Section 9.3(a).

 

“Existing Holder” shall mean (a) eachof BH MP and BH REIT and (b) any Person to whom an Existing HolderTransfers, subject to the limitations provided in this Agreement, BeneficialOwnership of Interests causing such transferee to Beneficially Own Interests inexcess of the Ownership Limit.

 

“Existing Holder Limit” (a) forthe Members shall mean, initially, 45% in the case of BH MP and 55% in the caseof BH REIT of the Interests, and, after any adjustment pursuant to Section 9.9,shall mean such percentage of the outstanding Interests, as the case may be, asso adjusted, and (b) for any Existing Holder who becomes an ExistingHolder by virtue of clause (b) of the definition thereof, shall mean,initially, the percentage of the outstanding Interests 

 

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Beneficially Owned bysuch Existing Holder at the time that such Existing Holder becomes an ExistingHolder, but in no event shall such percentage be greater than the ExistingHolder Limit for the Existing Holder who Transferred Beneficial Ownership ofsuch Interests or, in the case of more than one transferor, in no event shallsuch percentage be greater than the smallest Existing Holder Limit of anytransferring Existing Holder, and, after any adjustment pursuant to Section 9.9,shall mean such percentage of the outstanding Interests as so adjusted.

 

“Market Price” shall mean the marketprice of such class of Interests on the relevant date as determined in goodfaith by the Manager.

 

“Ownership Limit” shall initially mean9.8% in number of the Interests or value of the outstanding Interests, andafter any adjustment as set forth in Section 9.10, shall mean suchgreater percentage of the outstanding Interests as so adjusted.  The number and value of the outstandingInterests of the Venture shall be determined by the Manager in good faith,which determination shall be conclusive for all purposes hereof.

 

“Person” shall mean an individual,corporation, partnership, estate, trust (including, without limitation, a trustqualified under Section 401(a) or 501(c)(17) of the Code), portion ofa trust permanently set aside for or to be used exclusively for the purposesdescribed in Section 642(c) of the Code, association, privatefoundation within the meaning of Section 509(a) of the Code, jointstock company or other Entity.

 

“Prohibited Owner Event” has the meaningprovided in Section 9.3(c).

 

“Purported Beneficial Transferee” shallmean, with respect to any purported Transfer which results in Excess Interests,the beneficial holder of the Interests, if such Transfer had been valid under Section 9.2.

 

“Purported Record Transferee” shallmean, with respect to any purported Transfer which results in Excess Interests,the record holder of the Interests, if such Transfer had been valid under Section 9.2.

 

“Redemption Price” has the meaningprovided in Section 9.18.

 

“Restriction Termination Date” shallmean the first day on which the Venture determines that it is no longer in thebest interests of the Subsidiary REIT to attempt to, or continue to, qualify asa REIT.

 

9.2                                 Ownership Limitation.

 

(a)                                  Except as provided in Section 9.12,until the Restriction Termination Date, no Person (other than an ExistingHolder) shall Beneficially Own Interests in excess of the Ownership Limit andno Existing Holder shall Beneficially Own Interests in excess of the ExistingHolder Limit for such Existing Holder.

 

(b)                                 Except as provided in Section 9.12,until the Restriction Termination Date, any Transfer that, if effective, wouldresult in any Person (other than an Existing Holder) Beneficially OwningInterests in excess of the Ownership Limit shall be void *ab initio* asto the 

 

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Transfer of the Interestswhich would otherwise be Beneficially Owned by such Person in excess of theOwnership Limit; and the intended transferee shall acquire no rights in suchInterests.

 

(c)                                  Except as provided in Sections 9.9and 9.12,until the Restriction Termination Date, any Transfer that, if effective, wouldresult in any Existing Holder Beneficially Owning Interests in excess of theapplicable Existing Holder Limit shall be void *ab initio* as to the Transfer ofthe Interests which would be otherwise Beneficially Owned by such ExistingHolder in excess of the applicable Existing Holder Limit; and such ExistingHolder shall acquire no rights in such Interests.

 

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

 

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

 

(f)                                    Until the Restriction Termination Date,any Transfer that, if effective, would result in the Venture (treating theVenture as if it otherwise qualified as a REIT solely for this purpose)becoming a “pension-held REIT” as defined in Section 856(h) of theCode shall be void *ab initio*asto the Transfer of Interests which would result in the Venture (treating theVenture as if it otherwise qualified as a REIT solely for this purpose)becoming a “pension-held REIT;” and the intended transferee shall acquire norights in such Interests.

 

(g)                                 Until the Restriction Termination Date,any Transfer that would result in the Venture (treating the Venture as if itotherwise qualified as a REIT solely for this purpose) not maintaining itsstatus as a Domestically-Controlled REIT shall be void *ab initio* as to the Transfer of Interestswhich would result in the Venture (treating the Venture as if it otherwisequalified as a REIT solely for this purpose) failing to maintain its status asa Domestically-Controlled REIT; and the intended transferee shall acquire norights in such Interests.

 

9.3                                 Excess Interests.

 

(a)                                  If, notwithstanding the other provisionscontained in this Article 9,at any time, until the Restriction Termination Date, there is a purportedTransfer or other change in the capital structure of the Venture such that anyPerson would Beneficially Own Interests in excess of the applicable OwnershipLimit or Existing Holder Limit (as applicable), then, except as otherwiseprovided in Sections9.9 and 9.12, the Interests Beneficially Ownedin excess of such Ownership Limit or Existing Holder Limit (rounded up to thenearest whole Interest) shall 

 

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constitute “Excess Interests” and shall betreated as provided in this Article 9.  Such designation and treatment shall beeffective as of the close of business on the business day prior to the date ofthe purported Transfer or change in capital structure.

 

(b)                                 If, notwithstanding the other provisionscontained in this Article 9,at any time, until the Restriction Termination Date, there is a purportedTransfer or other change in the capital structure of the Venture (as a resultof a direct or indirect Transfer or otherwise) which, if effective, would causethe Venture (treating the Venture as if it otherwise qualified as a REIT solelyfor this purpose) to (i) become “closely held” within the meaning of Section 856(h) ofthe Code, (ii) become a “pension-held REIT” within the meaning of Section 856(h) ofthe Code, (iii) fail to qualify as a Domestically-Controlled REIT or (iv) otherwisefail to qualify as a REIT, then the Interests that are the subject of suchTransfer or other event which would cause the Venture to fail such requirementshall constitute “Excess Interests” and shall be treated as provided in this Article 9.  Such designation and treatment shall beeffective as of the close of business on the business day prior to the date ofthe purported Transfer or change in capital structure.

 

(c)                                  If, at any time priorto the Restriction Termination Date, notwithstanding the other provisionscontained in this Article 9, there is an event (a “Prohibited OwnerEvent”) which would result in the disqualification of the Venture asa REIT under the Code (treating the Venture as if it otherwise qualifiedas a REIT solely for this purpose) by virtue ofactual, Beneficial or constructive ownership of Interests, then Interests whichresult in such disqualification shall be automatically exchanged for an equalnumber of Excess Interests to the extent necessary to avoid suchdisqualification.  Such exchange shall beeffective as of the close of business on the business day prior to the date ofthe Prohibited Owner Event.  Indetermining which Interests are exchanged, Interests owned directly orindirectly by any Person who caused the Prohibited Owner Event to occur shallbe exchanged before any Interests not so held are exchanged.  If similarly situated Persons exist, suchexchange shall be *pro rata*.  If the Venture is still so disqualified as a REIT (treating the Venture as if itotherwise qualified as a REIT solely for this purpose), Interests owned directly or indirectly by Persons who did not cause theProhibited Owner Event to occur shall be chosen by random lot and exchanged forExcess Interests until the Venture is nolonger so disqualified as a REIT (treating the Venture as if itotherwise qualified as a REIT solely for this purpose).

 

9.4                                 Prevention of Transfer. If the Venture or its designee shall at any time determine in good faiththat a Transfer has taken place in violation of Section 9.2 or that a Personintends to acquire or has attempted to acquire beneficial ownership (determinedwithout reference to any rules of attribution) or Beneficial Ownership ofany Interests in violation of Section 9.2, the Venture or itsdesignee shall take such action as it deems advisable to refuse to give effectto or to prevent such Transfer, including, without limitation, refusing to giveeffect to such Transfer on the books of the Venture or instituting proceedingsto enjoin such Transfer; *provided**,**however*, that any Transfersor attempted Transfers in violation of paragraph (b), (c), (d), (e), (f) or(g) Section 9.2shall automatically result in the designation and treatment described in Section 9.3,irrespective of any action (or non-action) by the Venture.

 

9.5                                 Notice.  Any Personwho acquires or attempts to acquire Interests in violation of Section 9.2,or any Person who is a transferee such that Excess Interests result under Section 9.3,shall immediately give written notice or, in the event of a proposed orattempted Transfer, shall 

 

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give at least fifteen(15) days prior written notice to the Venture of such event and shall provideto the Venture such other information as the Venture may request in order todetermine the effect, if any, of such Transfer or attempted Transfer on theSubsidiary REIT’s status as a REIT.

 

9.6                                 Information for the Venture.  Until theRestriction Termination Date:

 

(a)                                  Every Beneficial Owner of more than 1⁄2 of1% of the number or value of outstanding Interests shall, within thirty (30)days after January 1 of each year, give written notice to the Venturestating the name and address of such Beneficial Owner, the number of InterestsBeneficially Owned, and a description of how such Interests are held.  Each such Beneficial Owner shall provide tothe Venture such additional information as the Venture may reasonably requestin order to determine the effect, if any, of such Beneficial Ownership on theSubsidiary REIT’s status as a REIT.

 

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

 

9.7                                 Other Action by Venture. Nothing contained in this Article 9 shall limit theauthority of the Venture to take such other action as it deems necessary oradvisable to protect the Venture, the Subsidiary REIT and the interests oftheir respective members by preservation of the Subsidiary REIT’s status as aREIT.

 

9.8                                 Ambiguities.  In the caseof an ambiguity in the application of any of the provisions of this Article 9,including, without limitation, any definition contained in Section 9.1,the Venture shall have the power to interpret and determine the application ofthe provisions of this Article 9with respect to any situation based on the facts known to the Venture.

 

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

 

(a)                                  Subject to the limitations provided in Section 9.11,the Venture may grant options which result in Beneficial Ownership of Interestsby an Existing Holder pursuant to an option plan approved by the Venture.  Any such grant shall increase the ExistingHolder Limit for the affected Existing Holder to the maximum extent possibleunder Section 9.11to permit the Beneficial Ownership of the Interests issuable upon the exerciseof such option.

 

(b)                                 The Venture shall reduce the ExistingHolder Limit for any Existing Holder after any Transfer permitted in this Article 9by such Existing Holder by the percentage of the outstanding Interests soTransferred or after the lapse (without exercise) of an option described inparagraph (a) of this Section 9.9 by the percentage ofthe Interests that the option, if exercised, would have represented, but ineither case no Existing Holder Limit shall be reduced to a percentage which isless than the Ownership Limit.

 

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9.10                           Increase or Decrease in Ownership Limit. Subject to the limitations provided in Section 9.11, the Venture mayfrom time to time increase or decrease the Ownership Limit; *provided**,**however*, that any decreasemay only be made prospectively as to subsequent holders (other than a decreaseas a result of a retroactive change in existing law that would require adecrease to retain the Subsidiary REIT’s status as a REIT, in which case suchdecrease shall be effective immediately).

 

9.11                           Limitations on Changes in Existing Holder andOwnership Limits.

 

(a)                                  Neither the Ownership Limit nor anyExisting Holder Limit may be increased (nor may any additional Existing HolderLimit be created) if, after giving effect to such increase (or creation), five (5) BeneficialOwners of Interests (including, without limitation, all of the then ExistingHolders) could Beneficially Own, in the aggregate, more than 49.9% in number orvalue of the outstanding Interests.

 

(b)                                 Prior to the modification of any ExistingHolder Limit or Ownership Limit pursuant to Sections 9.9 or 9.10, theVenture may require such opinions of counsel, affidavits, undertakings oragreements as it may deem necessary or advisable in order to determine orensure the Subsidiary REIT’s status as a REIT.

 

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

 

9.12                           Waivers by Venture. The Venture, upon receipt of a ruling from the Internal Revenue Serviceor an opinion of counsel or other evidence satisfactory to the Manager and uponat least fifteen (15) days written notice from a transferee prior to theproposed Transfer which, if consummated, would result in the intendedtransferee owning Interests in excess of the Ownership Limit or the ExistingHolder Limit, as the case may be, and upon such other conditions as the Venturemay direct, may waive the Ownership Limit or the Existing Holder Limit, as thecase may be, with respect to such transferee.

 

9.13                           Severability.  If anyprovision of this Article 9or any application of any such provision is determined to be void, invalid orunenforceable by any court having jurisdiction over the issue, the validity andenforceability of the remaining provisions shall be affected only to the extentnecessary to comply with the determination of such court.

 

9.14                           Trust for Excess Interests. Upon any purported Transfer that results in Excess Interests pursuant toSection 9.3,such Excess Interests shall be deemed to have been transferred to the ExcessInterest Trustee, as trustee of the Excess Interest Trust for the exclusivebenefit of the Charitable Beneficiary. Excess Interests so held in trust shall be issued and outstandingInterests of the Venture.  The PurportedBeneficial Transferee shall have no rights in such Excess Interests except asprovided in Section 9.17.

 

9.15                           Distributions on Excess Interests. Any distributions (whether as dividends, distributions upon liquidation,dissolution or winding up or otherwise) on Excess Interests shall be paid tothe Excess Interest Trust for the benefit of the Charitable Beneficiary.  Upon liquidation, dissolution or winding up,the Purported Record Transferee shall receive the lesser of (a) the amountof any distribution made upon liquidation, dissolution or winding up or (b) the

 

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price paid by thePurported Record Transferee for the Interests, or if the Purported RecordTransferee did not give value for the Interests, the Market Price of theInterests on the day of the event causing the Interests to be held intrust.  Any such dividend paid ordistribution paid to the Purported Record Transferee in excess of the amountprovided in the preceding sentence prior to the discovery by the Venture thatthe Interests with respect to which the dividend or distribution was made hadbeen exchanged for Excess Interests shall be repaid by the Purported RecordTransferee to the Excess Interest Trust for the benefit of the CharitableBeneficiary.

 

9.16                           Voting of Excess Interests.  TheExcess Interest Trustee shall be entitled to vote the Excess Interests for thebenefit of the Charitable Beneficiary on any matter.  Subject to Delaware law, any vote taken by aPurported Record Transferee prior to the discovery by the Venture that theExcess Interests were held in trust shall be rescinded *ab initio*.  The owner of the Excess Interests shall bedeemed to have given an irrevocable proxy to the Excess Interest Trustee tovote the Excess Interests for the benefit of the Charitable Beneficiary.

 

9.17                           Non-Transferability of Excess Interests. Excess Interests shall be transferable only as provided in this Section 9.17.At the direction of the Venture, the Excess Interest Trustee shall Transfer theInterests held in the Excess Interest Trust to a person whose ownership of theInterests will not violate the Ownership Limit or Existing Holder Limit and forwhom such Transfer would not be wholly or partially void pursuant to Section 9.2.  Such Transfer shall be made within sixty (60)days after the latest of (x) the date of the Transfer which resulted insuch Excess Interests and (y) the date the Venture determines in goodfaith that a Transfer resulting in Excess Interests has occurred, if theVenture does not receive a notice of such Transfer pursuant to Section 9.5.  If such a Transfer is made, the interest ofthe Charitable Beneficiary shall terminate and proceeds of the sale shall bepayable to the Purported Record Transferee and to the Charitable Beneficiary.  The Purported Record Transferee shall receivethe lesser of the price paid by the Purported Record Transferee for theInterests or, if the Purported Record Transferee did not give value for theInterests, the Market Price of the Interests on the day of the event causingthe Interests to be held in trust, and the price received by the ExcessInterest Trust from the sale or other disposition of the Interests.  Any proceeds in excess of the amount payableto the Purported Record Transferee shall be paid to the CharitableBeneficiary.  Prior to any Transfer ofany Excess Interests by the Excess Interest Trustee, the Venture must havewaived in writing its purchase rights under Section 9.18.  It is expressly understood that the PurportedRecord Transferee may enforce the provisions of this Section 9.17 against theCharitable Beneficiary.

 

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

 

9.18                           Call by the Venture on Excess Interests. Excess Interests shall be deemed to have been offered for sale to theVenture, or its designee, at a price per Interest equal to the lesser of theprice per Interest in the transaction that created such Excess Interests (or,in the case of a devise, gift or other transaction in which no value was givenfor such Excess Interests, the Market Price at the time of such devise, gift orother transaction) and the Market Price of the Interests to which such ExcessInterests relates on the date the Venture, or its designee, accepts

 

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such offer (the “Redemption Price”).  The Venture shall have the right to acceptsuch offer for a period of ninety (90) days after the later of (x) thedate of the Transfer which resulted in such Excess Interests and (y) thedate the Manager determines in good faith that a Transfer resulting in ExcessInterests has occurred, if the Venture does not receive a notice of suchTransfer pursuant to Section 9.5but in no event later than a permitted Transfer pursuant to and in compliancewith the terms of Section 9.17.  Unless the Manager determines that it is inthe interests of the Venture to make earlier payments of all of the amountdetermined as the Redemption Price per Interest in accordance with thepreceding sentence, the Redemption Price may be payable at the option of theVenture at any time up to but not later than one year after the date theVenture accepts the offer to purchase the Excess Interests.  In no event shall the Venture have anobligation to pay interest to the Purported Record Transferee.

 

**ARTICLE10DISSOLUTION OF VENTURE**

** **

10.1                           Bankruptcy of Member.

 

(a)                                  The Bankruptcy, insolvency, termination,dissolution, liquidation or other cessation or assignment for the benefit ofcreditors by, any Member (each a “Bankruptcy Event”), or, except as otherwisepermitted in accordance with Article 8, the withdrawal of anyMember, shall dissolve the Venture, unless within 90 days after notice is givento the other Member of the occurrence of such event, the remaining Memberelects to continue the business of the Venture. The Member suffering a Bankruptcy Event (or its legal representative) orwithdrawing from the Venture, except as otherwise permitted in accordance with Article 8,is hereby deemed to Consent to the continuation of the business of the Venture.  In the event of a Bankruptcy Event withrespect to BH REIT or a withdrawal of BH REIT as the Manager of the Venture,the Venture shall file an amendment to the Venture’s Certificate removing BHREIT as the Manager of the Venture.

 

(b)                                 For purposes of this Agreement, the “Bankruptcy”a Member shall be deemed to have occurred upon the happening of any of thefollowing:  (i) the filing of anapplication by the Member for, or a consent to, the appointment of a trustee ofits assets, (ii) the filing by the Member of a voluntary petition forrelief as a debtor under the United States Bankruptcy Code or the filing of apleading in any court of record admitting in writing its inability to pay itsdebts as they come due, (iii) the making by the Member of a generalassignment for the benefit of creditors or (iv) the expiration of 60 daysfollowing the entry of an order, judgment or decree by any court of competentjurisdiction adjudicating the Member a bankrupt or appointing a trustee of itsassets.

 

10.2                           Other Events of Dissolution. The happening of any one of the following events shall work adissolution of the Venture:

 

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

 

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

 

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

 

Each Member waives the rightto cause a dissolution of the Venture in any other way.  Dissolution of the Venture shall be effectiveon the day on which the event occurs which gives rise to the dissolution, butthe Venture shall not terminate until the assets of the Venture shall have beendistributed as provided herein and a certificate of cancellation of the Certificatehas been filed with the Secretary of State of the State of Delaware.

 

10.3                           Distribution Upon Liquidation.

 

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

 

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

 

(ii)                                  Cash and all other assets of the Venturenot sold pursuant to this Section 10.3 will be distributed amongthe Members in the same manner as Net Cash Flow in accordance with Section 5.1.

 

(b)                                 The Members shall continue to shareincome, loss and other tax items during the period of such Liquidation in thesame proportions as before dissolution. Subject to Sections 2.6(b) the Liquidator shall determinewhether to sell any Venture property, and, if so, whether at a public orprivate sale, for what price, and on what terms.  If the Liquidator determines to sell orotherwise dispose of any Venture property or any interest therein, theLiquidator shall not be required to do so promptly but shall do so in anorderly and commercially reasonable manner so as to avoid a distress sale.

 

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

 

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

 

10.4                           Procedural and Other Matters.

 

(a)                                  Upon dissolution of the Venture and untilthe filing of a certificate of cancellation, the Liquidator may, in the nameof, and for and on behalf of, the Venture, prosecute and defend suits, whethercivil, criminal or administrative, gradually settle and close the business ofthe Venture, dispose of and convey the property of the Venture, discharge ormake reasonable provision for the liabilities of the Venture and distribute tothe Members any remaining assets of the Venture, in accordance with this Article 10and all without affecting the liability of the Members or the Manager andwithout imposing liability on the Liquidator.

 

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

 

**ARTICLE11REPRESENTATIONS AND WARRANTIES**

** **

11.1                           Representations and Warranties of the Members. Each of the Members hereby represents and warrants to the other Memberas follows:

 

(a)                                  Such Member is a corporation or otherEntity duly formed and validly existing under the laws of the jurisdiction ofits organization with all requisite power and authority to own its assets andto carry on its business as now being conducted.  Such Member has all requisite power andauthority to enter into this Agreement and the other agreements contemplated tobe entered into by it in connection herewith and to carry out the transactionscontemplated hereby and thereby.

 

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

 

(c)                                  The execution, delivery and performanceby such Member of this Agreement and all other agreements contemplated herebyto which it is to be a party do not and will not (i) violate any decree orjudgment of any court of governmental authority that may be applicable to suchMember; (ii) violate any law (or regulation promulgated under any law); (iii) violateor conflict with, or result in a breach of, or constitute a default (or anevent with or without notice or lapse of time or both would constitute adefault) under any contract or 

 

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agreement to which suchMember is a party; or (iv) violate or conflict with any provision of theorganizational documents of such Member.

 

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

 

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

 

**ARTICLE12BOOKS AND RECORDS; REPORTS TO MEMBERS**

** **

12.1                           Books.  The Managershall maintain or cause to be maintained separate, full and accurate books andrecords of the Venture, and each Member or any authorized representative of anyMember shall have the right to freely inspect, examine and copy the same and tomeet with employees of the Manager responsible for preparing the same atreasonable times during business hours and upon reasonable notice.  In addition, the Manager agrees to provideeach Member, its representatives and an independent accounting firm (if any)designated by such Member reasonable access to all such books and records,during which such Member or such accounting firm may conduct an audit of theVenture.  The cost of any such auditshall be borne by the requesting Member unless an error is discovered which hashad the effect of reducing or increasing such Member’s distributions from theVenture by an amount equal to or greater than five percent (5%), in which casethe Venture shall bear the cost of the audit.

 

12.2                           Quarterly Reports. The Manager shall prepare and distribute to the Members a quarterlyreport with respect to the Venture within 75 days of the last day of each ofthe first three fiscal quarters of a fiscal year prepared in accordance withU.S. GAAP, consistently applied, including (i) a balance sheet, (ii) aprofit and loss statement, (iii) a statement showing cash distributionsfor such fiscal quarter and for the year to date, (iv) a statement showingcomputation of related party fees and Member distributions for such fiscalquarter and for the year to date, and (v) a report briefly describing anysignificant variances from the applicable budget line item in the Venture’sInitial Operating Plan or Subsequent Operating Plan.

 

12.3                           Annual Reports. The Manager shall engage Deloitte & Touche LLP or such othernationally recognized independent registered public accounting firm selected bythe Manager with the Consent of the Members to examine and audit the Venture’sbooks and records.  Within 120 days afterthe end of each fiscal year, or as soon as practicable thereafter, the Managershall distribute to the Members financial statements with respect to theVenture, which shall include the items set forth in clauses (i)-(v) ofSection 12.2 with respect to such fiscal year and which shall beprepared in accordance with U.S. GAAP, consistently applied, and shall beaudited by the Venture’s independent registered public accounting firm.

 

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12.4                           Accountants; Tax Returns. The Manager shall engage Deloitte & Touche LLP or such othernationally recognized independent registered public accounting firm selected bythe Manager and approved by the Members to review, or to sign as preparer, allfederal, state and local Tax Returns that the Venture is required to file.  The Manager will furnish to each Memberwithin 120 days after the end of each fiscal year, or as soon thereafter as ispracticable, a Schedule K-1 or such other statement as is required by theInternal Revenue Service that sets forth such Member’s share of the income,gain, loss, deduction and other relevant fiscal items of the Venture for suchfiscal year.  Each Member shall beentitled to receive, upon request, copies of all federal, state and localincome Tax Returns and information returns, if any, that the Venture isrequired to file.

 

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

 

12.6                           Project Valuations. Unless the Venture is to receive a report of a real estate valuationfirm set forth in the next sentence, the Manager shall cause the Venture,within 30 days after the end of each semi-annual fiscal period, to haveprepared and to provide to the Members, with a copy to PGGM, an estimate of themarket value of the Venture, based on traditional real estate principles. Inaddition, commencing at the end of the fiscal year that is four years after thelater of (x) the receipt of a certificate of occupancy for the Project and(y) the acquisition of the Project, the Manager, on behalf of the Venture,shall engage the services of a reputable real estate valuation firm to prepareand deliver an annual report to the Members, with a copy to PGGM, estimatingthe market value of the Project, based on traditional real estateprinciples.  All costs and expenses associatedwith the engagement by the Venture for the valuation by such real estatevaluation firm shall be borne by the Venture.

 

**ARTICLE13MISCELLANEOUS**

** **

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

 

If to BH MP, addressed asfollows:

 

Behringer Harvard MasterPartnership I LP

15601 Dallas Parkway, Suite 600

Addison, Texas 75001

Attention:  Gerald J. Reihsen, Esq.

Facsimile:  (469) 341-0540

Email:  greihsen@behringerharvard.com

 

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with a copy to:

 

StichtingPensioenfonds voor de Gezondheid,

Geestelijkeen Maatschappelijke Belangen

Kroostweg-Noord149

P.O. Box117

3700AC Zeist

The Netherlands

Attention:  Werner Sohier

Facsimile:  011.31.30.277 4724

Email:  werner.sohier@pggm.nl

 

with a copy to:

 

StichtingPensioenfonds voor de Gezondheid,

Geestelijkeen Maatschappelijke Belangen

Kroostweg-Noord149

P.O. Box117

3700AC Zeist

The Netherlands

Attention:  Gert-Jaap Das

Facsimile:  011.31.30.277 9191

Email:  gert.jaap.das@pggm.nl

 

If to BH REIT (whether asManager or a Member), addressed as follows:

 

Behringer Harvard WaterfordPlace, LLC

15601 Dallas Parkway, Suite 600

Addison, Texas 75001

Attention: Gerald J. Reihsen, Esq.

Facsimile: (469) 341-0540

Email:greihsen@behringerharvard.com

 

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

 

13.2                           Execution in Counterparts. This Agreement may be executed in several counterparts, each of whichshall be deemed an original but all of which shall constitute one and the someinstrument.  In addition, this Agreementmay contain more than one counterpart of the signature page, and this Agreementmay be executed by the affixing of the signature (or one of the severalsignatures) of the Manager and each of the Members to any of such counterpartsignature pages; all of such counterpart signature pages shall be read asthough one, and they 

 

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shall have the same forceand effect as though all of the signers had signed a single signature page.

 

13.3                           Amendments.  ThisAgreement may be amended only with the unanimous written Consent of the Managerand the Members.  Any waiver of anyprovision of this Agreement shall require the Consent of the Party from whomsuch waiver is sought.

 

13.4                           Additional Documents. The Manager may cause to be filed with any governmental agency anyApplications for Authority and, where applicable, certificates of cancellationor certificates or statements of dissolution as may be required or permitted bythe laws of the State of Delaware and any other jurisdiction where the Ventureis organized or doing business.  Eachparty hereto agrees to execute, with acknowledgment or affidavit, if requiredby the Manager, any and all documents and writings that may be necessary orexpedient in connection with the creation of the Venture and the achievement ofits purposes, provided that no such document may modify this Agreement.

 

13.5                           Validity.  If anyprovision of this Agreement or the application of such provision to any Personor circumstance shall be held invalid, the remainder of this Agreement or theapplication of such provision to Persons or circumstances other than those withrespect to which it is held invalid, shall not be affected thereby and shall continueto be binding and in force.

 

13.6                           Governing Law. This Agreement and the rights of the parties hereunder shall be governedby and interpreted in accordance with the internal laws of the State ofDelaware.  Except as otherwise providedherein, the rights and obligations of the Manager and the Members and theadministration and termination of the Venture shall be governed by the Act.

 

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

 

13.8                           Consent and Approval. Whenever under this Agreement the Consent of any Member is required orpermitted, such Consent may be evidenced by a written consent signed by anauthorized representative of such Member.

 

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

 

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

 

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13.11                     Entire Agreement. This Agreement constitutes the entire agreement among the parties withrespect to the formation and operation of the Venture; it supersedes any prioragreements or understandings among them and it may not be modified or amendedin any manner other than pursuant to Section 13.3.

 

13.12                     Captions.  Captions andheadings contained in this Agreement are inserted only as a matter ofconvenience and in no way define, limit or extend the scope of this Agreementor any provision hereof.

 

13.13                     No Strict Construction. The language used in this Agreement is that chosen by the parties heretoto express their mutual understanding and agreement, and no rule of strictconstruction shall be applied against any Person in interpreting thisAgreement.

 

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

 

13.15                     Recourse to the Manager. ANYTHING CONTAINED HEREIN TO THE CONTRARY NOTWITHSTANDING, NO PERSONALLIABILITY OR PERSONAL DEFICIENCY JUDGMENT SHALL BE ASSERTED OR ENFORCED AGAINSTANY MEMBERS OF THE MANAGER, AGAINST THE DIRECTORS, TRUSTEES, OFFICERS,EMPLOYEES, AGENTS, MEMBERS, SHAREHOLDERS OR PRINCIPALS OF THE MANAGER OR ITSMEMBERS, OR AGAINST THE ASSETS OF ANY SUCH PARTIES, FOR PAYMENT OF ANY AMOUNTHEREUNDER OR FOR OBSERVANCE OR PERFORMANCE OF ANY OF THE OBLIGATIONS OF THEMANAGER OR THE VENTURE.

 

13.16                     Recourse to the Members. ANYTHING CONTAINED HEREIN TO THE CONTRARY NOTWITHSTANDING, NO PERSONALLIABILITY OR PERSONAL DEFICIENCY JUDGMENT SHALL BE ASSERTED OR ENFORCED AGAINSTANY MEMBERS, PARTNERS OR SHAREHOLDERS OF EITHER MEMBER, AGAINST THE DIRECTORS,TRUSTEES, OFFICERS, EMPLOYEES, AGENTS, MEMBERS, SHAREHOLDERS OR PRINCIPALS OFEITHER MEMBER OR ANY SUCH MEMBERS, PARTNERS OR SHAREHOLDERS OF A MEMBER, ORAGAINST THE ASSETS OF ANY SUCH PARTIES, FOR PAYMENT OF ANY AMOUNT HEREUNDER ORFOR OBSERVANCE OR PERFORMANCE OF ANY OF THE OBLIGATIONS OF SUCH MEMBER OR THEVENTURE.

 

13.17                     Remedies Not Exclusive. Any remedies herein contained for breaches of obligations hereundershall not be deemed to be exclusive and shall not impair the right of any partyto exercise any other right or remedy, whether for damages, injunction orotherwise.

 

13.18                     Use of Behringer Harvard Trade Name. If any third parties other than Behringer, any of its Affiliates or anyBH-Sponsored Investment Program acquires the Interest of any Member, or if theproperty management agreement between the Subsidiary REIT (or any subsidiarythereof) and the Management Company (or any other Affiliate of Behringer) isterminated for any reason, then the remaining Member shall cause the Venture(and the 

 

48

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Subsidiary REIT (and anysubsidiary thereof)) to cease to use the name “Behringer Harvard” within 30days of such event, unless Behringer agrees in writing to allow the continueduse of such name beyond such 30-day period.

 

13.19                     Venture Counsel. The Manager has retained Mayer, Brown, Rowe & Maw LLP (“VentureCounsel”) in connection with the formation of the Venture and the SubsidiaryREIT and may retain Venture Counsel in connection with the operation of theVenture and the Subsidiary REIT, including, without limitation, acquiring,developing, holding and disposing of the Project.  Each Member acknowledges that Venture Counseldoes not represent any Member (in its capacity as such) in the absence of aclear and explicit written agreement to such effect between such Member andVenture Counsel (and then only to the extent specifically set forth in suchagreement), and that in the absence of any such agreement, Venture Counselshall owe no duties to any Member (in such capacity) or to the Members as agroup, whether or not Venture Counsel has in the past represented or iscurrently representing such Member or Members with respect to other matters.

 

13.20                     Waiver of Jury Trial. TO THE EXTENT PERMITTED BY APPLICABLE LAW, THE PARTIES HEREBYIRREVOCABLY WAIVE ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDINGARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATEDHEREBY.

 

[INTENTIONALLY LEFT BLANK]

 

*  *  * *  *

 

49

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

 

 
| Manager: | BEHRINGER HARVARD WATERFORD PLACE, LLC, a Delaware limited liability  company |
|----------|-------------------------------------------------------------------------------|
|     |                                                                          |
|     |                                                                          |
|     | By:                                                                           | /s/ Gerald J. Reihsen, III |
|     |                                                                          | Gerald J. Reihsen, III |
|     |                                                                          | Executive Vice President — Corporate Development & Legal and  Secretary |
|     |                                                                          |
|     |                                                                          |   |
|     |                                                                          |   |
| Members: | BEHRINGER HARVARD MASTER PARTNERSHIP I LP, a Delaware limited  partnership    |
|     |                                                                          |   |
|     | By:                                                                           | Behringer Harvard Institutional GP LP, a Texas limited partnership,  its general partner |
|     |                                                                          |   |   |
|     |                                                                          | By: | Harvard Property Trust, LLC, a Delaware limited liability company,  its general partner |
|     |                                                                          |   |   |
|     |                                                                          |   |   |
|     |                                                                          |   | By: | /s/ Gerald J. Reihsen, III |
|     |                                                                          |   |   | Gerald J. Reihsen, III |
|     |                                                                          |   |   | Executive Vice President — Corporate Development & Legal and  Secretary |
|     |                                                                          |   |   |   |
|     | BEHRINGER HARVARD WATERFORD PLACE, LLC, a Delaware limited liability  company |
|     |                                                                          |   |   |   |
|     |                                                                          |   |   |   |
|     | By:                                                                           | /s/ Gerald J. Reihsen, III |
|     |                                                                          | Gerald J. Reihsen, III |
|     |                                                                          | Executive Vice President — Corporate Development & Legal and  Secretary |

 

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**EXHIBIT A**

 

**MEMBERS; ADDRESSES; CAPITAL COMMITMENTS; PERCENTAGE INTERESTS**

 
| **Members**                                                                                           | ** ** | **Capital  Commitments** | ** **    | **Percentage Interests** | ** ** |
|-------------------------------------------------------------------------------------------------------|------------|--------------------------|---------------|--------------------------|------------|
| Behringer Harvard Master Partnership I LP  15601 Dallas Parkway, Suite 600  Addison, Texas 75001 |       | $                        | 8,992,687.05  |                     | 45         | % |
|                                                                                                  |       |                     |          |                     |       |
| Behringer Harvard Waterford Place, LLC  15601 Dallas Parkway, Suite 600  Addison, Texas 75001    |       | $                        | 10,991,061.94 |                     |  55   | % |
|                                                                                                  |       |                     |          |                     |       |
|                                                                                                  |       | $                        | 19,983,748.99 |                     | 100        | % |

A-1

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